GPWA Times Magazine - Issue 19 - February 2012

COVER STORY The U.S. market: out of many, one — or every state for itself? News Analysis by Vin Narayanan T wo days before Christmas, the U.S. De- partment of Justice (DOJ) reversed its stance on online gaming and said indi- vidual stateshad the authority to license and regu- latenon-sportsrelatedintrastateonlinegambling. Intrastate online gambling means the gambling has to be confined within an individual state’s borders. So poker players living in Nevada can only play with other poker players living in Nevada. Or people in New York can only buy New York lottery tickets online. They can’t buy Illinois lottery tickets as well. If no action is taken by the U.S. Congress, it means that the American online gaming mar- ketplace will be remarkably similar to the rap- idly fracturing European market, with 50 differ- ent states (51 if Washington, D.C. is included) setting their own rules, regulations and laws – much like how individual European countries are rejecting a harmonized market in favor of nation-by-nation regulation. The legal opinion issued by the DOJ came in re- sponse to inquiries from New York and Illinois about online lottery sales and a letter written by Senate Majority Leader Harry Reid (D-Nev.) and Sen. Jon Kyl (R-Ariz.) asking for clarifica- tion on the legality of online gaming. For years, the DOJ had maintained the Wire Act prohibited all forms of online gambling. But in a letter written to Reid and Kyl, the DOJ an- nounced it was adjusting its position after its Office of Legal Counsel (OLC) reviewed the law. “The Wire Act only applies to the transmission of bets or information assisting in the placing of bets or wagers relating to sporting events or contests,” wrote Assistant Attorney General Ronald Weich. “Since state lotteries conducted by New York and Illinois do not relate to sporting events, OLC concluded that the operation of these lotteries would not violate [the law],” Weich added. Fractured Markets The one-market dream for the U.S. and Europe is shattered Six industry experts look at what happened – and what’s next B alkanization – that old term we learned in history class when we were kids – comes to mind once again when sizing up what’s been going on recently in online gaming. The European Union caves in to the local interests of each member state at every crossroads. In the U.K., tax and regulatory changes are on the way. And in the U.S., the Department of Justice ruled just before Christmas that individual states – all 50 of them (plus the District of Columbia) – could license and regulate non-sports related online gambling. What does this mean for the industry? Read on! A Present from the DoJ: Internet Lotteries (and Poker?) Are Legal