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Internet Gambling: A California Plan B? 



by Stephan Mihalovits

Maybe it’s just me, but I would rather not see California open up a Pandora’s Box of internet gambling without a full and frank discussion beforehand.

As legislators in the Senate quietly move toward an internet gambling bill this year, there is a chance that is exactly what the state will do. But are we ready to gamble online?  As California’s insolvency situation enters its umpteenth year, the focus is on red ink, not the full potential benefits or consequences of internet gambling.

As a result of a recent U.S. Department  of Justice opinion, states across the country are looking to use internet gambling to fill budget holes. The DOJ concluded states are free under federal law to create internet lotteries within their states, reinterpreting the 1961 Wire Act to only prohibit intrastate gambling involving sports betting. Thus, with federal law out of the picture, states can legislate internet gambling within their borders and together with other states.

States like New Jersey, Connecticut, and Nevada have begun the initial legislative process. Governor Chris Christie said this month, “I think New Jersey should be in that business, I think we should be an epicenter for that business, but I want to do it right.”

Internet Gaming = California Dreamin'?


California is pursuing its own legislative efforts. Last year, two bills were introduced in the Senate, but both stalled. There is buzz in Sacramento that 2012 will provide the fiscal conditions necessary to pass an internet gaming law (a $13 billion deficit is projected for 2013). But for now Gov. Jerry Brown is playing cool to the idea.

But, in my opinion, the governor’s coolness is more of a poker face.

Based on Gov. Brown’s repeated calls for temporary tax increases as a budget solution, it’s clear his first preference is to pass a pair of November ballot initiatives that would raise taxes for five years. If both pass, he may nix the online gaming idea entirely or sign only a limited internet gambling bill. The problem is this strategy depends on voters voting for tax increases. Based on past precedent, I highly doubt voters will vote for them, especially the regressive sales tax.

What is Gov. Brown’s plan when the tax increases fail?  Answer: Plan B (and C, D, and E). I’m no psychic, but I believe November 2012, Gov. Brown will for the first time advocate his true position: he would rather have more revenue than more cuts. He will advocate some form of internet gambling.

But California lawmakers do a disservice to Californians by waiting to discuss the issue. Some people view gambling as taboo: a dangerous practice that leads to addiction, alcoholism, financial distress, and fatherless children. If our state is about to put gambling in our homes (and on our smartphones), our leaders should begin an honest and open discussion now.

There are plenty of legal and moral issues to discuss.

New technology will not limit internet gambling to stationary computers. Rather, our smartphones will become portable devices for cash money gambling. Smartphone gaming giant Zynga Inc. is pondering whether  or not to bet on online gaming.  This could lead to unforeseen harms. The easier it is to gamble, the easier it will be to make a terrible financial mistake. Imagine your 7-year old reaches to play a game on your iPhone and ends up losing thousands in a poker game. Or imagine a recovering gambling addict being sucked back in to his addiction through the ease of smartphone technology.

While Sacramento ruminates over more internet gambling, shouldn’t our leaders be preparing us for these foreseeable ethical issues?

Stephan Mihalovits is a Los Angeles Business Litigation Attorney. You may reach him by calling 818.990.2120, or via e-mail:           


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