Current Online Poker Bills Are Designed to Appease Casino Giants

The first in a 2-part examination of the current Federal online poker bills and a brief history of the buildup to the latest Poker-only bill.

In 2006 when the UIGEA was passed into law, the majority of Republicans likely felt that they had killed internet gambling in the United States. After all, getting money to and from offshore sites was going to become such an onerous task that the majority of American gamblers would almost certainly become frustrated with the hurdles and would give up on their quest to gamble offshore while intrastate wagering was viewed as a far off endeavor. The rest of the rules in the UIGEA such as the legalization of fantasy sports were likely viewed as irrelevant by the politicians because so few people took part in those activities.  For the first while the politicians who passed the UIGEA were correct with their assumptions but things changed drastically after the financial crisis when states found themselves with huge deficits and in a desperate need to find new sources of revenue to fill the void. Increasing taxes when citizens were being laid off in droves and their housing values were plummeting wasn't an option nor were other traditional means of raising revenue, so the states looked at the one revenue source that would create the least opposition – online gambling. From 2007 to 2010 Iowa, Nevada, New Jersey, California, Florida and a few other states tested the waters with online gambling and by all accounts as many as 22 states were looking at either online gambling or sports betting as a means to generate revenue. The federal government really had no beef with the states since the UIGEA rules stated that all intrastate wagering was legal but the Department of Justice under the Bush administration was clear with its opinion that all online gambling was interstate in nature since the internet had no physical boundaries and hence was illegal under the Wire Act. The UIGEA exemption in their opinion was invalid.

Regardless of the DoJ's opinion, numerous casino giants including Caesars, MGM, Wynn etc. were adamant that online gambling was necessary to save their dying land based businesses and they needed the law to be regulated at the federal level since a federal bill could put in stipulations that would limit the competition from foreign operators. The individuals at the Las Vegas based corporations knew they could dominate any nation wide online casino or poker operation but also knew they would find it more difficult to compete at the state level. This was particularly true with regards to PokerStars and Full Tilt which had hundreds of thousands of Americans playing on their sites daily. Consequently the casino entities and politicians bandied about the idea of putting in a regulatory requirement that would disqualify any foreign entity that ever catered to the U.S. market from operating in the country. Other politicians were more realistic and wanted a grace period whereby companies who operated in the U.S. but pulled out prior to the introduction of the UIGEA, such as Party Poker and 888 Gaming to wait at least a couple of years before receiving a license. Either of those requirements would stifle the competition and give the Las Vegas corporations a head start before foreign entities could enter the market.

While those stipulations were valid in a federal law, states weren't having any part of it.  California, for example, when announcing its intentions to take advantage of the UIGEA rules and legalize online poker initially indicated that they would permit Party Poker to apply for a license. The Las Vegas casino moguls protested loudly but their cries fell on deaf ears since legislators in that state said that they would decide themselves who could and couldn't apply for a license and they wouldn't be bullied. California even allowed Betfair to buy TVG and purchase the naming rights to Hollywood Park racetrack. New Jersey also seemed willing to look at foreign operators and Senator Ray Lesniak indicated that the rules in that state wouldn't automatically disqualify them. As such the casino giants knew they had much more sway at the federal level and wanted a bill passed there. As well, the casino giants didn't want to have to fight for market share in individual states.

