Law gets murky as gaming grows

Rick Alm

Tuesday, Sept. 21, 1999 | 11:47 a.m.

Industry lines are starting to blur as legalized gambling spreads.

Marriages of tribal and corporate casinos, slot machines and racetracks, the Internet and everybody come at a time when the nation's gambling laws have never been murkier or more misunderstood.

State and federal lawmakers' plates are heaped with hot-potato gambling issues, and none is hotter for Congress than deciding whether to ignore, regulate or outlaw the explosion of Internet gambling.

Federal lawmakers also soon must sort out the muddled state of American Indian gambling, which has pitted tribes desperate for casino revenue against state governments resistant to gambling.

Both topics were discussed last week at the World Gaming Congress convention in Las Vegas; and in the National Gambling Impact Study Commission report, which was issued in June.

The commission, after spending $5 million and two years researching the state of gambling in America, cooked up a casserole of 76 recommendations that ranged from criminalization of Internet gambling to the need for more research and public education.

But it did not answer the big question of whether America's infatuation with wagering had become a malignant obsession.

Instead it called for a nationwide "pause" in gambling expansion while states and gambling-host communities conduct their own economic- and social-impact studies and then reach their own hard decisions on whether to expand, contract or even abolish regional gambling activity.

That was hardly what the gambling industry -- or its opponents -- wanted to hear.

"People are taking whatever they want out of it to advance their own position," said Rick Hill, chairman of the National Indian Gaming Association, which represents 168 of the 195 U.S. tribes that offer legal casino or bingo gambling.

Even one of the commission's own members acknowledges a lack of interest by the American public and the news media.

"I think the report will disappear," J. Terrence Lanni, chairman and chief executive of MGM Grand Inc., said last week in remarks to delegates at the international gambling industry's largest annual trade show.

But at its heart, Lanni added, the commission's work did reflect the mood of the American public -- compassion for addicted gamblers but a demand for legalized gambling.

Even if the report fades away, those paramount issues will not. As wagering becomes ever more widespread, Congress must resolve the profound issue of Internet gambling and the politically touchy matter of tribal gambling. More than 30 nations, mostly in the Third World, license and tax online gambling enterprises that operate through 700 sites on the World Wide Web. The number grows almost daily.

At the moment, however, the most watched developments are in Australia, which recently permitted its states and territories to individually license and regulate sports and racetrack betting on the Internet.

U.S. gamblers are beginning to discover these legal bookies Down Under who gladly accept wagers from anywhere in the world -- seemingly daring legal retaliation from Uncle Sam.

In fact, sports book American Wagering Inc. of Las Vegas holds one of the Australian licenses. American is the only online Australian operator not accepting U.S. bets, but only because that action could jeopardize its U.S. licenses.

That doesn't bother American's CEO, Vic Salerno, who said he was convinced that his company had taken the Internet plunge in the right nation and at the right time.

And if the United States never joins the global cyber party, Salerno said, so what? "There's enough money left out there outside of the United States," he said.

Robust international betting on events such as World Cup soccer, Formula I auto racing, cricket and rugby "makes the NFL (sports books) look like child's play," he said.

Brian Gordon, an Australian territorial government gambling regulator, predicted at one World Gaming Congress seminar last week that Australian regulatory and consumer protection statutes would become the model as other rich nations, one by one, accept the inevitability of worldwide cyber gambling.

Meanwhile, the First World's foremost society debates whether to ban Internet gambling and almost certainly usher in a new Prohibition era -- this time featuring bootleg e-commerce sports bookies and slot machines.

Current U.S. law on gambling by "wire" communications was written in the 1960s, tying the hands of federal prosecutors with statutes that never imagined the legal complexities of offshore cyber casinos and bookies with toll-free phone lines, and bank accounts that can afford huge U.S. advertising budgets and platoons of silk-tie lawyers.

Sen. Jon Kyl, a Republican from Arizona, for two years has been pushing for outright prohibition of such high-tech gambling, and his Senate Bill 692 is heading toward a floor vote this fall. House action is not expected until 2000.

