Would Legalized Net Betting in Nevada Fly in Washington?

The Nevada Senate Judiciary Committee will meet Tuesday to discuss the future of a bill that could make online gambling a legal activity in that state.

Most insiders believe that the Senate will pass the bill, although one of its subsections has some novice legal eagles shaking their heads.

The section in question basically states that Nevada could legalize online gaming only if it was found to be in compliance with all federal laws, but gaming law expert Tony Cabot claims that the language will not stop Nevada from moving forward.

Questions have arisen within the industry because the federal government has done little to support the legalization of online gaming.

The government has prosecuted operators under a 1960s law, the Federal Wire Act, which made it illegal to transmit wagering information over "a wire communication facility designed for telephone and telegraph." Strict interpreters of the law claim that this definition includes the use of the Internet, but many supporters of online gambling disagree, arguing that Internet wasn't even around when the Wire Act was passed.

Cabot explains that while the clause in the Nevada bill may have sent a red flag up for some, it is standard in groundbreaking legislation.

"The question becomes what we can and can't do under federal law," he said. "Clearly they will be putting great deference to the opinion of the attorney general of the United States as to the application of the Federal Wire Act to this type of activity."

Using that guideline, it's unclear where online gambling stands legally on the federal level. Attorney General John Ashcroft has only been on the job for four months and has not publicly supported or opposed online gaming.

Cabot says that while the attorney general oftentimes can set the direction for the federal government on various issues, ultimately the courts will clear up any gray area.

"At some point, when you start getting appellate decisions they have more weight than the attorney general," he said.

Cabot says the federal regulation compliance section of the Nevada bill is necessary for Nevada to move forward with an assurance that no laws are being violated.

A federal case under appeal in Louisiana could provide regulators with the answers they're seeking. (The case, filed against MasterCard International and Visa International, involved the enforcement of debts incurred by players at Internet casino sites. It was dismissed, and according to Cabot, the ruling stands as precedence that the Wire Act does not encompass Internet gambling.)

"From a practical matter, I don't think the regulators from Nevada would be comfortable going forward unless they got an appellate decision saying the Federal Wire Act doesn't apply," he said. "Fortunately that Louisiana case was appealed and we will come to a very definitive answer to that question."

If the original decision is upheld, says Cabot, where Ashcroft stands on the issue would be irrelevant.

"The attorney general has got to follow the laws of the courts," he said. "If the appellate court holds that the Federal Wire Act doesn't apply to games of chance online, like the district court did, I assume the AG will abide by the decision of the courts."

Cabot has long said that the Wire Act cannot be applied to the Internet, but he admits his opinion may not be that important to the federal government.

"Ultimately the regulations have to be written in such a way that they are not in violation of any federal laws," Cabot said. "I have always said that the Wire Act doesn't apply to games of chance, but my opinion doesn't mean a whole lot when the attorney general is saying something different."

Cabot says that no hard date has been set for the appeal in Louisiana and that whether there will be oral hearings is up to the discretion of the court.

In the meantime Cabot will continue to lobby the Nevada legislature in hopes of getting the online gambling bill passed. He doesn't see the Senate changing the bill a great deal, mainly because it's in good shape.

"I don't see a lot changing in the Senate version," he said. "We are getting to the point where we are going to have a level of confidence that we can go forward on this."