The blog at Reason.com provided some interesting reading on the impact of U.S. online gambling legalization this week, airing some previously unpublished views by gambling law expert Prof. I. Nelson Rose, whom it quoted as saying: "…the federal government will end up doing nothing, except for a little unnecessary duplication of effort to make it seem like there is federal oversight." He added that once licensed, a site could serve customers in all 50 states, except those that choose to opt out within 90 days of the law's enactment.
Rose argues that the legalization favours domestic [US] gambling businesses because it denies licenses to anyone who "is delinquent in filing any applicable Federal or State tax returns or in the payment of any taxes, penalties, additions to tax, or interest owed to a State or the United States."
And Rose warns that "every Internet gaming site that ever took bets from the U.S., whether or not they stopped when the UIGEA was passed," could be considered delinquent if the Treasury Department claims "an operator that had American players was doing business here" and therefore should have paid federal and/or state taxes.
By contrast, he says "American companies, like Harrah's, which desperately want to get into the Internet gaming business, but have never had online gaming for money [in the United States], would have no trouble."
The blog correctly observes that while a protectionist tilt may be politically inevitable, it would be not only unfortunate but ironic, given that [Congressman] Frank's effort to legalise online gambling is often presented as a way of correcting the protectionist aspects of the current gambling policy, which discriminates against foreign-based websites and has given rise to several trade complaints.
In a parallel discussion on the attempts by Jim Tabilio's Poker Voters of America to legalise intrastate online poker in California, the liklihood that domestic companies would have the inside track in any regulated environment also surfaced.
Tabilio referred to what he called the "political comfort level" among Californian legislators for a pooled liquidity online poker network run by an experienced single operator with no history of US legal exposure.
That could give GTECH, which has a track record as California's lottery provider and Svenska Spel experience, the edge over external challengers like Cyberarts, which has indicated an interest.
Tabilio recently told EGR: “They want to be able to do their regulatory due diligence on a daily basis. Also, having someone operating in California who has had access to US customers at any point, and therefore has been operating, in the view of the Federal and California DOJ, outside of the law, would create problems for legislators and regulators.”
Tabilio added that suppliers who had taken bets from US citizens might have problems passing a ‘fit and proper test’ as part of the licensing process.