Congress urged to avoid “Wild West’ and form Web gambling rules

WASHINGTON — Congress was urged Wednesday to step in and form new rules for Internet gambling. Experts warned that the online world threatens to turn into the Wild West since the Obama administration loosened the law a year and a half ago.

States moving to establish online gaming after the Justice Department’s reinterpretation of the 1961 Wire Act are not positioned to detect and combat fraud, money laundering and other crimes associated with organized crime, and terrorist groups in some cases, law enforcement officials said.

Chuck Canterbury, national president of the Fraternal Order of Police, said a “fix” to the Wire Act to re-establish and update a national legal standard for online gaming “would help us immediately.”

“Law enforcement is always behind the eight ball on technology, especially state and local,” Canterbury said. “It will take us years to get to the place where we need to be technologically to fight any sort of money laundering at the state level, especially when it is cross-border money laundering.”

In North Carolina, he said, “they are still arguing over legalizing raffles for churches.”

At the hearing, an attorney called for federal action.

“For the states to try to enforce rules on Internet gambling is really a stretch,” said Jack Blum, a Maryland attorney who has investigated money laundering in the Caribbean and consulted for federal agencies on offshore financial schemes. “It has to be regulated at the federal level.”

The hearing before the Senate’s consumer protection subcommittee was the first this session on Internet gambling. In a statement on the hearing, American Gaming Association President Geoff Freeman said the federal government needs to step in quickly, or the U.S. “may soon experience the largest expansion of gambling in its history, including online slots, blackjack and other traditional casino games of chance.”

Freeman called Internet poker “a reality that is here to stay.” He said minimum regulatory standards set by Congress are needed to “protect consumers, exclude bad actors from the American market and provide Native American tribes with an appropriate regulatory framework.”

Most recent efforts at online wagering legislation have taken place behind closed doors as poker advocates and casino lobbyists worked with key senators to draft Internet bills.

A hearing Tuesday was the first public meeting on the issue in years other than to study impact on Indian tribes.

It also marked a return of sorts to the starting gate, as advocates of federal involvement began rebuilding a public record of why Congress needs to work toward regulating Web gaming.

“This was a good foundation, to make sure people know, one, we have a problem, and two, let’s fix the problem,” said Sen. Dean Heller, R-Nev., the top Republican on the consumer protection subcommittee. “And when we fix the problem, Internet poker ought to be part of the solution.”

Heller said he and Sen. Harry Reid, D-Nev., are in talks about offering new Web gaming legislation in the Senate, an effort that has been urged by Las Vegas casino corporations. The aim is to create a nationwide market for online poker that already has been made legal for players within Nevada.

Two bills have been introduced in the House. One by Rep. Joe Barton, R-Texas, seeks to legalize Web poker. The other, by Rep. Peter King, R-N.Y., would approve a broader set of online games. Both bills seek criteria to license gaming operators while creating controls to prevent playing by minors and problem gamblers.

On Wednesday, Sen. Claire McCaskill, D-Mo., the subcommittee chairwoman, left the hearing early. That left Heller in charge of the session, which was attended by a roomful of attorneys and lobbyists representing online outfits and brick-and-mortar casinos whose financial outlook rides on congressional action or inaction.

Heller blamed the Obama administration for creating uncertainty when the Justice Department late in 2011 revised a long-held legal opinion and stated that the 1961 Wire Act, which had been used to enforce gambling laws, applied only to sports betting. Heller characterized the change as a favor to lottery interests.

“The reason we are here today is on December 23, 2011, the administration changed this so their friends in Illinois and New York could put their lottery tickets online,” Heller said. “Unilaterally the White House made this decision two days before Christmas when all of us were out of town. And it concerns me.”

Sen. Roy Blunt, R-Mo., didn’t point fingers but said the Justice Department reinterpretation “certainly wasn’t what we anticipated. That decision totally and forever changes the playing field on these issues, and Congress has to go back and look at what we need to do now.”

“This is beyond the reach of local law enforcement,” said Sen. Kelly Ayotte, R-N.H. “Shame on us if we don’t get something done on this.”

Las Vegas Review-Journal reporter Howard Stutz contributed to this report.

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