Remote Gambling: Industry Trends and
Federal Policy
Michaela D. Platzer
Specialist in Industrial Organization and Business
November 8, 2012
Congressional Research Service
7-5700
www.crs.gov
R42820
CRS Report for Congress
Pr
epared for Members and Committees of Congress

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Remote Gambling: Industry Trends and Federal Policy

Summary
Gambling, once widely outlawed, is now a regulated, taxed activity that is legal in some form—
bingo, card games, slot machines, state-run lotteries, casinos—in all but two states. State
governments have the main responsibility for overseeing gambling, but Congress historically has
played a significant role in shaping the industry. Since passage of the Unlawful Internet Gambling
Enforcement Act (UIGEA; P.L. 109-347) in 2006, congressional focus has moved to remote
gambling. As used in this report, remote gambling refers to gambling that does not occur in a
casino, a bingo hall, or a store selling lottery tickets. Remote gambling includes gambling over
the Internet as well as gambling using devices that may communicate by other means, such as by
telephone or direct satellite links.
UIGEA, while preventing payments to illegal gambling-related businesses, does not outlaw any
form of remote gambling. It allows states and Indian tribes to offer remote gaming within their
territory if certain conditions are met. A majority of states already allow remote betting on horse
racing, and a number use the web for lottery promotions. A number of Indian tribes and gaming
companies have created entities to develop remote gaming and seem likely to expand them
rapidly if the legal issues are clarified.
While UIGEA did not outlaw remote gambling, it also did not clarify the scope of long-standing
laws that the U.S. Department of Justice (DOJ) has used to prosecute Internet gambling, such as
the Wire Act, 18 U.S.C. 1084. With wide-ranging implications, a recent DOJ interpretation of the
Wire Act authorizes states to allow online gambling, except for sports betting. Currently,
Delaware and Nevada are the only two states to permit some form of Internet gaming, but several
others are debating legislation to legalize online poker or other games. The global market for
Internet gaming is currently estimated at more than $30 billion a year. If the United States passes
federal online gambling legislation and all states opt in, H2 Gambling Capital, a consulting firm,
predicts a national online gaming market of some $20 billion five years after enactment.
Gambling companies hold divergent views on the desirability of allowing remote gambling.
Some casino operators, particularly the larger ones, foresee new opportunities for profit. On the
other hand, many operators of smaller casinos are concerned that remote gambling could draw
customers away. Complicating matters, total gambling revenues are only now recovering from
declines in 2009 and 2010, and many established casinos are struggling due to increased
competition as more states legalize casino gambling.
Several lawmakers have introduced legislation to allow, regulate, and tax remote gaming, and
House and Senate committees have held hearings and roundtable discussions on the issue. Those
favoring expanded remote gaming cite potential federal revenue from taxes and registration fees,
as well as the need for comprehensive national regulation. Opponents question whether it is
possible to have stringent regulation of online gambling, which they say holds the potential for
increased fraud and money laundering. Among other issues Congress faces are the proper balance
of federal and state regulation and the possible social costs of expanded gaming, including
problem gambling.

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Contents
Introduction ...................................................................................................................................... 1
The Rise of Remote Gaming ........................................................................................................... 3
Regulation of Remote Gaming ........................................................................................................ 7
The Competitive Impact of Remote Gaming ................................................................................. 10
Lotteries ................................................................................................................................... 10
Commercial Casinos ................................................................................................................ 11
Tribal Gaming .......................................................................................................................... 13
Indian Gaming Regulatory Act (IGRA) ............................................................................ 14
Financing Uncertainty ....................................................................................................... 16
Pari-Mutuel Betting ................................................................................................................. 17
Sports Betting .......................................................................................................................... 17
Remote Competition ................................................................................................................ 18
Problem Gambling ......................................................................................................................... 19
Gambling as a Government Revenue Source ................................................................................ 20
Congressional Action on Internet Gaming ..................................................................................... 24

Figures
Figure 1. Global Internet Gross Gaming Revenues ......................................................................... 4
Figure 2. U.S. Commercial Casino Revenues................................................................................ 12
Figure 3. Indian Gambling Revenues ............................................................................................ 14
Figure 4. Trends in State Gambling Revenue, FY1998-FY2010 ................................................... 21
Figure 5. State-Level Online Gambling Legislation ...................................................................... 22

Tables
Table 1. Top U.S. Casino Markets, by Annual Gross Revenue ..................................................... 13

Contacts
Author Contact Information........................................................................................................... 27
Acknowledgments ......................................................................................................................... 27

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Introduction
Gambling, once widely outlawed, is now a regulated, taxed activity that is legal in some form—
bingo, card games, slot machines, state-run lotteries, casinos—in all but two states.1 State
governments have the main responsibility for overseeing gambling, but Congress historically has
played a significant role in shaping the industry. Congressional actions include 1960s-era anti-
racketeering laws, a 1988 statute setting policy for Indian gaming, and a 1992 law banning state
involvement in sports betting.2
With potentially far-reaching consequences for remote gaming3 and the gambling industry, the
U.S. Department of Justice (DOJ) recently announced a major shift in its view of Internet
gambling. In December 2011, DOJ concluded that the federal Wire Act applies only to sports
betting, a departure from its long-held assertion that all forms of Internet gambling, especially
online poker, are illegal.4 One industry observer predicts that this change will cause “an explosion
of poker, instant lotteries, and casino games on the Internet, run or licensed by the states.”5
This report looks at the rise of remote gaming and its potential implications for the broader
gambling industry, including traditional and tribal gaming. Having developed into a significant
U.S. industry, traditional gambling industries and casino hotels directly employed about 390,000
people and generated an estimated $80 billion in revenue in 2011. The U.S. market for remote
gaming could be worth more than $20 billion if the United States enacts federal legislation and all
states opt in, according to projections by H2 Gambling Capital, a consulting firm.6
Congress addressed Internet gambling in a 2006 law, the Unlawful Internet Gambling
Enforcement Act (UIGEA; P.L. 109-347). The law, passed partly in response to the
recommendations of a congressionally created commission,7 bars gambling-related businesses

1 Lucy Dadayan and Robert B. Ward, For the First Time A Smaller Jackpot: Trends in State Revenues from Gambling,
Nelson A. Rockefeller Institute of Government, September 21, 2009, http://www.rockinst.org/pdf/government_finance/
2009-09-21-No_More_Jackpot.pdf. Gambling is not legal in Hawaii and Utah.
2 CRS Report 97-619, Internet Gambling: An Overview of Federal Criminal Law, by Charles Doyle. Laws include the
1961 Wire Act, 18 U.S.C. 1084; the Indian Gaming Regulatory Act of 1988, 25 U.S.C. 2701, and the Professional and
Amateur Sports Protection Act, 26 U.S.C. 3701.
3 Gaming is a synonym for gambling, or playing games of chance for money. Remote gaming refers to gambling done
away from licensed locations on devices such as wireless tablet PCs, mobile phones, hand-held gaming consoles, and
personal computers. These activities may or may not occur over the Internet.
4 The Department of Justice opinion stems from a 2009 request by Illinois and New York asking for clarification on
whether Internet lottery ticket sales and out-of-state vendors violated the 1961 Wire Act. Memorandum Opinion for the
Assistant Attorney General, Criminal Division, Whether Proposals by Illinois and New York to Use the Internet and
Out-of-State Transaction Processors to Sell Lottery Tickets to In-State Adults Violate the Wire Act, September 2011,
http://www.justice.gov/olc/2011/state-lotteries-opinion.pdf.
5 Nelson Rose, “The U.S. Justice Department Opinion on Internet Gaming: What’s at Stake for Tribes[.] Prepared for
the U.S. Senate Committee on Indian Affairs,” February 9, 2012, http://www.gamblingandthelaw.com/articles/321-the-
us-justice-department-opinion-on-internet-gaming-whats-at-stake-for-tribes-prepared-for-the-us-senate-committee-on-
indian-affairs.html.
6 H2 Gambling Capital Consultants, data furnished to CRS by e-mail, November 5, 2012.
7 National Gambling Impact Study Commission, National Gambling Impact Study Commission Final Report, Chapter
5: Internet Gambling, 1999, http://govinfo.library.unt.edu/ngisc/reports/5.pdf. Citing the potential for increased
underage gambling and fraud, the commission recommended that the federal government “should prohibit, without
allowing new exemptions or the expansion of existing federal exemptions to other jurisdictions, Internet gambling not
already authorized within the United States or among parties in the United States and any foreign jurisdiction.”
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from accepting checks, credit card charges, and other forms of payment for Internet gambling that
is outlawed by state or federal statutes, and sets fines and penalties on banks and financial firms
that process such payments. However, UIGEA does not outlaw any specific types of gambling
over the Internet, and allows states and tribes to continue or initiate Internet gaming within their
borders if they meet certain safeguards.8
Like many other industries, the gambling industry has been transformed by developments in
computing and telecommunications. Remote gaming has become an increasingly important part
of the global gambling industry, making use of smartphones, handheld mobile units, digital TV
sets, and dedicated devices. In the United States, states and tribes are using these advances to
strengthen their respective gambling industries. Whereas nine states have express remote
gambling prohibitions, in the majority of states, bettors can now use the Internet, television
hookups, or other remote technology to place bets on horse racing. Many states, including
Minnesota, New Hampshire, New York, North Dakota, and Virginia, permit online lottery sales
offering web-based subscriptions.9 In 2012, Illinois became the first state to sell individual lottery
tickets online.10 Nevada and Delaware are the only two states that have approved some form of
online gaming; other states are expected to follow.11
Estimates indicate that Americans spend approximately $4 billion to $6 billion annually on
Internet gambling, and about 1,700 international gambling websites currently take bets from
players located in the United States.12 Millions of Americans are said to visit poker websites each
month, despite questions about the legality of online poker; the extent to which players’ winnings
are declared to federal and state tax authorities is also not clear.13 The advent of software that uses
global positioning technology, Internet addresses, and other data to track the age and geographic
position of gamblers can make it possible for states to offer legal, remote gaming within their
borders.14 Regulations to implement UIGEA appear to have made it easier for state lotteries and
other legal gaming operators to receive payment via credit cards and other electronic payments.15
However, while UIGEA included exceptions for intrastate online betting, it did not clarify the
scope of older laws that DOJ has used to prosecute Internet gambling, such as the Wire Act.
Several bills to address this situation were introduced in the 112th Congress. Issues before

