© Copyright 2016, all rights reserved worldwide.  Gambling and the Law® is a registered trademark of Professor I. Nelson Rose, www.GamblingAndTheLaw.com.  Published in Gaming Law Review and Economics, Vol. 20, No. 10 at pp.  (December 2016).

         

Gambling and the Law®:

President Trump and the Future of Legal Gaming

          First, the facts:

          Former casino owner Donald J. Trump won the most Electoral College votes.  Hillary Rodham Clinton beat him by more than 1.5 million popular votes.  But Trump will be inaugurated President on Friday January 20, 2017.  The Republican Party lost seats in Congress but will keep control of the U.S. Senate and House of Representatives.

          Trump’s election may feel like a shocking surprise, but the best polls accurately predicted this result.  The leading pollster, Nate Silver and his 538.com, consistently and repeatedly emphasized that Trump had a 30% chance of winning.  Everyone connected with the business of legal gambling, a business based on probabilities, knows that a 30% chance is something that happens all the time.  A casino patron has much worse odds of betting on Red at Roulette and having Red come up three times in a row.  In fact, there was a greater chance of Trump winning the Presidency than of a player betting on Red and winning just two times in a row.

          As a former campaign manager, I agree with Nate Silver and the Clinton campaign that Hillary would have been elected President if not for the letter from Federal Bureau of Investigations Director James Comey.  Just 11 days before the election, Comey publicly announced that new Clinton-related emails had been found on a laptop owned by Anthony Weiner.  The timing was particularly bad for Hillary because the impact of Trump’s poor performances at the debates and his “Grab them by the pussy” recording were fading.  The letter reminded millions of Republicans, “Oh yeah, I almost forgot... it’s a Clinton,” a name they consider a scandal factory.  There was no time for another round of Trump Twitter craziness; plus, his campaign managed to take away, for a few days, his ability to tweet.

          But blaming a single factor such as the Comey letter is somewhat ridiculous in a close election, or even in one that is not so close.  Sure, Hillary would have won if a few tens of thousands of voters had switched from Republican to Democrat in Wisconsin and Pennsylvania.  But she also would have won if a few tens of thousands of Democrats who had voted for Barack Obama in 2008 and 2012 had bothered to vote in 2016.  And Hillary never even campaigned in Wisconsin.

          As for the Comey letter:  Yes, the Hatch Act makes it clear that a federal government employee is not allowed to “use his official authority or influence for the purpose of interfering with or affecting the result of an election.”[1]  But even assuming it would be possible to prove that Comey had the intent to help the GOP, so what?  This is not a criminal statute.  In fact, the worst that could happen would be that Comey would lose his job and pay a $1,000 civil fine.[2]

          And those emails would not have been there to be found if Hillary Clinton had not improperly used a personal server.  Reinforcing the “Clinton = Scandal” connection, Hillary kept Anthony Weiner’s wife, Huma Abedin, as her top aide, even after Weiner’s sexting became a national scandal not once, but three separate times.[3]

          So we are left with a country more deeply divided than at any time since the Civil Rights and Vietnam eras of the 1960s.  And it is important to remember how those turned out, if we want some idea of what this election will mean for legal gaming.

          The spotlight of media and culture has always been focused on the anti-war and other Baby Boomer movements of the 1960s.  But the reality is that the political fights were won by the Establishment; it was the Republican, Richard Nixon, who won the election in 1968 and again in 1972. 

          This resulted in a major boost to legal gambling.

          Nixon wanted to increase the power of the Republican Party.  The most notorious example is his “Southern Strategy,” openly courting white racists in the South.  He succeeded in turning the “solid South” from nearly 100% Democrat to nearly 100% Republican.

          Much less well-known is his out-reach to Indians.  Native Americans were, and are, by no means a solid block vote for either party.  Although small in number, they are concentrated in low population states, including Alaska, New Mexico and the Dakotas, where they can swing elections.

          To win Indians over to the GOP, Nixon issued a strong Statement on Indian Policy in 1970.[4]  The result, quite unexpectedly, was Indian gaming.  Nixon’s executive branch appointees, including Secretary of Interior Walter Joseph "Wally" Hickel, endorsed Indian bingo as a way of reducing tribes' dependence on federal funds.

          Indian bingo, created, in large part, by Pres. Nixon, morphed into tribal casinos through a decision of the U.S. Supreme Court[5] and an Act of Congress.  The Indian Gaming Regulation Act[6] was supported both by conservatives in Congress, who wanted to get Indians off welfare, and liberals, who supported strengthening tribal self-government. 

