Is This A Legal Plan for National Online Poker *Within* the US?

[BluffTHIS!]

We have discussed in past months the fact that the individual states are able to license and regulate online poker within their boundaries, as long as they bar residents of other states from playing. And that this wasn't a right granted to them by the UIGEA, but rather one that they possessed which the federal government even under its broadly interpreted Commerce Clause authority, couldn't take away. The UIGEA only made it clear that the states or Indian reservations could not allow non-residents to play on such a state/reservation platform.

So for example, the state of New York can license and regulate and thus legalize online poker for its residents. It presumably can even do so in a monopolistic fashion as is done with lotteries. And it could presumably license an existing online site like party poker to do so, though possibly they would have to maintain their servers for same within state boundaries. Of course except for the largest states, the player pools might not be very attractive in size for a single state, though perhaps that wouldn't be true even in smaller ones if online poker was totally legal. Nonetheless, it is a consideration and likely shortcoming.

Not back to those lotteries. We all know that there are multi-state lotto pools, often (always?) apparently the result of interstate compacts, and which compacts like all such ones apparently needing to be given the assent of congress (is that correct?). So the question is can the states form a compact and run multi-state online poker sites, where the licensed entity running same basically gives rakeback to the participating states on a proportional basis? And would the UIGEA need to be modified in order to do so, or would congress ratifying such a compact overide any such considerations?

Thus again using party poker as the licened primary site, and assuming the above was legal, a group of many or indeed all states licenses party poker to conduct online poker within the US, thus barring foreign players (since the gov't likes to ignore WTO considerations we will too for this example). But in order to foster competition, which domestic gaming companies would no doubt demand, a skin system is implemented. Any licensed gaming company like Harrahs could operate a skin through the primary licensee who ran the whole thing. And of course if the primary licensee didn't do a good job, they could be replaced by a skin, who then became the primary licensee.


If the above scheme was legal, it would be tantamount to a carve-out, except of course for players in states unwilling to join. So the question again is, will that fly legally?

[okietalker]

Of course this would be "legal". If only we could get 5 or more of the bigger states doing this, the rest would follow suit.

I think the real problem lies in getting the FIRST State to get this ball rolling.

[jschaud]

This is exactly what I was talking about here (http://forumserver.twoplustwo.com/showflat.php?Cat=0&Board=law&Number=8935467&Search page=1&Main=8913913&Words=+jschaud&topic=&Search=t rue#Post8935467). I think this is how it will eventually have to boil down, but i am one of the optimistic few and also very ignorant of exactly how this all works.

[redbeard]

I too have wondered why this wouldn't work. And maybe that is the long term plan. But I'm sure others will chime in and say this is not fesible as I've seen it in other threads.

[BluffTHIS!]

jsc,

I didn't really read that thread fully, but yes it is the same thing. And I am wondering as you do as to the legality of the whole thing, especially as to whether there would need to be any changes to the existing IUGEA for such a multi-state compact to come about, and whether in view of lotto compacts, there is any other reason a multi-state pact can't be used to have combined player pools in other forms of gambling.

Also there is the political question of whether the supporters of the IUGEA would vote against such a compact where they would basically be butting heads with pro-gambling states that have B&M casinos, and whose gaming businesses wish to expand online. Of course the question then too is whether such companies will be satisfied with starting with just poker, or will insist on foisting the whole array of gamlbing on the citizens of a state, including all the -EV stuff.

I would be interested in getting some of our attorney posters like Wynton to chime in this thread.

[jschaud]

I have a few more questions about this plan.

1. IF individual states decide to try this and then hook up on the same network, what ramifications will it have with the WTO case with Antigua, and will it piss off the EU who is apparently 'interested' in the outcome there.

2. Gonna be really hard from the technical aspect to control who/where a player gets onto a site. If Nevada legalizes it only for intra-state, i'll just get a PO box there.

3. If a state licenses online gambling for their state, do they allow foreigners onto it? Does anyone know if you can currently wager on US horse racing from out of the country? I think that would be a precedent.

4. What would be the best outcome? I would think one huge network for all the states together would be best, but are different states allowed to run things differently? Can SC offer no RB or Bonuses since there are no casinos nearby to compete while Nevada offers 30% RB and frequent reloads to combat people just heading to Vegas.


and my apologies if i sounded like a douche, truly didn't mean to.

[BluffTHIS!]

jsc,

1) ignoring the WTO implications for now and just exploring the legality/political considerations otherwise

2) not hard at all - the sites that booted US players are blocking us so could too a US network bar players from states that don't participate

3) no non-US players because of #1

4) could be several networks or one large national one, with the latter obviously being the best

[jschaud]

i just read the article about the sands opening in the UK. seems like they have instituted ways to verify ID and location. so you can only play on your state's site and only while you are physically in your state. the different states will negotiate the network deals and we are in business. well, i'm still optimistic of it working out.

