Why not regulate rather than banning?

Last Friday, Frank Catania, former Assistant Attorney General and Director of New Jersey Division of Gaming Enforcement, online gaming consultant and independent director of the player protection group eCOGRA gave a candid briefing to state legislators, reinforcing that Internet gambling is prevailing.
The Internet gambling expert told state lawmakers that instead of trying to ban the online gambling, state governments should start regulating this rapidly growing business. His opinions struck deep responses from several other experts addressing the conference.

Various industry experts explained lawmakers about the consequences of the federal Unlawful Internet Gambling Enforcement Act of 2006, which attempts to prohibit financial transactions with online gambling companies and has been condemned for its lack of both precision and practicality.

The assessment included an evaluation of the argument between Antigua and the US federal government which is going on for 5 years already over discriminatory carve-outs in US legislation, especially online horseracing and lotteries. That excludes other WTO members from accessing the American gambling market.

After the World Trade Organization ruled against the United States’ position, US had to withdraw retroactively its gambling obligations from its GATT obligations and had to deal with compensation claims.

“The United States is going one way, and the rest of the world the other,” said Catania, knowing the fact that the U.S. has tried to prohibit Internet gaming and other countries have decided to regulate it instead. Catania predicted that after the 2008 presidential election the U.S. would join the strategy of other countries. He said “The online gaming market will continue to expand regardless of any decision to regulate. Consumer demand and industry growth will force governments to act.”

Horse racing, fantasy gaming and lotteries still have the privilege of exemptions from the federal Internet gaming laws. However, Reuters reports that state interpretation of those regulations varies greatly. According to the panelists, about a dozen states prohibit all Internets gaming including wagering in accounts.

“Congress amended the Interstate Horse Racing Act to include Internet access. But of the ADW companies, each has its own policies. Some will permit wagers from any state where horse racing is legal; others limit themselves to states where legal issues have been resolved.” said Ken Kirchner, former senior vice president of the National Thoroughbred Racing Association and Breeders’ Cup Ltd.

“But I shouldn’t have to call a bookie to make a bet on the Lakers-Celtics game tonight. I should be able to do that in a legal matter regulated by state government. It’s an entertainment experience and it’s my money. It’s like going to the movie theater. I should know that my funds are deposited with a legitimate company and that I’ll be paid if I win. And I should not be fearful of prosecution by federal or state authorities for my activity.”

Ted Teruo Kitada, senior company counsel for Wells Fargo, noted that the fear of prosecution has banking officials in a quandary.

Banks are responsible for screening all transactions for suspect purposes including Internet wagering, under the UIGEA law. Since Wells Fargo handles millions of transactions everyday, “imagine what we have to do when the federal government and Congress can’t decide what is and what is not unlawful,” said Kitada.

“We’re not prepared with the volume of transactions we face daily. Perhaps the idea behind the act is commendable, but the challenge is the implementation.”

According to Catania, the estimated value of current online gambling in the U.S. is more than $15 billion. “States are better equipped to regulate online gaming than the federal government. States have done an excellent job in regulating traditional gaming facilities and that experience could be used to regulate online gaming.”

The purpose of regulating Internet gaming is same as that of regulating traditional casinos or other gambling outlets, said Catania: “Keep out those that do not have good character and provide fair and honest games as a means of protecting the public from unscrupulous operators. We’re talking basic consumer protection,” he added, noting that states should be able to regulate such aspects as age restrictions. “We need requirements to know where that player is and how old. Some lessons have been learned. The states have the experience and they should use it. Indian gaming is the only gambling area that the feds regulate and they’ve done a terrible job.”

Florida State Sen. Steve Geller, a past NCLGS president, said “we may end up with Internet gaming whether we like it or not. It’s an incredibly complex area that seems to change each week. States lose their ability to control what form of gambling takes place in their states. With new forms of technology, the effort now is to regulate it the best you can.”

Catania said that UIGEA is bad public policy and impossible to enforce, and there is an active efforts now to unravel that act.

John Pappas, executive director of the Poker Players Alliance pointed out that Internet gaming is a hot-button issue for many constituents. The federal prohibition on Internet gambling has swelled his grassroots group from 75,000 members to more than 1 million, he said.

Pappas told the lawmakers:” We have more than 100,000 members right here in California. These are your constituents. More than 70 million Americans play or have played poker. Poker is not a crime.”

Taking an opposing view, Rev. Jim Butler of the California Coalition Against Gambling Expansion said, “with Internet gambling, every home with a computer is potentially a gambling facility. We’re faced with a daunting task.” He claimed that the Internet will accelerate the gambling problems.

Casino News: Why not regulate rather than banning?

Why not regulate rather than banning?