An interesting debate has crept into the issue of regulating online gambling in the United States. Previously most of the opposition to federal online gambling regulation has been from those morally opposed to gambling. There has also been opposition from owners of tribal casinos and, for a time, from the brick and mortar casinos in Las Vegas (though they have changed their position). Now there is a debate about whether federal regulation would help or hurt the states.

Martin O’Malley, the governor of Maryland, sent a letter to the House of Representatives saying that federal online gambling would hurt his state. He says that gambling is Maryland’s fourth-largest source of revenue, at $519 million annually, and federal online gambling would put all of that revenue at risk. In the letter, Governor O’Malley said that regulation would not only cost that revenue, but also “jeopardize the jobs and survival of lottery retailers, many of whom are small businesses.” Politicians in some other states have echoed O’Malley’s sentiment. So is there truth to it?

Absolutely. Innovation always puts lesser competition at risk. Amazon hurt brick and mortar bookstores and Netflix buried Blockbuster. In each case, the lesser business was hurt because they didn’t adapt. For that reason, the gambling industries in each state need to adapt to remain lucrative. People will spend less money at local casinos and buying state lottery tickets if it is easier to play casino games online. The states have to adapt to regain a piece of that pie.

One suggestion is to regulate it at the intrastate level, but that has problems. Intrastate online casinos can only accept customers within that state’s borders if they don’t want to be subject to federal regulation (and taxes). If the state opts to keep the market inside the state, they will lose business, not only from customers in other states, but also in their own. Players would rather be at a casino or poker room that is bigger and has more players, which would make the national online casinos more popular than the state casinos.

It is a complex issue, but the states need to get a place at the bargaining table and make sure that when federal regulation happens, their interests are taken into consideration. Trying to block the legislation out of protectionism won’t work, because most believe the regulation will happen at some point anyway. Instead of opposing, it’s time to get onboard and make sure you get something out of it.

As passage of the Massachusetts gambling expansion bill becomes more likely, the focus moves from the three casinos and the slot parlor to smaller issues. On Wednesday, members of the state House of Representatives will debate a number of amendments that have been proposed. The bipartisan amendments would have a great impact on the gambling industry and on the state’s economy.

This morning, House Democrats are privately discussing 154 different amendments to the casino bill. Fifty of those amendments were offered by Republicans supportive of the bill, with the rest by fellow Democrats. Among those amendments are incentives for casinos to hire legal Massachusetts residents, creating a nonprofit charity casino, and banning the simulcasting of greyhound racing, according to The Herald News.

Several amendments by Republicans called for verification of legal status. A pair of amendments call for the casinos to use the Systematic Alien Verification for Entitlements program to ensure that employees and job seekers are not illegal immigrants. Another amendment would also check the status of any casino customer who wins more than $600. The bill already requires a check to make sure the prize winner is not delinquent on child support payments. The amendment would widen the scope to also check for immigration status. Another amendment would create a two-year waiting period between a politician holding elected office and then joining the gaming commission.

Though it’s not known how many amendments will make the cut, most insiders believe that the bill will pass the legislature easily. A similar bill passed without much opposition last year, only to be rejected by Governor Deval Patrick. The governor has said that he will accept the current bill. Like in most states, the 2010 election led to a lot of new Republican seats in the Massachusetts legislature, but most of those freshman Republicans support the bill.

At this rate, maybe Washington, D.C. won’t be the first jurisdiction in the United States to regulate online gambling. Each time we get excited that it’s about to happen, there is a delay. The most recent one is because it’s the summer right now, so that’s inconvenient for some people.

When it was reported that the District of Columbia had passed a law regulating online gambling, many in the public were outraged because it was the first they had heard of it. The measure was stuck into a supplemental budget bill, which the public rarely pays any attention to. In addition, the gambling measure did not receive a debate or a public hearing. The people were upset that they had not been consulted.

To quell the rising antagonism, the D.C. Council and D.C. Lottery agreed to hold public forums on the topic. This will give the government the opportunity to explain that it won’t lead to a crime wave (not that D.C. residents would notice) and opportunity for residents to act hysterical or share legitimate concerns (probably both).

So the forums were scheduled to start on August 16 and end in the middle of September, with the online gambling website launching shortly thereafter. But people complained. They want a public forum, but “August isn’t a good time for me because it’s the summer and I’m going to be out of town on vacation. Can we do it later?” Somehow, the D.C. Council forgot to check with every resident and ask when would work best with their schedules. So to quiet the anger (again), the forums were postponed. They will now begin in the middle of September and end sometime in October. That will also delay the implementation of the regulation.

