05-Jul-2009
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New Jersey: A State Prepared to Study Internet Gaming? |
New Jersey: A State Prepared to Study Internet Gaming?
By Frank Catania and Keith Furlong | |
Frank Catania is an attorney and principal in Catania Consulting Group, Inc. of New Jersey, a consulting firm with extensive experience in gaming issues. He is a former Assistant Attorney General and Director of the New Jersey Division of Gaming Enforcement, the regulatory and enforcement agency responsible for maintaining integrity and trust in all Atlantic City gaming operation. He currently serves as Chair of the International Masters of Gaming Law, has previously served as chair and vice chair of the International Association of Gaming Regulators, and was a co-founder and past Chair of the Forum of American Casino Regulators. | | | | Keith Furlong is the vice-president of the Catania Consulting Group, Inc. and serves as the deputy director of the Interactive Gaming Council, a non-profit trade association that promotes fair and honest online gaming. He is a former public information officer and legislative liaison with the New Jersey Division of Gaming Enforcement. | |
Legislators, Regulators, and Policymakers from all over the world are struggling with the challenges of new technologies; and, Internet gaming is one component of Internet commerce that has drawn a lot of attention. Anthony Impreveduto was introduced to the controversial issues surrounding Internet gaming over two years ago. Mr. Impreveduto, a New Jersey Assemblyman, quickly learned that New Jersey residents were already playing casino games online and that a minority of Internet gaming operators, also known as fly-by-night operators, had no desire to play fair with these players. After careful analysis, Mr. Impreveduto decided to draft legislation to legalize and regulate an industry that historically had flourished in an environment with little, if any, regulatory oversight throughout the world.
While the original New Jersey legislation, A-3150, introduced by Assemblyman Impreveduto fell victim to the politics of bills sponsored by the minority party in an election year, Assemblyman Impreveduto, now in the majority party in NJ, has backed a bill introduced with Assemblyman Gary Guear, Chairmen of the NJ Assembly Tourism and Gaming Committee, to present a new approach to Internet gaming: The establishment of an Internet Gambling Study Commission.
In early December 2002, Assemblymen Guear and Impreveduto introduced an Assembly Resolution AJR51, with a companion resolution introduced in the Senate as SJR52 (Senator Joe Palaia). Internet gaming regulation advocates remember their excitement when Nevada passed legislation to potentially regulate Internet gaming, but unfortunately the momentum from Nevada was slowed significantly when the U.S. Department of Justice (DOJ) wrote to Nevada officials stating that Internet gaming was a violation of Federal Law as interrupted by DOJ attorneys. And here is where the legal quagmire begins: The Department of Justice has contended, despite strong opposition, that Internet gaming is a violation of the Wire Act, and as such is already an illegal activity. In February 2001, however, a federal court in Louisiana in a class action lawsuit against credit card companies brought by gamers who lost monies while wagering at Internet casinos rejected the plaintiffs’ claims for various reasons. Included in the determination was the finding that “Internet gambling on a game of chance is not prohibited conduct under 48 U.S.C. Section 1084," or the Wire Act. The U.S. Court of Appeals upheld this decision in November 2002.
The difficulties arise because legislation and control has historically been left to the states, but the very nature of the Internet is global, ignoring jurisdictional boundaries. New Jersey and its casinos have made billions of dollars as people from other states (often where gaming is illegal) got in cars or on planes to go to Atlantic City casinos for the entertainment. When people travel from other states to gamble in New Jersey, the state considers that appropriate, and even good. But, the NJ Department of Law and Public Safety looks to prevent such gaming activity when New Jersey citizens “travel” via the Internet to place wagers in other countries where such activity is legal and regulated. In my view, this proves that Internet gaming is a difficult policy issue and New Jersey presenting legislation to study Internet gaming is a step in the right direction as it will allow for more information about an often assaulted, but never understood area of eCommerce.
In my experience, it is apparent that the application of gambling to the Internet has created a market force that cannot be stopped without pulling the plug on the entire World Wide Web. The total number of Internet gambling sites is estimated to be 1800. The Internet gambling industry has a projected gross income of 4.3 billion for 2003. Therefore, billions of dollars are reportedly being bet over the Internet with little, if any, oversight or guarantee that the operators of these sites are fair and honest or that protections are in place to keep children and compulsive gamblers away. These revenue projections imply that a percentage of these monies are from our citizens and leave not only New Jersey but also the United States with no subsequent benefit, directly or indirectly, to New Jersey (including no dedicated funds for protecting children and problem gamblers through education or other programs). To that end, I applaud the efforts of Chairman Guear and Assemblyman Impreveduto to create a commission that can learn about the Internet gaming industry and potentially develop sensible solutions for the protection of New Jersey citizens.
Clearly, there are a number of difficult issues that would need to be addressed before decisions are made with regard to Internet gaming. A commission looking into the matter will face a complex tangle of legal and technical questions. Some of the legal and technical issues a commission exploring potential regulatory schemes would look at, include: amending federal law, cash transaction reporting practices and procedural safeguards to protect against money laundering, tax revenue sharing, random testing of games and software to ensure fairness and consumer protection, licensing requirements, background checks of qualified operators, enforcement of underage gambling statutes and methods of identifying and helping problem gamblers.
Given that very little is actually understood by policymakers with regard to Internet gaming, Assemblymen Guear and Impreveduto and Senator Palaia should be commended for their efforts to create this commission. The challenge is now convincing their colleagues in the Assembly and Senate that a study commission is a good idea.
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