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all rights reserved worldwide. Gambling and the Law™ is a registered trademark
of Professor I. Nelson Rose, Whittier Law School, Costa Mesa, CA.
California Legalizes Internet Gambling
Gov. Gray Davis recently authorized what may be the second largest expansion
of legal gambling in the history of the United States. At the same time,
he brought legal Internet gambling to a significant percentage of the country's
nothing can compare to Gov. Davis's campaign for Prop. 1A and the dozens
of tribal-state compacts he signed. Within ten years, California will surpass
all other states, including Nevada, as the nation's largest casino market.
legalization of Internet gambling may be not as big, but it is big news,
even if it has not yet been recognized by the press.
signed a bill permitting everyone in California to bet on authorized horse
races from their homes, offices, schools, etc., by phone and computer.
The new law also allows California licensed operators to accept bets from
anyone in any state.
form of gambling is called Advance Deposit Wagering ("ADW"). Bettors are
required to set up accounts and deposit money in advance, before they can
make their long-distance bets.
went into effect on January 1, 2002. (It will expire on January 1, 2008,
unless the State Legislature extends it - a near certainty.) The statute
requires the California Racing Board to make regulations and to approve
all arrangements involving ADW.
Gov. Davis vetoed an identical bill. He issued a news release at the time,
saying it would open the door to children and teenagers placing bets using
their parents' accounts over the Internet. . . I cannot support provisions
lifting the state ban on Internet and telephone wagering. It would expand
the scope of gambling by allowing Internet and telephone betting on out-of-state
and out-of-country horse races.
he said he could sign the proposal for ADW because there had been a change
in federal law, so this time it would not be an expansion of gambling.
Internet and phone betting for 34 million Californians and millions more
in other states is a massive expansion of gambling. And the change in federal
law did not require states to authorize interstate at-home wagering on
2000, Congress amended the Interstate Horseracing Act, expanding the definition
of interstate off-track wager to include parimutuel wagers across state
lines by phone or "other electronic media." But it is still up to the lawmakers
of each state to decide whether they want to allow interstate betting.
which violates the laws of a state also violates federal law. Federal law
now allows an individual to make a bet with an Off-Track Betting ("OTB")
operator in another state, but only if both the state where the bettor
is and the state where the OTB is have passed laws making interstate betting
was necessary because it was unclear whether the federal Wire Act prohibited
gamblers sitting in their homes in one state from using telephones or computers
to make wagers with licensed OTB operators in other states.
Act makes it a crime for anyone in the business of gambling, even legal
gaming, to send wagering information by wire across a state or national
boundary. There has always been an explicit exception for bets placed in
person at an OTB outlet under the Interstate Horseracing Act. But, federal
prosecutors in the Department of Justice had indicated they believed the
Wire Act did not allow at-home interstate wagers. So the law was changed
to make it clear that horseracing bets, legal under state law, do not violate
is home to some of the leading tracks: Hollywood Park, Santa Anita, Del
Mar and more. The bill signed by Gov. Davis also allows bets to be placed
on races taking place at tracks in California, even if both the bettor
and the OTB (which has to be approved by the California Racing Board) are
in other states.
in other countries make up approximately 60% of the world Internet gaming
market. The Interstate Horseracing Act seems to only allow wagering information
to be transmitted from one state within the U.S. to another. However, racing
signals have been sent internationally for decades: American OTBs accept
bets on races taking place in Hong Kong and Canadian OTBs accept bets on
the Kentucky Derby. In fact, the Canadian federal Agricultural Code lays
out what a Canadian OTB has to do to be able to take bets on American races.
The new California law expressly
allows Californians to place bets with an approved OTB outside the state,
and it does not restrict those OTBs to the United States.
regs. are in place, Californians will be able to make bets by phone to
approved OTBs in California and in other states which allow out-of-state
telephone wagers, like New York, Connecticut, Oregon and nPennsylvania.
The last two, like California, also allow out-of-state computer bets.
is such a major market that other states will soon also allow out-of-state
bettors to wager online.
What about other countries? Canada has so far prohibited its OTBs from taking computer bets from outside their province. But California is larger and has more potential bettors than all of Canada.
the new California law will be the breakthrough to true licensed international
Professor Rose can be reached at his Web Site: www.GamblingAndTheLaw.com