8 CRS Report RS22749, Unlawful Internet Gambling Enforcement Act (UIGEA) and Its Implementing Regulations, by
Brian T. Yeh and Charles Doyle.
9 GamblingCompliance, Market Barriers: U.S. Internet Gaming, 2010, p. 101.
10 Alexandra Berzon, “States Up the Online Ante,” Wall Street Journal, April 15, 2012.
11 National Conference of State Legislatures, 2012 Legislation Regarding Internet Gambling or Lotteries, September
20, 2012, http://www.ncsl.org/issues-research.aspx?tabs=951,63,490.
12 U.S. Congress, House Committee on Energy and Commerce, Subcommittee on Commerce, Manufacturing, and
Trade, Written Statement of Parry Aftab, Advisory Board Member of FairPlayUSA, Hearing on Internet Gaming: Is
There a Safe Bet?, 112th Cong., 1st sess., October 25, 2011, p. 5.
13 The first online poker room, PartyPoker, went live in 1998, followed by Poker Stars and Party Poker in 2001.
14 UIGEA allows online, intrastate gaming (or gaming that links tribal gaming establishments) so long as there are
safeguards to verify the geographic location of gamers and to ensure that minors do not wager. Geolocation technology
tracks a user’s physical location through the IP address used to access the Internet, and it also evaluates Internet
browser settings such as time zone and language. Most forms of geolocation technology are reported to be extremely
accurate, with experts estimating accuracy rates of between 85% and 98% at the state level and over 99% at the
national level. See Kevin F. King, Geolocation and Federalism on the Internet: Cutting Internet Gambling’s Gordian
Knot, The Columbia Science and Technology Law Review, 2010, http://www.stlr.org/html/volume11/king.pdf.
15 Nelson I. Rose, “The New UIGEA Regulations: Opportunities for Operators,” Gambling and the Law, June 1, 2010,
http://www.gamblingandthelaw.com/articles/261-the-new-uigea-regulations-opportunities-for-operators.html.
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Congress include the adequacy of UIGEA to meet its stated goals of addressing “a growing cause
of debt collection problems for insured depository institutions and the consumer credit industry”
and creating “new mechanisms for enforcing gambling laws on the Internet”;16 the desirability of
legislation to legalize and tax interstate remote gaming; and the value of a greater federal role in
regulation.
The Rise of Remote Gaming
Remote gaming, which began to develop in the 1980s, has been growing rapidly. About 85
countries have legalized online gambling, but some of the biggest potential markets, including
China, Japan, South Korea, and the United States, continue to prohibit many forms of gambling
over the Internet.17 Currently, the computer servers and administrative offices of all online
gambling sites are physically located off-shore to avoid U.S. laws and regulations.18 According to
private estimates, annual gross global revenue from online, television, and mobile gambling is in
the range of $34.4 billion, representing an approximately 280% increase over 10 years (see
Figure 1).19 Estimates also indicate Internet gaming revenue comprises around 10% of gross
global gaming revenue as of 2012.20 In the United States, Internet gambling in 2011 accounted for
4% of gross gambling revenue, according to the American Gaming Association.21
Congress has been concerned about Internet gambling since the late 1990s. The 1999 report by
the National Gambling Impact Study Commission estimated that in 1998, 14.5 million gamblers
spent $651 million on hundreds of online gambling websites, here and abroad.22 Early on, sports
betting was the predominant form of Internet gambling,23 as electronic casino games and online
poker were slower to develop. The commission expressed concern about underage gamblers and
potential fraud, and recommended prohibiting additional Internet gaming.24

16 UIEGA §5361, congressional findings and purpose.
17 Antigua and Barbuda offered the first Internet gaming sites in the mid-1990s. David Stewart, Online Gambling Five
Years after UIGEA, American Gaming Association, May 18, 2011, p. 1. http://www.americangaming.org/files/aga/
uploads/docs/final_online_gambling_white_paper_5-18-11.pdf.
18 An international trade dispute arose in the mid-2000s, when Antigua lodged a complaint against the United States
with the World Trade Organization (WTO) because foreign casinos could not accept wagers from U.S. players. The
WTO ruled in favor of Antigua, finding the United States had violated the General Agreement on Trade in Services
(GATS) by restricting Internet gambling. Although the United States was asked to bring regulations in compliance with
GATS, the ruling has not changed the federal stance against Internet gambling.
19 H2 Gambling Capital Consultants, data furnished to CRS by e-mail, November 5, 2012. Gross gambling revenue
(GGR) is defined as the amount wagered minus the winnings return to players, and is considered the true measure of
the economic value of gambling. GGR is the figure used to determine what an operation earns before taxes, salaries,
and other expenses are paid.
20 Spectrum Gaming Group, Internet Gambling Developments in International Jurisdictions: Insights for Indian
Nations, October 4, 2010, p. 39, http://www.indiangaming.org/info/alerts/Spectrum-Internet-Paper.pdf.
21American Gaming Association, State of the States, The AGA Survey of Casino Entertainment, 2012, p. 28,
http://www.americangaming.org/files/aga/uploads/docs/sos/aga-sos-2011.pdf.
22 National Gambling Impact Study Commission Final Report, Chapter 5. Internet Gambling, p. 5-1,
http://govinfo.library.unt.edu/ngisc/reports/5.pdf.
23 David O. Stewart, An Analysis of Internet Gambling and its Policy Implications, American Gaming Association, p. 3,
http://www.americangaming.org/assets/files/studies/wpaper_internet_0531.pdf.
24 National Gambling Impact Study Commission Final Report, Chapter 5. Internet Gambling, p. 5-12,
http://govinfo.library.unt.edu/ngisc/reports/5.pdf.
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Figure 1. Global Internet Gross Gaming Revenues
Billions of Dollars
$50
$41.6
$39.4
$40
$36.9
$34.4
$30.2 $31.6
$27.6
$30
$24.8
$20.5 $21.7
$20
$16.4
$12.6
$9.6
$10
$0
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012 (p
2013 (e
2014 (e
2015 (e
)
)
)
)

Source: H2 Gambling Capital, October 2012. These figures show revenues after payouts of winnings.
As online gaming grew, state attorneys general and the Department of Justice moved to shut
down or halt payments to selected Internet sites. Federal officials acted under a series of 1960s
statutes, including the Wire Act, which makes it a federal crime to use the telephone or
telecommunications to conduct illegal gambling. In one of the best-known cases, Jay Cohen, a
co-operator of the Antigua-based World Sports Exchange, was arrested in 1998 and charged with
violating the Wire Act for advertising his company’s services in the United States and accepting
wagers from bettors in states where such gaming was illegal. Cohen was sentenced to 21 months
in prison and fined $5,000.25 The U.S. Supreme Court declined to hear his appeal.
In 2003, DOJ warned media outlets that ran advertisements for gambling websites that they could
be aiding illegal activities. Microsoft, Google, and Yahoo agreed in 2007 to pay a combined total
of $31.5 million to resolve DOJ claims that they were promoting illegal gambling by running
advertisements for certain websites.26
Congress addressed Internet gambling in UIGEA, barring gambling-related businesses from
accepting checks, credit card charges, electronic transfers, and similar payments for Internet
gambling that is outlawed by state or federal statutes. Violators are subject to criminal fines of up
to $250,000 (or $500,000 if the defendant is an organization), imprisonment of up to five years,
or both. After considerable delay, the Federal Reserve Board and the Department of the Treasury
in late 2009 issued final rules to implement the law. Those rules took effect in June 2010.27

25 United States of America v. Jay Cohen, 260 F.3d 68 (2nd Cir., 2001).
26 Elizabeth A. Ritvo and Samantha L. Gerlovin, Legal Guide, Massachusetts Broadcasters Association, September
2008, p. 77, http://www.massbroadcasters.org/images/MBA%20Legal%20Guide%20%28FINAL%29%20-
%20Updated%202008-09.PDF.
27 CRS Report RS22749, Unlawful Internet Gambling Enforcement Act (UIGEA) and Its Implementing Regulations, by
Brian T. Yeh and Charles Doyle. The delay was due to concerns of financial firms and banks that proposed rules were
too broad and would affect non-gambling payments, as well as to the complexity of both online payments and state and
federal laws governing gambling. UIGEA’s definition of “unlawful Internet gambling” does not specify what gambling
activity is illegal; rather, the statute says legality is determined by underlying federal or state gambling laws. The
(continued...)
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There is evidence that UIGEA initially dampened the Internet gaming market. Shortly after the
law was passed, some major gambling software companies announced that their products could
no longer be used to provide gambling services to U.S. residents,28 and publicly traded online
gaming companies suffered losses in overseas stock markets due to concerns about the impact of
the legislation and the loss of U.S. clients.29 London-based consulting firm H2 Gambling Capital
Consultants (H2G) estimated that U.S. wagering on international Internet sites, $6 billion in 2006,
declined to $4 billion in 2007 after passage of UIGEA. The firm said that the global “eGaming”
business began to rebound in 2010 and continued to grow until April 2011, when the Department
of Justice indicted several leading Internet poker operators.
On what online poker players have dubbed “Black Friday,” the U.S. Attorney for the Southern
District of New York on April 15, 2011, indicted the founders of three major Internet poker
websites—PokerStars, Full Tilt Poker, and Absolute Poker/Ultimate Bet—for allegedly using
phony corporations and websites to disguise illegal payments to their operations.30 DOJ charged
that the companies, which were located overseas but took bets from U.S. players, violated
UIGEA, the Wire Act, and other federal laws. In September 2011 DOJ filed a civil suit against
Full Tilt Poker for allegedly defrauding bettors.31 Prior to the April indictment, Full Tilt Poker and
PokerStars had an estimated 60% of the global Internet poker market. While U.S. bettors no
longer have access to those sites, an estimated 300 offshore gambling operators continue to offer
services in the United States through websites, according to estimates for the U.S. gaming
industry.32 On July 31, 2012, all civil complaints against PokerStars and Full Tilt Poker were
dismissed following agreements with DOJ, payments of $731 million to settle the claims, and the
purchase of Full Tilt by PokerStars.33 Fulltiltpoker.com reopened in Europe, but Americans
cannot access the Full Tilt website.34

