April 15, 2011.  Black Friday.   A date that will live in infamy.  Well, at least in the hearts and minds of online gambling enthusiasts, for that is the day that the FBI shutdown the three leading online poker sites, effectively ending all online gambling operations in the U.S.  But then, only several days later, a ray of sunlight pierced the post-shutdown fallout: the District of Columbia had become the first in the nation to legalize online gambling!

Excitement surrounding the D.C. plan, known as iGaming, spread quickly.  Officials in D.C. promptly rolled out the infrastructure and regulations to facilitate the nation’s first intrastate online casino.  Industry insiders had high hopes that the plan’s success would lead other states to pass similar legislation.  While some doubted the plan’s legality, the DOJ reversed its position on the Wire Act in late December 2011, clearing the way for iGaming’s launch.  From the outside, all seemed well with the plan.  But in February 2012, much to the chagrin of, well, pretty much everyone except for those that made the decision, D.C. pulled the plug on iGaming, killing the initiative.

As the Grateful Dead so sagely advised in the song Truckin’, “the cards ain’t worth a dime if you don’t lay ‘em down.” D.C. CFO Natwar Gandhi projected iGaming to generate $14 million in tax revenue alone for the District in the program’s first two years.  So what could possibly halt D.C. from playing its valuable hand?

Good ole fashioned shady politics.  While the D.C. council “legalized” online gambling, hardly anyone in the council seemed to realize.  See, in December 2010, when the council was voting on a several-hundred-pages-long budget bill, Councilmember Michael Brown slipped in an unnoticed amendment that simply extended the D.C. lottery to also apply to “games offered over the Internet.”   Usually when passing groundbreaking legislation, or really anything significant for that matter, there is a public vetting process.  I guess Michael Brown didn’t get the memo.  Essentially, no one noticed the teeny amendment and when the bill passed under a tight deadline, Vincent Gray signed it into law rather than squabble over a small piece of the gigantic budget.

When word got out that D.C. legalized online gambling without most council members realizing or any public vetting, there was a slight public backlash, but not anything that supporters expected would derail the initiative.  But as opponents of the law dug a little deeper, the other shoe dropped as an investigation exposed the shady manner in which the D.C. lottery contract was awarded.  It turns out the majority winner of the lottery contract to operate the online casino was a D.C. businessman with absolutely no gambling experience.  On top of that, he planned to operate the casino out of his mother’s duplex.  While money undoubtedly exchanged hands in some back room meeting in this blatant “pay-to-play” deal, D.C. officials are currently grappling with the idea of referring the investigation to the U.S. Attorney’s office.

Regardless of whether the D.C. officials will be held accountable, the scandal thus marks the death knell of iGaming.  What was once viewed as a huge potential momentum builder for the world of online gambling has instead become another black eye for an industry that just can’t seem to catch a break.   So long iGaming – looks like you crapped out before you even rolled the dice.