Regulating Poker in the US
The process of poker being regulated in the US is increasing looking like a game of poker itself. On the one hand, you have the states, jockeying for position, as they seek to prepare for the day when they significantly increase the state revenues they so desperately need, while, on the other, the government, despite various legislative initiatives, is refusing to blink. And all the while, land-base casinos, on-line operators, and game and equipment manufactures are all engaged in a last waltz as they seek to finalise alliances prior to the moment the balloon goes up and the race for glory begins in earnest.
Yet, despite the American Gaming Association Chief, Frank Fahrenkopf Jr, saying last year “no matter what Congress does, based on growth trends…and the actions of various states, it’s no longer a matter of if on-line gambling will be legalised in the US but when, where and how”, nothing much has happened and, more worryingly, not a great deal seems to be happening either. The answers to when, where and how appear to be as elusive as ever.
Take Nevada, the Silver State, for example. The general expectation was that on-line poker would become legal in the third quarter of 2012. The deadline, however, has not been met and there is still no certainty as to when it will happen. So what does this tell us about the prospects for the US igaming market as a whole.
The truth is that many states (and the large ones – at least in terms of population – in particular) are, in reality, waiting for the federal government to enact comprehensive Internet gambling regulation. This, though, doesn’t mean they are doing nothing, but the moves they are making only really make sense against a back cloth of preparation for when regulation actually arrives rather than a series of moves to make it do so.
Panellists in the closing session of the National Council of Legislators from Gaming States, which took place at the beginning of this year, had this advice for the law makers; “glean as much regulatory expertise as you can find, stay ahead of the technology curve and be prepared for a lot of disagreement.” Hardly earth shattering as advice goes and more like a statement from the Ministry of the Bleeding Obvious.
The truth is, whether one likes it or not, is that federal legislation is necessary so that companies that operate in multiple states can have a consistent internet gaming policy nationwide. Yet the bill that Senators Harry Reid and John Kyle were proposing to put before Congress would allow states to opt out of participation in gaming. The reason that this is so important is twofold; firstly, the States are all very defensive over their own rights to determine what happens within their own jurisdiction and secondly, by no means all states have the population within their jurisdiction to offer up meaningful liquidity on an interstate basis as far as online poker is concerned.
Which brings us back to Nevada, and its population of 2.7 million people. The Nevada Gaming Control Board has submitted a draft bill to its state legislature proposing the legalisation of bets taken from other states that have regulated e gaming. Indeed, its Chairman, A G Burnett, has claimed that it is “paramount” that the State Governor is able to choose, if he so wishes, whether or not Nevada should be allowed to take wages from other States, something that is not currently permitted under Nevada’s own current on-line gambling regulations. As he told the Las Vegas Review – Journal “the need to make clear the Governor’s ability should he choose, to negotiate such agreements, was paramount. We wanted to make sure the authority was there, however, to add more options in order to help this State”.
But it was only a preparatory measure, because, on an interstate basis, Nevada as a poker jurisdiction is going nowhere, which is why it has been focussing on an intrastate arrangement and, indeed, has been issuing licences to companies to operate intrastate internet poker in 2012. Moreover, the list of those companies who have applied for such licences reads like a who’s who of gambling; GTech, Golden Gaming, Paddy Power, William Hill, Caesars, Zynga and others. Is this, though, a precursor to active trading or is it just part of some learning curve? Tony Cabot of the Lewis & Roca law firm for instance, claims that Nevada has learned a huge amount since it began issuing licences to companies to operate intra state Internet poker in 2012. As he said, “even the most experienced people are not completely ready to regulate on-line play. You will need at least a year before a regulatory body can competently regulate it.” He also went on to say that if New Jersey, who became the second state to approve legislation to conduct internet gambling, “thinks they can do it in three months, they’re kidding themselves.” Indeed, he claims it took the Nevada regulators six months just to determine what companies and individuals needed to be investigated before they could hold licences. Issues such as eligibility verification by age and geography, the prevention of collusion and money laundering, and a whole host of security concerns all needed to be reviewed as well. Add to that, the rapidly changing technology and the need to keep on top of it, and it is not hard to see what problems they are facing. The States themselves are, at least by comparison to the Government, relatively fleet footed where new technology is concerned. The Wire Act which the Bush administration used to prohibit internet gambling, notwithstanding that it was enacted decades before the internet was ever even considered and palpably only applied to internet Sports Betting, has finally been clarified by the Wire Act memorandum opinion. That is not to say, however, that “federal language can be dropped from the state statute” as one lobbyist has claimed. Rather, it means that we are inching ever closer to a point where federal regulation will bow to the pressure of state regulation. The States, as we can see, are preparing for that day. They are embracing land-based gaming into the on-line space. They are offering opportunities to technology providers and gaming companies that are ready to launch poker sites: but that day has not yet come and, irrespective of whether Nevada thought it would go live in the third quarter of last year or not, no one yet know when that day will be.