          It was another conservative Republican, Ronald Reagan, who signed IGRA into law.  He liked IGRA because it helped make so many tribes self-sufficient.  But Reagan liked IGRA even more, because he was a strong believer in states’ rights.  IGRA not only allowed states to co-regulate Class III games; it expressly empowered the states to decide what forms of gaming federally recognized tribes would be allowed to offer.  That is why the tribes in Utah do not even have the right to offer bingo.

          Trump is no Nixon or Reagan.  For all their ethical and even personal problems, both Nixon and Reagan were within the historic bounds of normal politicians.  Nixon, for example, had goals and beliefs beyond himself.  He helped create Indian gaming to win support for other, future Republican candidates.  And he had an ideology, including believing in states’ rights, smaller government and individuals making their own financial choices.  That is why he did nothing to block the other great expansion of legal gambling during his tenure: state lotteries.  And Reagan did the same, facilitating the continuing spread of state lotteries and the then-new idea of states other than Nevada licensing privately owned casinos.

          Trump, on the other hand, appears to have almost no ideological beliefs, or at least is willing to change his mind before even ending a sentence, no matter how public his former position.  Among the few core ideas he does seem to consistently support is capitalism, at least for the rich and powerful, even at the cost of harm to society and the environment.  He also appears to support states’ rights, which would normally include gaming. 

          It has always been up to the individual states, not the federal government, to decide on the states’ public policies toward legal gambling.  That is why Nevada and Utah can share a border and yet have such wildly different laws on the subject.

          So the future legal environment for land-based gaming is mostly positive.  The federal government, including Congress and the pesky Department of the Treasury, will most likely be backing off from constant oversight of casinos.  Anti-Money Laundering regulations for casinos will be softened, so long as there is no suspected link with Islamist terrorists.  States will be free to do just about anything they want, when it comes to allowing or expanding land-based operations of state lotteries, including introducing Video Lottery Terminals.  And more jurisdictions will introduce legal casinos and racinos, perhaps with less regulation by state governments as well.

          This will inevitably lead to conflict and confusion, such as is now taking place in New Jersey.  Racetracks desperately need slot machines or VLTs to survive.  But allowing tracks and state lotteries to install gaming devices creates competition for nearby casinos, including those in the same state.  The politics of this will become dirty and messy.  But one thing we already know about Trump is that he thrives on chaos.

          Gaming on the Internet is a completely different matter.  Online poker is already licensed and operating in Nevada, and full Internet casinos can be found in New Jersey and Delaware.  Poker players in Nevada and Delaware can join in an online game with players from both states.  The present and prospective operators are privately owned companies and not governments, as in Canada, so you would think that Trump and the Republican majorities would be in favor of more capitalism.  That might be the case, except for two factors:

1)  Many in the GOP believe it is governments’ role to tell people what they can and cannot do in the privacy of their own homes; and,

2) Sheldon Adelson.

          Adelson’s influence over the next two, and possibly four, years should not be underestimated.  He is a true billionaire, and Trump likes to hang out with the very wealthy.  More importantly, Adelson is the biggest single contributor to political campaigns in the history of the United States, a much larger donor than Trump himself.  Adelson can gain access to both Trump and the GOP leaders in Congress.  And Adelson passionately opposes Internet gambling.

          The main thing stopping Trump and the Republican-controlled Congress from ramming through a bill outlawing all online gaming is the filibuster rule in the U.S. Senate.  The rule effectively requires there to be 60 votes before a bill can become law.  The GOP used the filibuster rule to kill almost every piece of legislation proposed by Pres. Obama, even when Democrats had a majority in the Senate.  With 51 or 52 Republican senators (and Vice President Mike Pence, who can vote in case of a tie), the GOP could eliminate the filibuster rule. 

          I do not believe the Republicans will do so for two reasons.  First, they know that sometime in the future they will again be in the minority in the Senate.  The filibuster rule is the main weapon the minority has to slow down or even stop the majority from doing whatever it wants.

          Second, there are individual Republican senators who have openly opposed Trump.  Many come from blue or purple states, with lots of Democrats waiting to see if their representatives act in ways that are as arrogant and reckless as their leader.

          In addition, there is the issue of the states that already have online gaming.  New Jersey and Delaware are safe blue states, so Republicans don’t care about hurting their feelings.  But Nevada is a swing state.  Nevada voters will long remember if the federal government comes in, in the name of some overriding morality, and stomps on their state’s right to decide whether or not it wants Internet poker.

