|June 5, 2001 |
Nevada Approves Online Gambling
By MATT RICHTEL
The Nevada Legislature voted yesterday to authorize regulators to license casinos to offer gambling over the Internet, the first time a state has moved to legalize the potentially lucrative but highly controversial business of online gambling.
The Legislature passed the bill on the last day of its every-two-year session, despite objections by some state senators who said it would permit only big, politically powerful casino corporations to participate. A spokesman for Gov. Kenny Guinn said he supported the idea of Internet gambling but would not make a decision about signing the bill until he had read it in its final form.
Even if he does approve, it is far from clear when Las Vegas's most powerful casinos will be able to offer gambling over the Internet, or to whom they will be able to offer it. Federal law enforcement officials say operation of an Internet casino is illegal under the Wire Act, but legal experts say it is not clear whether the courts concur with that interpretation, and, as a result, whether casinos will need to seek a change in federal law.
The casinos also must satisfy regulators that they have technology to prevent bets from being placed by minors or by anyone living in a jurisdiction where gambling is illegal, which currently includes most states.
If the Nevada Gaming Commission finds those criteria are met, it would have the power to "adopt regulations governing the licensing and operation of interactive gaming." Industry observers said that while the bill authorized regulators to license casinos, it did not legalize gambling immediately. It would, however, effectively legalize it in the future — a major victory for casinos that advocate online gaming.
"This is a very big step," said Anthony Cabot, a gambling law expert and partner in the law firm of Lionel, Sawyer & Collins, which represents some of Nevada's largest casinos. "There is no doubt that interactive gambling will be authorized."
If and when they are able to participate, Nevada's casinos will enter an already booming market. According to Bear Stearns, Internet users worldwide wagered $1.4 billion online last year on casino games, lotteries, horse races and other sports events — a figure that the investment banking firm expects to grow to $5 billion by 2003.
Some Nevada legislators say only the largest casinos will be able to benefit, however. The bill is written to ensure that the only casinos eligible to get a license are those with an established — and resort-size — physical presence in the state. To get a license, applicants must pay $500,000 for the first two years, and $250,000 a year thereafter.
"That would have been like saying five years ago, `only bricks-and-mortar bookstores can sell books over the Internet,' " said Senator Terry Care, who was on the losing side of yesterday's 17-to-4 vote in the Senate. "What would that have meant for Amazon?"
Mr. Care had hoped to offer an amendment to open the prospect of online gambling to any entity in the state with an unrestricted gambling license. But his was one of several amendments that was never introduced because of a parliamentary maneuver.
In recent weeks, a similar bill was tabled after it became clear that amendments would be offered by several legislators, including Senator Joe Neal, a longtime antagonist of the gambling industry who hoped to amend the bill to increase the gambling tax from 6.25 percent.
To get around the tax question — and the high-profile debate about taxes that it would have entailed — proponents of Internet gambling tacked the legislation as a rider onto a peripheral bill about the work card system for casino employees, said Senator Dina Titus, a Democrat from Las Vegas.
Ms. Titus, who voted against the bill, said she objected to the political maneuvering but she said she supported the idea of Internet gambling. She said the rationale behind permitting only large casinos to participate was the belief that they might be best able to "operate at this level" and would have the "capability and money to back up" the regulations.
Las Vegas's casinos are not united in their desire to move onto the Internet. Until recently, in fact, many of them advocated keeping online gambling illegal as a way of trying to kill competition from overseas. Several of the biggest casinos have, however, advocated legalizing Internet gambling, with the companies' executives asserting that since there is no way to stop people from gambling on the Internet, American companies should be allowed to compete.