...And The Congressman From Virginia Says 'I Call'

There's a lot of discussion these days about what governments, most notably ours here in the United States, are going to "do" about online gaming.

The issue of online gaming and its lack of recognition or regulation in many jurisdictions is quickly becoming a hot-button issue, and it appears the button may become hot enough to get some action.

House Reps Bob Goodlatte (R-VA) and Jim Leach (R-IA) have reintroduced the Internet Gambling Prohibition Act, an act that was soundly defeated when its predecessor was run up Capitol Hill. These bills have been finding their way onto lawmakers' desks since 1997. But while some of the different versions of this bill have passed the Senate over the years, none of them has made it out of the House of Representatives.

One fact makes the introduction of the bill this time around much more interesting. Since the last version of the bill was introduced, the US Government lost a decision in the World Trade Organization brought by the tiny island nation of Antigua. The US has until April 3rd to comply with the WTO ruling. The WTO ruling essentially said the US could not enforce the Wire Act in this case, and any enforcement of the Wire Act would violate Antigua's rights under prior trade treaties. Since the ruling, the US has taken no action toward compliance with the ruling, and indeed the only Internet gaming legislation introduced since the WTO ruling proposes the exact opposite of the ruling, a ban.

Early returns on this bill don't give it much of a chance, and even if it did pass, the WTO ruling could throw a roadblock into any action a passed bill would attempt to take.

Other nations around the world are taking interesting steps to try to control the Internet gaming "beast." On February 24th, Italy announced they were going to restrict access to Internet poker sites, only to announce the next day that it was OK to play on one site, in effect creating a single government-approved gaming site... at least for now. Sweden has done the same thing, allowing two Swedish gaming companies to build out a government-approved online poker site.

In a perfect world, we could model a system in the US after the U.K./European system, which is proven and clearly works. Under this system companies are licensed and regulated, and while often based in tax-friendly EU territories like Malta and Gibraltar, these companies happily comply with any and all regulatory requirements, as they are treated like any other internet related business.

The debate about the regulation of online gaming raises thoughts of a similar issue that surfaced in recent years—the illegal downloading of music and file sharing. In those cases, the content providers were standing side by side with the government, and interested in working with them on controlling Internet use in this way. In contrast, in this situation, the online gaming companies are clearly going to do everything they can to oppose any type of government control of Internet gaming, unless those controls are in the form of regulation, not prohibition.

The government and the online gaming industry really have some tough road ahead of them. Much of the current administration's conservative base will not go for blanket legalization and regulation of online gaming, despite the massive revenues regulation would bring to the US. The land-based US gaming companies are licking their chops at the thought of being able to brand their own online gaming sites, and legally take US customers. This fact may be the one real "wild card" the online gaming industry has to play in this game of ultra high stakes poker currently playing itself out behind closed doors.

Not surprisingly, it doesn't seem that the pressure from the international community has any affect on the US government's attitude toward online gaming. The US has had since April 7th 2005 to address the WTO ruling, and according to the ruling has about 3 ½ weeks left until it is supposed to be in compliance with the ruling. The government has taken no action that I have seen toward attempting to comply, and it appears this 'deadline' will pass without any action...which seems to boil down to the US government essentially thumbing its nose at the international trade community.

Which brings up a really interesting issue. If the US government is not interested in coming into compliance with an international trade ruling, what makes the government think the online gaming companies will comply with possible legislation "banning" online gaming? If the government blocked ISPs, how long do you think it would be until the online companies used things like proxy IP addresses to circumvent this? About 30 seconds. Would legislation prevent the bulk of users from playing? No.

This is a really big hand of poker being played, with a multibillion-dollar industry hanging in the balance. This particular hand of poker will, even in a best-case scenario, take years to get to the "river." I think we will see a few more raises and re-raises in this hand of poker. Eventually, the two parties will agree to some kind of 'chop'.

Let's get people from the online gaming industry and US political leaders into a room to discuss real solutions. We as an industry must be sensitive to the fact that the government is in a difficult position here. But by the same token, the government needs to realize that no amount of political pressure or technological barriers are going to get these billion-dollar offshore companies to fold their hands (and their tents) and give up on the US.

What an exciting and nervous time this is. Now, we wait to see if the Senator or Congressperson calls the next bet. Stay tuned.