Updated November 26th - The end of 2012 brings the best realistic hope to date for federal regulation of online poker, and most agree that if the federal government doesn’t act within that time frame, states will settle the issue one by one in the months (and years) to come.
Many expect a bill co-authored by Senators Harry Reid and John Kyl, commonly dubbed “Reid/Kyl”, to be addressed during the current lame duck session, which wraps up in early January with the swearing-in of a new Congress.
I’ve assembled a guide to the major players in the online poker regulation game, along with the broad strokes regarding their general position on poker, the amount of influence they could wield on the outcome and the chances that said influence will be deployed.
I have also put together a quick guide to relevant sources for following the lame duck session.
Opposed to Federal Regulation of Online Poker
Sheldon Adelson – Venetian head Sheldon Adelson has made little secret of his dislike for online poker. He’s also a substantial contributor to the various fund-raising arms of the GOP and is believed to have the ear of House Majority Leader Eric Cantor. His lackluster returns on 2012 election spending probably did little to diminish his influence.
That’s obviously a pretty strong opponent, but Adelson doesn’t necessarily hold all of the cards. His reach is significant, not absolute. He may also be a bit distracted by other issues at the moment, and online poker – while a priority – has never been his number one priority.
Finally, Adelson’s position puts him completely at odds with the rest of the Nevada-based commercial casino industry, a pressure that could eventually prove to be more powerful than his checkbook.
Social Conservatives – Not much to say here. Social conservatives tend to oppose any expansion of gambling, and online gambling is a flash point for most.
With that said, social conservatives are concerned with a number of issues this election cycle, and online gambling seems to be closer to the bottom than to the top of their list. After this salvo fired back in June, there’s been little in the way of concerted, coordinated action against the progress of online gambling at the federal level.
Also worth noting: the Reid/Kyl bill does far more to crack down on gambling than expand it. That might prove more palatable to social conservatives than the (much harder to shape and influence) state-by-state roll out of online gambling that would continue (and accelerate) should Reid/Kyl fail to become law.
Independent Casinos and Cardrooms - It’s not accurate to say that all independent casinos and cardrooms are opposed to federal regulation, but the bulk of them do seem to hold such a position.
Why? Such companies tend to have far more pull and influence at the state level, and would prefer to see regulation occur at that level (if at all). Also, companies in this category generally lack the resources to compete against a Caesar’s or MGM in the national arena, so it makes sense that they’d rather see online gambling rolled out locally where the playing field is a bit more level.
Unfortunately for independent casinos and cardrooms, that state of affairs also limits the amount of influence they can wield in the national political process. Limited as it may be, such influence could still have an impact in a federal battle that could well pivot on a handful of votes one way or the other.
State Lotteries – Before the leak of the Reid / Kyl bill, I would have put State Lotteries in the “unclear / mixed” category. After the leak, I think they can be firmly shifted to the “against” category as it appears federal regulation will come with a number of qualifiers that should be anathema to state lottery directors.
I don’t think they mind giving up a point or two to the feds on the rake, given that federal regulation likely means a bigger market for all involved. But with conditions that appear to limit the types of lottery tickets states could sell online, and the obvious favoritism the bill shows to Nevada, some state opposition is inevitable.
The National Governor’s Association penned a letter protesting the bill in October. Massachusetts Treasurer Steven Grossman did the same in November. Similar letters have come from a handful of other states. And while Nevada Gov. Brian Sandoval bucked the trend with his own missive supporting Reid/Kyl, he’s likely to be standing close to alone on that side.
How much power the states might have to stop federal regulation is another question. It’s also unclear what part of the positions staked out in Reid/Kyl reflect reality, and what part reflects extreme stances taken for the purposes of negotiation – that is to say, the bill states oppose now could easily be quite different from the bill that’s actually proposed.
For Federal Regulation of Online Poker
Commercial Casino Industry - No need for an in-depth analysis here; most major casinos have seen the writing on the wall and now realize that online gambling is going to be a critical part of any product portfolio in the years ahead. Even one-time opponent Steve Wynn flipped his position in 2011, leaving Adelson as the only high-profile dissenter among the casino mogul ranks.
Why federal regulation and not state? Federal regulation is simply more cost-effective for outfits like MGM. While certainly powerful in some states, major casinos have more pull at the federal level, and would prefer to apply for one license and submit to one regulator than apply for 50 different licenses and appease 50 different regulators.
While federal regulation may be the shared goal, there’s no guarantee that even a concerted effort by a consortium of casino titans will do the trick. The industry’s direct influence is somewhat limited to the handful of states where they operate, and they’ve already spent gobs of money to date with little progress to show for it.
One last note worth making: Recent comments by the heads of Caesar’s and MGM indicated that both may have shifted their energy away from the federal level and toward the state level, although both require some reading between the lines.
