Online poker legislation hits Nevada
The online poker industry tends to long for yesteryear. Before the October 2006 passing of the Unlawful Internet Gambling Enforcement Act, all sites and players operated without ramification in the echoes of cyberspace. Since that time, with players seemingly restricted (due to the inability to deposit) and the threat of increasing restrictions ever-present, the industry tends to look with hope for indicators of a return to those innocent times, or more realistically, a future in which the legal legitimization of the industry leads to the casual player's increased willingness to venture into online play.
In recent weeks, online poker heads have turned to Nevada, where the proposed A. B. 258 (a bill that would enact provisions governing the licensing and operation of Internet poker within that state) has seen widespread support from the online poker industry, in part because 258 wouldn't punish or restrict those operators who have continued to operate within U.S. borders since the UIGEA passed. Similar legislative attempts in many other states, including Iowa, California and Florida, have had more restrictive language in this regard. The language in Nevada suggests that industry powers PokerStars and Full Tilt Poker could conceivably work with licensed land-based casinos, providing their software without legal ramifications.
For Nevada, the benefits go beyond the $30-35 million a consultant retained by PokerStars estimated would be generated annually by intra-state Internet poker in state revenue.
"The play for Nevada on Internet poker is to be kind of a hub of Internet gambling in the U.S.," said Chris Krafcik, an editor-at-large with GamblingCompliance.com. "If you're a business, Nevada wants you to come there to get licensed because that's how they'll make money -- off business taxes and jobs created by the infrastructure that will be built in Nevada. It's a long-term play. Nevada would become a highly technical center for Internet gambling in the U.S."
It would also make Nevada the first state issuing such licenses, which would allow the state to get a head start on "competition" like New Jersey, California, Florida, Iowa and Hawaii, the five other states that have proposed state licensing laws. Other states could easily allow Nevada's licensing practices to govern those within their respective infrastructures. [Editor's note: The online gambling bill in New Jersey was recently vetoed, and language regulating to online poker was removed from the potential legislation in Iowa.]
"Our organization has reviewed state initiated Internet poker bills that have been introduced from coast-to-coast, and A.B. 258 is the first to earn our support," said Poker Players Alliance executive director John Pappas in a recent statement. "While it is still our preference to have a federal bill that allows for poker players from across the country to benefit from the regulated marketplace, the new Nevada bill is the best attempt at the state level to address the consumer concerns with intra-state regulation."
With limited time between now and the 2012 election and the contentious nature of the online gambling debate, Krafcik believes the passing of federal legislation before 2013 to be next to impossible, thus the push for state-level legislation.
Pappas and the PPA aren't the only new supporters of state-based Internet gambling legislation. At the same time as the circulation of A.B. 258, the Nevada Gaming Commission has announced the approval of the first partnership between land-based casinos and online counterparts -- Caesars/888. Two other deals are also on the table, and while the details of these agreements have not yet been publicly disclosed, it's understood that in essence, three land-based casinos will loan their respective brands to online portals using their respective partners' technology. The partnerships are contingent upon poker's legalization.
While two of the announced partnerships -- Caesar's Entertainment Inc/888 Holdings LLA and Station Casinos/Full Tilt Poker -- see the formalization of previously existing relationships, it's the March 25 announcement of a new relationship between Wynn Resorts and PokerStars that turned the most heads. Steve Wynn is traditionally a staunch adversary of online poker's legalization, and was quoted saying as much as recently as late 2010. These days his tune has changed, and his alleged defection is the clearest indicator that this is a time of change in the gaming industry.
"Wynn was public about being unhappy with certain provisions in Reid's bill," Krafcik recalled. "To see he's changed his tune now and has partnered with PokerStars -- someone he'd have considered an adversary -- is fascinating. I think the rationale for Wynn and other land-based gaming companies is simply that they understand the way worldwide commerce is trending is towards online distribution models. If they were to rely on the same business model they have for the next X years, they'd get passed by operators like PokerStars who have defined how to operate in an excellent way on the Internet. The idea for the land-based operators is to move in the same direction as modern commerce."
While determining winners and losers in these partnerships is a long way off, the potential benefits are clear. For PokerStars, they've earned a powerful new ally in the fight for legalization/regulation with a much stronger lobby than their own. They now have a foothold on American soil, improved public perception and a powerfully branded client with whom they can share profits. For Wynn, they've gained diversification of the brand and a new revenue stream without having to go through the many growing pains of developing their own software.
There may be more such deals on the horizon, with gambling industry giants like MGM and Las Vegas Sands (Venetian) still without partnerships, and online firms including BWin-Party Gaming allegedly seeking the same. Of course, all such deals are contingent upon the passing of legislation. One of the many details on which the industry's excitement seems to be jumping the gun.
"Will these partnerships be as effective as the market is treating them now?" Krafcik asked. "Or can we even say at this point that we know what a regulated environment will look like? Will it be two states operating Internet gambling? Will it be four? Will it be overseen by the federal government? What will the tax rate be like? What games will be allowed? What's the operating environment going to be like?
"There are so many questions right now," he continued. "The market is reading these deals as lucrative and there's potential for that, but to judge these deals as successful already and view them with reverence -- I think it's a little too early for that. We'll see what happens with how the market is regulated. That will likely be the single biggest decider of whether these deals are successful. All we know is two very large companies have signed an agreement that may or may not happen."
Krafcik is right, but we've seen the willingness of these entities to entertain the possibility that legalization could happen. In that course, they've found bedmates who were once enemies all in preparation. You can't blame online poker's hopefuls for deriving some hope from that.
You can read more of Gary Wise's musings at jgarywise.com.
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