[BluffTHIS!]

The real problem on the political end, besides the main one of opposition by groups who oppose all gambling, is that in order to do this or any type of gamling in most states requires a constitutional ammendment. Which might actually be a plus in initiative and referendum states like cali. Still an ammendment versus a bill is not only a longer, but also a more complex and difficult process. Which means online poker like this would probably have to ride with some other type(s) of gambling to fly, like B&M slots or online horse race betting (in areas where it's not now legal on the phone e.g.).

[jschaud]

you mean the state's constitution right? as in this still flies under state's rights? the Vegas casinos have to have thought of this also. maybe the deal in the UK and getting it banned here is just a way to get the ball rolling for an instate deal.

I thought i read about a casino allowing online gaming on their private network while in the hotel during the series or something, but i may be mixed up. Theoretically, can all the casinos in vegas team up and have a site that allows online gaming while in the city limits? If you are in your hotel room, is it legal to use a phone to place a bet at the sportsbook? (forget about the logistics of trust, getting the money to them, etc for a second, just the legality of the issue)

[Richas]

[ QUOTE ]
i just read the article about the sands opening in the UK. seems like they have instituted ways to verify ID and location. so you can only play on your state's site and only while you are physically in your state. the different states will negotiate the network deals and we are in business. well, i'm still optimistic of it working out.

[/ QUOTE ]

Not just Sands looking to run sites otside US but Harrah’s too. Interview with Jan Jones…
http://observer.guardian.co.uk/business/story/0,,2000106,00.html

http://tinyurl.com/2ns3wo

[ QUOTE ]
So what's next? London Clubs is now well placed to compete for many of the 17 new UK casino licences that will be up for grabs, thanks to the Harrah's infrastructure and cash. Harrah's may also open a gambling website in Europe.
Owning the rights to the World Series of Poker brand - the third most watched sporting event in America - the firm is exploring the possibility of bringing the idea to the UK, to take advantage of the game's surging popularity. It is also building casinos in Slovenia and Spain.

[/ QUOTE ]

[Wynton]

Similar thoughts had also occurred to me.

I actually think that an interesting, non-frivolous argument can be made that the statute would be unconstitutional, as applied, once a couple of states explicitly decided to license online poker to its residents.

Here is the scenario. NY and California separately decide to permit their residents to play poker online. Under the statute, the NY residents still could not play against California residents. But what would the justification for that particular restriction be?

I ask for the justification not to get into a debate about the statute itself, but to point out that commerce clause legislation must appear "rational" to be upheld. Ordinarily, virtually any commerce clause legislation is considered "rational." Thus, the courts would likely uphold the legislation - under the current situation - as a rational attempt to control certain problems they assume occur with internet gambling.

But even if you assume that the problems identified by Congress in passing the legislation had some remote rational basis, that reasoning may well be deemed irrational in the specific context of residents from one state gambling with residents of another state, when both states already permit gambling on the internet by its own residents.

Thus, one conceivable strategy would be: (1) to get two states to authorize internet gambling by their own residents; (2) then attempt to allow their residents to gamble with each other; and (3) fight any challenge to the arrangement by the feds by raising an argument that the statute, as applied, is unconstitutional as failing the rationality test of commerce clause legislation.

[yeahright]

man, you sure do put a lot of time and effort into these hypotheticals you come up with.

Anyway, what's being lobby'd in DC by the American Gaming association and others is a Federal system.

The internet is an international medium and having it regulated all the way down to a state level doesnt' seem realistic to most people involved.

When the internet gambling becomes legal, which I firmly believe it will, you want see each state being able to create their own environment.

It will be a federal policy.

On another note, the American Gaming association had a spokes person say the other day that they thought they could get a study bill pushed through in the next couple months. I think that's a little optimistic, but very encouraging.

We have to get a study bill pass SOON.

[BluffTHIS!]

[ QUOTE ]
Thus, one conceivable strategy would be: (1) to get two states to authorize internet gambling by their own residents; (2) then attempt to allow their residents to gamble with each other; and (3) fight any challenge to the arrangement by the feds by raising an argument that the statute, as applied, is unconstitutional as failing the rationality test of commerce clause legislation.

[/ QUOTE ]


Wynton,

Thanks for your reply. Regarding the two states deciding to join together in such a venture, would that not require as I asked in my OP a compact between the 2 states, and which compact would have to be approved by congress? If that is the case, it is at that juncture that a federal attempt to stop such a scheme would come into play. Only if there were some constitutional bar or conflicting legislation as with the IUGEA would such be challenged in court. So can you speak as to the compact issue?

