Will Congress Go All-In on Online Gaming?

The House mulls the future of online gambling

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Jonathan Ernst / REUTERS

Congressman Joe Barton (R-TX)

In 2006, Republicans in Congress led a crackdown on Internet gambling. Two years ago, many of them cheered when the U.S. Justice Department moved to suppress the booming online poker market, shuttering three top sites simultaneously on a day known within the industry as Black Friday.

But now some Congressional conservatives are increasingly enthusiastic about—or at least increasingly open to—the merits of online gambling.

A light snow on Tuesday spurred the closure of the federal government, but inside the Rayburn House building, a panel of members packed into a crowded committee room to consider a bill to legalize online poker. Its sponsor: Texas Republican Joe Barton, a Tea Party member who cast the measure in conservative terms.

“It is a states’-rights, user-friendly bill,” Barton said of his legislation, which would legalize online poker nationwide while giving states the ability to opt out.

The initiative is a sign of how the GOP‘s libertarian streak and a host of cash-strapped states have come to embrace online gaming—not just poker, but also state-run lotteries, sports betting and other forms of gambling—as potential sources of revenue in tough economic times.

Over the past year, Nevada, New Jersey and Delaware have legalized online poker within their borders. State legislatures from California to Iowa are considering doing the same next year. Proponents hope to tap into a multi-billion dollar industry, of which U.S. residents account for around 15% of the revenues despite laws that force Americans to patronize offshore companies to participate. A recent study by Morgan Stanley estimated that Internet gambling could become a $9 billion industry by 2020, roughly on par with the revenue generated in the glittering palaces on the Las Vegas strip and the casinos lining the Atlantic City boardwalk.

Much of the gaming industry, which once regarded the rise of online gambling as a threat to their market share, has come to see the Internet as both a fact of life and a revenue stream to tap into. “The government cannot put the Internet back in the bottle,” said Geoff Freeman, the CEO of the American Gaming Association, who suggested casinos will adapt to growing demand for gambling over laptops, tablets and mobile devices or risk becoming relics, like brick-and-mortar video stores in the age of Netflix and Amazon. “It’s not often,” Freeman noted, that “an industry comes before you asking for regulation.”

Not all gaming companies are on the same page, however. Las Vegas Sands Corporation, the casino operator run by billionaire Sheldon Adelson, is launching a national push to enact a federal ban on Internet gambling. Adelson, a top donor to Republican campaigns, is backing the newly created Coalition to Stop Internet Gambling, which argues the activity is insecure, unregulated and targets youth and the less fortunate. The lobbying group is led by former New York governor George Pataki, a Republican, former Democratic Senator Blanche Lincoln of Arkansas, and former Democratic Mayor of Denver Wellington Webb. Adelson said recently he is willing to spend “whatever it takes” to bar Internet gambling.

“The Internet is more dangerous than ever,” said Sands vice president Andy Abboud in his testimony before the House Subcommittee on Commerce, Manufacturing and Trade. “Internet gambling takes gambling too far.”

Some lawmakers on the panel were sympathetic to Abboud’s arguments that legalizing gambling would entice children, among others, to destructive behavior. Several staunchly conservative Republicans seemed ambivalent, drawn to the states’-rights argument even as they mused about the challenge of walling off impressionable children from vice. Democrat Jan Schakowsky of Illinois noted that Adelson’s company makes a lot of money from gambling. “It feels to me,” she said of its opposition,  “a little hypocritical.”

Barton is not the only member of Congress who wants to go all-in on online poker. Last summer New York Republican Peter King pushed a federal bill to license online gambling, and Nevada Senators Harry Reid, the Democratic leader, and Republican Dean Heller have worked on the issue. And while momentum on the Hill for a federal overhaul has waned amid rising partisan tensions, Barton says he believes legislators will soon recognize that the government should not prevent people from playing a game of skill in their own homes if they choose.

“The time is coming,” said Barton, a self-professed poker fan. He described a mad scramble Tuesday morning from his Dallas-area home, braving icy roads and escaping flight delays to make the hearing on time. “God,” he concluded wryly, “must be for this bill.”