          And there are more than 30 other states that use the Internet for bets on horseraces.  Congress amended the Interstate Horseracing Act[7] to expressly allow the states themselves to decide whether they wanted Advanced Deposit Wagering.  More than half have opted in, allowing people to bet from their homes and offices by computer on horseraces.  The racing industry and the millions of jobs it creates would be irreversibly crippled if patrons were required to once again be physically present at a racetrack to make a bet.

          A dozen states allow residents to buy lottery tickets over the Internet.  All but a half-dozen states now operate state lotteries, and all those lotteries would love to have more exciting games for their customers, preferably available on their cell phones.  Completely closing down online sales of state lotteries would most dramatically impact the named beneficiaries of state lottery revenue.  The Illinois State Lottery, for example, transfers more than $50 million every month to the Common School Fund.

          One interesting legal question is what will happen to the decision of the U.S. Department of Justice that the Wire Act[8] only applies to sports betting.  The Wire Act is one of the few federal statutes that could apply to online gambling.  And it is the only one, other than the federal anti-lottery laws,[9] that can apply to gambling that is legal under state law.  The DOJ’s Criminal Division had always stated publicly that the Wire Act applied to all forms of gambling.  Two days before Christmas in 2011, the DOJ at the highest level reversed this position.[10]  This “Christmas present” from the DOJ’s Office of Legal Counsel allowed the states to offer every form of gambling, except sports betting, to their residents, over the Internet.

          DOJ decisions like this are almost never reversed.  When Obama’s Attorney General announced that the DOJ was no longer approving water-boarding and other forms of torture, there was no great demand for Congress or a future AG to overturn the decision.  But, again, Trump is different.  If Adelson cannot get Congress to act, he can ask Trump’s Attorney General to announce that the DOJ is reversing its decision.  The DOJ could then announce that the Wire Act does make all forms of online gambling illegal.

          Alabama U.S. Senator Jefferson Beauregard "Jeff" Sessions III (R.-AL) is reported to be Trump’s top choice for A.G.  Sessions is a social conservative, one of the right-wing Republicans who feel that government should enforce morality.  Before he even took his seat in the Senate, he announced he was in favor of the “Kyl Bill of 1997,”[11] which would have outlawed all online gambling.  On the other hand, he is strongly for states’ rights.  Interestingly, Sessions has never signed on to any of the more recent attempts, funded by Sheldon Adelson and nicknamed the “Adelson Protection Acts,” which would have eliminated Internet gaming.

          The only way for all forms of remote gambling to be safe would be for supporters of Internet gaming, including Senator Harry Reid (D.-NV), Minority Leader of the U.S. Senate, and Rep. Joe Barton (R.-TX), to get a bill through Congress and signed by Pres. Obama to codify the Christmas present, locking into statute that the Wire Act only applies to wagers by non-participants on sports events.  It is possible the current Congress would pass such a bill; but gambling is such a low priority that it probably will not even be considered.

          Without an Act of Congress, Sessions as A.G. will probably reverse and eliminate the Christmas present.  Operators of all forms of legal gambling will then have to file lawsuits to protect their present and future operations.  Fortunately for operators and suppliers, the few federal courts that have looked at the issue have ruled that the Wire Act is limited to wagers on sports events.

          Of course, Pres. Trump now gets to appoint federal judges.

          One of the most unpredictable areas is sports betting.  Trump himself owned the New Jersey Generals in 1984-85.  Given his interest in casinos, we might assume that he is in favor of sports betting.  But it is impossible to know how this issue will play out in his mind, what lobbying he will be subjected to, and whether the new Congress will be able to function enough to pass any new laws.  The gaming industry is optimistic, [12] unduly so, in my opinion.  More important than Trump is the Wire Act, which can only be amended by Congress.  The National Football League has more than enough political power to prevent a sports betting bill from getting out of committee.

          The growth area of the last few years, daily fantasy sports, faces the most interesting challenges.  DFS ran into a buzzsaw of problems last year.  As I correctly predicted,[13] DFS operators and their allies had enough financial and political power to delay all of the civil actions they were facing, while they lobbied state legislatures to expressly make them legal.  The two giant operators, FanDuel and DraftKings, have succeeded admirably, convincing nine states to license fantasy games.  But the two companies have just about run out of money.  They now are trying to merge.

