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New Nevada Bill Would Allow for Interstate Gaming Compacts

Posted in Regulations by on January 7, 2013
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A bill has been introduced in the Nevada General Assembly, on behalf of the state’s State Gaming Control Board, that would allow for the state governor to enter into interstate gaming compacts with other states. This legislation sets up Nevada to potentially be at the forefront of a compact in which individual states that have passed online gaming bills can work together to offer online gaming without federal legislation.

The bill, titled Assembly Bill 5, would remove language in the previously enacted online gaming bill that stated that an online gaming license does not become effective until a federal law was passed authorizing online gaming or the U.S. Department of Justice (DOJ) provided notice that interactive gaming activities are permissible under federal law. The bill would add language that allows for the governor, on behalf of the state, to enter into agreements with other states.

Assembly Bill 5 has been referred to the Nevada General Assembly Committee on the Judiciary. The upcoming legislative session does not begin until February 4, 2013.

The possibility of gaming compacts became a reality after the DOJ released an opinion in December 2011 stating that the Wire Act applies only to sports betting.

This opinion by DOJ eased fears among state lawmakers that money involved in online gaming could not be sent across state lines without incurring a violation of federal law. With that hurdle removed, the possibility of states entering into online gaming compacts became a reality.

Thus far two states, Delaware and Nevada, have enacted laws legalizing intrastate online gaming. Last month, the New Jersey state legislature passed a law legalizing online gaming and the bill is currently waiting for action to be taken on it by Gov. Chris Christie. Other states have publicly stated that they will consider online gaming legislation in sessions this year.

One potential problem with interstate gaming compacts is the potential for a hodgepodge of different laws and regulations for players and operators. States that lack experience in regulating gambling activities may look to the states that do have such experience, like Nevada and New Jersey, to regulate for them as an alternative to establishing their own regulations for online gaming. Thus far, Nevada is the only state to implement regulations governing online poker.

Nevada may want something in return for helping regulate gaming activities in other states, and it is not clear from the bill what that may be. Compacts like this have the potential to entrust a significant amount of power in a state agency, such as the Nevada Gaming Commission, and it is unclear whether it would be in the best interests of players and operators for that to occur. The concern over one state agency having so much power may serve as an impetus for states that do not currently have regulatory bodies for gaming to decide to establish them.

One other potential problem that gaming compacts address is the size of player pools. While there may not be enough players online at one time in one state for games to be big enough, gaming compacts allow for states to share their player pools, allowing for the possibility of many more players to be online at one time.

Not all states would need to pass a law similar to this Nevada law in order to participate in an interstate gaming compact. Depending on the state law or the powers granted to the state executive based on the state constitution, a state may be able to participate in gaming compacts without any legislative action.

Interstate gaming compacts have the potential to be a good development for gamers, but at this point there are too many unanswered questions about how they would operate. The idea of one state-level agency wielding enormous power over online gaming throughout the country is something that should be studied carefully before it is implemented.

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