Republican Sen. Kit Bond of Missouri is a co-sponsor of the Kyl bill.

In a recent interview, Bond spokesman Dan Hubbard acknowledged the technological challenge of enforcing a nationwide ban.

"But that's no reason to throw up your hands," he said.

Bond has concerns about the spread of gambling that defies international boundaries.

"Most of these are based offshore," Hubbard said. "You can't regulate it."

Earlier failed versions of the Kyl bill would have made criminals of Internet casino executives and their customers. In the latest version the public is let off the hook, as are fantasy-sports players and some pari-mutuel wagering operations.

The national commission bolstered Kyl with its own call for a ban, criminal prosecution and even diplomatic pressure from the United States on nations that "harbor Internet gambling organizations that prey on U.S. citizens."

The problem is enforcement.

"I have serious doubts the Internet can be controlled by the federal government," Lanni said.

One idea out there would make cyber-gambling police of the U.S. banking industry, whose plastic accounts are the currency of choice for many in the online betting industry.

Barring the use of U.S. credit cards for Internet wagering would certainly put a damper on casual gamblers, but such legislation could be difficult to pass and would be a nightmare for the banking industry to implement.

And for serious gamblers, there still would be many ways around a credit block -- money orders and Australian or European bank-issued credit cards, for instance.

Domestically, commercial casino companies such as Station Casinos Inc. of Las Vegas are aggressively positioning themselves for the cyber-gambling era by teaming up with online operators.

Indian tribes are in court fighting for the right to establish multistate bingo, lottery and casino games that offer big jackpots. One such tribal Internet lottery case is scheduled to be argued Thursday in a Kansas City federal courtroom.

"It's so un-American to back away from a challenge," said Jacob L. Coin, executive director of the tribal gaming association.

"They (in Congress) fear the Internet because they don't understand it. So they are just going to ban it ... run and hide.

"Let's look to what Australia is doing. Let's learn from them. Let's find a way to benefit from it."

Bowing to a court ruling, Congress in 1988 laid out a statutory framework allowing American Indian tribes to offer high-stakes bingo games and casino-style gambling on their historic reservation lands.

In the decade since, almost no one is satisfied with how those laws have played out. A congressional revision of the law seems inevitable in the next year or so.

The problems are tangled ones.

Few states receive taxes or significant revenue from what has blossomed into an $8 billion-a-year industry.

The states' regulatory role is often minimal. Worse, governors -- Kansas' Bill Graves among them -- increasingly argue that states' rights have been trampled in a headlong rush to nurture needy tribes with this "new buffalo" of tribal sustenance.

The tribes, meanwhile, interpret assertion of states' rights as an assault on their sovereignty as legally independent nations.

That stance irritates the commercial casino industry, which competes with the tribes but must pay taxes and conform to tight state regulation.

By and large, each tribe regulates itself in conformance with broad federal rules that demand very little public accountability.

"Native American tribes need to be a little less geared to using sovereignty to protect themselves," said MGM's Lanni.

"They should have to disclose information like the rest of us. Native Americans should come into the (gaming industry) mainstream."

Such talk also rankles.

"Tribes feel under attack," Coin said. "Instead of applauding the early successes of Indian gaming, there are those who are trying to undermine it."

The bottom line, Coin said, "is that the quality of life on tribal reservations is improving" solely because of gambling dollars.

Tribal law expert and Minnesota lawyer Tom Foley told World Gaming Congress delegates that Indian gambling was entering a new era.

"This is a game of politics now," he said. "Tremendous dollars are at stake."

The commercial casino industry and state officials will push Congress to level the playing field with tribal gambling.

The tribes will resist.

Coin stated the tribes' case eloquently last week in Las Vegas in remarks that defiantly recalled centuries of injustice:

"When our children are as healthy as yours, when our futures are as bright as yours, then we can talk about a level playing field."

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