U.S.: Federal online gambling legislation issued in US Congress

Draft legislation was published in the US Congress on 6 June, seeking to introduce a federal system for the regulation of all online gambling (apart from sports). It was introduced by Republican Congressman Peter King and is called the “Internet Gambling Regulation, Consumer Protection, and Enforcement Act 2013”.

The King Bill is meaningful, because it restarts the discussion about potential federal legislation regulating online gaming — and there are expected to be other bills introduced (or at least drafted) this year, by serious legislators (including Rep. Joe Barton (R-TX) and, possibly, Senate Majority Leader Harry Reid (D-NV)).

However, the introduction of legislation is a far cry from passage in one house, let alone final enactment (which requires passage of identical legislation through both houses of Congress) and presidential signature.

The arguments in favour of federal legislation revolve around two issues: (1) the desirability of creating uniform national standards, and (2) the potential revenue that would be generated by federal taxes on online gaming.

The procedural and political hurdles to enactment of any federal online gaming legislation, however, remain very, very high. First and foremost, there is no sense that key committee chairmen are prepared to take up and consider legislation. In the House, the Financial Services Committee Chair Jeb Hensarling is a very conservative member from Texas. While he has privately told many advocates for online poker that he does not have a personal problem with it, he has never shown any evidence that he is willing to move legislation through his committee for a cause which is widely opposed by religious conservatives in his party. Furthermore, House passage is complicated by the need to consider companion tax legislation through the House Ways and Means Committee. That committee has never shown any willingness to move the issue.

In the Senate, things are more complicated, because of the ability of any single senator to block legislation — as has occurred in the past on online gaming issues. While Senator Reid would appear well positioned (as the Senate Leader) to move legislation, it would be difficult to line up the votes and overcome the substantial opposition that exists in the Senate (by both liberals who see gaming as exploitative and conservatives who have moral objections).

There are those who assert that online gaming legislation could bypass the regular order of legislation (which requires consideration by committees, followed by passage on the floor) by being attached to some type of omnibus legislation as an amendment. That strategy is only like to work in the context of something called “reconciliation,” which a formal part of the budget process (which allows legislation to be considered on a “privileged” basis — meaning the normal legislative blocking tactics are prohibited and the bill can be passed with a simple majority). The problem with the reconciliation strategy is that the Congress has failed to enact budget legislation in each of the last few years — and the outlook this year is no better — meaning that there is unlikely to be a “reconciliation” vehicle to which controversial legislation (like gaming legislation) could be appended.

Finally, the proponents of federal legislation have always sought to achieve passage through deals that seek to bypass the regular order of legislation. That approach has not worked so far and is not likely to work now. Rather, what the proponents of a federal bill need to do is to line up a coalition of support from states and other key stakeholders and present an overwhelming united front on the issue. That would require a sophisticated grassroots campaign coordinated with a strong federal lobbying strategy. The gaming industry is not sufficiently united to undertake that effort, and the current “grassroots” campaign underway by the online poker crowd are pretty unsophisticated (and to date ineffective).

Although there could be a flurry of activity on the issue, and it could start to build the case for enacting legislation at some time in the future (based mostly on the need for additional federal revenue), it is unlikely that developments will occur in the short term.