Online Gaming Becoming An Issue In Growing Number Of States

States across the country are either looking into setting up intra-state online regulations for gaming or already have. Connecticut is the latest to make a move towards online gaming with a decision that came down in late 2012 when they approved Sportech to operate online wagering for horse racing. Previously, Sportech had the sole license to provide tote betting on races and matches at OTB booths and via telephone wagering.

The move to go online makes a natural extension to their current licensing and business model. The move to go online by so many states is born from the fact that as long as there is a lack of regulation enforcing legal online gambling, the business will simply go to unauthorized and uncontrollable entities which are not under any rule of law.

Federal law is murky at best, and because of the nature of the activity it is extremely hard to trace and enforce. As long as the networks the states set up do not cross state lines, the thinking goes, the feds won’t have any problem with it though officially they could; anything that travels over wire in the form of information is subject to federal authority.

But, like many things, the feds pick and choose their battles. If states begin to set up a framework of successful regulations, then chances are the federal government will adopt a similar framework into federal law. Until that time, states are going to have to regulate online gaming themselves if they want any type of a legal market.

Most states’ programs are still in the formative stages. The justice department has just ruled on a contiguous effort by New York and Illinois to sell lottery tickets online. Current federal law reads thus:

“betting or wagering from knowingly using a wire communication facility “for the transmission in interstate or foreign commerce of bets or wagers or information assisting in the placing of bets or wagers on any sporting event or contest.” Id. The second bars any such person from knowingly using a wire communication facility to transmit communications that entitle the recipient to “receive money or credit” either “as a result of bets or wagers” or “for information assisting in the placing of bets or wagers.” Id.5″

The decision goes on to say that selling lottery tickets online does not infringe on the Wire Act since it is not considered placing a bet, which is what governs internet betting from the federal governments perspective.

Horse and track betting is also exempt, according to Connecticut. Stephen Dargan, co chairman of the Connecticut Legislator’s public safety committee said that the federal law specifically exempts online and in person par-mutuel betting on horse racing.

Still, with many states already developing systems for online betting systems, online lottery sales and betting on in state horse tracks, unless stopped at a different level, are set to take effect by next year. Other states that have made moves to regulate online gambling include Nevada and the District of Columbia, California and New Jersey and others.

California alone says they would stand to gain between 100 and 250 million dollars a year. There will be manipulation of loopholes as well. States lottery commissions are already experts at designing many different games, and the Justice Department ruling does leave loopholes.

It is going to be an interesting year for states and the federal government, and for fans of internet poker. One thing it won’t be, apparently, is neat.