          Federal antitrust law and regulators would seem to present insurmountable barriers.  FanDuel and DraftKings control more than 90% of the DFS market.  But antitrust law relies on the rule of reason: the illegality of a monopoly is in the eyes of the beholder.  A monopoly isn’t always a monopoly, if it is at least theoretically possible for new competitors to arise.  Under a President such as Barack Obama, and his Attorneys General, antitrust law has been seen as a way of protecting the general population from the economic abuses created by a concentration of the market in the hands of a few.  Under a Pres. Trump?  Trump likes unrestricted capitalism.  I suspect a Pres. Trump and whomever he appoints as his AG would have no problem with this merger.

          Probably the greatest unknowns – the threats – facing the legal gaming industry under the new regime is the complete unpredictability of Trump himself and his impact on the world.

          It is difficult to overstate the danger of having a President who could launch nuclear missiles just because another world leader insulted him in a tweet.  Short of that threat, we still face trade wars; ostracism from the community of nations; a dramatic fall-off of visits from foreigners, especially Muslims and from Spanish- and Portuguese-speaking countries; and economic crises.

          It is important that we not normalize Trump. 

          Trump has already named a racist anti-Semite, Stephen K. Bannon, to be the chief strategist and senior counselor in the White House.[14]  Trump himself has no moral center:  We have never had a top government official who lies continuously and is so blatantly out to enrich himself and his family.

          Trump is a nationalist, so he will push for deficit spending on infrastructure, like roads.  This will create jobs and is good for the gaming industry. 

          But a government built on a world-view that has no connection with reality has to eventually collapse.  We just don’t know if it is going to be runaway inflation or another Great Recession – or worse.

          This is a President who thinks climate change is a Chinese hoax.  He has promised to pull the United States out of the Paris agreement to fight climate change; an agreement ratified by 111 countries.[15] 

          Casinos in Atlantic City should redouble their flood insurance.

          And if you run a track in southern Florida, you had better just relocate -- or teach your racehorses how to swim.

                                                               END

© Copyright 2016.  Professor I Nelson Rose is recognized as one of the world’s leading authorities on gambling law and is a consultant and expert witness for governments and industry.  His latest books, Gaming Law in a Nutshell, Internet Gaming Law and Gaming Law: Cases and Materials, are available through his website, www.GamblingAndTheLaw.com.



[1]  The Hatch Act of 1939, officially An Act to Prevent Pernicious Political Activities, 5 U.S.C. § 7323(a)(1).

[2]  “An employee or individual who violates section 7323... shall be subject to removal, reduction in grade, debarment from Federal employment for a period not to exceed 5 years, suspension, reprimand, or an assessment of a civil penalty not to exceed $1,000.”  5 U.S.C. § 7326.

[3]  When he had to resign from the House of Representatives; when he was running for mayor of New York, and this year when he was caught sending photos of underwear-glad crotch to a 15 year-old girl.

[4]  Http://www.presidency.ucsb.edu/ws/?pid=2573.

[5]  California v. Cabazon Band of Mission Indians, 480 U.S. 202 (1987).

[6]   Pub.L. 100-497, § 2, Oct. 17, 1988, 102 Stat. 2467.

[7]  15 U.S.C. ch. 57.

[8]  18 U.S.C. § 1084.

[9]  18 U.S.C. §§1301-1307.

[10]  Virginia Seitz, "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," Memorandum Opinion for the Assistant Attorney General, Criminal Division, Sept. 20, 2011. 

[11]  Ruddock, Steve, “Attorney General Nominee Jeff Sessions’ Online Gambling Stance? The Record Paints A Mixed Picture  November 18, 2016,” http://www.onlinepokerreport.com/22823/jeff-sessions-attorney-general-online-gambling/ (Nov. 18, 2016).

[12]  Palmeri, Christopher, “Casinos to Seek Legal Sports Betting With Trump in White House,” http://www.bloomberg.com/news/articles/2016-11-18/casinos-to-seek-legal-sports-betting-with-trump-in-white-house.

[13]  Rose, I. Nelson, “Gambling and the Law®: What Should Daily Fantasy Sports Do Now?” 19 Gaming Law Review & Economics No. 10 at p. 683-686 (December 2015).

[14]  Drum, Kevin, “Is Steve Bannon Racist? Let's Find Out!” Mother Jones, http://www.motherjones.com/kevin-drum/2016/11/steve-bannon-racist-lets-find-out.

[15]  United Nations Framework Convention on Climate Change,  http://unfccc.int/paris_agreement/items/9485.php.