[Wynton]

In your OP, you wrote:

"We all know that there are multi-state lotto pools, often (always?) apparently the result of interstate compacts, and which compacts like all such ones apparently needing to be given the assent of congress (is that correct?). So the question is can the states form a compact and run multi-state online poker sites, where the licensed entity running same basically gives rakeback to the participating states on a proportional basis? And would the UIGEA need to be modified in order to do so, or would congress ratifying such a compact overide any such considerations?"

I have no idea how the inter-state lotteries work, and whether there is any federal oversight at all. In any event, the language of the UIGEA suggests to me that Congress did not intend to authorize similar such arrangements between states, and that those arrangements would violate the letter of that law. So, either Congress would have to amend the law or its application to such an arrangement would have to be challenged.

[BluffTHIS!]

From what I understand, multi-state lotteries were implemented via compacts, and I distinctly remember reading of one such compact. However that doesn't mean that I know enough to say that all such arrangements must be done via compacts.

I would say that you are right that such schemes aren't intended via the IUGEA, but if a precedent exists for other multi-state gambling pools with the lottos, as it does, then I would think congress would be hard pressed to deny the application of some states, especially including a large one, for same, and also language stating that such a compact overode any conflicting language in the IUGEA.

Of course I am talking of rationality, and the history of hypocrisy in our nation of favoring some forms of gambling but not others argues that reason and consistency wouldn't be the parameters by which congress or the states would frame this matter.

[Wynton]

Predicting what politicans would do is always dangerous.

Sure, you'd think that if two states presented Congress with some kind of plan, it would be hard for them to be ignored; at the least, Congress could not invoke the states' rights argument against them. But logic and rationality do seem to have little to do with any of this.

[Rvr_B_Good]

Sorry guys, but this is pie-in-the-sky thinking. In fact, as far as California is concerned it is an entire floating bakery.

The Horse Racing industry and the B&M rooms have way too strong a hold on the CA legislature. They will never vote to authorize on-line gaming. As far as doing it through the Initiative process you'd be looking at about $4-$5 million to get it qualified and ultimately approved. Good luck coming up with that kind of cash without the big on-line rooms behind the effort.

I don't understand why everyone is focused on getting around the law rather than repealing it. We have a new congress and the supporters of the UIGEA are long gone.

Repeal the law and all of this discussion is moot.

A Boycott is the only way...not all poker just the big weekend tournaments.

[Wynton]

Evaluating which plan is most wishful, or most pointless, is somewhat silly.

I think a boycott will accomplish absolutely nothing. And I also think that an outright repeal of the law is less likely to happen than getting a couple of states to approve internet gambling for their residents. But I think we can all agree that each approach faces serious difficulties.

[Rvr_B_Good]

"Evaluating which plan is most wishful, or most pointless, is somewhat silly."



Why do people on this site have to get personal?


"I think a boycott will accomplish absolutely nothing."


Why? Based on what? The only way to get the attention of a big corporation is to impact their bottom line somehow. Creating huge overlays in a months worth of tournaments will definately get their attention.




The law came to be as a rider tacked on in the dead of night. Why can't it be un-done the same way?

[Wynton]

[ QUOTE ]
"Evaluating which plan is most wishful, or most pointless, is somewhat silly."



Why do people on this site have to get personal?


"I think a boycott will accomplish absolutely nothing."


Why? Based on what? The only way to get the attention of a big corporation is to impact their bottom line somehow. Creating huge overlays in a months worth of tournaments will definately get their attention.

[/ QUOTE ]

I didn't mean to get personal and am sorry if you interpreted my comments that way.

I believe a boycott is pointless because I am certain that the poker sites already are fully aware of the business they are losing and need no reminder or further incentive.

[permafrost]

[ QUOTE ]
I would say that you are right that such schemes aren't intended via the IUGEA, but if a precedent exists for other multi-state gambling pools with the lottos, as it does, then I would think congress would be hard pressed to deny the application of some states, especially including a large one, for same, and also language stating that such a compact overode any conflicting language in the IUGEA.


[/ QUOTE ]

I had mentioned MUSL (Powerball) in earlier threads but have realized they have no online betting (at least interstate). They don't need a Federal enabling law to my knowledge. The State legalization and player sharing idea fits the horse racing model more closely.

[*TT*]

[ QUOTE ]
From what I understand, multi-state lotteries were implemented via compacts, and I distinctly remember reading of one such compact. However that doesn't mean that I know enough to say that all such arrangements must be done via compacts.

[/ QUOTE ]

My understanding was that interstate lotteries were arranged via compacts, but needed to be permitted via the Wire Act first. Prior to the Wire Act carve out this was not permitted.

Am I correct?

[BluffTHIS!]

