Feature: online poker in the US - power to the states?

READING US SENATOR for New Jersey Robert Menendez’s proposal to legalise online poker stateside, the likelihood of a single US online gaming market appears more remote than ever. But it does offer greater incentive for the larger states not to opt out of a federal system than Barney Frank’s bill.

Menendez’s Internet Poker and Games of Skill Regulation, Consumer Protection and Enforcement Act makes a better fist of clearing up the confusion created by the Unlawful Internet Gambling Enforcement Act (UIGEA) than Barney Frank’s bill.

For instance, it requires a publicly available list of every unlicensed website taking bets from the US to be drawn up, and notifies payment processors they cannot transfer any funds to operators of these sites.

And more positively for non-US operators, the bill also states the US Treasury may not deny an application from anyone on the basis they had at any time taken poker bets from US players.

But the bill also recycles a clause from Frank’s bill allowing the US treasury to reject applicants who have failed to file “a federal or state tax return”¦owed to a jurisdiction in which the applicant operates or does business””“ widely seen as a protectionist measure allowing the US to exclude overseas operators.

While both bills are obviously subject to revision, the Menendez proposal offers little solid evidence to debunk the view of 888 chief executive Gigi Levy that federal licences will only be granted to US operators such as Harrah’s and MGM.

With the most populous US states looking increasingly likely to exercise their option to withdraw from federal legislation in order to control and monopolise online gaming revenues generated within their respective borders, they are the ones that look set to spearhead the opening of the US egaming market and provide the entry point for offshore and perhaps even US operators.

And while Menendez’s bill, if passed, would allow states to keep 5% of deposits placed within their borders, compared to the 0% proposed under Frank’s bill, this is less than the likes of California, New York, Texas, Pennsylvania or New Jersey could expect by opting out under UIGEA. The Frank and Menendez bills, if passed, also offer states the chance to opt out of provisions within 90 days.

Delaying tactics

Jim Tabilio, former boss of Poker Voters of America (PVA), now one of the leading lobbyists for the state-by-state legalisation model in the US, says state politicians and regulators have told him that “90 days is too short a period to make that decision, and if at all unsure, they will say ‘no’ in order to take a longer look”.

Tabilio adds that the expertise deficit in the US has increased since UIGEA and legacy issues will not prevent European companies with demonstrable expertise of operating in a well-regulated environment from accessing online opportunities in the 12 most populous US states.

Frank Fahrenkopf, chief executive of US land-based trade body the American Gaming Association, also revealed that members including MGM Mirage and Boyd Gaming “would have no objection to internet gambling, so long as it was licensed and regulated at the state level”.

So while debates will likely rage about the relative chances of each bill making it into law, either bill passed in its present form looks set only to apply to smaller states left in a multi-state system once the larger states have withdrawn.

It remains to be seen how federal lawmakers will respond to potentially being left with a substantially reduced share of tax revenues, which PricewaterhouseCoopers has estimated could be worth US$52bn to the authorities over 10 years if taxed at federal level.

This article first appeared in the September issue of eGaming Review.

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