States Call Federal Bluff: Online Gambling and State Legislation

September 26, 2013

Thursday, September 26, 2013, by Britton Lewis
In recent months, Nevada, New Jersey, and Delaware have legalized and begun regulating online gambling, although any attempt at reaching a federal consensus has stalled among the legislature.  The legality and credibility of online gambling has been, at best, ambiguous since 2011 when the Department of Justice indicted industry-leaders Full Tilt and Poker Stars, forcing users to rely on off-shore alternatives for their virtual fix.  However, the launch of legal online casinos by corporate giants like Caesars Entertainment Corp. certainly lends an heir of credibility to the industry. Until recently, online gambling, including virtual poker, have been restricted rather than regulated.  Since 2011, online gambling sites have been pushed offshore, still accessible for the American user, but isolated from legislation.

Legitimate online gambling means the end of “wild wild west poker” at least for the residents of New Jersey, Delaware, and Nevada.

In recent years online poker has fallen under the Unlawful Internet Gambling Enforcement Act (Hereinafter “UIEGA”) which paralyzed American online poker sites by preventing banks from accepting deposits from gambling websites for presumptive money laundering.  However, the  UIEGA also had some restrictive language in that it narrowed the Interstate Wire Act of 1961 (“Wire Act”) to apply only to sports betting, rather than all interstate gambling relying on communicative transmissions like telephones or the internet.  Technological developments further sought to stave off the UIEGA.  The emergence of the virtual currency, BitCoin, circumvented the banking restrictions by eliminating the use of “real money” by utilizing third-parties to exchange voucher-like commodities. This paradox of apparent legislative interest and narrowly tailored restrictions thus opened the door for states to begin to legalize online gambling.
Although poker players across the country and virtual casinos may rejoice at the change in the current legislative environment, restrictions and complications still prevail.   The most glaring of issues is how state laws can and cannot restrict online activity lacking borders.  A second question revolves around restricting under-aged gamblers from firing up their laptops and logging into a virtual casino.
Ultimately, the technology for virtual casinos to restrict who accesses their casinos is out there.  Due to the availability of the technology, states will place the burden of restricting site access on the individual casinos.  It seems likely that casinos will address the age issue as many age-restrictive websites do—by requiring users to agree to terms including being the appropriate age, and voiding transactions involving minors as they are discovered.  Although this method is not perfect, it is widely accepted and likely will not be challenged.  The greater question is how tight the borders of the virtual casinos will be.  A strict enforcement of state restrictions will likely result in highly secure access restrictions, whereas passive enforcement may result in a similar consent-to-terms requirement.
Ultimately, these questions are moot.  The emergence of legalized online gambling does not introduce anything original to the internet, where any and everything can be found with a little effort.  An out-of-state user may be able to access a legal casino through technological manipulation, but even if they aren’t little will change for them.  Virtual casinos have always been accessible for the interested user.  However, the emergence of legitimate companies and government regulation to the industry will surely benefit all involved.  Legitimate online gambling means the end of “wild wild west poker” at least for the residents of New Jersey, Delaware, and Nevada.