The return of legal online poker is a subject getting a lot of play these days. Political maneuvering is happening at both the state and federal levels of government in an effort to get this cash cow of a business up and running again in the United States.
Will the legalization of online gaming happen and, if so, when? Although there is a push for it now, the answer appears to depend on which political party holds the best hand coming out of the 2012 election.
Is Online Poker Legal?
Yes and no. Playing online poker for fun is legal in the United States. The exchange of money in an online poker game is not. More specifically, the transfer of money for gaming is not.
This strange legal situation comes to us from the time of the Presidency of George W. Bush. During his terms, poker had exploded onto the scene online. Large numbers of people were playing it. Sites such as Party Poker were raking in huge profits, and so were the affiliates that were promoting the poker sites. Top affiliates were raking in well into the hundreds of thousands of dollars a month, if not millions.
Everyone was happy.
Then it all ended one day.
The problem is the Safe Harbor Act. The Act was passed to provide funding to secure the shipping ports of our nation against terrorism [of course]. At the last minute, a rider was added to the law known as the Unlawful Internet Gaming Entertainment Act. That rider essentially banned banks and credit card processors from funding any business or site that provided online gaming with certain exceptions such as betting on horse racing.
As you may have heard, most states are suffering from a financial condition known loosely as “deadus brokeus.” They are looking to and fro in an effort to raise revenues. With the lottery proving to be a cash cow in many states, more than a few are focusing on online poker as another means for bringing in revenues to the state coffers.
What states are leading the charge towards online poker legalization? Nevada is one as you would expect. North Dakota, California and ironically the District of Columbia are also doubling down. As I write this, however, my personal favorite is New Jersey where Governor Chris Christie is saying the following about the feds trying to stop the states legalization efforts:
“If someone wants to stop us, then let them try to stop us,”
Ah, don’t you just love a straight-talking politician?
The ability of the states to legalize online poker and gaming is questionable.
Feds Play The Grumpy Old Man
Alas, there are two problems with the effort by states to make online poker legal again. The first problem is the federal government has not overturned the laws that make it effectively illegal. This leads to the second problem.
When there are federal and state laws addressing the same subject, the federal law overrules the state law. The federal law only applies, however, where the action at the heart of the matter crosses state lines. An example would be the regulation of safety issues surrounding freight trains that cross the country. Since the trains cross state lines, federal law applies.
Online gaming would seem to cross state lines. Someone based in California could easily join a site based out of New York. This would suggest federal law trumps any state efforts.
How are states trying to get around this problem? They are going to restrict the sites based in their jurisdictions to allowing access only to people who live in the state. As a resident of California, for example, I would only be able to play poker on a website based in California. If I tried to join a site out of New Jersey, I would be rejected.
Yes, it is a bit odd.
Cometh The Tax Man
Will we ultimately see online poker legalized again? I believe so. The state efforts are a bit pathetic, to be honest, but moves are afoot at the federal level to bring it back. The reason is simple. Taxing online poker would raise a massive amount of money and the government needs money.
Congressman Barney Frank has introduced numerous bills trying to get online gaming up and running again. Unfortunately, Frank has announced he is retiring. His retirement does not mean the end of online poker. Oddly, the Justice Department has given the legalization movement a boost.
The Justice Department issued a voluntary clarification of its position in December of 2011 that was a bit of a jaw-dropper. The Justice Department had always argued that a particular law, the Wire Act, outlawed online gaming of any sort. In the December clarification, it revealed that it now only thought the law applied to online betting for sporting events such as football, basketball, and baseball. This new position significantly bolsters the case for bringing online poker back.
Still, the return of online poker is not a sure thing. The upcoming election will play an enormous roll in whether we see it again. Republicans are supposed to be the party of small government, but they are the party that will seek to keep it outlawed. Should Mitt Romney win the Presidency, it’s hard to see a man with Mormon beliefs signing off on any gaming law.
Hey, maybe you now have a reason to go vote!
Will we see online poker bloom again in the United States? Yes. A Romney victory may delay legalization, but the money and potential tax revenue from online gaming is simply too lucrative for it to remain banned in the long haul.
Richard A. Chapo, Esq.
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