Politics of US gambling makes for odd bedfellows

29 May 2006

Politics of US gambling makes for odd bedfellows
By Edward Alden in Washington
Published: May 26 2006 22:36 | Last updated: May 26 2006 22:36
Financial Times

Of the 50 states in the US, in only two – Utah and Hawaii – is it impossible to find a place to gamble legally.

Casinos dot America’s landscape, from the neon palaces of Las Vegas to some 400 more modest facilities on Indian reservations. In 2004, Americans paid more than 300m visits to them – nearly twice the figure of just five years previously.

And that figure takes no account of the public’s enthusiasm for the government-sponsored lotteries in every state, or gambling on sporting events.

Despite the extraordinary popularity of legal gambling, for the past decade a determined band of Republican conservatives has tried to ban Americans from participating in the fastest-growing segment of the market – online gambling.

The House judiciary committee on Thursday approved legislation that would in effect outlaw most forms of internet gambling by barring US banks from processing financial transactions involving online gaming. It was the latest in an effort dating back to 1995, when the first online gambling site was launched. So far it has come up short, but that has failed to deter its supporters. The legislation is likely to be passed by the House of Representatives next month, though so far there is no movement on a companion Senate bill and the prospects for approval this year appear slim.

But with US gamblers estimated to account for about half of the roughly $12bn (€9.4bn) global internet gaming market, and that market expected to double by 2010, the congressional efforts are still being watched closely around the world.

According to the Justice Department’s interpretation, Americans are already barred from gambling online by a 1961 law that prohibits betting over telephone lines. But prosecutions under the law have been rare, and the courts have been divided over the whether the 1961 law applies to the internet. The proposed congressional legislation would make this clear by barring US banks from processing financial transactions related to most forms of online gambling.

The issue has thrown up odd coalitions in Washington. Most of the push has come from a variety of Christian conservative groups. They are opposed to all forms of gambling but in particular they are concerned that it has come right into American homes through computers, where it may be easily accessible to children.

Robert Goodlatte, the Republican author of the latest legislation, says online gambling sites, which operate from the Caribbean and other offshore locations, “suck billions of dollars per year out of the US economy, serve as a vehicle for money laundering, undermine families and threaten the ability of states to enact and enforce their own laws”.

The bill has also received support from powerful interests that want to avoid being tainted by gambling, including professional and university sports associations and the big banks.

But their opponents are wealthy and determined. A new cadre of millionaire poker players, made famous by the World Series of Poker and other televised poker games, formed a coalition this year to fight the legislation.

Michael Bolcerek, president of the Poker Players Alliance, calls the opponents of internet gambling “the morality police”, saying that the business has matured and is regulating itself to avoid abuses such as gambling by minors. The PPA, and the online gambling industry, is pushing instead for laws that would legalise and regulate the business. “They’ve passed legislation in the UK to regulate gambling, and we should take a cue from the British,” says Mr Bolcerek.

Huge casino companies such as MGM Mirage and Harrah’s have recently backed that stance. While the American Gaming Association, which represents the big casinos, has remained technically neutral on the House bill, it favours launching a study that would examine whether legalisation and regulation of online gambling in the US would curb abuses and generate new tax revenues.

Opponents of the bill are optimistic that they can again defeat it, as they have every effort over the past decade.

But there is one wild card: Jack Abramoff.

Among the many sordid accomplishments of the Republican super-lobbyist, who in January pleaded guilty to conspiracy, fraud and tax evasion in relation to a broad influence-peddling scheme, was his key role in blocking similar gambling legislation in 2000. On behalf of a client, eLottery, which wanted to sell lottery tickets online, he recruited the top aide to former Republican leader Tom DeLay and others to help quash the bill.

Supporters of the bill are hoping that the revulsion over Mr Abramoff’s illegal gifts to lawmakers and aides will help trigger a backlash that could see the gambling bill finally win passage. But Mr Bolcerek of the Poker Players Alliance says that would be an ironic outcome: among the many carve-outs in the legislation, it would permit online betting on state lotteries, exactly the exemption the lobbyist’s client was seeking. “This isn’t an anti-Abramoff bill at all,” he says.

The $3.6bn casino complex, which will include convention and performance halls, shopping malls, a museum and a 2,500-room luxury hotel, is the centrepiece of plans to create a business and entertainment district around the city-state’s Marina Bay.

THE TWO-HANDED PROTAGONIST

FRANK FAHRENKOPF

Frank Fahrenkopf, president and chief executive of the American Gaming Association, is regarded as one of the best connected and most effective Republican lobbyists in Washington. He served as chairman of the Republican party for six of the eight years when Ronald Reagan was president, making him the second-longest serving chairman in the party’s history. A Nevada native, Mr Fahrenkopf has represented the big casino companies such as MGM and Harrah’s since 1995, overseeing the fastest expansion of casino gambling in US history. According to the National Journal, he was paid $1.25m (£674,000) in compensation by the AGA last year, making him the 23rd highest paid lobbyist in Washington

JAMES DOBSON

James Dobson, chairman and founder of Focus on the Family, is among the prominent Christian conservatives backing efforts to ban Americans from online gambling. The group says that legalised gambling has fed a rise in divorce, suicide, bankruptcy, child abuse and domestic violence. While most Christian conservative groups still support the Goodlatte bill, many have been annoyed by the broad carve-outs

Financial Times

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