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Interview with Jorge Van: legal expert on online gambling

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Attorney Jorge Van is a legal export on online gambling in the US and former principal investigator of the National Gambling Impact Study Commission on Internet Gambling. In this reprint of an interview with him in 2008 he reflects on the legislation that was introduced in the late 1990s to curb online gambling in the United States, and throws in a few predictions for the future of Internet gambling.

How are you doing Jorge?

I recently testified before the US Senate regarding online gambling licences for Neveda casinos and as you know I was the principal investigator of the National Gambling Impact Study Commission on Internet Gambling. I have recently chaired conferences on the subject in New Orleans, Chicago and Sydney. I have been a conference speaker on the subject before the World Gaming Congress, the American Gaming Summit and, most recently, the National Association of Attorneys General.

What do you think was the main reason that some of legislation in the late 1990s to curb online gambling in the US, including the Kyl Bill, did not become law all the way?

In hindsight the Kyl Bill should have been named the "Interactive Gambling Promotion Act". The Kyl Bill continued to evolve as politics had overtaken policy. This evolutionary process took longer than I initially estimated. The Kyl Bill ultimately almost passed the Senate just before the close of the 106th Congress, but some loopholes prevented it from gaining enough support.

How do you view the latest version of the bill that was introduced by Senator Kyl in 1999?

Senator Kyl obviously could not garner enough support for his original bill to curb online gambling. To overcome the opposition, he conceded to exceptions to the law that ultimately prevented it from being passed. The major exceptions related to horse and dog race industries and state lotteries. The latter exception was especially significant because state lotteries would be able to offer a variety of games under the guise of a lottery, including slot machines. Hence, while these exceptions were for closed-looped subscriber systems, they still permitted interactive wagering at home on the internet which the law aimed to prevent in the first place.

No bill that attempts to regulate Internet content will achieve the objective of removing that content from the Internet. All US lawmakers can hope for is to impact the size of the industry. A US prohibition, which the Kyl Bill was not, would impact the size of the industry for three principal reasons. First, strong US brands (i.e. traditional casinos or media companies) would not enter the industry. Second, US institutional money would be readily available to build strong brands. Third, some percentage of US bettors would not gamble over the Internet if it were unlawful.

The Kyl Bill, if passed in its latest form, would have resulted in an increase in interactive wagering as those fortunate to be granted exceptions would have worked to exploit their good fortune.

Generally, I disagree with the notion that Government should interfere with a person's freedom to gamble online or anywhere else. I have always given both sides of the argument, which both are logically supportable. I am fundamentally a civil libertarian in the spirit of John Stuart Mill.

But, I recognize also that no one has any natural rights to cheat or steal from any other person and, if they do they should be punished. The Internet and Internet gambling scare me because of the lack of accountability. This is the problem that the lawmakers should be most concerned about. Unfortunately, I am not sure there is a good solution.

How do you think a law based on the latest version of the bill would affect the online gambling industry today?

I would seriously consider investing in those companies that provide support to state lotteries because their revenues would soar. The players in the online racing industries would be interesting to watch, although I think in time only one or two of these companies will survive and prosper.

Considering the fact that other countries are legalizing online gambling, do you think US lawmakers will take on a similar regulatory model somewhere down the line?

I am not sure what type of model the current bills espouse. They are schizophrenic. Again, take the Kyl Bill. Regarding online lotteries, it adopted a government-run model. Regarding online racing, it adopted a state-controlled regulatory model. Regarding online sports wagering and most casino gaming, it adopted a prohibitory model.

Will US lawmakers change their position regarding casino and sports wagering?

My thoughts are that the answer is negative regarding sports wagering. The US government made a broad policy statement some years ago that sports wagering generally should be prohibited (with a limited exemption for Nevada and two other states). Today, despite that illegal sports wagering is quite widespread and substantially tolerated by law enforcement, the US lawmakers are not considering the regulatory model. Just the opposite is occurring as Congress is considering revoking a part of Nevada's exemption for amateur sports.

With regard to casino wagering, any exemption would have to come before passage of the Kyl Bill. If not, I do not see future support for liberalization of any Federal gambling laws in the near term.

Let's talk about a different issue. What are your comments on the Cynthia Haines settlement?

It should be apparent that the profit margins in the online gaming industry are large enough to absorb loses due to refusals of some customers to pay their bills. You need to remember that gaming debts were not enforceable in Nevada until 1981 and the state gaming industry did quite well. Simply put, most players pay their debts. It has long been part of the Gambler's Code. Nor do I believe that the case will scare off most credit card companies. They will simple shift the burden of loss back to the Internet gambling operator.

What do you think about Ira Rothken (Cynthia Haines's lawyer) now taking on the similar case of Fred Marino?

I do not know Mr. Rothken's motivation for taking on this case or his fee arrangement with his client. But, most often lawyers are simply representing their clients' interest for a fee. I am sure that the credit card companies will hire good attorneys for a fee to represent their interests. This is simply the American way.

Are we seeing the beginning of a trend?

Sure. Gambling debts are not enforceable in most states. So the online operators better begin factoring bad debts into their business models. In a decision on July 26th, New York State Supreme Court Justice Charles Edward Ramos ruled that a foreign-based Internet casino web site was subject to New York State gambling laws.

What consequences could this ruling have on Internet gambling?

"The New York decision was not unique, nor particularly well-thought- out or written." The ultimate ruling in that case is that an out-of-state operator that accepts online wagers from a resident of a state is subject to the criminal laws of that state. This ruling, I believe, will withstand the test of time. The New York decision was not unique, nor particularly well-thought- out or written. The cases from Wisconsin, Minnesota & Missouri are better specimens of the legal principle.

These decisions collectively are bad news for persons within the reach of state governments, e.g. Americans, that want to get into the online industry. These people could, and many will, face prosecution all across the United States.

Non-US operators (who are not planning to visit Disneyworld) will likely ignore the ruling unless a U.S. law suit could impact their licenses in their place of operation. A non-U.S. operator cannot be adjudicate to be in violation of the law unless the court obtains physical custody of the person charged. If the person is outside the US, no practical method of obtaining physical custody is available because no current extradition treaty covers gambling violations.

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