The Republicans also soon learned that gamblers and poker players in general had a loud voice and representation on Capital Hill. After the passing of the UIGEA, the PPA started a grass roots campaign in Iowa asking poker players to vote against Jim Leach in the 2006 midterm elections for his role in introducing and passing the UIGEA and it worked. Leach lost to Dave Loebsack in one of the biggest upsets in recent memory and Leach himself admitted that poker players played a major role in that defeat. Like it or not the Republicans were being blamed by poker players for their inability to get money to their favorite poker sites easily and the movement was gathering steam which could later affect other Republican candidates as well.  With this realization in place, some Republican legislators started introducing bills to legalize online poker at the federal level. Barney Frank and Jim McDermott introduced laws to overturn the UIGEA and tax and regulate online gambling but Republicans focused on poker and believed they could save their hides in future elections if they were seen as the party that saved the day for poker players. While refusing to support Frank or McDermott's bill, Pete Sessions, a Republican Representative from Texas introduced HR 6663, the Unlawful Internet Gambling Enforcement Clarification and Implementation Act of 2008. That bill aimed to legalize poker and effectively make just sports betting illegal. The bill also wanted to give a reprieve to companies that left the U.S. market when the UIGEA was passed. Under Sessions' bill Party Poker and 888 Gaming would not have the 2 year waiting period. It is believed that the latter stipulation killed any momentum for the bill since U.S. based casino giants and other Republicans refused to accept those terms,  although the bill may have died when Barack Obama was elected the first time and there was no political gain to be made at that point by the Republican Party. Republicans also seemed to become more "poker friendly" approaching the 2010 midterm elections although they still refused to bite for the most part on Barney Frank's bill.

In 2011 Joe Barton introduced HR2366, The Online Poker Act which looked to legalize poker but created numerous stipulations which would limit the minimum age to 21 years, would only allow casino giants, racetracks and land based poker rooms to apply for a license for 2 years and would disallow credit cards to be used for deposits. The bill had bi-partisan support but got bogged down since the 2012 elections were just around the corner.

In the meantime the large casino moguls excluding Las Vegas Sands started up an advocacy group called Fair Play USA which was designed to build support for legalized federal poker. And to the shock of many observers one of the founding members was Tom Ridge who was best remembered as the head of the Department of Homeland Security following 9/11 and later the group hired on Louis Freeh, a former FBI director. Fair Play USA was clear that they weren't a lobbying group but were strictly an advocacy group aimed at pointing out the benefits of legalized and regulated federal poker. The timing of the startup of the group (in the midst of the 2012 election campaign) was suspect but the group was given the benefit of the doubt and was propped up by all the poker forums and the PPA. And the site seemed to be working. Many poker players started believing the rhetoric by Fair Play USA while the Black Friday crackdowns by the Obama government had many people wondering whether they wouldn't be better off under a Republican administration.

Perhaps the most interesting development took place in 2011 vote when John Kyl, the Godfather of the anti-online gambling movement joined forces with Harry Reid and indicated on his website that he was willing to support federally run online poker as long as all other forms of gambling remained illegal. From the man who coined the phrase "click the mouse, lose the house," this was a major concession; albeit he made it known that he was not going to run for re-election. The timing of all these pro-poker bills certainly had many wondering if indeed it was all an election ploy by the Republicans who could say to the PPA and its members "hey we're the party that's on your side,"  ignoring the fact that Barney Frank and other Democrats had been pushing for legalized gambling for years.

The results of the 2012 election seemed to answer those questions. Once Obama was re-elected the rhetoric from Kyl died down, Barton's bill seemed to fall off the table and Fair Play USA shut down. I asked some people at Caesars and MGM who funded Fair Play USA why the organization went defunct when they seemed to be getting a lot of exposure and one representative told me "the group served its purpose so we don't need it anymore." That had me scratching my head. After all if the purpose of Fair Play USA was to provide advocacy for federally regulated online poker then how was the purpose served? Online poker still isn't legal at the federal or state level so how could they have served their purpose? One other person indicated that the interest in the group died when it was clear the Kyl-Reid bill went nowhere and they believed they needed to put money into other avenues. In better words Fair Play USA was set up to get support from poker players in the 2012 elections and when their side didn't win they failed to see any continued value with it.

That said the Las Vegas casinos are still pushing for a federal law with or without an advocacy group to speak for them and last week Joe Barton reintroduced a new variation of his bill.

Read the conclusion of this story exclusively on by clicking here.

Contact Hartley via email at hartley[at]osga[dot]com.

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