THE FIGHT: Will California or the Feds Kickstart U.S. Online Poker?

U.S. Capitol

Will the Feds regulate online poker?

This week online poker finally returned to the U.S. (hooray!) and Rational Group’s deal to purchase a casino in New Jersey died a curious death (boo!). THE FIGHT to legalize online poker played out with similiarly mixed results, as California began to circulate an online gaming bill with tribal support (hooray!) but Massachusetts failed to include an online poker bill in a budget proposal (boo!). The biggest surprise of all, however, came at the federal level.

Let’s start with California. Last week I mentioned that efforts to legalize online poker in California, spearhead by State Sen. Lou Correa (D-Santa Ana) have been languishing. There just didn’t seem to be any urgency to push any online gaming legislation forward through the state legislature.

This week Victor Rocha, the editor of Pechanga.net, a news source covering Indian gaming issues, teased his Twitter followers with some bullet points that he said would be included in an upcoming amendment to Correa’s bill. The amendments include: authorizing intrastate poker only; only allowing California card clubs and tribes to operate online poker sites; and setting the tax rate at 10% of gross gaming revenue.

The amendments aren’t major, but the fact that there’s any movement at all on Correa’s bill – and movement that potentially has the support of the tribes, long an antagonist in California’s efforts to legalize online gaming of any kind — is a step in the right direction for California. The state’s 38 million residents would provide instant liquidity to any operator, and if the bill permits interstate player pooling arrangements (unclear), would provide instant liquidity for the rest of the country.

Back East in Massachusetts, the updates were less promising. An amendment to the Massachusetts House of Representatives budget proposal for Fiscal Year 2014 that would have authorized online poker was deleted from the budget proposal that was ultimately passed by the House. While that doesn’t mean that online poker or online gaming are dead in Massachusetts – the state is still considering other forms of expanded gambling – it is at least a setback for operators and players who were hoping to get a leg up on the rest of the country.

There were pluses and minuses in the Massachusetts amendment. The biggest minus was the inclusion of a “bad actor” clause to restrict online gaming companies that operated in the U.S. after 2006. Those bad actor clauses continue to be a flashpoint for the industry. Expect that, if and when an online gambling bill returns to Massachusetts, there will be plenty of scuffling over the inclusion or deletion of a bad actor clause.

All of the intrastate proposals currently floating around statehouses across the country could be made redundant if Rep. Peter King (R-NY) has his way. A spokesman for King told Politico.com that King “intends to introduce [federal online gambling legislation] shortly”. King prefers a federal solution to competing and overlapping regulation on a state-by-state basis. He believes that the window to get a federal bill in place is closing. Once too many states enact online gaming laws, the genie will be out of the bottle.

There’s no word yet on any specific provisions of King’s legislation. It’s worth noting, however, that the House typically has not been the stumbling block for online poker legislation. The Senate, where almost nothing gets accomplished these days, has been the biggest obstacle. Senate Majority Leader Harry Reid (D-NV) tried to get an online poker bill passed in 2010 and 2012; neither bill was ever even introduced.

While it would be great if THE FIGHT to legalize online poker were settled with a few strokes of President Obama’s pen on federal legislation, there may not be any turning back from the state-by-state model at this point. If that’s true, prepare  yourself for many more weeks of hoorays and boos.

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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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