U.S. Virgin Islands to move on interstate online gambling compacts

Hard on the heels of reports that the U.S. Virgin Islands Attorney General Vincent Frazer has given the green light to Internet gaming operations in the state comes the news that local senators plan to make changes to the law in order to facilitate compacts with other US states that have legalised online gambling and widen the field for master providers.

The Virgin Island Daily News reported over the weekend that while the AG has ruled a dormant V.I. law does not conflict with US federal rules, senators are now moving to amend the law establishing a framework for interstate gambling, which they say is rife with conflicts of interest and gives a monopoly to two companies explicitly named as master service providers.

One of those companies, USVI Host, estimates that the island government could reap $30 million in tax revenues if the firm and the other master licensor, St. Croix Internet Group LLC, are at last permitted to start operations with global operators as clients.

However, company spokesman Nick Pourzal pointed out that the 12 years of dithering on internet gambling since legislation was passed in 2001 have resulted in many of his investors pulling out in sheer frustration.

USVI Host and St. Croix Internet Group LLC are geared to serve as master service providers, supplying the technological portals through which online gaming companies can conduct business worldwide.

Wharton Berger, director of the V.I. Bureau of Economic Research, told the VI Daily News that his forecasters are working with the Bureau of Internal Revenue to determine how much money can be brought into government coffers under current laws, but have yet to make an actual estimate.

The island government’s AG issued an opinion and sent it to Gov. John deJongh Jr. and to the Casino Control Commission on October 18. The opinion cleared the way for the long-delayed implementation of online gambling regulation and licensing and was hailed as a turning point in the diversification of the local gambling industry by Gov. deJongh.

“This marks a turning point in the diversification of our gaming industry from land-based casinos and racinos, to internet gaming and gambling,” the governor said in a press release earlier this week .

In his six page opinion, the AG outlined the history of the US Justice Department’s flip-flopping on the legality of online games of chance, such as poker and blackjack, and the challenges presented through the federal courts by states trying to defend their own legislation for gaming.

In December 2011 the Justice Department made a revolutionary policy change on the federal legality of internet gambling when it admitted that the Wire Act applied only to sports betting, reversing years of assertions that it applied to all online gambling.

“I opine that the Virgin Islands Internet Gaming and Gambling Act is legal on its face. However, caution should be the rule because the pitfalls are in the implementation of the law,” The AG concluded in his opinion.

The AG cautioned on the delivery of internet games across state lines, noting: “There is concern whether the use of the V.I.’s Internet gaming and gambling platform may be used by persons outside of the Virgin Islands and not run afoul of the federal law.”

Casino Control Commission acting chairwoman Violet Ann Golden told the Daily News that the US Virgin Isles is a frontrunner in the U.S., being the first jurisdiction to fully legalize intrastate gambling, despite the fact that the legislation was not practically implemented.

She claimed that the current legislative framework fully supports transactions between gaming companies hosted by V.I. providers and gamers in other states where Internet gambling is legal.

The Commission is actively working on agreements with states such as New Jersey to regulate usage by off-island gamers, she revealed.

Golden said that USVI Host is in the process of renewing its licence, while St. Croix Internet Group LLC never pursued its right to a licence.

The state government would get money in the form of an off-the-top tax of 1.5 to 2 percent to master service providers and a 10 percent tax on individual winnings, plus whatever taxes the V.I. imposes on income earned from territorial betters, she said.

Political concerns over hosting and master service provider monopolies have been expressed by state Senator Nereida Rivera-O’Reilly, who argues that USVI Host and St. Croix Internet Group LLC should not be allowed to operate as master service providers.

The enabling legislation should never have named those two companies, some of the principals of whom are or were government insiders at its passage, she says, adding that she plans to introduce an amendment designed to open up the field in a competitive process.

This is likely to run into opposition from Gov. deJongh, who recently vetoed a similar bill by state Sen. Craig Barshinger.