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Battle Lines Being Drawn Between States, Feds Regarding Online Poker

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Battle Lines Being Drawn Between States, Feds Regarding Online Poker

26 April 2012

According to a report in a major newspaper, the battle lines are being drawn between state governments and the U. S. Congress regarding the online poker issue.


In an article on Wednesday in the Wall Street Journal written by noted journalist Alexandra Berzon and assisted by Heather Haddon, the duo report that Nevada Senator and Senate Majority Leader Harry Reid and Arizona Senator Jon Kyl are currently working on legislation that would regulate and legalize online poker federally in the United States. While this news is not earth-shaking to the poker community – it has been long rumored that the Senators were working on such legislation – what is the big topic is how the federal government is trying to subjugate state governments from acting on their own legislation.


Berzon and Haddon report that, while Sens. Reid and Kyl have not put their proposals in front of the Congress as of yet, the states are rapidly passing the Congress when it comes to enacting their own legislation. This, according to a former Congressman quoted in the Berzon and Haddon piece, is something that the Congress is attempting to thwart.


“States are moving rapidly and the federal government is saying, ‘time out,’” former Nevada House of Representatives member Jon Porter is quoted as saying by Berzon and Haddon. Former Rep. Porter is a lobbyist for online poker companies and made that comment during an internet gambling conference yesterday. As the states are moving forward with their own versions of online poker regulation, Sens. Reid and Kyl’s proposals may not even see the floor of Congress this year.


The activity regarding online poker regulation stems back to a letter sent by Sens. Reid and Kyl to Attorney General Eric Holder last summer. In that letter, the Senators pushed for clarification of the Department of Justice’s stance regarding online gaming, including poker. In that letter, the Senators stated their opposition to legislation from the states allowing online gaming, requested clarification of the DoJ’s stance and asked that the Department of Justice “consult with Congress” before finalizing any position regarding the question. This was after the April 15 “Black Friday” indictments by the DoJ, which shut down three of the major online poker operations to U. S. customers.


For Sens. Reid and Kyl, it became a case of “beware of what you wish for.” In December, the Department of Justice came back with a significant change in their approach. The DoJ stated that the Wire Act of 1961, which had long been used as the reason for federal crackdowns on online gaming, only applied to sports betting. This has led to the individual states moving forward with their own rules and laws regarding not only online poker but also operating state lotteries online and potentially offering other online gaming options, such as slots and other table games.


Following that bold announcement, several states have either considered online poker legislation or are enacting it as we speak. Nevada, of course, has begun accepting applications for its intrastate online poker operation and it is expected to open before the end of 2012. New Jersey has legislation in front of its Legislature for regulating online gaming. In California’s proposed legislation, there is the potential to go beyond just online poker and offer full casino operations. Illinois was the first state to offer its lottery online to its citizens, making millions of dollars by opening it up during the rush in the record setting Mega Millions drawing from late March.


Berzon and Haddon report that the federal legislation from Sens. Reid and Kyl would look to overturn many of those maneuvers by the states. The proposed legislation from Sens. Reid and Kyl would allow for a federally regulated online poker industry but would prohibit any other online gaming and lotteries from being offered online. Of course, if the Reid/Kyl proposals were to pass through Congress and become law with President Barack Obama’s signature, the legislation would supersede any state-enacted laws.


The potent power of the casino industry would prefer to see federal regulation of online poker, but they are not sitting on the sidelines as the states move forward. Several of the top casino operations in Nevada, including Caesars Entertainment, Boyd Gaming and MGM Resorts International (to name a few) continue to push for federal regulation but have also applied for licenses in the intrastate Nevada industry, seemingly playing both sides of the coin.


As the battle of online poker moves forward, there could be a collision course between the power of the federal government to act in the national interest, the rights of the states to govern their own citizens and the powerful land-based casino industry looking to get in on the action.

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