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WV Shows DOJ Middle Finger in Latest Online Gambling Bill

Posted on by John Lathram

West VirginiaThe language of West Virginia´s latest online gambling bill fails to disguise what its authors think of the Department of Justice´s revised Wire Act opinion.

West Virginia´s on-off relationship with online gambling appears to be back on again. Within weeks of Shawn Fluharty´s “slot-less” HB 2178 being introduced and withdrawn, a new “West Virginia Lottery Interactive Wagering Act” (HB 2934) has been introduced into the Mountain State´s legislature by delegate Jason Barrett, with Fluharty listed as one of the bill´s co-sponsors.

The latest set of proposals are slightly different to those that preceded them. The state´s existing casinos and racinos would be able to apply for five-year operating licenses at a cost of $250,000 (previously $50,000) and Gross Gaming Revenues would be taxed at 10% (previously 14%) – ensuring the state gets more money upfront in case revenues from regulated online gambling fail to meet expectations.

There would be additional licensing requirements (and fees) for online gambling companies wanting to partner up with licensees ($100,000 per year), plus further licensing requirements (and fees) for third-party software providers ($10,000 per year).  Also licensed operators, their partners, and third-party software providers would have to pay an annual fee of $100 per employee.

Bill Starts by Asserting State´s Rights

What also distinguishes this bill from its predecessor is the language used during the preamble to assert West Virginia´s rights under the Tenth Amendment to regulate online gambling. This is clearly a middle finger to the Department of Justice for revising the Wire Act opinion. The opening section goes on to imply the state would contest any enforcement action taken against a licensed operator:

The federal government is a government of limited and enumerated powers, and powers not delegated to the United States by the Constitution nor prohibited by it to the states are reserved for the states and its respective citizens.

The preamble continues by stating the objective of the bill is to transfer “black market demand [for online gambling in West Virginia] into a secure and highly regulated environment” in order to protect the public (from what?), positively benefit state revenues (naturally) and enhance the tourism of the state (not sure how many tourists will visit West Virginia to play online poker).

Interestingly, one of the clauses in the preamble mentions a “federal ban on interactive wagering”. In the context of the clause ((b)(5)), it is difficult to determine whether the phrase means “we´re going to wait until the federal ban is lifted”, or “if there is going to be a federal ban, we don´t care. We´re doing this anyway”. Considering how the preamble starts, I suspect the latter.

What´s Sparked this New Love Affair with Online Gambling?

Three weeks ago, John Myers – the state´s lottery director – told the House Finance Committee he was not in favor of online gambling at the minute because the state lottery (who would be responsible for fine-tuning the online gambling regulations, vetting license applications, and issuing licenses) has its hands full with the rollout of mobile sports betting platforms.

As West Virginia´s legislative session ends in March, it seemed as if regulated online gambling would be delayed another year. However, the quick reintroduction of another online gambling bill suggests the bill´s sponsors are hedging their bets with regard to the Wire Act opinion, and trying get the bill passed before details are released about how the revised opinion will be enforced (they are due by April).

Quite possibly, the DOJ may say they will allow intrastate online gambling – and ignore any incidental routing across state lines – in states that have already passed legislation. Although this will not be good news for online poker players (because West Virginia´s population is insufficient to support a ring-fenced ecosystem), it could explain why the latest online gambling bill has been introduced so quickly.

It could also be the case legislators wanted to flex their Tenth Amendment muscles to test the water, or just show the Department of Justice a middle finger. Whatever the motive, I hope the DOJ got the message.

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