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Online Gambling Door Open For States

ALBUQUERQUE, N.M. — In case you missed it – and you may have because of the press of the holidays – the U.S. Justice Department issued an opinion Dec. 23 that opens the door for legalized Internet gambling, except on sports.

The American Gaming Association estimates Americans spend $4 billion a year to gamble online, much of it illegally, and that legalized Internet poker alone could generate $2 billion in tax revenue.

With that kind of money at stake, some states are moving to legalize, regulate and tax Internet gambling.

New Mexico officials are in the early stages of analyzing the Justice Department opinion, but there is a legal argument that the state’s casino-gambling compacts with Native Americans won’t bar New Mexico from getting into the business of online gambling.

Here are some possibilities for what we could see in the coming months and years:

♦ Internet ticket sales by the New Mexico Lottery. A few other states are offering online subscriptions to Powerball and other games. Players have accounts for purchasing tickets and collecting prizes.

♦ Online games for only New Mexico residents operated by the Lottery, such as poker, blackjack, bingo and scratch tickets. The District of Columbia is preparing to offer such “i gaming” to its residents.

♦ Multistate Internet poker run by a consortium of states. Lawmakers in Iowa – home of the association that runs the multistate Powerball – will soon consider poker legislation.

♦ Other multistate online games such as blackjack and bingo.

♦ Virtual casinos operated on the Internet – including slot machines, roulette, blackjack, poker, bingo and more – by American Indian tribes.

California attorney I. Nelson Rose, who specializes in gambling law and runs the website www.GamblingAndTheLaw.com, says the Justice Department “declared, perhaps uninten-tionally, that almost every form of intrastate Internet gambling is legal under federal law and so may be games played interstate and even internationally.”

In the opinion, the Justice Department reversed its long-held legal view that the federal Wire Act prohibits all forms of Internet gambling. It said the act applies to only sports betting.

The opinion written by an assistant attorney general was the result of inquiries from the New York and Illinois lotteries.

“A bureaucrat has basically reversed 60 years of law,” says Guy Clark, a Corrales dentist who chairs the national anti-gambling group Stop Predatory Gambling.

At the New Mexico Lottery, officials are in the early stages of trying to figure out what the Justice Department opinion means. Ditto at the state Gaming Control Board, which oversees gambling at Indian casinos, racetrack casinos, and veterans and fraternal clubs.

“I’m not sure at this point how it’s going to play out,” says Frank Baca, general counsel and interim executive director at the Gaming Control Board.

One major factor will be the state’s compacts with Indian gambling tribes and the related revenue-sharing agreements.

Under the revenue-sharing deals, the tribes give the state a cut of the take on their slot machines. In exchange, the state gives the tribes the exclusive right to provide “Class III” gambling in New Mexico, with the exception of a state lottery and slot machines on a limited basis at racetracks and veterans and fraternal clubs.

Generally speaking, Class III gambling is the sort of gambling that is traditionally associated with casinos, such as house-banked card games, roulette, craps and slot machines.

Class III gambling doesn’t include bingo and card games like poker that pit players against one another and not the house. Blackjack also can be structured as a game in which players compete against one another.

Given that the state/tribal revenue-sharing agreements permit a state lottery and given that bingo, poker and some other games fall outside the tribes’ near-monopoly on Class III gambling, that would seem to clear the way for the New Mexico Lottery to offer some Internet gambling.

Tribes, like the state, are in the early stages of trying to figure out what the Justice Department ruling could mean for them and what legal grounds they could have to challenge state-sponsored Internet gambling.

When it comes to virtual casinos on the Internet, it seems only tribes could offer them to residents of New Mexico under the revenue-sharing agreements with the state.

Rose, the gambling law attorney, says the Justice Department opinion means, “There is little stopping tribes from offering most forms of gambling online.”

One major consideration for the tribes will be the hundreds of millions of dollars that they have invested in their brick-and-mortar casinos and what impact Internet gambling – whether by themselves or the state – will have on foot traffic.

UpFront is a daily front-page news and opinion column. Comment directly to Thom Cole at tcole@abqjournal.com or 505-992-6280 in Santa Fe. Go to www.abqjournal.com/letters/new to submit a letter to the editor.
— This article appeared on page A1 of the Albuquerque Journal

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