GPWA Times - Issue 21 - May 2012

COVER STORY merated to the federal government automati- cally devolve to the states and the people.” The English translation of that is that the DOJ has no more business telling the states what their gambling policy should be than it does dictating the color of state flags. VN: So the states were always in a position to do this, then. They just were cowed by the DOJ, essentially? OWENS: Well, it’s a political calculation, es- pecially when election years roll around. Who wants to lock horns with Uncle Sam? The DOJ people are just taking advantage of that posi- tion they had. But as far as their legal justifica- tion, you saw what they had to do, and I always maintained that they were going to have to do this someday. They had to climb down off that high horse, because there’s no support in the statutory language, there’s no support in the case law. VN: We’ve got an election coming up. Is there the potential for the DOJ, under a new admin- istration, to go back and issue a new opinion? Even though it’s not a court, the Office of Legal Counsel changing their mind, saying, “Yeah, what we said before, just forget about that.” OWENS: This is something that I have sadly noted over the years. We are more and more getting away from precedent and the rule of law, and simply going to governing and ruling the country by administrative fiat. The phrase that is beginning to be bandied about is “post- Constitutional America,” and I very much re- gret to say that much of what I see pushes me to agree with that. VN: So in the post-Constitutional era, online gaming is coming because the states want it? OWENS: It’s already here. Thirty-two of the 50 states already employ some sort of Internet service to help with their horse bets. Illinois just legalized its state lottery to go on- line; other states are sure to follow. Just yes- terday a bill cleared California’s Government Operations Committee to legalize sports bet- ting in California, which is perhaps a blowback from the Christmas present, because such a law would mean a head-on collision with the DOJ policy and PASPA (Professional and Amateur Sports Protection Act), of course. VN: And that would make two states that have a head-on collision with the DOJ and PASPA (New Jersey is the other). Realistically, what are the chances of overturning PASPA? What’s the legal argument to overturn PASPA, and what’s the likelihood it happens? OWENS: First of all, the likelihood is low be- cause of sheer inertia. Governments are not in the habit of reversing themselves. PASPA itself is a preposterous notion that the purity of ama- teur and professional sports must be protected from wicked gambling. But at the same time they grandfathered four states in to allow them to keep sports-based gambling programs of various types. Nevada was the big winner there, no surprise. It’s silly to say that it’s a moral and upstanding thing to place a bet on the Super Bowl in Reno, but if you go over to Salt Lake City, it’s a threat to society. And it’s unconsti- tutional on a dozen scores. First of all it gives the sports leagues the right to sue states, which is against the 11th Amendment. It’s against the 5th Amendment because it doesn’t even really define what it’s supposed to be forbidding. It’s the old “We know it when we see it” argument. Even the Clinton administration filed a brief against that law. Now when Bill Clinton says you’ve gone too far, by God you’ve gone too far. VN: Let’s spin this forward two years, five years, 10 years. What is the state of online gam- ing beyond lotteries and horse racing, so casino and poker products. What is the state of online gaming in the U.S., two years, five years, 10 years from now? OWENS: There is going to be online gam- ing. Lots of it. Billions of dollars worth. The only question is do the states want to go ahead and get their piece of it. Because it’s not going to wait for them. And this is something that our regulators and legislators [can’t] get their heads around. This is a global market that has come into existence and grown up without them. In fact, online gambling started at zero in 1995, [and] it has reached $30 billion this year in the teeth of everything the authorities on four continents could throw at it. So I think that what they need to do, if they’re serious about getting this revenue that they keep talk- ing about, is follow the same successful path they’ve already used for lotteries, that they’ve already used for simulcast horse racing. There are interstate regimes letting the wagers and lottery tickets cross state lines. They’ve been doing it for decades. VN: The U.S. unilaterally withdrew its gam- bling schedule from GATS. Given the fact that individual states are going to be licens- ing and offering online gaming, does the WTO treaty come into play again? Or is the fact that the schedule has been withdrawn make it a moot point? OWENS: To borrow a phrase from Joseph Stalin – “WTO? How many divisions do they have?’” VN: Fair enough. The exit question: I sat through that California hearing yesterday, watching the tribes argue and discuss what they wanted for online gaming. I’m sure you sat through and watched it too. What were you thinking as you were watching what you saw on stage? And what do you see for the future for online gaming in California? OWENS: There is going to be online gaming in California, whether you want it or not, whether you like it or not. The only question is whether the Indians or the state authorities are going to assert a position there. They can argue all they like. If I was somebody over there in one of the gray or pirate jurisdictions, I’d be laughing all the way to the bank. Let them kick each other in the shins – it’s fun to watch and it’s no money out of my pocket. Martin Owens is a California attorney special- izing in the law of Internet and interactive gaming and related issues, serving clients worldwide since 1998. He co-authored Internet Gaming Law with Professor Nelson Rose, America’s senior authority on gambling law (Mary Ann Liebert Publishers, second edition 2009), as well as numerous other articles. He is an Associate Editor for Gaming Law Review and Economics magazine and a regular contributor to The Sports Network and assorted other gaming publications. Comments and inqui- ries welcome at to mowens@trade-attorney.com . Where to now in the U.S. – and who’s driving ?