Internet gaming issue tossed to lawmakers

Tuesday, Dec. 3, 2002 | 11:18 a.m.

The potential legalization of intrastate Internet gambling in Nevada may be delayed or even rejected because the state Gaming Control Board wants input from the Legislature when lawmakers meet in February.

A legislative review of the issue could delay the possibility of legalizing in-state, interactive gambling for Nevada residents until at least mid-summer, a top regulator said Monday.

"We want to put information together so that when the Legislature meets in February, we can report to them what we found, make any recommendations and allow the Legislature to at least consider whether or not we want to go forward with this," Control Board member Scott Scherer said.

That information would also include court decisions such as a recent decision by a federal appeals court in Louisiana to uphold a dismissal of a class-action lawsuit by people who lost money in Web casinos, he said.

Last year, the Legislature adopted rules allowing the Gaming Control Board to explore drafting regulations that would legalize Internet gambling in Nevada for a worldwide audience. The board set out to consider whether Internet gambling systems could satisfy existing state and federal laws related to gambling, such as preventing minors from accessing Web casinos.

The Legislature and the board viewed Internet gambling as a way to broaden the tax base for the state's casino industry by extending its reach and promoting Nevada as a preeminent gambling destination.

But a letter from the federal government this year prompted the board to change course. In August, the U.S. Justice Department sent a letter to Control Board Chairman Dennis Neilander stating its belief that interstate gambling over telephone lines is illegal under federal law. The board then initiated a series of public discussions about whether to move forward with regulations that could legalize in-state, interactive forms of gambling by Nevada residents only.

The Board could theoretically adopt rules for in-state gambling without violating federal law, Scherer said. Still, he said, such systems open up a host of new policy questions that the Legislature didn't specifically address when the original bill was adopted.

"Some have argued that if we allow people to gamble from their homes, it will take money away from bricks and mortar casinos ... but it may create new jobs, companies may build new facilities here. It's really about (striking) a balance. That's a legislative issue," Scherer said.

The Legislature may decide to pass new guidelines with updated information or may keep the existing law on the books, he said. The original legislation included a definition of Internet gambling that was broad enough to include in-state betting. But the legislation instead focused on worldwide Internet gambling, he added.

The news comes amid an escalating debate on whether to legalize or explicitly outlaw Internet gambling, with both supporters and opponents offering louder arguments.

Supporters say legalization is the only way to keep profits and tax revenue close to home while offering some protections to consumers now funnelling millions of dollars to illegal "offshore" betting sites.

Private Internet networks, otherwise known as "closed-loop" systems, would satisfy legal requirements by allowing only certain people to enter the systems to gamble, they say.

That argument was raised two weeks ago at a Nevada Gaming Commission meeting, with several companies presenting interactive systems to state regulators for the first time.

Among those present were representatives from tech giants Motorola, NexTel and Orbis Technology Ltd., a London-based company that has designed Internet gambling technology for major Web casinos including an MGM MIRAGE site for foreign gamblers.

"They are stepping forward now because they know where things are going legally," said Richard Fitzpatrick, chief executive of the Interactive Gaming Institute of Nevada, a nonprofit group that assists startup companies and lobbies government agencies.

Opponents, including longtime Internet gambling foe Sen. Harry Reid of Nevada, say the freedom and pervasiveness of online gambling make it virtually impossible to regulate.

Reid expects to continue to push for a ban on Internet gambling next year, joining other lawmakers, consumer advocates and religious groups.

Though several bills to ban or curb Internet gambling have failed in past sessions of Congress, Reid said he believes sentiment is shifting.

"Whether it's enough (for a ban) I don't know," Reid said.

Reid said he remains opposed to any form of Internet gambling, even systems that could be limited to residents in Nevada.

Supporters are rallying behind a bill introduced last month by Rep. John Conyers, D-Mich., that would establish a commission to study the feasibility of regulating Internet gambling on a state and federal level. The bill, which will be re-introduced next year, aims to bridge what appears to be a widening gap between the two factions. Still, Conyers has publicly stated that he favors legalization to prohibition.

Meanwhile, companies are busy introducing interactive gambling devices that some say could open the door to Internet betting.

They include kiosks and other devices that let people gamble anywhere on the casino floor.

Last month, state regulators approved a concept for a sports betting kiosk that would allow gamblers to place bets elsewhere on the casino floor and after sports books have closed for the night, for example.

Letting people gamble outside of the casino environment and from the privacy of their hotel rooms or homes goes a step further, Control Board member Scherer said.

Such systems raise concerns about underage gambling and how business would effect existing casinos, he said.

If legalized, Internet casinos in Nevada may operate on some kind of private network or closed-loop system -- rather than the World Wide Web -- to limit bets within Nevada and monitor gamblers, he said.