Regulatory Update, US: Intrastate Internet Gaming May Become a Reality

Many states, particularly California and Florida, are projecting a massive deficit primarily caused by overspending during slow economic activity. Attention has turned once again to online gaming and how to regulate it and tax it efficiently on a state level.

Federal Congressional Activity

Progress has been slow on the federal level with three bills failing to make it further than committees. It is doubtful that any action on internet gaming will take place before the November congressional elections.

State Legislative Activity

Progress has been much more encouraging on the state legislative level. This is due to the interpretation of the The Unlawful Internet Gaming Enforcement Act of 2006 (UIGEA) which was enacted at the federal level to prevent money transfers related to internet gaming.

According to a logical interpretation, the UIGEA does not include placing, receiving or otherwise transmitting a bet or wager where 1) it is initiated and received in a single state that has authorised the bet or wager and 2) the state law or related regulations include age and location verification requirements reasonably designed to block access to minors and persons located outside teh state, as well as appropriate date security standards.

This provision enables each state to determine the status of internet gaming within its own borders.

Opportunities in Florida, California and New Jersey

Legislators have identified the opportunity created by these provisions and have introduced legislation to legalise internet gaming within its borders. Florida is the pioneer with already a bill that meets all the conditions set forth in UIGEA. In second place comes New Jersey and California is not far behind. The bill’s aim is not to create a a single monopoly, instead its aim is to establish a competitive and transparent licensing system.

Conclusion

It is only a matter of time before internet gaming will be legal, regulated and taxed in the United States. The fundamental reason why is that states desperately need the revenue. This liberalisation will start at a state level and eventually grow to a federal level.

Simon Dehaney LLB, LPC