(...continued)
Federal Reserve and the Department of the Treasury, in final regulations to implement UIGEA, said they considered
making a list of Internet gambling activities outlawed by state and federal law, but chose not to on the grounds that
“Creating such a list would require the Agencies to formally interpret those laws that are written and enforced by other
entities, such as State legislatures and law enforcement agencies. Accordingly, interpretations by the Agencies in these
areas may not be determinative in defining the Act’s legal coverage and could set up conflicts or confusion with
interpretations by the entities that actually enforce those laws.” (Federal Reserve System 12 CFR Part 233, Regulation
GG; Docket No. R-1298.) The House Financial Services Committee report on H.R. 2267 (H.Rept. 111-656, Part I)
notes that the UIGEA regulations “like the underlying legislation, fail to define the term unlawful Internet gambling,
leaving it to each financial institution to reconcile conflicting state and federal laws, court decisions and inconsistent
Department of Justice interpretations, when determining whether to process a transaction. Furthermore, some of the
information needed to make this determination would generally be unavailable to banks because customers or financial
institutions in foreign jurisdictions will likely be unwilling or unable to provide it.”
28 Robert J. Williams, coordinator, Alberta Gaming Research Institute, University of Lethbridge, Internet Gambling: A
Comprehensive Review and Synthesis of the Literature, August 31, 2007, http://www.uleth.ca/dspace/bitstream/10133/
432/1/2007-InternetReview-OPGRC.pdf.
29 Ian Swanson, “Internet Gambling Ban Stung Foreign Bookies,” The Hill, June 11, 2008.
30 U.S. Department of Justice, “Manhattan U.S. Attorney Charges Principals of Three Largest Internet Poker
Companies with Bank Fraud, Illegal Gambling Offenses and Laundering Billions in Illegal Gambling Proceeds,” April
15, 2011, http://www.justice.gov/usao/nys/pressreleases/April11/scheinbergetalindictmentpr.pdf. Indictment is
available at http://www.scribd.com/doc/53107543/Indictment-DOJ-vs-Scheinberg-Bitar-Tom-et-al.
31 Alexandra Berzon, “U.S. Alleges Poker Site Stacked Deck,” Wall Street Journal, September 21, 2011.
32 David O. Stewart, Ropes & Gray, for the American Gaming Association, Online Gaming Five Years After UIGEA,
May 2011, p. 8, http://www.americangaming.org/files/aga/uploads/docs/final_online_gambling_white_paper_5-18-
11.pdf.
33 The United States Attorney’s Office Southern District of New York, “Manhattan U.S. Attorney Announces $731
Million Settlement Of Money Laundering And Forfeiture Complaint With Pokerstars And Full Tilt Poker,” press
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Another change affecting remote gaming is DOJ’s recent determination on the Wire Act.35 In its
clarification made public in December 2011, the department isolated the Wire Act to be
applicable only to sport-related gambling activities. According to legal gambling experts, this
clarification eliminated nearly all federal anti-gaming laws. Furthermore, it appears that its stance
not only opens the door to intrastate Internet activity, but possible interstate activity as well.
Even though legal questions remain, there are a number of indications that companies and states
are poised to expand remote gaming as part of a larger trend toward online entertainment and
communications. According to the Pew Internet & American Life Project, 85% of all adults now
use the Internet and the same percentage have a cell phone, two-thirds of U.S. households have
access to a high-speed broadband connection, 45% have a smartphone, and 18% have a tablet
computer. All of these platforms could be used for gambling.36 Soon, interactive television is
expected to become widely available, offering even more potential platforms for betting. Nelson
I. Rose, a professor at the Whittier Law School, argues that UIGEA and the regulations to
implement it may have paved the way for expansion of remote gaming:
By issuing these [regulations] federal agencies have now made it clear that some forms of
gambling on the Internet are legal in the United States. This creates opportunities for existing
or expanding legal state gaming, and for bolstering faltering state budgets. But, mostly it
opens some doors for creative Internet gaming operators … The result will be a major
expansion of Internet gambling. The major obstacles facing legal online gaming are the
customers’ fear that they might be breaking the law and their difficulty in getting money to
sites they trust. Individual patrons will now be able to use their credit cards to make bets.
And they will know that they are not breaking the law and the gaming operation is honest
when the gambling site is operated by a state lottery or licensed by a state racing or gaming
board, or has a reasoned legal opinion.37
Many participants in the existing gambling industry, from Indian tribes to state lottery
commissions to casino operators, have been exploring ways to increase their involvement in
remote gaming. Companies not involved in the traditional gaming industry are also interested.
Social networking sites such as Facebook provide online venues to play online bingo for cash
prizes.38 Another form of gaming is Internet sweepstakes cafes: consumers buy phone cards that,
as a bonus, include sweepstakes entries and then use the cards to play games that resemble slot
machines.39 Wall Street brokerage firm Cantor Fitzgerald has developed a mobile device that can

(...continued)
release, July 31, 2012, http://www.justice.gov/usao/nys/pressreleases/July12/pokersettlement.html.
34 PRNewswire, “Shuffle Up and Deal! Full Tilt Poker Opens for Real Money Online Poker,” press release, November
6, 2012, http://www.marketwatch.com/story/shuffle-up-and-deal-full-tilt-poker-opens-for-real-money-online-poker-
2012-11-06.
35 Memorandum Opinion for the Assistant Attorney General, Criminal Division, Whether Proposals by Illinois and
New York to Use the Internet and Out-of-State Transaction Processors to Sell Lottery Tickets to In-State Adults
Violate the Wire Act, September 2011, http://www.justice.gov/olc/2011/state-lotteries-opinion.pdf.
36 Pew Internet & American Life Project, Trend Data (Adults), August 2012 Survey, http://pewinternet.org/Trend-Data-
%28Adults%29/Whos-Online.aspx.
37 Nelson I. Rose, “The New UIGEA Regulations: Opportunities for Operators,” Gambling and the Law, June 1, 2010,
http://www.gamblingandthelaw.com/articles/261-the-new-uigea-regulations-opportunities-for-operators.html.
38 Christopher Thompson, “Facebook Ventures into Online Gambling,” Financial Times, August 7, 2012.
39 David O. Stewart, Internet Sweepstakes Cafes: Unregulated Storefront Gambling in the Neighborhood, American
Gaming Association, October 2012, http://www.americangaming.org/files/aga/uploads/docs/whitepapers/
internet_sweepstakes_white_paper_103112.pdf.
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be used for sports betting inside Las Vegas casinos, allowing consumers to wager during a live
game on such things as the outcome of a field goal kick or an at-bat.40 The Nevada Gaming
Control Board has approved the use of mobile devices, including Blackberry, Android, and
iPad/iPhone applications, to enable people to bet on sports within the state. 41 Zynga, a social
gaming company, in partnership with bwin.party, announced plans to develop real-money mobile
and online poker and casino games like blackjack, slots, and roulette in the United Kingdom,
where such things are legal.42
Because of concern about the legality of some remote gaming activities in the United States, U.S.
companies are looking to certain foreign markets where Internet gaming is legal. Many of the top
Internet gambling sites are licensed in the European Union (EU), especially in the United
Kingdom, Gibraltar, Malta, Ireland, and Austria.43 While noting the dearth of accurate data, a
2009 EU report called the sector “economically significant,” estimating that it employed more
than 10,000 people. Betfair, a major online gambling firm, is listed on the London Stock
Exchange.
Regulation of Remote Gaming
One major question about UIGEA and other recent legislative initiatives is whether it is possible
to construct an effective system to regulate gaming that occurs outside identified physical
locations. Enforcement of remote gaming laws presents logistical difficulties, including
monitoring myriad websites to make sure that minors do not gamble; verifying the geographic
location of gamblers on sites that are limited to certain states or territories; and auditing websites
and payment systems. Consumers may experience difficulty resolving disputes with online
operators whose physical location may be in countries with weak law enforcement or extreme
banking secrecy.
Final federal rules to implement UIGEA required financial firms to engage in due diligence to
ensure that businesses engaged in Internet gambling furnish proof of legal authority to operate the
business and that state or tribal gambling ordinances include requirements verifying the age and
geographic location of clients.44 Nonetheless, the Department of Justice, the Department of State
and state attorneys general have raised questions about the potential for fraud and money
laundering on Internet gambling sites. In a November 2009 letter to Representative Spencer
Bachus, Shawn Henry, assistant director of the FBI Cyber Division, cautioned that Internet poker
could be used to “transfer ill-gotten gains” via the creation of private tournaments on online poker
programs. He cast doubt on the ability of the gaming industry to accurately verify the age of
gamblers or their geographic location and noted that Internet addresses could be manipulated to
provide misleading information about location.45

40 Susanne Craig, “Taking Risks, Making Odds,” New York Times, December 24, 2010, http://dealbook.nytimes.com/
2010/12/24/taking-risks-making-odds.
41 Julian Rogers, “William Hill Goes Mobile in Nevada,” iGamingBusiness North America, October 2012.
42 Tom Taulli, “Good News From Zynga? Finally!,” InvestorPlace, October 24, 2012.
43 European Union Staff Working Paper, Report to the Trade Barriers Regulation Committee, June, 2009, p. 7,
http://trade.ec.europa.eu/doclib/docs/2009/june/tradoc_143405.pdf.
44 American Bankers Association, “UIGEA Final Rule, Frequently Asked Questions, Fact Sheet,” http://www.aba.com/
NR/rdonlyres/62A8C8BC-70E9-4D97-9568-53540F3045B5/57544/UIGEAFAQs.pdf.
45 Rep. Spencer Bachus, “Enforce Ban on Illegal Internet Gambling Congressman Bachus Says,” Press Release
(continued...)
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Soon after regulations to implement UIGEA took effect in June 2010, DOJ announced several
high-profile settlements with online gambling operations. In September 2010, it entered into a
non-prosecution agreement with British-based Sportingbet PLC, which operates betting websites
in 21 countries. As part of the settlement, Sportingbet agreed to pay $33 million and publicly
admit that it created payment methods designed to hide its customers’ transactions from U.S.
credit card firms, which did not allow their cards to be used for Internet gambling.46
The Oregon Racing Commission has addressed some of the regulatory issues in its procedures for
licensing firms that provide Advanced Deposit Wagering (ADW) on horse races. Under ADW,
consumers set up accounts with companies such as Twinspires (owned by the Churchill Downs
racetrack), You Bet, or TV Games Network (TGV).47 They then use the account to place bets on
races over the phone, through the Internet, or with mobile device applications and set-top remote
control devices linked to TGV channels that broadcast horse racing. Some ADW firms ran into
difficulties after final regulations to implement UIGEA took effect, as several credit card issuers
blocked payment to the companies out of concern that they might be linked to illegal gambling
operations. Oregon now requires such firms to be licensed and audited by the commission,
whether or not they are physically headquartered in the state.48 ADW firms must provide:
• financial information including resources and detailed projections of revenue,
expenditures, and cash flows by month;
• a list of all personnel;
• a segregated account with a federally insured bank to hold the funds of its
account holders;
• a $50,000 security fee; and
• proof of “an operational presence within the State of Oregon,” such as a call
center or a subcontract with an existing call center.
The Remote Gambling Association (RGA), a trade association of licensed gambling operators in
Europe, has worked with regulators to develop industry standards. In July 2010 the RGA issued
anti-money laundering guidelines for the Internet casino industry, designed to supplement laws
and regulations.49 The guidelines recommend third-party verification of data, including use of
software or approved third parties for “face to face” verification of customer documents;
validating a customer’s address; and ensuring that transactions are carried out through recognized
credit institutions. In August 2012, RGA published model technical guidelines for the online
gambling industry, including responsibilities for credit card payments.50

