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Online Poker Players Short of Winning Hand on Hill

Not long ago, legislation to legalize online poker seemed a good bet to pass Congress. But the retirement of Sen. Jon Kyl, R-Ariz., last year has left online poker players without a key Senate GOP ally and a card short of a winning hand.

Since the federal government largely shut down the Internet poker industry in April 2011, poker players and the casino industry have been lobbying furiously for the legalization and regulation of the online game at the federal level. Those efforts have resulted in the introduction of several pieces of legislation, including a high-profile effort last year from Kyl and Senate Majority Leader Harry Reid, D-Nev.

For a time, there was even talk of attaching the Reid-Kyl bill to an omnibus spending package, but House Republicans balked at its inclusion. Reid, whose state is home to several large gaming companies, has since soured considerably on the prospects for federal poker legislation, telling the Las Vegas Sun recently that he’s pessimistic about anything happening in the near future.

Supporters of legalizing online poker agree that Kyl’s departure has left a leadership void on the Hill that has yet to be filled.

“The biggest challenge is that there is no real non-Nevada Republican in the Senate that would take the lead,” said John Pappas, executive director of the Poker Players Alliance, which represents more than 1 million online poker players. “A lot of people viewed Kyl as being a very reasonable counterpart in all this, someone who can credibly go to gambling opponents [in Congress] and say, ‘This isn’t about expansion of gambling, it’s about regulation of activity that’s going on in unregulated fashion.’”

Complicating the effort for federal legislation is the fact that states are independently authorizing online gaming websites within their borders, following a shift in late 2011 in the Justice Department’s interpretation of the 1961 Wire Act. That opened the door for states to offer online gaming to their residents. Nevada recently launched the first legal online poker site, with Delaware and New Jersey set to follow this year. Several other states, including Massachusetts, Illinois and California, are considering similar laws.

But poker players and the gaming industry would both prefer a federal solution. Poker sites rely on having a large pool of players and liquidity to support a range of games and betting levels, meaning smaller states likely couldn’t support more than one or two providers. The gaming industry also would prefer federal oversight for the sake of consistency, and to avoid a patchwork quilt of various state rules to comply with.

Already the states that have moved to allow online gambling have taken different approaches to licensing. In Nevada, brick-and-mortar casinos that hold gaming licenses can open online poker sites. Similarly, in New Jersey, only the Atlantic City casinos can open gambling sites, while in Delaware there will be a single online poker provider essentially overseen by the state lottery board.

There is still support for legalizing online gambling at the federal level, as evidenced by Rep. Peter T. King’s introduction of a bill (HR 2282) last week that would legalize not only online poker but other online casino games as well. The New York Republican said his legislation is an attempt to establish uniform regulation of online gambling, rather than letting states approach it in piecemeal fashion.

“A common federal standard will ensure strong protections for consumers, protect against problem and underage gambling, and make it easier for businesses, players, lawmakers and regulators to navigate and freely participate,” King said.

King’s legislation would create an Office of Federal Gambling Oversight in the Treasury Department that would establish the criteria under which states and tribal bodies could license online gaming sites. Under the bill, there would be no restrictions on who could apply for a state license. States could still opt out of the federal system and offer online gaming within their borders.

The American Gaming Association, which represents the major casino companies and makers of gaming devices, hasn’t yet taken an official position on King’s bill.

“We do applaud Rep. King for his longtime support and his understanding for the need for Congress to get involved in the online gambling issue to establish minimum standards that ensure consumers across the country are protected and provide a consistent mechanism to stop illegal operators,” an AGA spokesman said.

King’s bill has been referred to the relevant committees, but even supporters of online poker aren’t optimistic about its chances of advancing. Reid even suggested that King’s bill would hurt the odds of legalizing online poker, because it also allows other casino games such as blackjack and roulette.

Poker players have worked hard to differentiate their game, in which players wager against other players, from traditional casino games like blackjack, where a player is betting against the casino. They argue that poker is a game of skill, not pure chance, and that millions of Americans already enjoy playing the game in their homes or watching it on television.

Rep. Joe L. Barton, R-Texas, is expected to reintroduce legislation that would legalize online poker alone, and he has argued that poker is distinct from other forms of wagering. Both the Poker Players Alliance and the gaming industry would prefer a poker-only solution, which they also believe would be more palatable to conservative lawmakers in Congress than legalizing all forms of Internet gambling.

But pockets of strong opposition to the legalization of online gambling remain on Capitol Hill, and at the moment, any congressional action appears highly unlikely, especially given Kyl’s absence and Reid’s pessimism. That leaves the states, which is where poker advocates have turned their attention.

“The battleground has shifted. Everyone who has been a keen policy observer recognizes that federal legislation would be preferable, but we’re not going to sit and twiddle our thumbs as Congress decides what they want to do,” Pappas said. “We gotta go where the fight is, and the fight is in the states.”

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