Internet Gaming Legislation in the Lame Duck Session

BACKGROUND
Internet gaming legislation on the federal level has been quiet in the 113th Congress.  However, as has happened in past years, the issue is gaining some traction as Congress prepares to bring the session to a close. 

Two opposing bills have been introduced in the 113th Congress.  The first, H.R. 2666 (Barton (R-TX), the Internet Poker Freedom Act, would legalize Internet poker in the United States.  The second, H.R. 4301 (Chaffetz (R-UT)) / S. 2159 (Graham (R-SC)), the Restoration of America’s Wire Act, would amend the Wire Act to prohibit most forms of Internet gaming in the U.S.

As the 113th Congress comes to a close, we have learned that Senate and House leadership are actively considering Internet gaming legislation.  While the above-stated proposals have seen limited oversight, the proposals that are actively under consideration have not seen the light of day.  The issue is being handled at the Member and very senior staff level and is being dealt with completely behind closed doors.

NIGA has learned that some form of the Wire Act prohibition proposal is being given the most serious consideration.  However, the Barton poker-only proposal remains on the table.  Because Nevada (as well as New Jersey and Delaware) has legalized Internet poker, Senate Majority Leader Harry Reid (D-NV) may try to attach the poker authorization to the package.

We cannot let our guard down.  Anything can happen in the last days of Congress.  The most likely vehicle is continuing resolution / omnibus spending bill, which must pass prior to Congress’ departure. 

NIGA is working with the Rep. Tom Cole (R-OK) (Republican Co-Chair of the House Native American Caucus) and others to ensure that tribal governments are treated fairly – and that existing tribal rights are protected – if any Internet gaming legislation moves.  The remainder of this memo summarizes the existing proposals.  We have also attached a draft letter for your consideration.  Please contact Danielle Her Many Horses at dhermanyhorses@indiangaming.org if you have any questions or need more information on this important matter.


SUMMARY OF THE BILLS

            Poker-only Legislation

Rep. Joe Barton (R-TX) introduced H.R. 2666 in June of 2013.  The bill would legalize commercial Internet poker in the United States for entities that have operated a facility that has 500 or more slot machines in 1 location or a facility that has at least 175 poker tables in 1 location.  This would shut out more than half of the tribal governments that currently operate Indian gaming facilities.  It would shut out all tribes that operate only Class II gaming, because of the failure of state governments to negotiate a compact. And it would shut out all tribes that currently do not conduct Indian gaming within their borders.

As with past federal Internet gambling bills, H.R. 2666 provides that action taken by a state or tribe to legalize Internet poker shall not “any effect on non-Internet gaming activities within the scope of [IGRA] or … on any tribal-State compacts.”  This could be viewed as permitting the violation of exclusivity provisions in some tribal – state gaming compacts. Tribal governments have invested significant resources to reach compact agreements, and continue to make significant investments based on these agreements. A federal blessing to violate these provisions would set a dangerous precedent.

H.R. 2666 does contain some positive provisions, but they do not outweigh the bad policy that would be established by the provisions noted above.  On the positive, the bill permits states and tribal governments to opt-out, to prohibit Internet poker within their borders.  The bill includes a positive change that expressly acknowledges that if a state opts out to prohibit Internet poker, such prohibition will “not apply to the acceptance of bets or wagers from persons located within tribal lands….”  In addition, the bill authorizes the Office of Internet Poker Oversight (a new agency within the Department of Commerce), in the case of state governments, and the National Indian Gaming Commission (NIGC), in the case of tribal governments – to qualify Internet poker regulatory authorities. These qualified regulatory authorities will then be responsible for issuing licenses to operate Internet poker facilities. 

            Enhanced Wire Act Prohibition

In March of 2014, Members of Congress in both chambers introduced identical legislation to extend the Wire Act of 1961 to all forms of gambling - as opposed to only sports gambling. This would essentially reverse the Department of Justice (DOJ) December 2011 Wire Act opinion. As noted above, the bills are entitled "Restoration of America's Wire Act."  The Senate bill, S. 2159, was introduced by Senator Lindsey Graham (R-SC), and is co-sponsored by Senators Feinstein (D-CA), Ayotte (R-NH), and Lee (R-UT).  Rep. Jason Chaffetz (R-UT) introduced the House bill, H.R. 4301, which has nine bipartisan co-sponsors.

The December 2011 DOJ opinion opened the door for the legalization of online non-sports gambling.  Since release of the DOJ opinion, three states - Delaware, Nevada, and New Jersey - have legalized online gaming within their borders.  In February of 2014, Delaware and Nevada signed an online poker partnership to permit people located in both states to engage in Internet poker online.  In 2014, at least 10 other states are considering legalizing some form of Internet gaming.  Several tribal governments are also pursuing online class II gaming.  In addition, more than a dozen state governments are now selling lottery tickets online, and some are considering online scratch-off ticket sales. 

The bills have not received a hearing, but have garnered strong support from social conservatives, including those opposed to all forms of gambling.  Not surprisingly, Republican Presidential hopefuls, Texas Governor Rick Perry and South Carolina Governor Nikki Haley, wrote in support of the bills.  Attorneys General from 16 states have also written Congress to restore the prior interpretation that the Wire Act.  

However, a number of groups have spoken out against the measure, including Nevada Governor Brian Sandoval (R-NV), the National Conference of State Legislatures, the State Lotteries organization, the Poker Player Alliance, and others.  

