HomePublicationsNewsletter ArchiveNewslettersVolume 21Issue 39U.S. House Holds Hearing on iGaming Legislation

On Wednesday, December 9, 2015, the House Committee on Oversight and Government Reform held a hearing to review issues related to the Restoration of America’s Wire Act, H.R. 707 (“RAWA”), federal legislation that seeks to amend the Wire Act and to clarify that the federal law covers all forms of internet gambling. The hearing was titled “A Casino in every Smartphone – Law Enforcement Implications,” and featured testimony from law enforcement, public attorneys, and state representatives.

In September of 2011, the Department of Justice published a memorandum in response to questions received from the New York and Illinois state lotteries seeking guidance as to whether federal law prohibited in-state online ticket sales that utilized out-of-state transaction processors. The law in question, the Wire Act, had language that, under a conservative reading, could be interpreted to prohibit anygaming transaction that occurred over a wire that crosses state lines, even if only on a temporary basis and even when that data both originated and ended within the state. The 2011 memorandum concluded that the Wire Act only applied to communications related to a “sporting event or contest.” The change in interpretation (allowing for intra-state lottery transactions on-line) has since resulted in several states, including Michigan, establishing online lottery sales, as well as New Jersey, Nevada, and Delaware authorizing intrastate online gaming activity.

RAWA seeks to reverse the 2011 interpretation and policy change by amending the Wire Act to clarify that its provisions apply to all wagering communications, not just sports-related wagering, as the law was originally interpreted. As a result, the law, if adopted, would effectively prohibit online lottery sales and gaming activity.

Wednesday’s hearing was chaired by the bill’s sponsor, Rep. Chaffetz (R-UT), and included the testimony of four witnesses followed by commentary from several Committee and House members. The witnesses included Joseph S. Campbell, Assistant Director, Criminal Investigative Division of the FBI; Alan M. Wilson, South Carolina Attorney General; Donald W. Kleine, Douglas County (Nebraska) Attorney; and Mark Lipparelli, Nevada State Senator.

Much of the discussion centered around the 10thAmendment, states’ rights, and the role, if any, that the federal government should play in regulating gambling activity. While Rep. Chaffetz characterized RAWA as a states’ rights bill, many of his colleagues appeared to disagree. Rep. Thomas Massie (R-KY) stated that existing state laws should govern gaming activity and provide a basis by which states may continue to limit gaming activity according their independent policies towards gaming. He and other representatives expressed concern that RAWA would be an improper extension of federal power and serve as precedent for future federal usurpation of policy areas traditionally reserved for the states. These concerns were echoed by the majority of Committee members who participated in the discussion, including Rep. Mick Mulvaney (R-SC), who questioned his Attorney General, Mr. Wilson, on how a federal bill that would ban online gaming be construed as advancing states’ rights. In his response, Mr. Wilson stated that if online casinos were operated in a jurisdiction that permitted the activity, citizens from states where the activity is banned would inevitably find ways to access the sites. Mr. Wilson and Mr. Kleine maintained these concerns despite testimony from Mr. Lipparelli and numerous statements from committee members affirming the success of geolocation software in current online gaming jurisdictions.

Of the seventeen House and Committee members who participated in the discussions, only Rep. Chaffetz, Rep. Mark Walker (R-NC) and Rep. Gary Palmer (R-AL) appeared to be in support of RAWA. The other representatives indicated that the goal of protecting states that wish to ban or restrict online gambling could be better achieved through the use of geolocation and other technologies that verify the identity and location of players, and that RAWA may be an impermissible extension of federal oversight.

For more information on RAWA, including video from the hearing, please visit the House Committee on Oversight and Government Reform website: https://oversight.house.gov/hearing/a-casino-in-every-smartphone-law-enforcement-implications/.

 

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