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Federal Online Poker Bill Leaked

THE WEEKLY SHUFFLE, 2012-09-16, by Ozone

The team at QuadJacks.com recently got their hands on a draft of a federal online poker bill being worked on by Senators Jon Kyl and Harry Reid. If passed, the bill, titled the Internet Gambling Prohibition, Poker Consumer Protection, and Strengthening UIGEA Act of 2012, would strengthen prohibition on most forms of Internet wagering while creating a pathway for legalized online poker in the U.S.

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Trade-off Approach

In order for this bill to have a maximum amount of political palatability, it aims to both strengthen the existing ban on online gambling in the U.S. while creating an exception for online poker.

The bill will update the language in the 1961 Wire Act and 1970 Illegal Gambling Business Act making wording in those bills clear that it targets forms of gambling that employ modern technology. This would in effect reverse the recent DOJ legal opinion that the Wire Act only applies to sports-betting. Exceptions to the gambling prohibition would be made for both off-track horse-racing and licensed online poker.

Law enforcement would be granted more power under the bill to take steps towards preventing illegal gambling activities. The bill also explicitly states that all player and operator proceeds traceable to an illegal gambling act can be subject to forfeiture.

Opt-In Clause

Another smart political aspect of the bill is its language that provides states to choose to opt-in to the bill's plan. To opt in, each state's legislature must vote to do so with a simple majority. Bets will not be accepted from players residing within a state that has not elected to opt-in to the legislation.

Other Key Points

Additionally, the bill states that no licensed operator may accept wagers from persons living in another country. This means the hypothetical online poker network that could come into existence through this bill would contain only American players.

Furthermore, operators who violated the UIGEA by servicing Americans after 2006, namely PokerStars and Full Tilt Poker, would be prohibited from operating in the U.S. for five years following the enactment of this bill.

For the first two years under the bill, licensees must already be operators of a substantial land-based gaming operation. Essentially, this bill is granting rights of first access exclusively to major casino corporations.

A majority of revenues derived from legal online gambling operations will be directed to states which have opted in to the legislation. The bill calls for a 16% "online poker activity fee" (which is just a fancy term for "tax") 88% of which will be payable to states and Native American tribes. The federal government will retain the remaining amount to fund responsible gaming efforts.

The bill requires operators to withhold player winnings consistent with federal tax law to ensure players meet their applicable tax burden.

Analysis

There are a few unlikable aspects of this bill from the perspective of poker players.

First, the "bad actor" clause which would prevent PokerStars and others from entering the market is unfortunate. No company on the planet is more skilled at running an online poker room than PokerStars, so it's unfortunate that they would not get the chance to operate in the U.S. market for five years were this bill to be passed. It is even more unfortunate that sites like Party Poker, who complied with the UIGEA by exiting the U.S. market once it was passed, would also be exempt from servicing U.S. players. This is a decidedly pro-big gaming bill.

Additionally, there are some aspects of the bill that are unfriendly to players themselves. The prohibition of international player pools is unfortunate; part of what makes online poker so great is the chance to compete against people from all over the world. However, this is a privilege Americans would probably be willing to forego if it means actually having legalized online poker in the U.S.

The bill also gives law enforcement agencies the power to confiscate player winnings from illicit online gambling operations. This is unfortunate as it stands to reason plenty of Americans will continue playing at such sites many of them perhaps not even realizing their winnings could be taken away from them. It underscores the importance of online gaming information sites to restrict themselves from advertising for unlicensed operators. Any portal of integrity would choose not to do this as it would essentially be feeding their readers to the wolves.

Marco Valerio of QuadJacks.com offered the following insight to PokerTips regarding the bill's chances of being passed, "If a bipartisan alliance between Reid and [Dean] Heller was necessary to bring this bill anywhere, then progress is very unlikely at this point given the near-complete deterioration of that relationship. It may not thus be an accident that the bill's summary was leaked at around the same time. Reid himself might have asked the janitor to toss it."

Conclusion

Despite this bill's downsides, Americans should be hoping fervently for the unexpected which is that this bill is passed into law. It's not perfect but there is nothing about this bill that should make poker players accepting of more years of prohibition in hopes of something better down the line.

However, there have been pro-online poker bills drafted at the federal level before all of which failed to be passed into law. In all likelihood, this bill will ultimately join those ranks, but it is a sign that the federal government will not completely roll over and play dead while state-by-state legalization of online poker continues. It's reasonable to expect some form of online poker legislation at the federal level eventually, but despite this new bill it remains anyone's guess as to when that might finally happen.

The Weekly Shuffle is our Sunday column with our observations and commentary on the poker world. Have an idea for an article? Leave a suggestion on the feedback page.

 


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