(...continued)
containing link to FBI letter, December 3, 2009, http://bachus.house.gov/index.php?option=com_content&view=
article&id=912:enforce-ban-on-illegal-internet-gambling-congressman-bachus-says&catid=40:2009-press-releases&
Itemid=132.
46 Sportingbet, “Non-prosecution agreement concluded with U.S. authorities,” Press Release, September 21, 2010,
http://www.sportingbetplc.com/21Sep2010nonprosecution.aspx.
47 GamblingCompliance, Market Barriers: US Internet Gaming, 2010, p. 125.
48 Oregon Racing Commission, http://arcweb.sos.state.or.us/rules/OARS_400/OAR_462/462_220.html.
49 Remote Gambling Association, “Anti-Money Laundering: Good Practice Guidelines for the Online Gambling
Industry,” July 14, 2010, http://www.rga.eu.com/data/files/rga_aml_guidance_2010.pdf.
50 Remote Gambling Association, Technical Issues: Good Practice Guidelines for the Remote Gambling Industry,
August 31, 2012, http://www.rga.eu.com/data/files/rga_technical_guidelines.pdf.
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A Short History of Legal U.S. Gambling and Lotteries
Government-supported gambling has been part of America’s development since the earliest days, starting with a 1612
London lottery to raise money for the Virginia Colony.51 While gambling restrictions were imposed in some of the
early colonies, the Continental Congress used lotteries to raise funds for forces during the Revolutionary War.
Lotteries were used to finance public works projects and establish universities, including Harvard, Yale, Columbia,
Dartmouth, and Princeton.52 By 1832, there were more than 400 lotteries in eight states.53 Annual ticket sales came
to 3% of national income and were several times larger than the federal budget.54
Public opinion began to sour due to high-profile scandals and graft in lotteries, and by the time of the Civil War legal
lotteries basically had been halted.55 Some gambling and gamblers moved west with the Gold Rush. During
Reconstruction, Louisiana created a special lottery to help rebuild the state, drawing players from around the nation.
The Louisiana Lottery continued for years, despite evidence of mismanagement and theft. Congress intervened,
passing legislation in 1876 banning the use of mail for lottery advertising. Congress approved a second bill in 1890 to
ban the use of mail to sell lottery tickets, and in 1895 banned the transport of lottery tickets in interstate commerce.
By 1910, U.S. legal gambling, with the exception of horse racing, was moribund. State-sanctioned gaming began a
comeback during the Great Depression as a means to raise money for charity and government services. States began
to legalize bingo games in the 1930s, and Nevada legalized casino gambling in 1931.
Illegal gambling also proliferated, leading Congress in 1950 to investigate organized crime and gambling casinos. In
1951 lawmakers passed the Johnson Act, which barred transport of gambling machines in interstate commerce unless
they were being moved to a legal jurisdiction. A second round of congressional investigations (from 1955 to 1960)
resulted in a series of laws to combat gambling and racketeering.
In 1964, New Hampshire became the first state to reinstate a lottery. In 1976, New Jersey voted to allow casinos in
Atlantic City. In 1979, Indian gambling began on the Seminole reservation in Florida.56 In 1987, the Supreme Court
upheld the right of Indian tribes to offer unregulated gambling on sovereign lands, so long as they did not violate state
criminal laws. In response, Congress in 1988 passed the Indian Gaming Regulatory Act (IGRA) providing for Indian
gambling to be regulated under compacts negotiated between state governments and tribes. In 1992, Congress passed
the Professional and Amateur Sports Protection Act (PASPA) limiting states’ ability to offer sports gambling. After
viewing the success of Indian gaming, states began approving non-Indian casinos, riverboat gambling, and racinos,
which are racetracks with other forms of gambling such as video slot machines. By 1994, casinos were authorized or
operating in 23 states, and Tunica County, Mississippi, with an expansion of riverboat gambling, had moved from one
of the poorest counties in the country to one of the fastest-growing.57 More recent developments include the
increase in online lottery sales in several states and approval of online gaming in Nevada and Delaware. Nine states
have explicitly outlawed online gambling.

The European Parliament, in a 2008 report on online gambling, said it found “limited hard
evidence of gambling operators defrauding consumers.” The fraud it had seen included sites
collecting money and then shutting down; refusing to pay; selling gamblers’ personal details to
other websites; and installing viruses on users’ computers.58

51 Many of the dates in this section come from the Chronology of Gambling Events in: William N. Thompson,
Gambling in America: An Encyclopedia of History, Issues and Society (Santa Barbara, CA: ABC-CLIO, 2001).
52 Roger Dunstan, California Research Bureau, Gambling in California, CRB-97-003, January 1997,
http://www.library.ca.gov/crb/97/03/crb97003.html#toc.
53 Rex M. Rogers, Gambling: Don’t Bet on It, (Grand Rapids, MI: Kregel Publications, 2005), p. 31.
54 William N. Thompson, Gambling in America: An Encyclopedia of History, Issues and Society, p. 227.
55 Roger Dunstan, California Research Bureau, Gambling in California, CRB-97-003, January 1997,
http://www.library.ca.gov/crb/97/03/crb97003.html#toc.
56 500 Nations, “Brief History of Indian Casinos,” http://500nations.com/news/Indian_Casinos/history.asp.
57 Adam M. Zaretsky, “Laissez le Bon Temps Roulette: Letting the Good Times Roll on Riverboat Casinos,” The
Regional Economist, Federal Reserve Bank of St. Louis, July 1994.
58 European Parliament, Policy Department, Economic and Scientific Policy, Online Gambling: Focusing on Integrity
(continued...)
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The Competitive Impact of Remote Gaming
Many traditional forms of gambling could be affected by the legalization of additional remote
gaming. The existing industry, which includes horse racing, card rooms, lotteries, charitable
games, and casino gaming, consists of approximately 500 commercial casinos, about 400 Indian
casinos and bingo halls, and lotteries in about 40 states. According to one private estimate, gross
revenue for the nation’s domestic gambling industries totaled about $80 billion in 2011, not
including revenue from casino-related hotel operations. Of this, commercial casinos are estimated
to have taken in $35 billion, Indian casinos $25 billion, and state lotteries $20 billion.59
Taken together, gambling industries and casino hotels employed almost 390,000 people
nationwide in 2011. Of these, 126,300 worked in gambling, while 263,000 were employed in
casino hotels. Gambling industry and casino hotel employment fell 6% between 2002 and 2011.60
The domestic gaming market consists of several distinct sectors, each with its own business
model and technology.
Lotteries
Lotteries, generally defined as games of chance with the winner chosen via the drawing of lots,
are the most widespread form of gambling in the United States; they are now run in 43 states and
the District of Columbia. Since New Hampshire reinstituted the modern lottery in 1964, state
offerings have moved from rudimentary games with preprinted tickets and weekly or monthly
drawings to instant scratch-off tickets, lotto games (in which players pick their own combination
of numbers), and, in a growing number of states, video lottery terminals, commonly referred to as
VLTs, that offer casino-type games such as blackjack and poker.61 Lottery revenues are typically
used to finance various state programs and services, with the money often earmarked for worthy
purposes such as financing education.
States have banded together to offer lottery games such as Powerball across state lines, working
through the Multi-State Lottery Association and the Mega Millions consortium.62 (The two lottery
groups in 2010 agreed to cross-sell tickets.) Such mega-games allow states to offer jackpots that
can be in the millions of dollars, increasing demand. Unlike many other countries, including
Ireland, the United Kingdom, and Germany, the United States does not have a national lottery.

(...continued)
and a Code of Conduct for Gambling, November 2008, p. 7, http://www.europarl.europa.eu/activities/committees/
studies/download.do?file=23191.
59 First Research, Gambling Overview Industry Profile, October 1, 2012, p. 1.
60 Bureau of Labor Statistics (BLS), Quarterly Census of Employment and Wages, NACIS 7132 and NACIS 72112,
accessed October 31, 2012. The North American Industry Classification System (NAICS) places gambling industries
into NAICS 7132, which comprises establishments primarily engaged in operating gambling facilities or providing
gambling services, including bingo, off-track betting, slot machine parlors, lotteries, bookmakers, and card rooms.
Casino hotels are classified in NAICS 72112, which comprises establishments primarily engaged in providing short-
term lodging in hotel facilities with a casino on the premises.
61 According to the North American Association of State and Provincial Lotteries, “Unlike slot machines, video lottery
terminals do not dispense money. Rather, a winning player is provided a ticket that is redeemed by the retailer for
prizes.”
62 Multi-State Lottery Association, http://www.musl.com; Mega Millions, http://www.megamillions.com.
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Lottery gross revenues were reported at more than $25 billion in 2009, based on the most recent
available data.63 State lottery revenues rose about 44%, adjusted for inflation, from 1993 to 2010,
with much of the growth driven by the increased number of video lottery terminals.64 As revenue
growth has become less robust, state lottery administrators have experimented with strategies to
improve sales and returns, such as online sales. Some states have debated privatizing their
lotteries; Illinois was the first state to move in that direction, in the expectation that a private
operator might be better able to boost sales while the state would benefit from an up-front
payment.65 But privatization also raises questions about the lengths to which states should go to
encourage gambling.66 A few states, including Minnesota, New Hampshire, New York, North
Dakota, and Virginia, now offer advance subscription sales over the Internet.67 In a three- to four-
year pilot program that started in March 2012, the Illinois Lottery is marketing tickets on its
website in time for MegaMillions; the state expects to increase sales by up to $100 million per
year with this program.68 Maryland is also considering online sales and anticipates additional
revenue of $2.2 billion in fiscal 2013 if the program starts at the beginning of the fiscal year.69
Commercial Casinos
According to the American Gaming Association (AGA), in 2011, there were 445 land- or
riverboat-based commercial casinos in the United States, along with 47 racinos (gambling venues
located at race tracks) and 517 card rooms.70 Commercial casinos, owned and managed by private
companies without the involvement of Indian tribes, were in operation in 15 states. Racinos were
operating in 13 states. AGA reports gross revenues for commercial casino operators of $35.6
billion in 2011 and a direct employment base of almost 340,000 people (see Figure 2).71

