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Pennsylvania On The Road to Legalizing Online Gambling

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Yesterday (8 November, 2015) the state of Pennsylvania took a step closer to legalizing online gambling with the passing of the House Bill 649 by the state’s House Gaming Oversight Committee to ‘legalize interactive gaming’. Despite the rejection of an amendment to the bill allowing video gaming machines in restaurants, bars and nightclubs it passed with a majority of 18 to 8 and clears the way for casinos in the state to offer online casino games, as well as allowing slot machines to be placed in off track betting venues and the state’s international airports. The next step in the process for the bill to become law requires a vote in the Pennsylvania House of Representatives and then the state Senate which if positive will be presented to the state governor Tom Wolf to sign into law.

A large factor which likely swayed the Gaming Oversights Committee is the state of Pennsylvania’s state finances, which at the start of the year was facing a $2.3 billion deficit. Last year the state’s Legislative Budget and Finance Committee estimated that allowing online gambling would bring in around $184 million into the state’s treasury in its first year, with the amount raising to around $307 million a year once the market reaches full maturity. The state’s budget is well overdue and an alternate way for the bill to be made law would for it to form part Pennsylvania’s 2016 budget, which is voted on by the state’s legislative assembly.

Since the 2008 economic crash many states have seen the relaxing of online gambling laws as a means to boost their finances, but this had been blocked by the 1961 Federal Wire Act, which outlawed, ‘the transmission of a wire communication which entitles the recipient to receive money or credit as a result of bets or wagers, or for information assisting in the placing of bets or wagers’. A year before the crash Leslie Bryant, the head of the FBI’s Cyber Crime Fraud unit warned, ‘you can go to Vegas. You can go to Atlantic City. You can go to a racetrack. You can go to those places and gamble legally. But don’t do it online. It’s against the law’. However, following proposals by New York and Illinois to use the internet to sell state lottery tickets the Department of Justice (DoJ) issued a legal opinion in December 2011 that the Wire Act only applied to sports betting, thereby clearing the way for states to propose the allowance of online gambling such as slots or poker.

However, it has not been simple for the bill to pass the committee stage and the HP 649 bill which passed was the latest of five which had been authored by the chair of Pennsylvania’s House Committee on Gaming by Republican John Payne, the first being submitted in February this year. The bill has seen hearings cancelled and has gone through various amendments including the scope of the bill widening from ‘any interactive poker game’ to, ‘any interactive game approved by the [Pennsylvania Gaming Control] board.’ The version passed yesterday defined interactive games as, ‘any gambling game offered through the use of communications technology’. There have also been opposition from the state’s casino and horseracing interests who argued online gambling would cannibalise their industries. John Payne countered these claims saying that ‘internet based firms can be complementary to brick and motor businesses.' Payne appears to have won over many of the state’s casinos, eleven of twelve of which declared themselves in favor of online gambling in an unrelated Senate hearing.

Payne didn’t however win over America’s third wealthiest man; Sheldon Adelson, owner of Las Vegas Sands and his Coalition to Stop Internet Gambling (CSIG) who have accused him of ‘working hard to legalize predatory online gambling’, which were ‘putting families at risk’. Adelson is the biggest proponent of the Restoration of America’s Wire Act (RAWA) and his Las Vegas Sands company has donated $69.4 million between 2002 and 2015 to the Republican party, making it the single largest financial contributor to political parties in the US.

However, it may not go the anti-online gambling lobby’s way as the people of Pennsylvania appear to be in favor of John Payne’s proposals with 66% of them responding to a poll commissioned by The Bravo Group that they, ‘want Pennsylvania to pass a law that will tax online gambling so the money can be used for education and other vital state programs’. There is still a long way to go before Pennsylvania joins Nevada, Delaware and New Jersey in allowing online gambling for real money, but the prospects seem good.