Senate Majority Leader Harry Reid (D-NV) indicated that he would support tightening up the Wire Act, but also stated his preference that any Wire Act legislation include a carve-out for Internet poker.  Upon introduction of the bills, Reid said, "a significant expansion of gambling that would bring slot machines to every computer at home in America is bad for Nevada and bad for the country.  We're going to take it one step at a time and see what happens.  The best solution for Nevada is to allow Internet poker."

For Indian Country, expansion of the Wire Act could help limit possible adverse economic impacts of Internet gambling on Indian brick-and-mortar gaming operations.  However, if there is a carve-out for Internet poker, tribal governments nationwide have demanded that such a provision protect existing forms of Indian gaming under IGRA, provide all federally recognized tribes with equal access to enter the market at governments, and provide that tribal Internet gaming revenues not be subject to taxation.  

NIGA continues to maintain that any legislation that legalizes Internet gaming, including Internet poker, must satisfy the following principles that are essential for fairness to Tribal Governments:

1.      Indian tribes are sovereign governments with a right to operate, regulate, tax, and license Internet gaming, and those rights must not be subordinated to any non-federal authority;

2.      Internet gaming authorized by Indian tribes must be available to customers in any locale where Internet gaming is not criminally prohibited; and

3.      Consistent with long-held federal law and policy, tribal revenues must not be subject to tax; 

4.      Existing tribal government rights under Tribal-State Compacts and the Indian Gaming Regulatory Act (“IGRA”) must be respected;

5.      The legislation must not open up the IGRA for amendments; and

6.      Federal legalization of Internet gaming must provide positive economic benefits for Indian country.

7.      Indian Tribes possess the inherent right to opt in to a federal regulatory scheme to ensure broad-based access to markets.

Again, a draft letter to House and Senate Leadership is attached for your consideration.  We have included cc: addresses for leadership staff at the Senate Committee on Indian Affairs, and ask that you blind cc: NIGA at dhermanyhorses@indiangaming.org.  Please also include e-mail to staff for your U.S. Senators.


December 4, 2014

The Honorable John Boehner
Speaker of the House
U.S. House of Representatives
H-232 Capitol Building
Washington, D.C. 20515
E-mail:   maura.kantakevich@mail.house.gov

The Honorable Harry Reid
Majority Leader
United States Senate
S-230 Capitol Building
Washington, DC 20510
E-mail:   jason_unger@reid.senate.gov

The Honorable Kevin McCarthy
Majority Leader
United States House of Representatives
H-107 Capitol Building
Washington, DC 20515
E-mail:   Kyle.Lombari@mail.house.gov

The Honorable Nancy Pelosi
Minority Leader
United States House of Representatives
H-204 Capitol Building
Washington, DC 20515-6537
E-mail: victoria.bright@mail.house.gov

The Honorable Mitch McConnell
Minority Leader
United States Senate
S-230 Capitol Building
Washington, DC 20510-7010
E-mail: russell_coleman@mcconnell.senate.gov

Re:      Internet Gaming Legislation

Members of Congress:

I write on behalf of the _______ [Tribe] regarding ongoing discussions about legislation that would impact Internet gambling on the federal level.   I respectfully urge you to open these discussions to ensure that Indian tribes are treated fairly in any legislative effort that involves Internet gaming. 

Indian tribes are recognized in the United States Constitution as governments and should be treated as such with regard to Internet gaming.  Tribes should have the authority to operate, regulate, and tax Internet gaming if Congress acts to establish the new industry in the United States.  Our Constitution recognizes Indian tribes as governments in the Commerce, Apportionment, and Treaty clauses and the 14th Amendment.  The United States signed hundreds of treaties with tribal governments.  Tribes ceded hundreds of millions of acres of their homelands.  In return, the United States agreed to preserve tribal sovereignty, and promised to provide for the health, education, and general care of reservation residents.

Congress determined that it is important to protect and regulate Indian gaming through enactment of the Indian Gaming Regulatory Act (IGRA).  As a result of IGRA, tribes have an established government-to-government relationship with the Department of the Interior (DOI) and the National Indian Gaming Commission (NIGC).  When Congress enacted IGRA in 1988, it intended tribes to use new technology to foster Indian gaming as technology advanced.  The Internet has become a new market for gaming, and tribes should have access to this new market. 

Indian gaming, a tribal self-government initiative, has proven successful in creating jobs on Indian lands and in generating a consistent revenue stream that enables many tribal governments to provide essential services to their communities.  Directly and indirectly, Indian gaming generates more than 600,000 American jobs nationwide. 

Treating Indian tribes fairly in Internet gaming legislation includes: ensuring that all tribal governments are eligible to opt-in to participate in the new industry, not subject to state veto; ensuring that all tribal revenues will be used for tribal government purposes, aid to local communities, or for charitable purposes – and not subject to federal or state taxation; and protects existing rights of tribal governments in IGRA and existing tribal-state gaming compact provisions. 

Conversely, if Congress moves to strengthen existing prohibitions on Internet gambling, such a prohibition must protect existing rights of tribal governments to conduct Indian gaming using technology – including linked games, progressive games, and other methods of Indian gaming currently in use. 

Thank you in advance for your consideration of this important issue. 

Sincerely,

___________ (Tribal Leader)

cc: Mary_Pavel@indian.senate.gov
      Rhonda_Harjo@indian.senate.gov
      Stratton.Edwards@mail.house.gov
      Rebecca.Taylor@mail.house.gov
      [please cc: your Senate delegation]

bcc: Dhermanyhorses@indiangaming.org