I. Nelson Rose

We are in what I call the Third Wave of Legal Gambling. Twice before in American history, legal gambling spread across the nation, only to crash down in scandal and complete prohibition. The prior crashes left legal debris that is still on the statute books.

The November 2010 elections were historic, but not for the reason most people think.
 
The President’s party always suffers in mid-term elections during economic hard times.
 
Sure, the Democrats lost a lot. But not everything. The Republicans could not even gain control of the Senate. But 2010 did make history. It was the first time in American history that more proposals to expand legal gambling won at the polls then lost.
 

A federal judge in New Jersey has issued the most complete and comprehensive judgment ever about whether a compulsive gambler can sue a casino.
 
The short version of her 10-page-long legal analysis: “No.” Arelia Margarita Taveras, a disbarred lawyer, sued most of the casinos in Atlantic City, as well as many of their owners and employees, alleging that, “the Defendants facilitated Plaintiff’s gambling addiction and induced her to gamble away money belonging to her and others . . .” She pleaded 12 separate causes of action, including negligence, negligent and intentional infliction of emotional distress, breach of contract, unjust enrichment, and violations of the federal racketeering statutes and the Bank Secrecy Act.

On March 25, 2010, Governor Steve Beshear of Kentucky launched his latest attack against online gaming companies. He previously tried to seize Internet domain names using ancient anti-slot-machine laws. Now he is suing Pocket Kings, operator of Full Tilt Poker, for all the money lost by Kentucky online poker players, times three.

Indian casinos may soon overtake commercial casinos. Total gaming revenues for tribes appear to be more than $26 billion a year, while the American Gaming Association reported the 12 commercial casino states generate less than $31 billion in 2009.

But Indian gaming is getting a boost from changes in the law, or, more particularly, from those who make the laws.

"If we read Ohio law as controlling the contract in question, the parties probably are guilty of a crime under Ohio law, the contract is void, and both parties could be extradited and prosecuted together in an Ohio criminal court." -Gilbert Stroud Merritt, Jr., Concurring, in Wong v. PartyGaming

A year ago, I wrote, "Party Poker won a nice victory in federal court in Ohio, because its Terms and Conditions say that all disputes will be heard in the courts of Gibraltar."

Hidden in the compact recently signed by Governor Charlie Crist and the Seminole Tribe is a provision giving Florida's licensed cardrooms the right to spread no-limit poker.

Crist felt he had to give these operators something, because he had just agreed to let the tribe have a virtual monopoly on casino gambling for 20 years.

Sometimes the most important part of a legal document are the words that are not there.

The new compact, for example, expressly allows the Tribe to have slot machines and banking card games, like blackjack.

Internet gaming bills are pending in the U.S. House of Representatives, mainly introduced by Barney Frank (D-MA). And the Senate has its own online gaming bill too, the "i-Poker Act," authored by Sen. Robert Menendez (D-NJ).

Both sets of bills appear to set up a federal licensing and regulatory system in the Department of the Treasury. But both allow state and tribal gaming authorities to be approved by Treasury to certify applicants and even take over all regulation.

The movement to legalize Internet gaming has come mainly from the U.S. House of Representatives, most notably from Barney Frank (D-MA). Frank has so much seniority and the Democrats have such a large majority, that he can get any bill he wants through the House. But to become law, it must also pass the Senate, and be signed by the President. Barack Obama will not veto a bill from the Democratically controlled Congress.

Which means everything depends upon having someone shepherd a bill through the Senate.

What do insurance, commodities trading, and state lotteries all have in common? They were all originally outlawed as forms of gambling. The major fight today over whether poker should be legalized usually revolves around the question of whether it is predominantly skill or chance.

But this unnecessarily gives up part of the political as well as legal battleground. Many activities that are indisputably gambling are now operated under state licenses, or by the state itself. And other activities, such as insurance and commodities, are today generally not even thought of as gambling.