63 U.S. Census Bureau, The 2012 Statistical Abstract, Table 1259, Gaming Revenue by Industry: 2000 to 2009.
64 Lucy Dadayan and Robert B. Ward, Back in Black, Nelson A. Rockefeller Institute of Government, June 23, 2011, p.
10. There are several measures of lottery returns: total sales; profits, which are sales minus payouts and all other
expenses; and gross revenues, which are sales minus payouts to players. Government-sponsored lotteries in 43 states,
the District of Columbia and Puerto Rico generated about $58 billion in total sales in fiscal 2010, and about $17.6
billion in profits, according to the North American Association of State and Provincial Lotteries. Those numbers are up
from 2009, when lotteries generated about $58 billion in sales and $17.6 billion in profits.
65 Illinois Department of Revenue, “Recommendation of a Private Manager for the Illinois State Lottery,” September
10, 2010; James Kilsby, “Pennsylvania, Delaware Deal Growth for Shuffle Master,” GamblingCompliance Ltd.,
September 10, 2010.
66 Jonathan Walters, “Turning the Lottery Loose,” Governing, August 31, 2008, http://www.governing.com/topics/
transportation-infrastructure/Turning-the-Lottery-Loose.html.
67 Natalie Cohen and Roy Eappen, Dream Big: Lotteries and the States, Wells Fargo Securities, April 4, 2012, p. 1,
http://www.cdfa.net/cdfa/cdfaweb.nsf/0/801FC7E2E1A9D669882579E9004FA41A/$file/Dream%20Big_040412.pdf.
68 John Byrne, “Feeling Lucky? Log on to lottery, state says,” Chicago Tribune, March 25, 2012.
69 Stephen Martino, FY 2013 Budget Presentation, Maryland State Lottery Agency, so Many Ways to Play ... So Many
Ways to Win, http://dbm.maryland.gov/agencies/operbudget/fy2013testimony/e75d00.pdf.
70 American Gaming Association, 2012 State of the States, p. 4, http://www.americangaming.org/files/aga/uploads/
docs/sos/aga-sos-2011.pdf. The AGA defines a commercial casino as a private-sector establishment, wherever located,
that offers games of chance and is regulated and taxed by the state where it is located. While Indian casinos are
included in the AGA count of total casinos, racinos, and card rooms, the $35.6 billion industry revenue total does not
include Indian gaming. Some video lottery terminal receipts are also counted in state lottery revenue totals.
71 American Gaming Association, 2012 State of the State, p. 7. AGA casino revenue and employment figures do not
include Indian gaming establishments.
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Figure 2. U.S. Commercial Casino Revenues
Billions of Dollars
$40
$35.3
$35.5
$36.2
$34.3
$34.6
$35.6
$32.8
$31.2
$30
$28.1
$28.7
$20
$10
$0
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011

Source: American Gaming Association and state regulatory agencies.
Commercial casinos are regulated by the states, which generally mandate background checks for
key employees, specify the level of payouts to players, and require audits and inspections. Many
large casino companies, such as Caesars Entertainment, MGM Resorts International, Wynn
Resorts, and Las Vegas Sands Corp., are publicly traded on U.S. stock exchanges, which also
make them subject to Securities and Exchange Commission financial reporting requirements.
Slot machines now account for 70% of revenue on casino floors, up from about 40% in the 1970s,
according to the American Gaming Association. The machines are increasingly sophisticated,
using electronic screens that display a variety of games, and offering combined jackpots that can
run into the millions of dollars.72 Commercial casinos in South Dakota and Iowa earn more than
90% of their revenues from slot machines. In Nevada, where table games are more important than
in other states, slot machines accounted for more than 60% of gambling revenues in 2011. 73
Las Vegas has the largest number of commercial casinos with 256, but Atlantic City, the Chicago
area (including nearby parts of Indiana), Detroit, Connecticut, St. Louis, and Philadelphia each
generated $1 billion or more in casino revenues in 2011 (see Table 1). While many casinos, such
as riverboat casinos, cater to day visitors, major casinos in Las Vegas, Atlantic City, and other
select areas market themselves as vacation destinations, with high-end amenities, convention and
meeting facilities, and big-name entertainers. On the Las Vegas strip, gambling revenue accounts
for 35%-45% of total revenue of casino hotels, according to an analysis by Standard & Poor’s.74

72 David Stewart, Ropes & Gray, LLP, Demystifying Slot Machines and Their Impact in the United States, White Paper
for the American Gaming Association, July 2010, p.1, http://www.americangaming.org/Publications/AGA_studies.cfm.
73 American Gaming Association, 2012: State of the States, p. 32.
74 Esther Y. Kwon, Industry Surveys, Lodging & Gaming, Standard and Poor’s, May 24, 2012, p. 3.
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Table 1. Top U.S. Casino Markets, by Annual Gross Revenue
Calendar Year 2011
Rank
Casino Market
Gross Revenue
1
Las Vegas Strip, NV
$6.069 billion
2
Atlantic City, NJ
$3.318 billion
3 Chicagoland,
IL/IN
$1.934
billion
4 Detroit,
MI
$1.424
billion
5
Connecticut
$1.346 billion
6
St. Louis, MO/IL
$1.114 billion
7 Philadelphia,
PA
$1.090
billion
8
Biloxi, MS
$824.82 million
9
Tunica/Lula, MS
$817.09 million
10
Boulder Strip, NV
$778.89 million
11
Kansas City, MO (includes St. Joseph)
$741.39 million
12
Shreveport, LA
$732.67 million
13
Lake Charles, LA
$672.62 million
14
Reno/Sparks, NV
$663.28 million
15
New Orleans, LA
$631.16 million
16
Pittsburgh/Meadow Lands, PA
$626.01 million
17
Lawrenceburg/Rising Sun/Belterra, IN
$625.37 million
18
Black Hawk, CO
$618.70 million
19
Yonkers, NY
$577.07 million
20
Charles Town, WV
$541.93 million
Source: American Gaming Association and the Innovation Group.
Tribal Gaming
According to the National Indian Gaming Commission, 237 of the 564 federally recognized tribes
ran some type of gaming operation in 2011. Indian facilities generated $27.2 billion in gross
gaming revenue (see Figure 3).75 Tribal operations were affected by the recession. Indian gaming
revenues in 2009 and 2010 were down from the $26.7 billion level of 2008—the first drop since
the Indian Gaming Regulatory Act (IGRA) was passed in 1998.76 2011 marked the first increase
for the industry since 2008.

75 National Indian Gaming Commission, “2011 Indian Gaming Revenues Increased 3%,” Press Release, July 17, 2012,
http://www.nigc.gov/Portals/0/NIGC%20Uploads/readingroom/pressreleases/2011GGRPressRelease07172012.pdf.
76 P.L. 100-497.
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Figure 3. Indian Gambling Revenues
Billions of Dollars
$30
$27.2
$26.1 $26.7 $26.5 $26.5
$24.9
$25
$22.6
$19.5
$20
$16.8
$14.7
$15
$12.8
$11.0
$9.8
$10
$5
$0
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011

Source: National Indian Gaming Commission.
Many of the nearly 460 Indian establishments are rural and relatively small.77 But Indian gaming
includes major casinos, such as the Mohegan Sun in Uncasville, CT, operated by the Mohegan
Tribal Gaming Authority Management Board, and Foxwoods Resort Casino in Ledyard, CT,
owned and operated by the Mashantucket Pequot Tribal Nation. Foxwoods is not only the
nation’s largest tribal casino, but one of the largest casinos in the United States.78 Illustrating the
differences in scale, the top 20 Indian gaming operations account for 55.5% of tribal gaming
revenues.79
Indian Gaming Regulatory Act (IGRA)
The 1988 IGRA provides the legal framework for gaming on Indian lands.80 Among its purposes
was the promotion of tribal economic development, self-sufficiency, and strong tribal
governments.81 Congress passed the law after the Supreme Court held in 1987 that Indian tribes

77 KPMG, Online Gaming: A Gamble or a Sure Bet? 2010, p. 99.
78 Clyde W. Barrow, New England Casino Gaming: Update 2012, Center for Policy Analysis, University of
Massachusetts Dartmouth, 2012, pp. 4-12, http://www.umassd.edu/media/umassdartmouth/seppce/
centerforpolicyanalysis/NEGU_2012.pdf.
79 National Indian Gaming Association, “Proceeds of Indian Gaming,” Fact Sheet, http://www.indiangaming.org/info/
pr/presskit/PROCEEDS.pdf.
80 CRS Report RL34325, Indian Gaming Regulatory Act (IGRA): Gaming on Newly Acquired Lands, by M. Maureen
Murphy.
81 The IGRA’s statement of policy states that the legislation is intended to, among other things, promote tribal
economic development, self-sufficiency, and strong tribal governments; and provide a statutory basis for the regulation
of gaming by an Indian tribe adequate to shield it from organized crime and other corrupting influences.
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had considerable authority to conduct gaming operations on their land that did not comply with
all state laws and regulations.82 IGRA authorizes three classes of gaming:
• Class I social gaming, for prizes of minimal value or in connection with
traditional tribal ceremonies, is subject to tribal regulation;
• Class II bingo and card games, excluding baccarat and slots, are subject to joint
tribal and federal regulation; and
• Class III casino gaming is subject to both state and tribal control through a tribe-
state compact, which must comply with a federal framework.
For a tribe to offer class II and class III gaming on a reservation or land held in trust, the tribe
must be “located in a State that permits such gaming for any purpose by any person, organization
or entity.”83 Federal courts have interpreted this provision to permit tribes to conduct any type of
gaming permitted in the state, but without state limits or conditions. For example, tribes in states
that permit “Las Vegas” nights for charitable purposes may seek to negotiate a compact with a
state that allows for class III casino gaming. On the other hand, the fact that state law permits
some form of lottery is not, in itself, sufficient to permit a tribe-state compact allowing all forms
of casino gaming.84
There has been controversy regarding so-called “reservation shopping,” in which tribes, often in
rural areas, seek to locate casinos on land closer to urban centers in order to attract more
customers.85 The Secretary of the Interior has authority over tribe-state compacts. The National
Indian Gaming Commission oversees class II gaming, tribal gaming ordinances, and some
regulatory issues. Its chairman is appointed by the President and confirmed by the Senate. The
other two commissioners are appointed by the Secretary of the Interior.
IGRA places limits on the use of tribal revenues from Indian gaming. Among the permissible
uses are education, health care, tribal government and other development activities, and per capita
distributions to tribal members.86 Because Indian tribes are sovereign nations under federal law,
they do not pay taxes on income generated by commercial activities. Tribes pay employment
taxes, however, and are taxed on wagering.87 In negotiating compacts with state governments,
some tribes have pledged to share a portion of proceeds from class III gambling with the state.
The National Indian Gaming Commission estimated that in 2009, based on the most recent
available data, that Indian gaming returned $2.4 billion to states in the form of taxes, revenue
sharing, and other payments including compact revenue agreements.88

