Budget shortfalls will force US to act
Ever since UIGEA was enforced, the egaming industry has been debating when, not if, the US will regulate online gambling. With the lure of a steady revenue stream too strong to resist, Jim Tabilio believes years of lobbying could soon be over.
Two years ago, the common wisdom on possible regulation of internet poker in the United States was focused entirely on a federal solution. Most industry observers gave state-by-state regulation no chance, even though the intrastate exemption in The Unlawful Internet Gambling Enforcement Act (UIGEA) was clear and explicit.
But things change. In the past two years, intrastate advocates, led by non-profit groups like Poker Voters of America (headed for the past year by the experienced political strategist Melanie Brenner and her team in states throughout the US), have worked with legislative leaders and land-based operators in California, Florida and New Jersey to develop regulatory models for intrastate online poker.
Legislative votes are expected this year in New Jersey and California. Florida, meanwhile, is likely to hold legislative hearings on its own intrastate online poker regulation bill at the end of this year in order to have legislation ready for floor votes when the Legislature reconvenes in March 2011.
This has created a significant amount of momentum with several representatives of European gaming companies discovering the ‘joys’ of US state capitals in mid-summer. You can’t walk the halls of state government buildings in Sacramento, Tallahassee or Trenton without tripping over executives from the UK, Sweden and elsewhere explaining the details of payment processing, geo-location, responsible gaming algorithms and KYC (know your customer) programs ““ the due diligence and bank regulation that financial institutions and other regulated companies must perform to identify their clients and ascertain relevant information pertinent to doing business with them. Let’s just say the masses of representatives from California Indian gaming tribes weren’t booked into the Eurostars Madrid Tower in July earlier this year just to celebrate Spain’s World Cup victory.
But it’s not only California, New Jersey and Florida re-evaluating their positions. In recent months, lawmakers in other large states have asked Brenner and Poker Voters for advice, financial data and an introduction to European operators so these states can begin developing their own intrastate legislation for introduction early next year.
A new attitude
A number of factors have converged to move the intrastate approach forward. The most obvious is the critical budget shortages being faced by virtually every US state.
The second is a dramatic increase in the information now available to sympathetic state legislators. Poker Voters of America, for example, engaged H2 Gambling Capital to analyse revenue models for 12 of the largest states. When those detailed numbers were verified by various state budget directors, elected officials felt more comfortable raising the issue.
Finally, several states have been jolted into action by the recent progress of Barney Frank’s Federal bill. It may, however, not make any further progress this year, despite its chances being improved by several amendments, including an extension of the time states will have to opt out of the federal system. Meanwhile, another amendment prompted the National Football League to drop its opposition to the bill, which also increased its chances of success.
It is perhaps more likely that the bill will be pre-empted by a streamlined ‘poker only’ federal online bill by Nevada Senator Harry Reid in a post-election Congressional session. But it’s almost certain that any federal bill will retain the state opt-out provision that will allow large states the opportunity to create their own intrastate online poker systems.
So, have all these elements finally created the tipping point that makes US regulation of online poker inevitable? It seems likely that in the next year, one or more large states ““ as well as Congress ““ will find the lure of significant revenue simply too powerful to resist.
But it is still all about politics, so anything can happen. In past years, some of the most vocal opponents of online regulation, both state and federal, have been established gaming companies and tribes contributing their political muscle to defeat any online proposal.
Will that opposition continue? Greed and lack of vision are powerful political weapons and have often derailed good policy and good business sense in the past, but don’t bet on it this time.