April 8th, 2011
D.C. Bets Online Poker Is Lawful
The Wall Street Journal
Washington, D.C., is poised to become the first place in the U.S. to allow online poker, challenging the federal government’s effective ban on the practice in its own backyard.
The city council approved a budget last year allowing the district’s lottery to operate a poker website accessible only inside district boundaries. City officials say the window for Congress to raise objections to the law was due to expire Thursday, allowing it to take effect.
Opening the district to online gambling could make the nation’s capital the first test case for “intrastate” online poker, which allows only players within a state—or the district—to gamble on a site.
States including Florida, California and Nevada are also debating bills to implement intrastate gambling, in part as a way to raise revenue in the face of big budget deficits. The district estimates online gambling could bring in around $13 million over three years, beginning in 2012.
A similar measure was recently vetoed by New Jersey’s governor.
Those moves have come despite federal efforts to stop online gambling. A 2006 federal law bans financial companies from processing gambling transactions across state lines, and the Department of Justice has long taken the position that nearly all forms of online gambling are illegal.
Proponents of the intrastate approach say it should pass legal muster, in part because the federal government hasn’t raised objections to some lotteries offering gambling products for state residents online for the past few years. Proponents interpret that as a tacit endorsement of online gambling as long as it stays inside the state. The Justice Department hasn’t weighed in publicly on the state proposals and had no comment.
The district’s move also shows the growing role that lotteries are playing in states trying to introduce online gambling. Some states have taken early steps in that direction, including Minnesota and New York, which allow players to buy an online subscription for their state lotteries.
Online gambling services are essential for lotteries to keep pace with a younger generation of social media-oriented players, said Buddy Roogow, executive director of D.C. Lottery. The lottery’s sales have been declining for four years.
“It’s not the whole future, but it’s a very important part of it, if lotteries intend to continue to grow,” Mr. Roogow said of online gambling. “States need the revenue. And whether it’s the lottery or someone else, [online gambling is] going to be available anyway.”
The lottery hopes to have the poker system operating in a test run available in certain select spots, such as hotels, by the end of the year, Mr. Roogow said. It could still be stymied, however, if the technology to keep out people from outside the district proves ineffective, or if Congress takes additional action, he said.
For many lotteries, providing poker games online would require a change in law to allow lotteries to run card games. Historically, lotteries have been allowed to run random-numbers games but not “skill games” such as poker. In addition to poker, the district’s law would also allow the lottery to run a fantasy-sports site.