82 California v. Cabazon Band of Mission Indians, 480 U.S. 202.
83 CRS Report RL34325, Indian Gaming Regulatory Act (IGRA): Gaming on Newly Acquired Lands, by M. Maureen
Murphy. The law requires states in such compacts to negotiate in good faith.
84 Ibid.
85 Judy Keen, “Tribes, City At Odds Over Casino,” USA TODAY, November 4, 2010, http://www.usatoday.com/news/
nation/2010-10-04-reservations04_ST_N.htm.
86 National Indian Gaming Commission, “Frequently Asked Questions,” http://www.nigc.gov/About_Us/
Frequently_Asked_Questions.aspx.
87 Internal Revenue Service, Gaming Tax Law and Bank Secrecy Act Issues for Indian Tribal Governments, 2008,
http://www.irs.gov/pub/irs-pdf/p3908.pdf. Income of certain corporations set up as separate and distinct from a tribe
can be taxed.
88 National Indian Gaming Association, The Economic Impact of Indian Gaming, 2009, p. 8,
http://www.indiangaming.org/info/NIGA_2009_Economic_Impact_Report.pdf.
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Financing Uncertainty
As is the case with commercial casinos, some tribal operations that expanded in recent years have
had difficulty meeting or restructuring debt obligations. The Mashantucket Pequot Nation, which
operates the Foxwoods casino,89 defaulted in 2009 and is restructuring a debt estimated at $2
billion.90 The Mohegan Tribal Gaming Authority, which refinanced $1.64 billion in long-term
debt in March 2012, announced layoffs involving hundreds of employees at the Mohegan Sun in
2010 and again in 2012.91 Because tribes are sovereign nations, there are emerging complications
for lenders. For example, the Mohegan tribe’s constitution gives its Gaming Disputes Court, made
up of a trial court and an appeals court, exclusive jurisdiction over disputes involving gaming.
The Mohegan Sun 2009 Annual Report spelled out some of the potential legal issues:
We, the Tribe and our wholly-owned subsidiaries may not be subject to, or permitted to seek
protection under, the federal bankruptcy laws since an Indian tribe and we, as an
instrumentality of the Tribe, may not be a “person” eligible to be a debtor under the U.S.
Bankruptcy Code. Therefore, our creditors may not be able to seek liquidation of our assets
or other action under federal bankruptcy laws. Also, the Gaming Disputes Court may lack
powers typically associated with a federal bankruptcy court, such as the power to non-
consensually alter liabilities, direct the priority of creditors’ payments and liquidate certain
assets. The Gaming Disputes Court is a court of limited jurisdiction and may not have
jurisdiction over all creditors of ours or our subsidiaries or over all of the territory in which
we and our subsidiaries carry on business.92
An ongoing dispute between Wells Fargo Bank and Saybrook Investors LLC, and Wisconsin’s
Lac du Flambeau Band of Lake Superior Chippewa Indians could affect gaming financing. Wells
Fargo has sued the tribe over its failure to make monthly payments on a $50 million tribal bond to
consolidate debt and invest in a riverboat casino operation in Mississippi. The U.S. District Court
for the Western District of Wisconsin in 2010 found that the bond deal was invalid because it had
not been reviewed by the National Indian Gaming Commission, as the court said was required
under IGRA.93 Wells Fargo has appealed.94 After a remand in September 2011 from the Seventh
Circuit Court of Appeals, court action continues regarding the validity of the bond documents
other than the bond indenture.95

89 Michael Sokolove, “Foxwoods is Fighting for its Life,” New York Times, March 14, 2012.
90 Brian Hallenbeck, “Debt Deal Lifts Veil on Foxwoods’ Finances,” theday.com, October 14, 2012.
91 Brian Hallenbeck, “Mohegan Sun Laying Off More than 300 Workers; CEO Replaced,” Hartford Courant,
September 27, 2012.
92 Mohegan Sun, 2009 Annual Report, p. 37.
93 Wells Fargo Bank N.A. vs. Lake of the Torches Economic Development Corporation, United States District Court,
Western District of Wisconsin, Case No. 09-CV-768, January 5, 2010.
94 Alexandra Berzon, “Tribal-Casino Loans are Tested by Ruling,” Wall Street Journal, May 12, 2010.
95 Dennis J. Whittlesey, “Seventh Circuit to Lac Du Flambeau: “They Can't Touch You”,” Gaminglegalnews,
September 8, 2011, http://www.jdsupra.com/legalnews/gaming-legal-news-september-8-2011-v-44607/.
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Pari-Mutuel Betting
Now legal in 43 states,96 pari-mutuel betting is defined as “player-banked betting with all the bets
pooled and prizes awarded from the pool.”97 The most common examples in the United States are
dog and horse racing and jai alai (a game played on a court with a ball and wicker racket).
In recent years, the industry has developed an extensive system of Internet and off-track
wagering. In 2000, Congress approved legislation to amend the definition of “interstate off-track
wager” in the Interstate Horseracing Act (15 U.S.C. 3001-3007). Proponents claim the
amendment permits tracks to accept bets online from individuals located in states where pari-
mutuel betting is legal (although not necessarily where either off-track or online betting is legal);
the Department of Justice disagrees.98 Legislation introduced in the 112th Congress, H.R. 2702,
would clarify that the Wire Act and other laws do not apply to the Interstate Horseracing Act.
Despite the legal uncertainty, interstate pari-mutuel betting with remote devices is growing
through the use of Advance Deposit Wagering. Fans can also go to off-track betting parlors to
watch a simulcast of a race and place bets. States have also attempted to revive racetracks that
have been losing patronage by turning them into racinos with video lottery terminals, slot
machines, and other gambling. The Oregon Racing Commission, which licenses and audits many
of the nation’s largest ADWs, reports that online wagering via its licensed companies rose to $1.7
billion in 2011, from $883 million in 2004. 99
Sports Betting
Congress in 1992 passed the Professional and Amateur Sports Protection Act (PASPA; P.L. 102-
559) with strong support from the National Basketball Association, National Football League
(NFL), and National Collegiate Athletic Association, among others. The law generally barred
state governments from licensing, sponsoring, or engaging in sports gambling. It contained select
exceptions for Nevada, Oregon, Delaware, and Montana, each of which allowed certain types of
sports betting at the time of passage. Currently, Nevada is the only state to permit wagers on a full
complement of sporting events and leagues.100 According to the Nevada Gaming Control Board,
casino-goers in Nevada wagered more than $2.8 billion on sporting events in 2011, a rise from
$2.4 billion in 2006.101

96 Seven states do not currently offer legal pari-mutuel wagers: Alaska, Georgia, Hawaii, Mississippi, North Carolina,
South Carolina, and Utah.
97 William N. Thompson, Gambling in America: An Encyclopedia of History, Issues and Society, 2001, ABC-CLIO,
Santa Barbara, p. 289.
98 CRS Report 97-619, Internet Gambling: An Overview of Federal Criminal Law, by Charles Doyle. The language
was amended to read: “‘interstate off-track wager’ means a legal wager placed or accepted in one State with respect to
the outcome of a horserace taking place in another State and includes pari-mutuel wagers, where lawful in each State
involved, placed or transmitted by an individual in one State via telephone or other electronic media and accepted by
an off-track betting system in the same or another State, as well as the combination of any pari-mutuel wagering
pools.” 15 U.S.C. 3002(3); sec. 629, P.L. 106-553, 114 Stat. 2762-108 (2000).
99 Oregon Racing Commission. Hub Information, Advanced Deposit Wagering Hub Handles, http://www.oregon.gov/
Racing/pages/hub_index.aspx.
100 CRS Report 97-619, Internet Gambling: An Overview of Federal Criminal Law, by Charles Doyle.
101 American Gaming Association, 2012 State of the States, The AGA Survey of Casino Entertainment, 2012, p. 33.
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Delaware, which allowed only limited multi-game or parlay betting102 on NFL contests at the time
the 1992 law was passed, enacted a law in 2009 to create a state sports lottery. The NFL and other
sports leagues challenged the law, and the U.S. Third Circuit Court of Appeals in Philadelphia
ruled that the state was limited to offering narrow betting, similar to what existed in 1992. The
U.S. Supreme Court in May 2010 declined to hear an appeal, effectively ending Delaware’s effort
to expand sports betting.103 After its voters authorized sports betting at casinos and racetracks in
2011, New Jersey has mounted the latest court challenge to the constitutionality of PASPA.104
Remote Competition
If Congress acts to encourage the expansion of remote gaming, there are likely to be significant
effects on brick-and-mortar casinos and racetracks. Some may benefit; others may not benefit, or
may be harmed. In Nevada, for example, some Las Vegas-based casino operators are actively
preparing remote gaming options, while in nearby Reno and Lake Tahoe, officials at some of the
smaller casinos worry that legalizing online poker could pull dollars away from their casinos.
Casinos that primarily serve day trippers with slot machines may face the greatest challenges. As
Standard & Poor’s wrote in a recent analysis of the U.S. gambling industry,
Standard & Poor’s thinks some players will migrate all their gambling to online venues, but
we also believe that casino properties that are able to offer a differentiated experience or
other options, such as theater shows, spas, restaurants, and shopping, will continue to appeal
to certain customers. We believe that Internet sites would find it difficult to offer experiences
of camaraderie and indulgence that some physical properties can provide, although we think
younger players could more easily adapt to Internet gaming. However, we believe companies
will need to become more proactive in deciding how to differentiate their product/property,
whether that means developing an online presence or providing a better value or experience
at their properties. As the music industry has already found out, adapting to and successfully
incorporating new technology could be critical to casino industry profits.105
Federal remote gaming legislation could benefit some sectors of the gaming industry more than
others, depending on how it is crafted. State lottery officials, for example, have expressed concern
that proposals that would give existing gambling establishments preference for online poker
licenses could give those businesses an advantage in the market. By the same token, commercial
casinos are worried that under the existing legal framework, online state lottery promotions, such
as keno-type games, could encroach on their turf. A report for the state of New Hampshire noted
concerns about market saturation and the possibility that the federal government could legalize
online gaming, which could have an impact on the competitiveness of the state market. The report

102 A parlay bet is a wager than links two or more bets. The bettor wins only if all the linked wagers fall his or her way.
The potential payout is higher, but the odds of winning are longer.
103 Office of the Commissioner of Baseball v. Markell, 579 F.3d 293 (3d. Cir. 2009); Warren Richey, “Supreme Court
turns back Delaware bid to expand sports betting,” Christian Science Monitor, May 3, 2010,
http://www.csmonitor.com/USA/Justice/2010/0503/Supreme-Court-turns-back-Delaware-bid-to-expand-sports-betting.
104 Raven Clabough, “New Jersey, Christie, Fight to Allow Sports Gambling,” New American, August 15, 2012,
http://www.thenewamerican.com/usnews/constitution/item/12483-new-jersey-christie-fight-to-allow-sports-gambling.
105 Esther Y. Kwon, Lodging & Gaming, Standard & Poor’s Industry Survey, May 24, 2012, p. 8.
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said it was difficult to quantify the potential impact of federal regulation and liberalization of
Internet gambling.106
Interest groups are at odds over remote gambling. The American Gaming Association and Caesars
Entertainment, a large casino operator, have urged Congress to adopt federal legislation to
regulate Internet gambling to avoid a patchwork of state regulations and different tax rates.
Aligned against them are others such as the National Conference of State Legislatures (NCSL),
which wants individual states to have the right to legalize, license, and tax remote gaming.107
Many Indian tribes have declared their opposition to any federal gaming regime because of its
broad waiver of sovereign immunity, although some of the larger tribes are now beginning to
reverse their previous position, viewing online gambling as a possible business opportunity.108
Even if it leads to the growth of gambling revenues and employment at the national level, federal
remote gaming legislation has the potential to cause revenue and employment declines in certain
locations. These effects may well depend upon the details of whatever legislation Congress passes
and the specific actions taken by individual states in response.
Problem Gambling
As states have expanded legal gambling, a number have also created programs—funded through
tax revenues or assessments on private companies—for treatment of individuals who are
considered problem or pathological gamblers.109 The National Council on Problem Gambling
estimates, based on previous research, that about 1% of the population can be classified as
pathological gamblers and another 3% as problem gamblers.110 Adolescents and males are
considered to be at higher risk of a gambling disorder.111
According to a survey by the Association of Problem Gambling Service Administrators, more
than 30 states offer some type of publicly funded gambling addiction service, though only about
15 states fund employees who work full-time on the issue.112 Spending ranges from a high of

