Prospects improve for legalized online poker
By Mark Gruetze
Published: Friday, Jan. 13, 2012
While a recent Department of Justice ruling brings legalized online gambling in the United States closer, players won't be clicking their bets anytime soon, a noted gambling lawyer says.
"This can't possibly be done that fast if it takes action of the legislature," says Professor I. Nelson Rose, a longtime gambling-industry consultant and distinguished senior professor at Whittier Law School in Costa Mesa, Calif. He referred to the New Jersey legislature's failed attempt last week to approve an online measure before a lame-duck session ended.
Pennsylvania and other states with legalized gambling have the option to offer Internet gambling -- poker, slots and any casino games other than sports betting -- based on a U.S. Department of Justice ruling released just before Christmas.
In response to inquiries from the Illinois and New York lotteries about the legality of selling tickets online, the Justice Department says the federal Wire Act forbids only sports-related gambling in interstate and foreign commerce. Previously, the department interpreted the act as outlawing all forms of gambling.
"This ruling says the main federal statute doesn't apply to gambling that is legal under state law, except for sports-betting interstate," Rose tells Player's Advantage. "Therefore, we're going back to the way things have always been historically and traditionally -- which is, it's up to the states to decide their public policy, not the federal government to impose its public policy on the states."
Since the federal government's crackdown on offshore Internet poker sites nine months ago, gambling advocates have pushed for legalization and regulation of online poker in the United States. Proposals for federal regulation seemed to gain traction for a time; Nevada, New Jersey and other states started preparing their own versions.
Rose says he doesn't know of any move toward legalizing online gaming in Pennsylvania.
Pennsylvania Lottery spokeswoman Allison Roberts says the agency is studying the fiscal and social effects of selling tickets online, including the impact on retail outlets. Ultimately, the governor's office and Legislature would decide whether to pursue online sales.
A spokeswoman for state Rep. Curt Shroder, chairman of the Gaming Oversight committee, says his office has not had a chance to talk about online gaming since the ruling was released.
Before any state launches online gaming, Rose says, officials will have to address several issues: which games to allow, how many licenses to award, how much they will cost, how sites will be regulated, who will operate them, the tax rate and whether to allow bettors from other states -- or countries -- access.
Although the Justice Department says states may regulate online gaming, the debate appears far from over.
FairPlayUSA, which backs federal regulation and was funded by casino giants MGM Resorts and Caesar's Entertainment, released this statement from former FBI Director Louis Freeh, a member of its board of advisers:
"This (ruling) proves the need for federal legislation, because unlicensed and unregulated sites will now proliferate more than ever, without safeguards against fraud, underage gambling and money laundering. Further, we will have multiple state regimes without consistent regulatory standards for activity that takes place electronically across state lines. States do not possess the necessary law enforcement tools to enact such regulatory requirements in a border-less Internet. Only strict and comprehensive federal regulation will ensure that play is safe, secure and confined to players among jurisdictions that permit the practice."
Professional player Robert "Chip Burner" Turner, credited with introducing the game of Omaha to casinos, says he supports online poker but thinks software is not advanced enough to protect players from cheats. He questions whether states would be able to regulate gamblers or operators outside their borders.
Rose doubts that opponents of online gambling can get the ruling overturned because court precedents support the new Justice Department interpretation. "It's already decided," he says.
Online poker sites want as many players as possible, and Rose predicts on his blog, www.GamblingAndTheLaw.com , that states will allow operators to take bets from residents of other states and countries that also have legalized online gaming.
The revenue potential is huge. In California alone, online poker could generate $1 billion a year for operators, Rose says. At a 20 percent tax rate, the state could reap $2 billion or more in 10 years.
"Because there is so much money involved," he says, "(Internet gambling) will be done."
Western Pennsylvania's first slot tournament open to the public will be Jan. 21 at The Meadows.
Players club members who accumulate at least 500 base points between Jan. 1 and 20 will qualify for entry. First place is expected to pay $3,000 in free play; 10 other entrants, including the one with the lowest score, will win prizes. Awards will be a percentage of the prize pool, which will be $10 in free play for each entry. The event is scheduled for 10 a.m. to 5 p.m.
Slot players lost $46.1 million at Pennsylvania's 10 casinos in the week ended Jan. 8, the Gaming Control Board reported. That's up from $38.2 million in the comparable week last year.
The state gets 55 percent of that "gross slot revenue," or what's left of players' bets after all jackpots are paid.
The statewide slot payout rate is 90.1 percent since the fiscal year started in July; for every $100 bet, the machines returned an average of $90.10.
Payout rates since July for Western Pennsylvania casinos:
- 89.88 percent: The Rivers; weekly revenue of $4.85 million, up from $4.36 million last year.
- 89.78 percent: The Meadows; weekly revenue of $4.35 million, up from $3.64 million last year.
- 90.46 percent: Presque Isle in Erie; weekly revenue of $3.02 million, up from $2.37 million last year.
QUESTION OF THE WEEK
Why don't all Pennsylvania casinos offer wagering on horse races• (from Bob Wagner of Scott)
State regulations allow only licensed racetracks to offer simulcast wagering outlets, known as OTBs, for betting on races elsewhere in the country. Gaming Control Board spokesman Richard McGarvey says the four casinos without tracks could ask the Racing Commission to operate a separate OTB in partnership with a licensed racetrack. For example, The Meadows, which has a track, and Rivers, which doesn't, could agree to operate an OTB at Rivers, if the commission approved.
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