On Friday, the D.C. Lottery announced the schedule for public hearings that they will hold regarding the online gambling law. From August 16 to September 14, the Lottery will hold a series of public meetings on the controversial program, which was passed into law before any debate or public vetting.

The program would regulate online gambling within the borders of Washington, D.C. The bill was slipped into a supplemental budget bill, where it passed in December. Since then, one district councilmember, Tommy Wells, has said that he wants to repeal the bill. Some of the public is outraged that they didn’t hear about online gambling regulation until after it was signed into law. To soothe the fears and anger, the D.C. Lottery will hold public hearings to discuss the matter.

A sure topic of conversation will be the so-called gambling “hot-spots.” In the beginning, players will have to go to certain locations, such as a hotel or restaurant, to play at the online casino. Having the gaming at specific locations will enable the regulators to make sure the safety features that protect people from problem gambling and prevent minors from playing. Once the regulators are satisfied that the protections are working, they will transition the program over to a system where players can log into the online casino and play from anywhere within the district limits of Washington, D.C.

Whatever comes out of the hearings, though, the public shouldn’t expect big changes. The law has already been passed and is ready to be implemented.

Yesterday, there was a rare statement from a Congressman that didn’t have anything to do with the debt deal. Congressman Michael Grimm, a Republican representing New York in the House of Representatives, issued a press release stating his support for online poker regulation in the U.S. He also praised FairPlayUSA, a poker lobbying group.

In the press release, Congressman Grimm said that he fully supports “the efforts to create a strong regulatory framework for legal online poker and to crack down on illegal sites, many of whom have ties to organized crime.” He went on to say that there are a lot of online poker players among his constituents and that he supports their right to continue playing online poker. He wants federal regulation to be passed in order to provide adequate protection for the players.

Having a Congressman, especially a Republican – since the party tends to be more anti-gambling than Democrats – speak out in favor of online poker on such a busy political day could be a good sign that regulation is coming. Many in the industry, most recently Bodog’s Calvin Ayre, have said they believe that is the case.

Congressman Grimm also praised the efforts of FairPlayUSA to “educate policymakers and the public on the broad public policy interests raised by the current ambiguous laws in the U.S.” The group wants to amend UIGEA to clarify that constitutes “unlawful internet gambling,” getting rid of the ambiguities that the Justice Department is using to its advantage. The group also supports federal regulation of online poker, but believes that individual states and Native American tribes should be able to opt out.

Soon the UK’s White Pages system of dealing with overseas online gambling operators will be a thing of the past, according to the government. John Penrose from the Department of Culture, Media and Sport said that the UK will end that system and do their own licensing and regulating of offshore gambling companies.

For now, the White List passes off responsibility to foreign regulators. Certain foreign regulatory agencies are approved on the White List and if they approve of an online casino, the UK basically says “if it’s good enough for them, it’s good enough for us.” By relying on foreign regulation, the UK is able to avoid the costs of regulation as well as pass off the responsibility. As a perk for the casinos, that allows them to avoid paying taxes in the UK if they are located overseas, though they are still allowed to do business there, including advertising.

Full Tilt Poker changed all of that. After the Black Friday indictment by the United States and the subsequent refusal (or inability) to repay those who had deposited money with the poker room, their licensed was suspended by their regulators in Alderney. Soon London will be home to a public hearing on Full Tilt, to discuss their future and whether they will be allowed to remain in business. After all of that, the UK isn’t as confident in the regulatory power of other countries and wants to do it on their own.

Pensrose says that the UK will institute its own licensing and regulating structure and any foreign online casino that is not licensed by the UK will be banned. He says it will help protect British citizens, but some in the casino industry are decrying having to pay the taxes and fees. As a result of the announcement of regulation and taxes, stocks of many gambling operators that do business in the UK have fallen, most notably a 3.9% drop for Betfair and a 5.75% drop for Paddy Power.

On Wednesday, top lawmakers in Massachusetts said that debate on casino legislation will be delayed until September. In a joint statement, House Speaker Robert DeLeo and Senate President Therese Murray said that they need more time and will not begin debating gambling expansion until after Labor Day.

Lawmakers were unable to get a deal done last year because DeLeo and Murray wanted gambling expansion that included adding slots to racetracks. Governor Deval Patrick, however, opposed that idea and only wanted to allow casino construction. When the legislature gave him a bill that included both, he sent it back and the bill died. This year, lawmakers are trying again and DeLeo had said that he hoped to pass the bill by the end of July.

