Professor I. Nelson Rose Interview on Legal Online Gaming in 2012

admin January 13, 2012

Professor I. Nelson Rose, one of the leading experts in gaming law, has agreed to answer a few online gaming questions exclusively for Legal Poker Sites readers.

Do you think US online poker will be viable for pros and profitable for casinos if it is legalized on a state by state basis without a federal bill?

Professor I. Nelson Rose: Yes. Now that the Wire Act is out of the way, the states are free to not only legalize poker intra-state, but also to make compacts among themselves and with other countries. Even a few small states together can create a pool of millions of residents. Sharing the tax revenue should not be a problem. This is already being done in Australia, and computers can keep track of players’ payments (the rake) and the skins, so that operators and states get the correct amounts. The biggest problem will be licensing. Caesars is licensed by Nevada and NJ. But not in California, where corporations cannot own poker clubs. So, California would have to expressly allow its residents to play at sites licensed by Nevada.

For pros, this is good news. State-legal sites will be able to advertise and accept credit cards. In fact, under the UIGEA regulations, credit card companies are required to make payment processing for legal Internet gambling easily available. This will bring back the days when less experienced players will be logging on and using credit cards to play online poker.

If a federal bill is passed, do you think the taxes imposed will be so high that it would be difficult for gaming companies to turn a profit similar to the sitatuon in France?

Professor I. Nelson Rose: No. All of the federal proposals are looking at reasonable rates. There is a potential problem if both the federal government and states try to impose taxes, which cumulatively could be quite high. France has shown that taxing deposits, rather than gross gaming revenue, won’t work.

Understand, there is virtually no chance that a federal bill will pass in 2012. The Republicans have decided that the best way to defeat Pres. Obama is to have the federal government do literally nothing. And they control the House and have imposed barriers in the Senate, mainly the filibuster, to prevent any Democratic bills from passing. Even if there were federal legislation, it would have to allow states to opt in or opt out: Congress cannot impose a uniform gambling policy on both Nevada and Utah.

Which states do you believe will follow Nevada and pass a version of their own online poker bill?

Professor I. Nelson Rose: The first state will probably be Iowa, which has been studying it for three years, and the Iowa State Legislature meets for only 100 days. Iowa has lots of legal gambling, and prides itself on being the first in the nation. Although I don’t see how they can beat Nevada for that honor. The District of Columbia can also get up and operating before Iowa, if the political problems can be resolved.

I expect 2012 will also see New Jersey and California legalizing. A bill already passed both houses of the NJ legislature once, controlled by the Democrats, and was vetoed by Republican Gov. Chris Christie. He has now said he is in favor of a new bill, which can be passed in a couple of months. This will be for Internet casinos, including poker. But there is a legal problem: The NJ Constitution requires that all casino gambling take place in Atlantic City. The main proponent, Sen. Ray Lesniak, thinks that requiring the servers to be in AC is enough. I would recommend they amend the State Constitution at the ballot in November. NJ voters approved sports betting in Nov. 2011. They would certainly approve Internet casinos in a presidential election, where more Democrats, independents, liberals and young people vote.

The Governor of Connecticut recognizes that casinos are coming to Massachusetts, and probably to New York (in fact, NY already has racinos with slot machines and tribal casinos). The two largest employers in Conn. are Foxwoods and the Mohegan Sun. So, he has called for legalization of Internet gambling to make up for the coming loss of business. But I don’t know if the politics of the state will allow legalization in 2012.

Florida has also looked at the issue. But the big fight there is over billion-dollar resort casinos in Miami. And the state would lose the big $ it is getting from the Seminoles. I do expect Florida to legalize online poker, but probably not this year.