NCLGS Reconsiders Stance on Internet Gambling

BOSTON -- The National Council of Legislators from Gaming States (NCLGS) took a position against Internet gambling in the late 1990's, fearing that online gaming would take the ability to control gambling away from states. The organization may reevaluate that position after holding a hearing on the issue at its summer meeting in Boston just over a week ago.

Current legislative efforts in the U.S. Congress, such as Rep. Bob Goodlatte's (R-Va.) Internet Gambling Prohibition Act, have brought Internet gambling issues into the national spotlight, leading NCLGS to begin the process of reviewing its current position.

"Some people have suggested that there is now sufficient technology to ensure that states would be able to control what types of gambling are legal in their states," said Florida State Sen. Steven Geller, President of NCLGS. "If that is accurate, that is a whole new ballgame for us."

Bill White, the CEO of Global Cyber LLC, claimed his company has developed technology that will "perfectly regulate Internet gambling."

"If regulated, Internet gambling would essentially be the same as gambling at a casino," White said, comparing the experience to seeing a DVD at home instead of going to a movie theatre.

White plans to use his software to create an intrastate Internet gambling model. The system would verify the position of Internet gamblers by use of GPS. People outside a state's borders would not be allowed to purchase lottery tickets, play poker or place wagers in at online gambling sites licensed by that state.

Mark Hichar, an attorney for the Rhode Island partnership of Edwards, Agnell, Palmer & Dodge, questioned whether White's technology would keep all "data packets" within state borders, or if information might travel through cyberspace outside of state borders. When White admitted that his system did not account for the exact location of all data at all times, Hichar pointed out that this system would not be legal under the Goodlatte bill, as information could travel outside of state borders even though both the operation and the user would stay within the state.

"I think he's got a steep curve to prove to us that what he's saying is accurate, doable, non-hackable, etc.," Geller said. "But if he's able to prove all those things, that would at a minimum cause us to certainly give a lot more weight to reexamining, though not necessarily changing (our position)."

While the idea sounds promising for states that might like to regulate Internet gambling, there are a number of questions about the efficacy and the legality of the system. One year ago, the U.S. Supreme Court ruled that states could not discriminate between in-state and out-of-state Internet wine sales under the Commerce Clause in Granholm vs. Heald.

"Time and again this Court has held that, in all but the narrowest of circumstances, state laws violate the Commerce Clause if they mandate 'differential treatment of in-state and out-of-state economic interests that benefit the former and burdens the latter,'" Justice Anthony Kennedy wrote for the majority in the decision.

Should individual states move to regulate certain Internet gambling activities, such as lottery ticket sales, casino games, or poker, it is uncertain whether the same opinion would apply. However, out-of-state residents are currently allowed to participate in any gaming activity currently regulated by individual states. The question is, would out-of-state residents be afforded the same opportunity on the Internet.

Internet poker adds another challenge to the possibility of intrastate gaming, as offshore sites offer networks with tens of thousands of players. States with small or medium populations would likely have a hard time sustaining a poker network on their own.

"I don't believe there's any practical way of saying 'We will permit this only for residents of Delaware,'" Geller said. "The interstate commerce issues raised by the California wine growers could end up invalidating the technology that Mr. White has come up with."

Even if NCLGS shifts its position and if states begin to investigate ways to regulate Internet gambling, the industry would still face a number of legislative and legal challenges. Geller points out that the Supreme Court's decision in Granholm vs. Heald does not mean the court would rule similarly in a case on Internet gambling, especially since the decision was a 5-4 vote.

NCLGS members will review testimony and do further research before reopening the discussion at the next meeting in January in Duck Key, Fla.

In his previous life, Aaron Todd was a sports journalist by day and a poker player by night. He can now be found covering the poker beat for Casino City and making horrendously unsuccessful bluffs in his home game. Write to Aaron at aarontodd@casinocity.com.