106 New Hampshire Gaming Study Commission, Final Report of Findings, May 18, 2010, p. 18.
107 An August 2012 NCSL resolution on Internet gaming stated “Congress should consider the perspective of the states
as it examines this issue and asks that it involves state legislators in any federal efforts that seek to reform the
regulation of online gaming..” NCSL Resolution, State Sovereignty in Online Gaming, http://www.ncsl.org/documents/
telecommunications/Online_Gaming_Resolution_.pdf.
108 Rob Hotakainen, “More Tribes, including Tulalip, Now Support Legal Online Gambling,” The News Tribune,
August 4, 2012.
109 According to the National Council on Problem Gambling, problem gambling is characterized by an increasing
preoccupation with gambling, a need to bet more money more frequently, restlessness or irritability when attempting to
stop, “chasing” losses, and loss of control manifested by continuation of the gambling behavior in spite of mounting,
serious, negative consequences. The American Psychiatric Association defines pathological gambling as: “Persistent
and recurrent maladaptive gambling behavior” that meets at least five of 10 criteria.
110 National Council on Problem Gambling, citing H. Shaffer, M. Hall, and J. Vander Bilt, “Estimating the prevalence
of disordered gambling behavior in the United States and Canada: a research synthesis,” American Journal of Public
Health, 1999, 89:1369-1376.
111 National Council on Problem Gambling, “Advancing Health Through System Reform-Problem Gambling,” May 22,
2009.
112 Jeff Marotta, Thomas Moore, Tim Christensen, 2010 Survey of State Agencies Providing Problem Gambling
Services, Association of Problem Gambling Service Administrators, http://www.problemgamblingservices.org/
CMS_uploads/APGSA%202010%20Survey%20Summary.pdf.
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about $1.60 per capita in Oregon to less than 5 cents per capita in Maryland. A recent study
prepared for the state of Connecticut noted that Connecticut’s Problem Gambling Services
division had a more than six-fold increase in its caseload from 2001 to 2008.113
The National Council on Problem Gambling endorsed legislation before the 112th Congress, H.R.
2334, the Comprehensive Problem Gambling Act of 2011, which would include problem and
pathological gambling in federal mental health programs and to initiate research on problem
gambling. Opponents of legislation to expand remote gaming cite the potential for an increase in
problem gambling if the ease of online gambling encourages even more people to gamble.114 The
first-ever legislation to address problem gambling was introduced in the 111th Congress as H.R.
2906. The House Financial Services Committee recommended passage of the bill, but dissenting
members expressed concern about the consequences of increased gambling activity:
[y]oung people are particularly at risk. John Kindt, Professor of Business Administration at
the University of Illinois says: “It’s ‘click the mouse, lose your house.’ It puts gambling at
every work desk and every school desk and in every living room. It would increase problem
gambling rates exponentially.” By approving this bill, the largest expansion of gambling in
history, the Committee has taken steps to open casinos in every home, dorm room, library,
iPod, Blackberry, iPad and computer in America.115
Because Internet gambling has developed only recently, the scientific literature on its effects on
problem gambling is meager. Iowa’s Department of Public Health recently studied the potential
health issues related to legalizing Internet poker in Iowa. Among other findings, the study said
“the literature cannot support a claim that Internet poker will cause people to become problem or
pathological gamblers; however, researchers have asserted that Internet gambling has the
potential to contribute to problem gambling.”116
Gambling as a Government Revenue Source
Revenues from lotteries, taxes on commercial casinos and other gambling represented an average
of 2.4% of own-source general revenue raised by state governments in FY2010.117 State gambling
revenues rose from $15 billion in 1998 to $24 billion in 2010; a significant part of the increase
was because more casinos, racinos, and lottery products came into the market (see Figure 4).
Legislative policy changes were another important factor, driving more than 35% of growth in
gambling revenue over the period, reports the Rockefeller Institute.118

113 National Council on Problem Gambling, http://www.ncpgambling.org/i4a/pages/index.cfm?pageid=1.
114 June Cotte and Kathryn A. Latour, “Blackjack in the Kitchen: Understanding Online Versus Casino Gambling,”
Journal of Consumer Research, 2008, http://ejcr.org/preprints/2009/february/cotte-preprint-feb09.pdf.
115 H.Rept. 111-656, Part 1, p. 56, http://www.gpo.gov/fdsys/pkg/CRPT-111hrpt656/pdf/CRPT-111hrpt656-pt1.pdf.
116 Melvin G. Gonnerman and Gene M. Lutz, Internet Poker: A Public Health Perspective, Iowa Department of Public
Health, September 2011, p. 30.
117 2010 calculation based on general revenue data from the Census Bureau’s State Government Finances and total
VLT revenues from the Rockefeller Institute.
118 Lucy Dadayan and Robert Ward, Back in the Black: States’ Gambling Revenues Rose in 2010, Rockefeller Institute
of Government, June 23, 2011, pp. 3, http://www.rockinst.org/pdf/government_finance/2011-06-23-
Back_in_the_Black.pdf.
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Figure 4. Trends in State Gambling Revenue, FY1998-FY2010
Billions of Dollars
$30
$25
$20
$15
$10
$5
$0
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Total
Lottery
Casino

Source: Nelson A. Rockefeller Institute of Government.
Notes: Total also includes pari-mutuel betting and racinos. Totals based on state fiscal years. 2010 data are the
most recent available at the time this report was prepared.
Although minor on a national scale, gambling taxes are extremely important for certain states. In
Nevada, gaming taxes made up about 24% of the state’s general fund revenue in 2011, compared
to 28% from the sales tax.119 In Delaware, gambling revenue accounts for more than 7% of the
state’s general fund budget, which makes it the fourth largest source of revenue, ahead of
corporate income and gross receipts taxes.120 In Rhode Island, casino revenue represents the third
largest source of income, contributing more than 10% of the state’s general revenue.121
Connecticut’s gaming industry represented the state’s fifth-largest revenue source in 2010.122
Even though Las Vegas is the nation’s number one gambling venue, more commercial casino tax
revenue was collected by Pennsylvania ($1.5 billion) than Nevada ($865 million).123 In part, the
difference is explained by tax rates. Pennsylvania taxes at a rate of 55% of gross slot machine

119 Anne Knowles, “Online Sales Increasingly Cutting into Tax Dollars, Says Retailers’ Group,” Nevada News Bureau,
September 1, 2011.
120 Michael Cooper, “States Up the Ante in Bid to Lure Other States’ Bettors,” New York Times, August 2, 2012.
121 University of Massachusetts, Dartmouth, New England Gaming Research Project, http://www.umassd.edu/seppce/
centers/cfpa/newenglandgamingresearchproject/.
122 Pamela M. Prah, “Casinos, Online Poker Get State Attention,” Stateline, the Pew Charitable Trusts, December 9,
2011.
123 American Gaming Association, 2012 State of the States, p. 6.
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revenue and 16% of table games revenues, whereas Nevada’s rate tops out at 6.75% on gross
gaming revenue, with additional county fees and levies.124
Nationwide, gaming revenues have recovered from the recession that began in December 2007
and ended in June 2009. However, the expansion of gambling is not leading to increased revenue
for all state governments. The creation of new lottery games and construction of casinos in new
locations may be leading to market saturation, especially in the Northeast, where casino revenue
in New Jersey fell 7% in 2011 due mainly to expanded gaming opportunities in nearby states.125
Following DOJ’s recent opinion on the Wire Act, several states have reconsidered Internet
gaming. However, several proposed state measures have failed to pass (see Figure 5).
Figure 5. State-Level Online Gambling Legislation
July 2012

Source: Perkins Coie. Reproduced with permission.

124 Ibid, p. 18-21.
125 Lucy Dadayan and Robert Ward, Back in the Black, The Nelson A. Rockefeller Institute of Government, June 23,
2011, http://www.rockinst.org/pdf/government_finance/2011-06-23-Back_in_the_Black.pdf.
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Among recent developments at the state level:
• Nevada became the first state to develop a regulatory framework for online poker
and to award statewide online gaming licenses. 126 In June 2012, Nevada’s
gaming commission issued its first licensees for online poker to International
Game Technology and Bally Technologies.127 Boyd Gaming, Fertitta Interactive,
and Golden Nugget have also received licenses. By federal law, the online poker
games approved in Nevada can only be played within Nevada’s borders. Before
any online system can go live, the licensees must “prove their systems are
capable of identifying players by location and that players are of legal age.”128
• Delaware became the second state to authorize online casino-style gambling. The
Gaming Competitiveness Act of 2012 allows the state’s three casinos and the
Delaware Lottery to offer online versions of slot machines and table games
including blackjack and poker, under the control and monitoring of state lottery
officials.129 The Delaware Department of Finance has estimated the law will
generate $7.75 million in revenues for the state in fiscal 2013. Delaware has yet
to announce a timetable for the start of online gambling.
• California has debated legislation to create a framework to authorize intrastate
Internet gambling for several years. Native American tribes currently have the
exclusive right to offer video gaming in California, and their opposition led to
withdrawal of the proposed Internet Gambling Protection and Public-Private
Partnership Act of 2012. Separately, there is a push to legalize online poker.
• The New Jersey Assembly in 2010 approved a bill to allow Internet gaming
within the state, based out of Atlantic City casinos, but it was vetoed by Governor
Chris Christie amid concerns it violated the state constitution.130 In June 2012, a
state assembly committee approved a bill to allow Atlantic City casinos to offer
Internet poker under certain circumstances; the legislation is still pending. One
consulting firm, Econsult, has estimated online gambling in New Jersey would

