How to Pass a Federal Poker Only Bill

John Mehaffey February 21, 2014

It looks like we may be headed towards another attempt at a federal online gaming bill that would give online poker an exemption while banning games banked by casinos. This could be a replay of 2012 when Senate Majority Leader Harry Reid teamed up with Arizona Senator Jon Kyl. That bill, referred to as Reid/Kyl by the poker community, failed to receive any debate and died in a lame duck session due to a lack of interest. Hopefully that was a learning experience for supporters.

Industry Different Today than in 2012

Reid/Kyl was proposed at a time when Nevada’s sports betting apps and websites were the only form of regulated online gaming in the country. Nevada had just started the process of licensing online poker companies. Delaware lawmakers had approved online gaming through its state lottery. New Jersey was still debating the issue in the legislature.

The situation is much different now. All three of these states are live with their regulated products and more states are expected to consider similar legislation this year.

Lessons Learned from Reid/Kyl

Reid/Kyl was never seriously considered by Congress. It found opposition on all sides. Gaming interests did not like the banning of casino games. Governors and lotteries did not want their right to offer house games taken away. The opposition considered Reid/Kyl to be an expansion of gambling.
This left few supporters beyond online poker players. That must change this time around for a poker only proposal to have even the slightest chance.

Education is Key

There is a major misconception about the Interstate Wire Act interpretation. This law clearly covers only sports betting and even then only when the action crosses state lines. The reversal as it is called was simply acknowledging this. The law did not change and there was no need to consult Congress as suggested by some online gambling opponents. This message must be understood by Congress and the misinformation provided by overzealous anti-gambling lobbies must be confronted.

Once the Wire Act has been understood by lawmakers, it is time to consider the conservatives. They are the key to passing any federal gaming bill. Some conservative groups put out misleading information about Reid/Kyl.

Conservatives must understand that there is no federal law preventing any state from offering online slots, video poker or table games. A poker only bill is a compromise that gives opponents the feeling of victory by outlawing the most dangerous forms of gambling in their eyes. Conservative lawmakers could declare a poker only bill as anti-gambling legislation to constituents.

States would still have to opt into poker. Nothing would be forced.

Governors and lotteries will likely object to the potential loss of casino game revenue. The key here is to follow the same pattern used by the Professional and Amateur Sports Protection Act (PASPA). This law banned sports betting in 46 states that did not already have any forms of betting in the previous 10 years. It provided a one year window for states with established gaming experience to legalize sports betting. This part of PASPA was tailored for New Jersey. It failed to legalize sports action and is now hoping the Supreme Court will throw out the entire law. If PASPA is found to be unconstitutional, it could also apply to any attempt to ban online casino games at a federal level.

PASPA did not give states enough time. Some legislatures only meet every two years. Others may need more than one session to debate the topic if there is pressing legislation that must be addressed. A good compromise here would be to allow states three or four years to pass their own laws that would then be grandfathered. Another option would be to limit the number of years that the law remains in effect, requiring Congress to revisit the casino game ban down the road or risk it expiring.

Mandate U.S. Jobs

One disappointment in regulated online poker has been the number of U.S.-based jobs created. Some sites have chosen to outsource support or other services to other countries. That must change if a federal bill is to be considered. Terms must be added that address how jobs will be created within the U.S. This may be done through tax incentives or regulatory framework.

Keep Taxes at State Level

The feds have no reason to require a tax on regulated gaming. The IRS will get its share in the end. The hundreds of millions of dollars in revenue will create jobs and corporate profits. Both of these will generate federal income taxes. Each state should be allowed to control taxes, licensing and liquidity sharing agreements without any interference from the federal government.

Chances of Passage Slim

No matter how hard the online poker industry tries, it will still be a massive challenge to get a poker only bill passed at a federal level. Too many people outside of the industry will put poker in the same category as slot machines. Any bill that restricts casino games is likely to find opposition among the gaming industry. At this point, it appears the window for any federal legislation has already passed.

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