DoJ Opinion Raises Questions About State's Rights In Regards To Online Betting

After the U.S. Department of Justice's about face on internet gambling, many states have begun determining what their options are for the hobby, even debating whether or not they have the right to go forward with legislation.

One of the potential hurdles to individual states handling online gambling is the issue of whether or not federal law would allow this to be passed. The UIGEA, which was passed appears to allow intrastate gambling, although there is no real certainty to the issue in the law.

Other potential issues include:

• Tribal compacts with Indians. If state's violate contracts with the tribes, it could potentially cost the offending state hundreds of millions of dollars. It is likely that any state based online gambling would need to include the tribes.

• Where would funds generated by online gambling go? Lotteries generally provide public schools with funds, and while state sponsored wagering has provided millions in relief, only 1.5 cents of every education dollar is funded by the lottery.

• Substantiation. If no federal legislation is passed by the U.S. government, there is a chance that a new president could try to overturn the DoJ opinion, setting any progress on regulating online gambling back to square one. Las Vegas lawyer Greg Gemignani summed up the issue by saying, "This is just an opinion of the Department of Justice and only reflects what the Obama administration would bring charges on. Future departments of Justice could interpret the Wire Act differently,"

Industry insiders have voiced their opinion for a federal option, thinking that a state by state option is not nearly as good a bet. Caesars Entertainment Chairman Gary Loveman told Reuters that individual state legislation is a "far less rational way to proceed; it runs the risk of not addressing the illegal operators in any way. If there is not a federal bill then you will see individual states each passing unique sets of rules."

A spokeswoman for the Justice Department said that states that have specific laws banning online gambling will still be upheld, with the government investigating and prosecuting offending businesses.

"In states that ban various forms of gambling - including Internet poker - the Department will be able to investigate and prosecute those gambling businesses under the Unlawful Internet Gambling Enforcement Act and other sections of the criminal code," the spokeswoman said.