Reid Nixes Legalized Online Poker Provision from Tax-Cut Legislation

Close…but not close enough. The USA almost had its first taste of legalized online gaming today, when Senator Harry Reid (D-Nevada) proposed adding language to the tax bill currently before the Senate that would give major Nevada land based casinos the green light to start online poker operations. Reid removed this provision, however, at the last minute, choosing instead to introduce this potentially industry changing legislation at a later date. So, as far as the lame duck Senate is concerned, legalizing online poker is off the table. For now, virtual doors to the MGM Grand and Caesar’s Entertainment Group (formerly Harrah’s) will not open just yet.

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It’s widely believed that legalizing online poker at the Federal level would bring massive amounts of income to Nevada, where land based casino giants could legally cash in on the popularity of online poker by paying the state licensing fees. In turn, these fees would support new job growth, and regulation for an industry that is widely thought to be full of sketchy offshore companies that consistently rip-off Americans. For proof, look no further than the 60 Minutes piece “The Cheaters”. The story, which aired about a year ago, chronicles the Absolute Poker scandal, in which company directors were caught cheating players in big money tournaments by looking at the cards in their hands, and then using this ill-gotten knowledge to essentially win their own prize money.

Reid believes USA based legalization would not only curtail the criminal elements that plague offshore gaming businesses, but also clamp down on underage gambling. Currently, most online casinos that accept USA players are not subject to any sort of USA law enforcement. Therefore, age verification is based on good-faith and the logic that if a person has a credit card in their name, it’s likely they’re at least 18. Of course, it stands to reason that any teenager with their parent’s credit card and a scanner could easily make their way to an online poker table. If online poker was legalized in the USA, many believe that various gaming regulatory bodies and law enforcement would keep a close eye on underage gambling, and head off any potential problems before they become epidemic. Clearly, USA based casino companies would be much better equipped to deal with this issue than their offshore counterparts.

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You might be wondering about how all this impacts the UIGEA of 2005 (Unlawful Internet Gambling Enforcement Act). If Reid had pushed his initiative forward, parts of this legislation would have to be repealed, because UIGEA law stipulates that no USA bank can process financial transactions to ANY online gambling operation. With legalized online poker, however, the government would have no choice but to update this law, since the only way to fund an online poker player account is by some sort of electronic transaction, save mailing a check to the gambling company. It would also be a boom for the credit card industry, which could make millions in transaction processing fees.

So why didn’t Reid oppose the UIGEA during the first go-around? It’s widely believed that Reid’s recent change of heart was spurred on by Las Vegas based casinos, who contributed upwards of $250,000 USD to his 2010 re-election campaign. Reid’s constituents also face a staggering unemployment rate of just over 14%, the highest in the nation. That realization, teamed with the fact that gaming is Nevada’s largest industry, means that state lawmakers must take all necessary steps to improve economic conditions. Legalized online poker may not solve all of Nevada’s financial woes, but it would certainly provide some new job opportunities and much needed cash to the state government.

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In the end, it really comes down to money: if Nevada casino companies push hard enough, and are generous with their campaign contributions, eventually some sort of legalized online gambling will begin in the USA. Furthermore, if not in Nevada, it’s highly probable New Jersey may soon begin licensing online casinos. The state legislature is already entertaining bills that would legalize online gambling, effectively providing the citizens and state government of New Jersey with desperately needed additional revenues. For the immediate future, though, we’ll just have to wait with baited breath; and continue to meander through the swamp of offshore gambling operations, hoping to find those that don’t abuse their customers.

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