Financial Industry – The financial industry wasn’t a fan of the UIGEA and would certainly welcome the substantial bump in revenue that federal regulation of online gambling would bring. Much like the major commercial casinos, this industry would prefer one clear set of regulations issued from a single source, as opposed to a hodge-podge of competing regulations that could introduce uncertainty, increase compliance costs and reduce profits.
You’re unlikely to see the industry come out “guns blazing” in support of any gambling regulation – especially given the image problems banks in general have been facing in the US over the last few years – but it’s safe to assume that Reid and company can find a bit of support behind the scenes from banks and credit card issuers should a credible push for federal regulation of online poker (or gambling) occur.
Foreign Poker Operators - Now that Black Friday has removed all but the most persistent operators from the US market, the major online poker sites are all basically singing the same tune when it comes to regulation of online gambling.
There’s not much they can do, however, to advance that cause – PokerStars is now obviously a bit of a tainted name on the Hill, and other major companies like William Hill have pressing domestic priorities that are going to demand their attention. Expect any efforts to be very behind-the-scenes and impact of said efforts to be relatively minimal.
Poker Players – It might seem odd to categorize the intensity of poker players as “moderate” on the issue of online poker regulation, but the community at large seems pretty split on the best way to regulate online poker in the US.
As for Reid/Kyl itself, the reaction has been varied and intense. Safe to say that the bill does not enjoy anything close to universal support among online poker players – at least not the more vocal cohort on TwoPlusTwo.
It’s a bit of a moot point; while a number of players have rallied behind the Poker Player’s Alliance and kicked up a bit of grassroots dust supporting the cause of regulation, the major stars of the pokerverse seem disinclined to lend time, money or other support to the cause.
Silicon Valley - Again, it’s a little awkward to paint an entire industry with a single stroke, but it’s relatively safe to assume that the giants of the tech industry – especially those with a foot in the media column – would support federal regulation. Facebook is already moving into real-money gambling in the UK, and would certainly like to pursue a similar path in the US if federal law cleared the way. Google would no doubt love to get back the substantial chunk of advertising revenue they had to give up after the DoJ cried foul back in 2007. Zynga obviously has quite a good bit riding on regulated online gambling coming to fruition in the US sooner than later.
While a few reports of Zynga lobbying on the issue surfaced back in August, you’re unlikely to see any other companies come out full-force in favor of gambling. It’s not great for PR and – as interested in the issue as they may be – gambling is simply way down the list of issues a company like Google is looking to hash out with the US Government.
Tribal Casino Industry – Another group that is far from monolithic, but I’m discussing this issue in very broad terms so forgive the generalizations. Tribes have been credited with stalling the California online poker bill, and were thought to be an opponent of federal regulation as well.
That view changed in July when a discussion draft of a federal online poker bill backed by powerful tribal casino interests emerged. Apparently, at least a decent chunk of the tribal gambling bloc believes that online gambling regulation is inevitable and the federal government is the lesser of two evils, a position that is understandable when you consider the ongoing battles (like this one) that tribes are fighting with state governments over gambling issues.
Unclear / Mixed Position on Federal Regulation
US House of Representatives – There is a really quality argument for putting the House into the “against” category, but that would do a disservice to the the multiple supporters online poker has in the governing body. Joe Barton, for one, has been an outspoken friend to online poker. While pro-poker Rep. Barney Frank is on his way out of Congress, he’s still a vote and a voice until this term ends. And so on.
That said, the house is GOP-controlled and that party is anything but fond of online gambling. The question is not so much whether or not the GOP will support poker regulation – it’s how aggressively they’ll seek to defeat a bill should it come through the chamber. Further, the growing number of states looking to go it alone on online gambling may give anti-gambling voices in the GOP a reason to temper their position.
Ultimately, we won’t know where the House stands on the issue until a bill comes up for a vote in some way, shape or form. While I wouldn’t risk any significant amount of money betting that the House would approve a standalone poker bill, I also wouldn’t want to make a substantial wager that the House would hold up a piece of legislation simply because poker happened to be attached to it.
US Senate – Much of the above analysis applies equally here. The Senators behind Reid/Kyl are obviously powerful individuals with the ability to influence Senate outcomes, but at the end of the day they’re only two members of a 100 member body.
The last public word from the pair (November 15th) on poker’s chances in the Senate wasn’t positive, but it’s tough to know how much of that is for real and how much is for show.
Side note: The much-publicized, highly-politicized pre-election spat between Senator Reid and Senator Heller appears safely settled with no real harm to an online poker bill’s chances.
While there are certainly more groups by volume in favor of online poker regulation, it’s hard to argue that those groups are more vocal, more passionate or willing to wield more influence than groups in the anti-online gambling camp.
That imbalance doesn’t necessarily spell the end of hope for a federal online poker move before the clock winds down on 2012, but it does somewhat starkly illustrate the severity of the hurdles to passage which wait along the path. The good news: One way or the other, we won’t have to wait long at this point to find out how the story (or, more accurately, this chapter) ends.