THE FIGHT: The Devil is in the Details

THE FIGHT is a day late this week, but it’ll never be a dollar short, especially with all the regulatory developments that continue to fan the flames of legal poker in the U.S. online poker market.

We start this week with Legal Poker in Pennsylvania. Last week I mentioned that Rep. Tina Davis (D-Bucks) introduced her long-awaited online gaming bill. It took a few days, but the public finally got a chance to look at that bill this week. From the player perspective, there was a lot of good news in the bill, including a provision to allow for player pooling with other states and no provision targeting operators that took bets in the U.S. after 2006.

From the operator perspective, the outlook wasn’t as rosy. Pennsylvania is asking for a steep $5 million upfront licensing fee and a tax of 28% of the gross gaming revenue received by the operator. That’s a lower rate than Pennsylvania charges on brick-and-mortar slot revenue (55%) but almost double what it charges for brick-and-mortar table games (16%).

A prohibitive tax regime such as this one would encourage the development of online slots over online table games and online poker. The poker industry has already seen, in some of the European regulated  markets, how high gaming taxes can cause problems for sites that don’t have a casino component to their offerings. In Italy, for example, it’s been alleged that poker-only sites break even at best.

Davis’ bill has been referred to the Pennyslvania House Gaming Oversight Committee. We’ll see how it goes from there.

The outlook became a little more ominous with legal poker in Illinois this week with a report that state lawmakers there have bowed to pressure from the horseman’s association and have stripped online gaming provisions out of a bill that looks to expand legalized gambling in the state. The internet gaming legislation is likely to return to the Senate in a separate bill, but without the weight of other gambling provisions that have widespread support behind them, it’s difficult to see how the internet gambling legislation will survive the legislative process, given that the legislative session ends in about five weeks.

There still hasn’t been much movement on online gambling bills that are pending in California, to the dismay of many in the industry. California, with about 10% of the U.S. population, is seen by many as a keystone to state-by-state regulation of online poker and/or online gambling in general. The many competing interests in the state have been unable to coalesce behind a single piece of legislation so far.

Nevada continues rolling down the track towards its first hands of regulated online poker. The Nevada Gaming Commission has published 17 comment letters it received about the state’s plans to seek multistate compacts for player pooling purposes. The commenters range the gamut from individual players to attorneys to technology providers and gaming operators. By and large the comments stress the idea that Nevada should consider a contributed rake model for allocating revenue among states.

Those sorts of details may seem like nitty-gritty right now, with online poker still not available to any U.S. players, but engaging in THE FIGHT to get those details right now will make for a better experience for everyone (player and operator) down the road.

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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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