Public Gaming Magazine September-October 2016

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September/October 2016 // PUBLIC GAMING INTERNATIONAL // 67
that laws against it are working, lawmakers are likely to regulate
and tax it. Some people might say that sports-betting in the U.S.
has passed that threshold. It is conservatively estimated that illegal
sports-betting exceeds $100 billion a year, that 97 percent of the
$4.1 billion bet on last year’s Super bowl was illegal, and that mil-
lions of otherwise law-abiding citizens are betting on sports in the
U.S. in spite of the illegality. At what point does it become imprac-
tical to continue to outlaw it?
Private operators building markets where the boundaries of the
law are not crystal clear is the end-game of the “ask for forgiveness
instead of permission” method.
Mark Hichar: The legal boundaries that depend on a precise
legal definition of gambling are an example of that. Most may think
that DFS fits state legal definitions of gambling. But, from a legal
point of view, the relevance of chance versus skill and the ways to
measure those are not precisely defined. We are talking not just
about legality versus illegality. We are also talking about ‘gambling’
versus not gambling. Tax rates are higher and regulatory require-
ments more demanding for gambling than for other goods and
services. So, DFS advocates want it to be classified as not gambling
because then it falls under a different tax and regulatory framework.
Another problem is that nobody has a crystal ball to foresee the
implications that current decisions will have on a future that will
be much different than today. When legislators built a carve-out for
Fantasy Sports into the UIGEA back in 2006, nobody could have
foreseen that it could grow to the size that it became ten years later.
Of course, neither the UIGEA nor other federal legislation pro-
hibits states from exercising their prerogative to enact laws that
make DFS or Traditional Fantasy Sports or i-poker or other online
games illegal.
Gordon Medenica: Doesn’t the diversity of states’ positions as
regards the best regulatory policy for games-of-chance validate the
position that the only way to respect the will and the interests of
the people is to let them decide on a state-by-state basis, and not
impose a federal decree like RAWA?
Mark Hichar: Absolutely. The regulation of gambling has histor-
ically been left to the states, with most federal laws specific to gam-
bling intended to assist the states in the enforcement of their laws.
A key area in which the federal government has acted independent
of the states is in regard to sports-betting, which is prohibited in
all but the four states where it was grandfathered in to the extent
conducted prior to the time the 1992 federal sports betting law
was enacted. Now we have a $149 billion illegal and unregulated
sport-betting market that benefits nobody except the criminals who
are making money from it. Hopefully these counter-productive im-
pacts of federal intrusion into gambling will inform the decision-
making process of federal lawmakers such that states are allowed
to retain control over gambling policy, along with the authority to
clarify the definition of what exactly constitutes “gambling.”
Gordon Medenica: James … are today’s rogue operators to-
morrow’s mainstream companies? And are there ways that Lottery
can leverage the impacts of change and disruption to the benefit of
its stakeholders?
James Maida: These gray area private operators would prefer
to navigate a process that leads to them becoming mainstream. For
example, enterprises like FanDuel and Draft Kings cannot go pub-
lic, or at least not optimize their IPO, if they’re operating in a legal
gray zone. That’s at least one of the reasons why they are attempt-
ing to operate transparently, remove ambiguity in the laws, and
push for credibility in other ways. There is the problem, though,
that your tenure as illegal operator can come back to haunt you.
Companies which operated illegally in the past are being required
to account for their past behavior when applying for a license to
operate legally now. I would observe, though, that they seem to be
successful at doing that. It’s a classic example of a particularly edgy
“ask for forgiveness instead of permission” strategy.
Philippe Vlaemminck: That’s why European operators work
aggressively on both fronts. They work tirelessly to make sure law-
makers at both the member-state level and the EU Commission
level recognize, and hopefully appreciate, the role that lotteries
serve in channeling economic benefit to good causes and providing
the gold standard of consumer protection and Responsible Gam-
ing. But they also vigorously compete in the market-place, applying
technology and innovation in game development and distribution
and every aspect of business and marketing operations.
I would emphatically concur with James’ description of the “ask
for forgiveness instead of permission” approach employed by illegal
operators. And that approach has served them well in pushing law-
makers to evolve regulatory and taxation frameworks in ways that
are not favorable to government lotteries. Lawmakers may decide,
for instance, to allow Lottery to operate in all game-of-chance cat-
egories. That would seem to be good, right? But the quid pro quo
is typically to also implement and regulate and tax model that al-
lows private commercial operators to apply for a license to operate
Panel Discussion … continued from page 50
A London-based internet operator
called sold an Oregon
MegaBucks lotto ticket to a player in
Iraq. Companies like Lottoland and
Tipp 24 sell Powerball, Megamillions,
Euromillions, Eurojackpot, and many
of the jurisdictional games online and
into markets where they are not licensed
to sell.
—Gordon Medenica