What’s Next for the Reid-Kyl Online Poker Bill?

Michael Jones : October 23rd, 2012
Harry reid Bill

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After the full text of the Reid-Kyl online poker bill leaked last week, what does the bill say, and what’s next for the legislation to become law in the United States?

The bill, named after Sens. Harry Reid (D-Nevada) and Jon Kyl (R-Arizona), can be seen here in its entirety. Last month, a summary of the bill surfaced that gave a good sense of what was contained in the bill.

What is contained in the draft differs little from what was contained in the summary of the bill, called “The Internet Gambling Prohibition, Poker Consumer Protection and Strengthening UIGEA Act of 2012.” The draft of the bill makes most forms of online gaming illegal, with a carve out for online poker. States must opt into the regulatory framework set up by the bill. It also makes online poker rooms that did business in the U.S. after the passing of the 2006 Unlawful Internet Gaming Enforcement Act wait five years before they can apply for a license to operate.

The 73-page bill, in its introduction, notes that states are attempting to regulate online gaming and poker, and that a federal bill would be preferable:

A number of States are considering legalizing and promoting Internet gambling to generate revenue. Absent Federal limitations and enforcement, State regulation of Internet gambling, including consumer safeguards, could vary widely from State to State, and States could have difficulty enforcing Internet gambling restrictions within their borders, especially against out-of-State operators. In addition, State authorizations of Internet gambling would result in a major expansion of gambling of all types on the Internet.

The bill also notes why poker is different from other forms of gambling, and why it deserves to be treated differently:

Poker is unlike casino-banked games or sports betting. Poker operators are not participants in the games and only receive a set fee for hosting them. Much like winnings in pari-mutuel wagering, a type of betting that Congress has permitted, poker players’ winnings come not from the house, but from the pool of other players. In addition, winning at poker involves some measure of skill. Skillful poker players can earn winnings in the long term, while players of house-banked games will always play against odds favoring the house.

As learned earlier, the bill would set up the “Office of Online Poker Oversight” under the umbrella of the Department of Commerce. The bill outlines how licenses to operate online poker rooms would be handed out and safeguards that would be implemented to stop underage gambling and to ensure taxes are paid, among other topics. It also notes how revenue would be generated with online poker regulation:

“Imposition of Online Poker Activity Fee.—Each person who is a licensee shall be required to pay not later than 15 days after the end of each calendar month an online poker activity fee equal to 16 percent of a licensee’s online poker receipts for that calendar month.”

The biggest point of contention in the poker world right now regarding the bill is the possibility of player penalties for playing on “illegal sites.” The following language was contained in the summary of the bill:

“To deter U.S. players from patronizing illegal sites, the bill makes explicit that any property involved in or traceable to a gambling transaction in violation of the new act (including winnings) is subject to forfeiture.”

Chris Grove was one of the first to write about the Reid-Kyl draft at PokerFuse (read the story here), and he believes that the above portion of the summary does not match anything in the draft of the bill.

Many read this to mean that any and all US player funds at unlicensed online poker sites would be under constant threat of seizure from the government.
(The Poker Players Alliance’s Rich) Muny asserted that this language is now completely absent from the current bill draft. “It’s very clear and explicit that there are no criminal penalties for players,” Muny said. “They knew we would likely oppose a bill with player penalties and were willing to answer us on that.”
Instead, Muny explained, the bill draft contains language that simply prohibits players from seeking restitution from the federal government if the government seizes funds from unlicensed sites or associated payment processors.

However, Hailey Hintze, a respected poker journalist, disagreed with Grove’s and Muny’s take here. Hintze believes that Sec. 204 on “Bettor Forfeiture” still applies to players; here is the passage of the draft bill:

“(I) Any property, real or personal, involved in a transaction or attempted transaction in violation of section 103 of the Internet Gambling Prohibition, Poker Consumer Protection, and Strengthening UIGEA Act of 2012, or any
property traceable to such property.”

Hintze’s take on this wording:

“This is not quite as awful as online players facing prison time, but it’s only one step lessened. It’s also terrible news for the hundreds of US high-stakes online grinders who moved to other countries after Black Friday, because by my read of this, 100% of their income could be seized upon their eventual return to the States.”

PTP contacted Grove for his opinion:

“I respect Haley’s opinion. I just don’t agree with it. I think the risk for US players of de facto funds seizure at unlicensed poker sites is on the table not only in the status quo (see Minted Poker & Full Tilt Poker), but under any regulatory regime. I don’t think Sec. 204 – which is clearly written to only apply to operators – represents some unique threat that should dissuade players from supporting the Reid/Kyl bill.”

Despite the back and forth in the poker community, the true meaning of the passage will either be clarified in later drafts, or it will be sorted out after passage by the government officials tasked with enforcing the law.

While the public has now seen a draft of the Reid-Kyl bill, there is still a long way to go before it would become law. First, it’s still just a draft, not a finished bill that is in front of the U.S. Congress. A story at Gambling Compliance this week outlined the bill’s chances of passage in the near future; you can read it, behind a paywall, here.

In a nutshell, GC writes that the elections in November are key to the bill’s hopes of passing during the so-called “lame duck” session of Congress following the elections. Three things need to happen, according to the story:
–Barack Obama needs to be reelected as president. Mitt Romey would be far less likely to pass an online poker bill than Obama.
–Reid must hold on to his job as Senate majority leader, meaning the Democrats must keep control of that chamber of Congress. Reid would lose a lot of sway if the Republicans take over the Senate, even in a lame-duck session in which Reid still technically holds that post.
–Senator Dean Heller, also of Nevada, must be reelected. Reid will likely need the help of Republicans to get the bill passed.

So what is next? Congress could be voting on the bill as soon as the end of this year. If it doesn’t happen then, regulated online poker in the United States could be a long way from reality.

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