Trade rules gamble with state laws: the WTO ruling on Internet gambling seems to favor the states, but some fear it also left the door open for another challenge in the future.

• Author: Boulard, Garry

When North Dakota Representative Jim Kasper introduced two bills earlier this year to legalize online poker, he thought he was identifying an untapped revenue source by acknowledging "what a lot of people are doing every day."

"There are millions of people who gamble on the Internet and the numbers are getting larger all the time," says Kasper. "It is a huge business with a huge revenue potential for a state like North Dakota.

"I thought the time had come to make this particular type of gaming legal through the kind of regulating that other forms of gambling are subject to in other states," he says.

In March, the North Dakota House passed HB 1509, which set forth the rules for regulating, licensing and taxing online poker, and HCR 3035, which would have presented the question in 2006 to voters as a proposed amendment to the state constitution.

Then the federal government stepped in.

In a letter addressed to North Dakota Attorney General Wayne Stenehjem, U.S. Deputy Assistant Attorney General Laura H. Parsky wrote that "federal law prohibits gambling over the Internet, including casino-style gambling."

She cited three sections of the U.S. criminal code that prohibit the use of a wire communication for gambling, gambling across state lines, and the establishment of any business that could promote gambling in an illegal way. Parsky said that anyone who "knowingly assists the gambling business to operate would likewise be subject to prosecution."

Shortly after the letter was made public, the Senate defeated Kasper's measures. He is convinced that the DOJ letter--"intimidating in tone and intent"--was instrumental.

While it may or may not have been the main reason the bills failed, Kasper says there is "no doubt in my mind that the letter scared away a lot of the support. How could it not have?"

EXPLOSIVE TOPIC

That the U.S. Department of Justice should find itself playing a prominent role in what seemed, until Parsky's letter was released, a topic of interest only to the lawmakers of North Dakota, shows how explosive Internet gambling has become for the federal government and the states.

"It is an issue that is becoming front and center for the states," says Martin D. Owens, a Sacramento attorney and Internet gambling law expert. "And, let's face it, one of the reasons why so many people think the states are going to finally address the whole Internet gambling issue is because they are already willingly and happily involved in so many other forms of gambling."

Owens says that not only do 48 states currently offer some form of gambling, "but in most cases they have become very active in promoting gambling in the confident expectation that they have had a captive market."

But the introduction of Internet gambling, says Joseph Kelly, a professor of law at the State University of New York in Buffalo, has added a new and uncertain element to the mix, primarily because it remains illegal throughout the country, but also because it is so stubbornly popular.

"I don't think anyone has seen anything like this before," Kelly says. "The growth rate is fantastic. And unless you take some sort of drastic measure like chopping off the right hand of every 10th bettor, there is nothing anyone can do...