Now, however, both the House Speaker and Senate President say they need more time to write the bill and get a response from the public before they can vote on it. The debate will be pushed back to at least the middle of September, in part because there are many more important bills under consideration as well. According to the Associated Press, that includes legislation overhauling the state’s court system as well as a bill that would make human trafficking a crime.

Whoa, wait a second. Human trafficking is not a crime already in Massachusetts? Okay, I agree. They need to pass that bill right away. That’s more of a priority than casino expansion.

The Joint Committee on Economic Development will continue to review gambling legislation prior to that, but the full House and Senate will not do so until after Labor Day, allowing more time to craft the bill and let the public read it and react.

Jeremy Hunt, the UK Culture Secretary, plans to initiate a massive overhaul of the online gambling regulations in the United Kingdom. Though there was already a push to do that, the recent Black Friday scandal in the United States and its impact on Full Tilt Poker has made reforms more urgent.

According to a spokesman for the Department of Culture, Media and Sport, the Full Tilt scandal “highlights why the government is looking at reforming how overseas-based operators are regulated.” Currently, online gambling operators based overseas can accept UK customers and even advertise in the UK without having to obtain a license or submit to any regulation from the UK government. Instead, the UK Gambling Commission has always differed to foreign regulators, such as the government of Alderney, where Full Tilt Poker is licensed.

The problem is that due to the scandal, many UK customers are unable to recoup money won at the online poker room. When the U.S. Department of Justice indicted Full Tilt Poker’s founders, they also froze bank accounts related to the transactions, including some in the UK. Subsequent to the American indictments, the Alderney regulators revoked Full Tilt’s license, effectively shutting the company down. Anyone who still had money deposited with the company is out of luck, at least for the time being.

PokerStars was indicted along with Full Tilt Poker, but the former company has cooperated with the government and has returned all funds that players have requested. Full Tilt never did return the money and is now shut down. According to Hunt, the scandal with Full Tilt Poker shows why the UK government should be regulating any online gambling company that operates in their jurisdiction. A spokesman for the Culture Department said that they hope to make an announcement regarding new regulations “in the next few weeks.”

With the U.S. federal government approaching its debt limit, the national deficit out of control, and spending at an all-time high, members of Congress are looking at a variety of ways to solve the nation’s financial woes. Though opinions on how to do that vary, in general Republicans want to focus on reducing spending and Democrats want to focus on increasing revenue, mostly through taxes. Jay Rockefeller, the senator from West Virginia, has a proposal that includes regulating online gambling.

Senator Rockefeller wants to increase revenue by regulating an online gambling industry that is currently operating outside the control of the federal government. Without regulation, the companies are able to benefit without their business benefiting the American people, he says. Though little is known about Rockefeller’s particular regulatory plans, he says that it would still protect states’ rights and state sovereignty while protecting consumers and paying off a large chunk of the national debt. By Rockefeller’s estimate, regulating online gambling would generate $41.8 billion over the next year in tax revenue, with $30 billion going to the individual states.

Senator Rockefeller has an interesting relationship with the Internet. In the past, Rockefeller has called the Internet the “number one national hazard” to national security. He posited that we would have been better off “if we had never invented the Internet and had to use paper and pencil and whatever.” With that in mind, he wrote a bill giving the President of the United States the power to shut off the Internet. Now that he sees how bad the financial state of the country is, it seems Rockefeller is willing to use something he fears and sees as dangerous to national security as a source of revenue.

When Washington, D.C. passed a law allowing intra-district online gambling, it was heralded as a success by the gambling community. After all, D.C. became the first jurisdiction in the United States to regulate online gambling. Though the market is not yet up and running, it is already becoming more controversial.

Michael A. Brown was the District Councilmember most responsible for passage of the gambling legislation. He pushed hard for it last year and eventually had the council include the gambling amendment in a supplemental budget bill. The bill passed last December and the time period for the federal government to strike it down expired, but since then, more information about Mr. Brown has come out.

The Washington Post took a break from their usual regurgitation of liberal talking points to do some investigative reporting. They found that at the time he was pushing the bill and at the time it was passed, Brown was employed by a group called Edwards Angell Palmer & Dodge. The international law firm represents a number of companies in the gambling industry, including casino owners and companies that provide gaming equipment. As someone with a client base of gambling companies, his work on the online poker bill could be seen as a conflict of interest.

Brown says he worked as a lobbyist for Edwards Angell and lobbied Congress for various causes beneficial to his clients. However, he never registered as a lobbyist in Washington. Add that to the secrecy surrounding the bill – that then-Mayor Adrian Fenty was not consulted and there was no public debate – and the controversy surrounding the bill is continuing to pick up steam.