The Online Poker Slalom Begins

"Go that way, really fast.  If something gets in your way, turn."

—Better Off Dead

The movie quote above involved a character explaining to a high school kid how to ski.  The online poker legalization efforts remind me a lot of skiing—a long trudge up the mountain, followed by a lightning fast, treacherous obstacle course ride to the bottom. 

As you probably heard if you are at all connected to the poker media, the Barney Frank online gaming legalization bill (HR 2267) was successfully voted out of the House Financial Services Committee by a fairly comfortable and bi-partisan margin.  So what does this bill propose for online gaming, and what happens next?

The base bill plus approved amendments contain a lot of positive points for online poker.  Some of the highlights:

• The federal Treasury Department will have authority to license online gaming.
• There will be regulatory oversight of online casinos, with civil and criminal penalties for violations of gaming regulations.  Think of Russ Hamilton in jail for five years per cheating episode, as well as an end to any claims that the random number generators (RNGs) are rigged (if only it were this easy to legislate an urban myth to death).
• Online gaming sites will need to be headquartered in the United States, with a majority of assets, operations, and employees also located within the United States.  This is intended to ensure legal jurisdiction over online sites, as well as to make regulatory oversight easier, and to maximize the economic benefits (read "jobs") of online gaming sites in the U.S.
• Consumer protections against problem gambling include bans on credit cards funding gaming, self-selected limits on losses (by amount, time, or other variables), and self-banning from play.
• Child protection, requiring age verification, and bans on many kinds of advertising.
• A state opt-out provision, allowing states to prohibit or restrict the kinds of gaming that can be offered to individuals within the state's borders.

The state opt-out provision is vitally important to the legalization effort.  A proposal which attempted to impose online gaming on every state on an equal footing would be a political non-starter.  But, an opt-out provision is far better than an opt-in provision, because the default status is usually the status that is easiest to maintain.  In states where there might be opposition to online gaming, it will be more difficult for anti-gaming advocates to mount a campaign to opt out, while pro-gaming advocates will not need to mount gaming legalization campaigns in all 50 states.  This opt-out provision is unquestionably the key point to an effective and politically palatable bill, yet it is probably one of the least-discussed and least-appreciated provisions.

The final noteworthy provision is contained in Amendment 15, proposed by anti-gaming, pro-"family values" Representatives Bachus and Bachmann.  This is a provision which attempts to punish online gaming sites which are currently operating in apparent violation of UIGEA and/or state gaming laws.  This provision might operate to effectively prevent current online sites like Full Tilt, PokerStars, the Cake Poker network, and the Ultimate Bet / Absolute Poker group from being licensed under the new regulatory scheme.  This provision, and the possible loopholes I can see the sites attempting to use to avoid a licensing ban, merit their own post with more detailed analysis (hopefully tomorrow morning—watch this space!).  But, this is another provision that seems to be politically necessary to gather sufficient support to enable the bill to pass the House.

So, what next?  Much like skiing, getting up the hill is the hard part.  Now that the committee vote has started the legalization process on its trip down the mountain, momentum is clearly on its side.  Legalization advocates are mostly working to avoid obstacles at this point.  Major obtacles remaining are primarily in the Senate, which has yet to act on a companion bill (Senate Bill 1597).  Unlike the House which is essentially a "mob rules" operation  (think of the Alpha Beta jock fraternity in Revenge of the Nerds), the Senate gives much more deference to a few political divas who feel they are the elite (think of the "Plastics" in Mean Girls).   So, in the Senate, a handful of determined opponents can doom any bill.  Plus, there is the complication that a major pro-online gaming advocate in the Senate is Majority Leader Harry Reid, who is facing a tough reelection battle in Nevada (and has received a lot of money from Harrah's and MGM to promote online gaming legalization).  Given this election year dynamic, it wouldn't be a shock to see Republicans resist any pro-online gaming bill merely to deny Sen. Reid a political victory.

I do want to give a thumbs up to the efforts of the Poker Players Alliance (PPA) in helping get the bill marked up and voted out of committee in a reasonable form.   Although I have been (and remain) critical of the PPA for a number of reasons, the PPA deserves credit for their efforts in promoting this bill.  Although the PPA wasn't solely responsible for this legislative progress, it certainly deserves credit for representing the interests of poker players alongside the interests of the big gaming corporations and big business interests.

Even if the current legalization effort wipes out or slams into a tree, the House committee vote today marks the turning point in the online gaming legalization effort.  Now, the question no longer is whether online gaming will be legalized, but instead is merely when ... and the applicable tax rate.

"This is pure snow! Do you have any idea what the street value of this mountain is?"

—Better Off Dead