Senator Lesniak Response to Reid/Kyle Letter

25 July 2011


One good letter deserves another it seems and though it at least keeps online gambling in the forefront in Washington it seems the war between state and federal politicians about the topic is heating up. New Jersey Senator Ray Lesniak sent his own letter to Attorney General Holder last week disputing some of the facts from the Senator Reid and Kyle letter that was sent earlier last week.

Senator Lesniak got his intrastate online gambling bill through both legislative houses in New Jersey earlier this year before it was inevitably vetoed by the Governor. It is good to at least see online gambling being talked about in Washington again. Here is his letter in its entirety.

Dear Attorney General Holder,

As sponsor of legislation (S-490) to establish intrastate online gaming in New Jersey, I must correct the assertions, unsupported in fact or law, made by Senators Reid and Kyl in a letter to you dated July 14, 2011, that intrastate online gaming is illegal under federal law.

Were you to accept Sens. Reid and Kyl’s letter on its merits, you would have to prosecute the Nevada Gaming Board, which this year approved sports betting via mobile internet within the confines of the state of Nevada. Nevada has also approved other forms of internet and remote wagering on casino games, poker and sports within Nevada by firms like Las Vegas Sands and Station Casinos.

For that matter, New Jersey and 37 other states would also have to be prosecuted for permitting online wagering on horse races, which has existed for years.

Sen. Reid & Sen. Kyl’s letter claims that intrastate internet gambling would be illegal, “because activity over the internet inherently crosses state lines, implicating federal anti-gambling laws such as the Wire Act.”

Sen. Reid and Sen. Kyl are incorrect about the permissibility of intrastate internet gambling. Both voted for the passage of 31 U.S.C. § 5361 et seq., the Unlawful Internet Gambling Enforcement Act (UIGEA) of 2006. The text of the UIGEA is contemporary and clear. In it, Congress expressly permitted “intrastate” internet gambling:

(B) Intrastate transactions – The term “unlawful internet gambling” does not include placing, receiving, or otherwise transmitting a bet or wager where —

(I) age and location verification requirements reasonably designed to block access to minors and persons located out of such State; and

(II) appropriate data security standards to prevent unauthorized access by any person whose age and current location has not been verified in accordance with such State’s law or regulations; and

(III) the bet or wager does not violate any provision of —

(i) the Interstate Horseracing Act of 1978
(ii) chapter 178 (commonly known as the “Professional and Amateur Sports Protection Act”);
(iii) the Gambling Devices Transportation Act or
(iv) the Indian Gaming Regulatory Act

Also, Congress was clear that the intermediate routing of Internet traffic across state lines as part of the normal network management required by Internet service providers (ISPs) does not affect the permissibility of intrastate internet gambling:

“(E) INTERMEDIATE ROUTING— The intermediate routing of electronic data shall not determine the location or locations in which a bet or wager is initiated, received, or otherwise made.”

Further, the US 3rd Circuit Court o Appeals, in upholding UIGEA in a 2009 unanimous decision by a three-judge panel, made clear that it fell to the states to determine the legal status of internet gambling within their borders:
“Whether the transaction…constitutes unlawful internet gambling turns on how the law of the state from which the bettor initiates the bet would treat that bet, i.e. if it is illegal under that state’s law, it constitutes “unlawful internet gambling” under the Act.”; Judge Dolores Sloviter, (iMEGA v. Holder, et al; US 3rd Circuit no. 08-198)

As such, despite the claims made by Sen. Reid and Sen. Kyl, the intrastate internet gambling permitted under UIGEA does not violate 18 USC § 1081-1084 – the “Wire Act of 1961”, nor is it included in Congress’ recitation of applicable federal laws above.

Indeed, the federal Wire Act was intended to punish criminal enterprises utilizing “telecommunications” to facilitate interstate sports wagering. The Act was not intended to prohibit state-licensed and regulated operations like those permitted under UIGEA.

Nor is there any Federal prohibition against internet gambling contained within UIGEA, as Judge Sloviter acknowledged in iMEGA v Holder, et al (“It bears repeating that the Act itself does not make any gambling activity illegal”).

Although Governor Christie vetoed S-490, his veto message focused on concerns having nothing to do with federal law. I will address the governor’s concerns in legislation which will be introduced when the legislature reconvenes for a full session later this year.

Intrastate internet gaming will produce more than $100 million in net revenues for our casinos in Atlantic City, reversing its declining profitability and creating hundreds of high-paying, high-tech jobs in an area suffering from high unemployment. It will also boost state revenues by tens of millions.

The State of New Jersey should not be impeded in any manner from exercising our rights under our state constitution and under federal law, Senator Reid and Kyl’s letter notwithstanding.

Senator Raymond J. Lesniak
New Jersey State Legislature
20th Legislative District

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