June 07, 2010

Nevada Gaming Fires a Warning Shot at Full Tilt & PokerStars

Dan Michalski at Pokerati.com has started a series of reports related to the recent NAPT tournament stop at the Venetian.  Michalski reported that the Venetian has ended its relationship with the NAPT over concerns that the NAPT's sponsorship by PokerStars.net might violate Nevada gaming regulations.  It seems likely that some of the Venetian's competitors (most likely Harrah's and MGM) complained that the ".net" persona of PokerStars was too cozy with the ".com" incarnation, causing the Nevada Gaming Control Board to express "concerns" over the Venetian-NAPT relationship.  And when a powerful regulatory agency has "concerns", a prudent business does what the Venetian did—cave and punt.

In today's post on the issue, Michalski provided a link to an opinion letter from the Nevada Gaming Control Board, directed to an unnamed critic of the Venetian-NAPT relationship.  The letter addresses concerns raised by the critic that, by associating with PokerStars, the Venetian was gaining an unfair advantage over other, more legally cautious casinos.  I was particularly struck by a paragraph late in the letter:

As in any regulatory environment, any acts of rehabilitation undertaken by a company to address past practices is appropriate when giving consideration to the suitability of that company’s methods of operation. Through this assessment process, the Board has an interest in past and present compliance efforts and will look favorably upon those companies that are currently operating within compliance of not just U.S. law, but international laws, as they pertain to internet gaming. Clearly, those internet companies that have not complied with state and federal law, especially after the passage of UIGEA, and have demonstrated no interest in voluntary compliance will be looked upon less favorably.

This paragraph has ominous implications for online poker sites like Full Tilt and PokerStars, which have continued to operate in the United States post-UIGEA, and appear to take the position that state and federal laws do not apply to foreign-based online poker sites.  This paragraph of the letter is also consistent with the theory advanced by Michalski and Bill Rini that companies like Harrah's, MGM, and the Sands (owners of the Venetian) will advocate legalization of online poker under terms that will essentially disqualify current foreign-based online poker sites, allowing the brick and mortar behemoths to establish a dominant position in the United States market.  Harrah's certainly makes no effort to conceal its view that online poker will play a major role in its future growth, and in fact is lobbying for Congress to legalize online poker under favorable terms.

These types of "advisory opinions" by regulatory agencies are significant statements of agency policy.  Although the letter offers plenty of conditions and caveats, the fact the agency went out of its way to indicate that future licensing decisions may be affected by whether casinos or online poker sites have made an effort to comply with current state and federal regulations (i.e., they aren't currently operating in the U.S.) has to be regarded as a direct warning shot to current online poker sites which are flouting state and federal laws related to online gambling that they may be shut out of the market once online poker is expressly legalized.  The language also serves as a warning to current brick and mortar and online sites which are not offering online poker to stay in line until online poker is expressly authorized and regulated.

Given that Nevada is the logical candidate to establish industry-standard regulations for online poker once it is legalized by Congress, this advisory opinion letter packs a punch that will have an impact far beyond the Venetian-NAPT relationship.


  1. Very interesting reading and enjoy your perspective on the legal aspect of the online poker fight.

    One thing I'm curious about, when the UIGEA was passed, I remember a good bit of discourse from some European outlets about 'fair trade' and how the UIGEA essentially was limiting Euro companies such as Party Poker from performing under fair trade laws. I'm an extreme laymen when it comes to most legal arguments, so I tend to try do the best with what I know, at the time, I thought that would be the argument that might hold the most weight. Just curious on your thoughts on it, again perhaps it was just some 'sour grapes' by some of the European corporations, as there didn't seem to be much movement with it.

    (then again, it's not like the U.S or any country for that matter always adheres to their agreed to treaties anyway either, especially when something can be interpreted very liberally)

  2. @ Michael: Sorry, meant to respond to this weeks ago, but after doing some research on the trade issue, I completely forgot to come back and post the results. The short answer is that in the 2003-09 time frame, there were WTO rulings requiring the U.S. to accept foreign-based online gambling business, because the U.S. had domestic gambling. The U.S. fought the ruling, lost, and essentially took its ball and went home, withdrawing online gambling from the businesses subject to various trade agreements (after reaching a settlement with the EU and paying a small arbitration award to Antigua). If you do a Google search for "WTO poker rulings", you'll find plenty of coverage on the issue, including: