Gloves are off in lobbying war for online gambling

The weather isn’t the only thing heating up in D.C. this summer.

The battle over state-based online gambling has reached a fever pitch. Until last week, Congress had been seemingly quiet on the Restoration of America’s Wire Act (RAWA; H.R. 707), the bill to ban Internet gambling. But then Sens. Lindsey Graham (R-S.C.) and Marco Rubio (R-Fla.) introduced a companion bill to RAWA (S. 1668). Behind closed doors, the push for Congress to vote on the bill before adjourning for summer recess has intensified and the tactics become more extreme. And as usual, Sands Chairman Sheldon Adelson, one of RAWA’s most prominent supporters, is lurking in the background.

The National Association of Convenience Stores’s (NACS) lobbying firm, Steptoe & Johnson, recently hired the former Sands lobbyist who literally wrote RAWA. Convenience stores want to protect the monopoly they have on lottery ticket sales in most states. So, NACS is trying to convince lawmakers that state lotteries simply don’t have the technology to effectively regulate online gambling.

{mosads}According to a Capitol Hill source, Steptoe & Johnson partner Douglas Kantor has been making the rounds on Capitol Hill screening a video that supposedly shows a person in Virginia using a virtual private network (VPN) to unlawfully access the Georgia online lottery. This tactic is straight out of the Adelson “scare them with half-truths” playbook.

The video may well show that someone can successfully cheat Georgia’s lottery website (also successfully violate state and federal laws). Yet it doesn’t prove that technology to prevent this doesn’t exist.One only needs to try the same trick in the three states that have legalized online gambling within their borders — Delaware, New Jersey and Nevada — to see technologies to stop this kind of fraud at work. This is not a failure in technology. It’s a failure in regulation.

In a video released by the Poker Players Alliance the week prior to the House hearing, representatives of GeoComply, the firm that provides geolocation services for the majority of gambling sites in Delaware, New Jersey and Nevada, walk the viewer through the multi-tiered system of checks users must go through before they can gain access to gambling sites. GeoComply uses IP addresses, Wi-Fi triangulation, GSM and cell tower triangulation and GPS data to pinpoint a device’s location — down to a city block.

 As GeoComply CEO Anna Sainsbury describes it, her company’s software “fingerprints” concealing technologies like remote servers and VPNs to spot and block fraudulent users. It employs this multi-level system of checks not just because it’s the smart thing to do, but because it’s required by law in states like New Jersey that have legalized online gaming. In the case of someone accessing the Georgia lottery from out of state, it isn’t a failure of technology, but of Georgia’s laws and the lottery relying only on an IP address to determine a user’s location.

While the Georgia Lottery declined to comment, a representative of International Game Technology (IGT, formerly GTECH) which administers state lotteries, noted that states are taking an “aggressive” approach to complying with state and federal laws. “The technology is rapidly changing and new threats are continuously emerging,” said Angela Wiczek, IGT’s vice president of Corporate Communications, “and we are constantly designing, reviewing, and analyzing new and enhanced technologies, assessing alternative third-party partners, and adopting best practices.” IGT offers state lotteries a menu of technologies they can use to improve security and block out-of-state players. Lotteries should follow the lead of states like New Jersey in its implementation of online casino-style gambling and implement multi-layered system of checks.

Claims that an Internet gambling ban is necessary to protect the public are either misguided or disingenuous. Prohibitions simply don’t work. All a ban will do is push the activity back into the black market, making consumers less safe than they are now. Licensed online gambling businesses have an incentive to comply with state and federal laws, lest they risk being fined, sued and losing their license to operate. In the black market there is little incentive for illegal online gambling businesses to keep minors, addicts or out-of-state players off of their site.

If lawmakers truly desire to protect consumers and uphold the constitutionally protected state powers, they should let states decide for themselves if and how to regulate the activity. As the last few years have demonstrated, the technology is available and states are motivated to play by the rules.

Minton is a fellow with the Competitive Enterprise Institute.