THE FIGHT: Are the Feds Really Back in the Game?

Rep. Peter King (R-NY)

Rep. Peter King (R-NY)

Yesterday produced some seemingly big developments on the federal legislative beat. Rep. Peter King (R-NY) introduced a federal online gaming bill called the Internet Gambling Regulation, Consumer Protection and Enforcement Act of 2013 in the House of Representatives. It’s the first online gaming bill to be introduced in Congress since the current Congress began in January.

Proponents of a federal solution, like the Poker Players Alliance, hailed the bill as a meaningful step towards the federal legalization of all online games. Most of the rest of the poker world reacted to the bill with some version of, “This is unlikely to fly.”

Here’s why: even if we assume that King’s bill could make it through the House, the Senate remains a big, big problem for any federal online gaming bill. It’s been years since legislation was even introduced there, never mind made it out of committee or to a full floor vote. The coalition of Republicans and Democrats that would be necessary to pass any such legislation in the Senate largely dissolved this year when Sen. Jon Kyl (R-AZ) retired.

Sen. Mitch McConnell (R-KY) represents gambling interests of his own back home and maybe could serve as a potential replacement for Kyl, but McConnell hasn’t show much interest in that. Reid is also having problems handling his own state’s other Senator, Republic Dean Heller. If the two Nevada Senators can’t get on the same page, how can Reid get any other Republican Senators on board?

Sen. Majority Leader Harry Reid (D-NV) also isn’t exactly in the pocket of the gaming industry anymore. He traded barbs earlier this week with outgoing American Gaming Association head Frank Fahrenkopf. Each man accused the other of failing to shepherd internet poker through the previous Congress, to the point that no bill was ever introduced in the Senate.

Long story short, should a version of Frank’s bill ever make it to the Senate, it will likely get bogged down in the morass that seems to engulf everything in the Senate these days. And honestly, there’s no guarantee that King’s bill has any shot in the House. In that chamber of Congress, legislation has at least been introduced in recent years, championed by legislators like Joe Barton (R-TX) and Barney Frank (D-MA). None has ever made it out of comimttee.

The King bill isn’t a bad piece of legislation, mind you. It has an opt-out procedure for states that do not wish to permit online gaming, contains regulatory safeguards for fraud and cheating, requires certain techonological safeguards to address underage and problem gaming, leaves licensing decisions to individual states, and allows equal licensing access for all providers, from so-called “bad actors” to Indian tribes.

That last provision is sure to create deep division among entrenched gambling interests. Indian tribes have long been protective of their own monopoly on Class III gaming in many states, and the brick-and-mortar casino industry is not likely to let the bill go anywhere without a strenuous challenge to the lack of penalties for bad actors. You’d expect a PPA-sponsored bill not to have a bad actor clause, and it doesn’t, but you’d also expect that groups like the AGA will scream bloody murder about it.

The horse may already be out of the barn, though. Nevada, New Jersey and Delaware have all enacted intrastate online gaming legislation. Pennsylvania, California and Massachusetts have taken concrete steps towards legalizing some form of online gaming themselves. Federal legislators, who weren’t all that receptive to online gaming legislation when the states hadn’t stepped in themselves, may be less likely to address the topic now that several states are doing so satisfactorily on their own.

I hate to be Debbie Downer, but don’t get your hopes up too high for the King bill. Focus instead on large states like California and Massachusetts. Any large state, by itself, could provide instant liquidity for the rest of the market and could start a domino effect among other states looking for a little extra revenue themselves.

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Kevin McGrady

Legislative and Politics Beat Writer: Kevin McGrady practiced corporate law in New York City for eight years before moving to Las Vegas in 2008 to join the gaming industry. Kevin is a graduate of New York University and Columbia University School of Law.
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