In the gambling arms race, Maryland to fall behind again

January 02, 2012|Jay Hancock

In the contest between marijuana and gambling to gain acceptance by generating new tax revenue, gambling just pulled three reels of cherries.

Just before Christmas, the Justice Department dropped its ancient opposition to most kinds of Internet wagering, saying that the 1961 Interstate Wire Act bans only sports bets online. That the flip-flop was a sheepish bow to expediency and the need for revenue can be inferred from the timing of the announcement (when everybody was distracted by the holiday) and the administration's suggestion that it wasn't really a policy reversal.

The most immediate effect is a green light for Maryland and other states contemplating selling lottery tickets over the Web. But the "gaming industry" is already renewing its push for Congress to set rules for Internet poker and blackjack sponsored by giants such as Harrah's and Caesar's.

Meanwhile, non-virtual casinos continue their march. As Maryland bumbles along in its efforts to get the local populace to waste money on slot machines, Pennsylvania, West Virginia and Delaware have upped the ante, as it were, allowing not only slots but Atlantic City-style table games such as blackjack and craps.

Not to be outdone, Atlantic City will offer its first casino strip joint this summer. Scores, a "gentlemen's club" chain that operates a branch in Baltimore, will open in Atlantic City's Trump Taj Mahal. The establishment is unlikely to be the last of its kind.

Desperate times call for desperate measures, so it's no surprise that the states with the biggest budget problems are the ones most interested in gambling escalation.

In Illinois, Gov. Pat Quinn approved video poker in 2009. Although he favors more gambling, he's acting prissy about state lawmakers' desire for a huge expansion of full-service casinos, including one in Chicago. Expect Quinn and the Legislature to reach a deal this year.

In California, where a ballot initiative to deregulate and tax marijuana failed in 2010, Native American tribes that run casinos have given a ton of money to Gov. Jerry Brown and hope to get in on the ground floor of Internet gambling. California Senate Bill 40 would legalize in-state Web poker.

Even such bluenose states as Texas are talking about brick-and-mortar casinos. The Nevada Gaming Commission already has written regulations for online gambling. Former Maryland lottery boss Buddy Roogow can't wait to launch Internet poker in the District of Columbia, where he has run the lottery since 2009.

On the federal level, Senate Majority Leader Harry Reid and Rep. Barney Frank, the ranking Democrat on the House financial services committee, favor legalizing and taxing online casinos.

There was hope in some circles that last fall's congressional "supercommittee" would deliver a deficit-reduction measure that made honest men and women of the millions of American Internet gamblers. Legal and federally taxable Web poker would have given Democrats the revenues they wanted while allowing Republicans to claim they hadn't raised taxes on rich "job creators."

It didn't happen. But now the Obama administration, as it has been known to do, is seeking administratively what was unavailable legislatively.

The Justice Department, responding to requests for opinions from Illinois and New York, said that the Wire Act does not prohibit states from selling lottery tickets on the Web. The ruling is widely understood to also pave the way for online gambling of all kinds except that relating to sports, which the Wire Act plainly outlaws.

True, a different law, the Unlawful Internet Gambling Enforcement Act of 2006, continues to ban U.S. financial companies from processing payments for any interstate online betting. Rod Rosenstein, the U.S. attorney for Maryland, employed the statute to bust several online poker rooms and their bankers last year.

But now there seems to be no federal bar to state-by-state approval of online gambling and in-state processing of Web bets. As states start to OK online poker, Congress might feel a responsibility — and will certainly be lobbied — to set national regulations. And perhaps repeal the ban on interstate transactions in the bargain.

Maryland seems nowhere near to allowing Internet poker dealt by private companies. It's only starting to consider online lottery sales. Lottery officials recently told legislators that online Multi Match, Pick 4 and other games could raise an extra $200 million a year.

For better or worse, Maryland's casino gap with its neighbors will widen. State policymakers surely know that the bigger the sin, the bigger the sin tax. But they've lagged in allowing more extreme forms of gambling, rightly worrying that lotteries and casinos ruin lives and tax lower-income folks heavily.

As a result, neighbors such as West Virginia and Delaware are reaping the out-of-state customers and disproportional harvest that comes from being the first to lower their standards.

Some day, legal gambling of all kinds will be everywhere. Even the Scores club in Baltimore will feature roulette wheels and poker tables along with the dancers. The Baltimore Marriott Waterfront can become the casino that God and John Paterakis Sr. always intended it to be.

But not for a while. Maryland, as usual, will dither before caving in, ceding both the moral high ground and the revenue bonanza.

jay.hancock@baltsun.com

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