Last week I wrote about a new proposal, released by the House Energy and Commerce Committee, that would end the 25-year prohibition against states legalizing sports gambling. The bill would allow states to legalize any other form of gambling they choose to regulate. This approach, I wrote, had the potential to unite much of the gaming industry behind it. After a second look at the proposal, it appears more likely that the only unity it may generate will be among the opposition.
In my excitement over a proposal that would repeal an outdated and unjust law — not something that happens often — I failed to notice a few devils in the bill’s details. While it would repeal the Professional and Amateur Sports Protection Act (PASPA) and return the right to regulate any form of intrastate gambling to the states, the proposal would also grant brand new powers to the federal government to interfere in state matters.
For one, the bill would require any state-licensed gambling facility that wants to accept interstate wagers to submit to the Federal Trade Commission (FTC) a description of how they have “complied with the law of each such State with respect to each of the consumer protections.” It also gives the FTC enforcement authority over licensees and allows it to promulgate rules for complying with the new reporting requirements.
For another, it would amend the Public Health Service Act, establishing within the Department of Health and Human Services (HHS) new programs aimed at studying and addressing gambling addiction, including the creation of a Gambling Addiction Research Advisory Committee within the National Institutes of Health (NIH). It also requires the Centers for Disease Control and Prevention to deviate from its core mission — preventing the spread of actual disease — by setting up a National Gambling Addiction Surveillance System, at a cost of $5 million a year.
This expansion of government is likely to drive away any support its sponsor, Rep. Frank Pallone (D-N.J.), might have hoped to garner from Republicans, many of whom are already skeptical of expanding the availability of gambling and generally adhere to the idea of limiting the size of government. Furthermore, members of the casino industry are unlikely to throw their weight behind legislation that would increase federal oversight of their industry, along with compliance costs. Without their support, any proposal is probably dead on arrival.
Additionally, as I briefly touched on in my initial analysis, the bill’s definition of what constitutes gambling is very broad. At first, I interpreted this as a good thing — a way to give states the power to legalize and regulate any activity as they see fit. But, the proposal actually would rope in a few industries that have, thus far, escaped federal regulation. The bill’s definition of what a “bet” or “wager” is defined as:
The risking of “something of value, including virtual currency or virtual items that can be sold or otherwise exchanged for cash … upon the outcome of a contest of others, a sporting event, a game subject to chance, or a game in which the outcomes reflect the relative knowledge and skill of the participants, upon an agreement or understanding that the person or another person will receive something of value in the event of a certain outcome.” [Emphases added]
This seems to mean that an online or offline event, in which players stake anything of value — including virtual currency if it can be exchanged for something of value — would be subject to the proposal’s requirements. So even something like, say, a tournament of a first-person shooter game (e.g. the Unreal Tournament) may fall under this designation if players or teams have to pay an entry fee and stand to win some predetermined prize of value. Based on my initial evaluation, even hot dog eating contests and fair games that have a pay-to-play structure might need to adhere to the consumer protection and federal reporting requirements.
In the end, if a final bill includes this broad language, increase in federal involvement, and compliance requirements, I cannot imagine that any industry would be supportive. More likely, many will expend energy fighting the proposal.
If Rep. Pallone really wants to return the power to regulate sports gambling to the states, he should offer a simple bill that does only that: repeals PASPA without increasing the size of government or creating onerous new requirements for the gaming industry.
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