126 From the Nevada Legislative Counsel’s Digest:
Existing law authorizes certain gaming establishments to obtain a license to operate interactive
gaming. (NRS 463.750) This bill requires the Nevada Gaming Commission to establish by
regulation certain provisions authorizing the licensing and operation of interactive gaming under
certain circumstances. This bill further provides that a license to operate interstate interactive
gaming does not become effective until: (1) the passage of federal legislation authorizing
interactive gaming; or (2) the United States Department of Justice notifies the Commission or the
State Gaming Control Board that interactive gaming is permissible under federal law.
Available at http://www.leg.state.nv.us/Session/76th2011/Bills/AB/AB258_EN.pdf.
127 Nevada Gaming Commission Meeting, Agendas and Dispositions, June 21, 2012, p. 10 and p. 16.
http://gaming.nv.gov/modules/showdocument.aspx?documentid=5383.
128 Richard N. Velotta, “Nevada Issues First Licenses for Online Poker Within State,” Las Vegas Sun, June 2012.
129 The Delaware Gambling Competitiveness Act of 2012 was signed on June 28, 2012. http://legis.delaware.gov/LIS/
lis146.nsf/vwLegislation/HB+333/$file/legis.html?open.
130 Office of Gov. Chris Christie, “Governor Christie Vetoes Internet Gaming Bill as Inconsistent with the Goals of
Revitalizing Atlantic City’s Tourism and Gaming Industries,” March 3, 2011, http://www.state.nj.us/governor/news/
news/552011/approved/20110303b.html. New Jersey has also been active on other gambling issues. In 2012, the
Governor signed a bill that would allow betting on sports at New Jersey’s casinos and racetracks.
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see annual gross revenues of more than $200 million, raise as much as $55
million annually in taxes, and possibly create up to 1,900 new jobs.131
• On May 26, 2011, Iowa Governor Terry Branstad signed Senate File 526, which
directed the Iowa Racing and Gaming Commission to conduct a study of
regulating Internet poker. That report, submitted to the Iowa General Assembly in
December 2011, concluded that legalizing online poker might net the state $3
million to $13 million a year.132.
• The District of Columbia authorized online gambling in 2011 when it passed the
Lottery Modernization Act, which authorized online games over the Internet, but
the DC City Council voted to repeal the law in 2012, leaving the future of online
gaming in the District of Columbia uncertain.133
Congressional Action on Internet Gaming
As states move forward on a piecemeal basis, Congress has considered legislation to legalize and
regulate interstate Internet gambling nationwide. The House Energy and Commerce
Subcommittee on Commerce, Manufacturing, and Trade on October 24, 2011, held a hearing on
the pros and cons of Internet gaming.134 The Senate Committee on Indian Affairs in July 2011
held a roundtable discussion with tribal leaders, seeking input on how expanded Internet gaming
could help or hurt Indian gambling operations.135 The committee also held a hearing on July 26,
2012, to discuss Internet gaming and how it might affect Indian tribes.136
The congressional Joint Committee on Taxation estimated that licensing fees from the Internet
Gambling Regulation, Consumer Protection, and Enforcement Act, introduced as H.R. 2267 in
the 111th Congress, would have led to a net federal revenue increase of $283 million over a 10-
year period.137 That legislation would have authorized the Secretary of the Treasury to establish a
system to license and regulate Internet wagering, subject to additional oversight and licensing
investigations performed by recognized state gaming authorities, with operators paying fees to
meet the cost of reviewing license applications and administering the act. The Joint Committee on

131 Econsult Corporation, Potential Economic and Fiscal Impact of the Proposed New Jersey Intrastate i-Gaming Bill,
December 2010, p. 2, http://www.econsult.com/articles/IMEGA_Summary_120710.pdf.
132 Iowa Racing and Gaming Commission, Report on the Possible Regulation of Intrastate Internet Poker in the State
of Iowa, December 1, 2011, p. 94, http://www.iowa.gov/irgc/Intrastate%20Internet%20Poker.pdf.
133 The Lottery Act would have authorized the D.C. Lottery and Charitable Games Control Board to offer both games
of skill and games of chance via the Internet. In February 2012, the Finance and Revenue Subcommittee of the District
of Columbia City Council voted to repeal the measure and reverted to its prior definition of legal lottery games, thereby
excluding online gaming.
134 House Energy and Commerce Committee Subcommittee on Commerce, Manufacturing, and Trade, “Internet
Gaming: Is There a Safe Bet?,” http://energycommerce.house.gov/hearings/hearingdetail.aspx?NewsID=9027.
135 Senate Committee on Indian Affairs, “Roundtable on the Future of Internet Gaming: What’s at Stake for Tribes?,”
July 26, 2011, http://www.indian.senate.gov/hearings/hearing.cfm?hearingID=3d9031b47812de2592c3baeba61b2f52.
136 United States Senate Committee on Indian Affairs, Oversight Hearing on Regulation of Tribal Gaming: From Brick
& Mortar to the Internet, July 26, 2012, http://www.indian.senate.gov/hearings/hearing.cfm?hearingID=
b7d10740c81221f121fde25595bfdc8b.
137 Congressional Budget Office Cost Estimate, H.R. 2267, Internet Gambling Regulation, Consumer Protection, and
Enforcement Act, September 22, 2010, http://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/118xx/doc11883/
hr2267.pdf.
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Taxation also estimated that the federal government would collect an additional $42 billion over
10 years under H.R. 2230, the Internet Gambling Regulation and Tax Enforcement Act of 2011.
That legislation would have imposed a license fee for online gambling operations equal to 2% of
all funds deposited by customers into special accounts that could be used for online wagering, and
would have given states and tribes the option of accepting from licensees, on a monthly basis, an
online gambling fee “equal to 6 percent of all deposited funds deposited by customers residing in
each State or area subject to the jurisdiction of an Indian tribal government.”138 The $42 billion
revenue gains were based on the assumption that no states opted out of the system.139 Revenue
estimates were much lower under other scenarios, suggesting that the impact of increased remote
gaming on state receipts will depend heavily upon the specifics of any federal legislation.
Senate Majority Leader Harry Reid and Senator Jon Kyl have proposed the Internet
Gambling Prohibition, Poker Consumer Protection and Strengthening UIGEA Act of 2012.
The draft legislation would give some existing establishments preference for online gambling
licenses for poker, off-track horse race wagering, and certain state lottery sales for the first two
years after enactment. States would have to choose to be covered by the licensing provisions.140
The bill would prohibit other forms of online gaming and strengthen enforcement. Poker sites
would pay 16% tax rates, of which 14% would go to individual states or Indian tribes, and 2%
would go to the federal government. Of the states’ portion, 70% would go to the state where the
player resides, while 30% will go to the regulatory state based on where the player resides.
Separately, state governments would be authorized to launch online lottery sales at their
discretion. The act would create an Office of Online Poker Oversight within the U.S. Department
of Commerce to monitor the licensing and enforcement of online gambling.141 The proposed
legislation also makes any business that served U.S. customers in violation of the UIEGA after
December 31, 2006, ineligible for a license for five years after the bill is adopted.
Another measure introduced in the 112th Congress is H.R. 2366, by Representative Joe Barton, to
legalize and regulate Internet interstate online poker while restricting some other forms of
Internet gaming. Under the Barton bill, online poker sites would be licensed by a state or tribal
gambling oversight commission approved by a new Office of Internet Poker Oversight in the
Department of Commerce. Registered sites would be subject to regulation and inspection to,
among other things, prevent minors from playing, prevent money laundering, and identify
problem gamblers. States would have the ability to limit activities. Certain established gambling
businesses would initially have preference for licenses.
Also in the 112th Congress, Representative John Campbell introduced H.R. 1174, establishing a
federal regulatory and enforcement framework covering many forms of Internet gambling but
prohibiting sports betting. The bill would allow Indian tribes and states to opt out of the law if
they wished to ban such gaming within their territory. The Secretary of the Treasury would hold
the ultimate authority to grant licenses to operate Internet gaming facilities. Other pending

138 CRS Report RS22749, Unlawful Internet Gambling Enforcement Act (UIGEA) and Its Implementing Regulations,
by Brian T. Yeh and Charles Doyle.
139 Joint Committee on Taxation, letter to Rep. Jim McDermott, October 23, 2009, http://www.safeandsecureig.org/
sites/default/files/InternetGamblingScore.pdf.
140 States wishing to offer online poker and off-track betting would opt-in via an election requiring legislative approval.
Doing nothing would see a state opt-out. A tribe can only opt-in if the state in which it resides also opts in.
141 Marcus Webb, “U.S. Internet Poker Bill Stalled by Infighting; Delaware Okays Online Casinos,” Vending Times,
Vol. 52, No. 10, October 2012.
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legislation includes H.R. 2702, by Representative Christopher Gibson, to clarify the status of
pari-mutuel betting on horse racing, and H.R. 2230, by Representative Jim McDermott, to license
and tax Internet gaming, including requiring tax withholding on winnings and extending excise
taxes to Internet gaming bets. Senator Daniel Akaka has released a discussion draft of a Tribal
online gaming bill that includes rules to permit federally recognized tribes to apply for licenses to
operate online gaming and to establish a new Office of Tribal Online Gaming within the
Department of Commerce to provide oversight and regulation of Indian gambling operations.142
Interests which have been at odds in the past over Internet gaming have lobbied for the Joint
Select Committee on Deficit Reduction143 to include provisions in any broad budget deficit
reduction proposal to legalize and tax Internet poker. The Poker Players Alliance, for example,
has urged its members to push for legalization of Internet poker. A group called Fair Play USA,
which includes state law enforcement officers and gambling industry representatives, is also
supporting legislation on online for-profit poker. There has been some pushback from the states.
For example, Maryland Governor Martin O’Malley, in an October 2011 letter to leaders of the
Joint Select Committee on Deficit Reduction, said efforts to federalize poker and casino gambling
threaten the $500 million in receipts his state generates annually from its lottery, as well as other
gambling revenues.144 More recently, the National Governors Association called on lawmakers to
include state input before moving on any online-gaming legislation.145
Indian gaming officials have expressed concerns about attaching Internet gaming legislation to
any deficit reduction bill. The American Indian Gaming Association has a set of conditions it
wants to see met in any bill to legalize interstate Internet gambling.146 The tribes, as sovereign
nations, want to ensure that their Internet gambling revenues are not taxed, that qualified tribal
operations are allowed to participate in the online market from the outset, and that existing state-
tribal compacts are not undermined. The American Indian Gaming Association has been
concerned that some proposals could give commercial casinos and other established businesses
early entry into the market, possibly putting tribal operations at a disadvantage.


142 Senate Committee on Indian Affairs Examines Tribal Gaming Regulation, July 27, 2012,
http://www.indian.senate.gov/news/pressreleases/2012-07-27.cfm.
143 CRS Report R42013, The Budget Control Act of 2011: How Do the Discretionary Caps and Automatic Spending
Cuts Affect the Budget and the Economy?, by Marc Labonte and Mindy R. Levit.
144 Letter from Gov. Martin O’Malley, http://thehill.com/images/stories/blogs/flooraction/Jan2011/omalley.pdf.
145 Letter from National Governors Association to Senator Harry Reid, Majority Leader U.S. Senate, October 25, 2012,
http://www.nga.org/cms/home/federal-relations/nga-letters/economic-development—commerce-c/col2-content/main-
content-list/october-25-2012-letter—internet.html.
146 National Indian Gaming Association, National Indian Gaming Association Resolution on Legislation to Legalize
Internet Gaming, October, 20, 2010, http://www.indiangaming.org/info/alerts/
NIGA_Internet_Gaming_Resolution_2010.pdf.
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Remote Gambling: Industry Trends and Federal Policy

Author Contact Information

Michaela D. Platzer

Specialist in Industrial Organization and Business
mplatzer@crs.loc.gov, 7-5037


Acknowledgments
The author appreciates the assistance of Suzanne Kirchhoff, Analyst in Health Care Financing, who
contributed substantially to this report and authored a previous report on this subject.

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