TT,

I don't think the wire act had anything to do with the lotteries since all the tickets are being sold in B&M venues. And again, if there is a conflict with this scheme wrt the wire act or the language in the UIGEA, then congress would have to wave same as part of the assenting legislation to the compact.

perma,

I'm not sure about the powerball, but what I remember reading had to do with a tri-state lotto compact, which can't be the powerball since more states are involved I think. So again I'm not sure whether a compact was in fact required for all such multi-state lotto pools, which is what I am asking for a legal opinion on here.

[MiltonFriedman]

The UIGE Act has an exemption in it big enough to house a California State Poker Authority, which can be a skin of a US aggregator, ala PowerBall..... a good analogy.

Add a geo-locator and age verification .... such as Drivers Licenses, keep the State players funds in escrow in the First Bank of State, and put servers in the State, and you would be legally good to go .... if the State approves it.

[MiltonFriedman]

Is it legal ? yes.

Your argument is whether it is politically feasible, a different issue. Nevertheless, consider whether the State of California would turn down a 50% cut of all the money which online poker players in Calofrnia generate in a year ... basically for signing a deal.

Bluffthis may be pie-in-the-sky, but your idea of a boycott is insanely misdirected ..... Why boycott the few sites which offer services to the US market ? Who are you tryinbg to pressure or influence ?

[MiltonFriedman]

No reason why the two states need make a compact between them. Each makes a unilateral deal with an aggregator.

[MiltonFriedman]

There is NO question that the matter is under consideration by US B&M operators.

[*TT*]

[ QUOTE ]
TT,

I don't think the wire act had anything to do with the lotteries since all the tickets are being sold in B&M venues. And again, if there is a conflict with this scheme wrt the wire act or the language in the UIGEA, then congress would have to wave same as part of the assenting legislation to the compact.

[/ QUOTE ]

My understanding is that the wire act permits the licensed operators of powerball to transfer data across state lines to a common location using modems (they may now use new technology such as the net or via dedicate leased access lines, I don't know).

My first real job was working for Tech Data, the contractor for NY State Lotto as a Lotto Machine Tech, this is where I derive my knowledge. At the time lotteries could not be held across state borders due to the federal gambling guidelines, I was under the impression that the Wire Act carved out an exception for intra-state lotteries as well as Horse Racing. Also if it wasn't for this carve out, then Antigua would not have had won it's WTO action from my limited knowledge. I know you are far more attuned to the law than i am, I think you should check this out for accuracy.

PS: keep up the good work.

TT /images/graemlins/club.gif

[BluffTHIS!]

TT,

I'm not up on the law enough to know whether the wire act also controls information used in gambling, and not just wagers themselves. It would be interesting to get a knowlegeable legal opinion on this and other related stuff, which is what my OP was asking for.


Milton,

Some good points. And like any other enterprise, it just takes a few states doing this for it to snowball and run over opposition in states where that opposition is stronger. States hate nothing like the thought of missing out on another tax gravy train.

[Yakuman]

[ QUOTE ]
States hate nothing like the thought of missing out on another tax gravy train.

[/ QUOTE ]

Just think how much winrate you'll need to pay the extra rake...

[BluffTHIS!]

Yaku,

The current rake times several orders of magnitude of increase in the number of players that would result with online poker not just being legal by our interpretations, but by anyone's, will generate more than enough profits where the taxes on same won't necessitate a huge rake increase.

[RGC2005]

At a minimum a single state can allow online gaming within its own borders as long as all of the actors (players, servers, money, etc..) remain within the borders of the hosting state. Once one or two states enact this model and begin generating revenue other states will jump on board. Using the history of lotteries a snowballing of single state interests will drive the federal government to allow loopholes for interstate transactions. The key is finding that first cash starved medium sized state to test the waters.

[_Apollo_]

I dont know a lot about this bill but wasnt this the plan all along you think?
This way the money stays in the US ( and they can controll money from illegal sources).

I cant say much about it (Im non-US) but if this goes through it will feel like 'they' got what they wanted.

I hope poker will be worldwide again one day but even if the US gets its own rooms, plenty of players in europe at first sight.

[Dennisa]

[ QUOTE ]
Sorry guys, but this is pie-in-the-sky thinking. In fact, as far as California is concerned it is an entire floating bakery.

The Horse Racing industry and the B&M rooms have way too strong a hold on the CA legislature. They will never vote to authorize on-line gaming. As far as doing it through the Initiative process you'd be looking at about $4-$5 million to get it qualified and ultimately approved. Good luck coming up with that kind of cash without the big on-line rooms behind the effort.

I don't understand why everyone is focused on getting around the law rather than repealing it. We have a new congress and the supporters of the UIGEA are long gone.

Repeal the law and all of this discussion is moot.

A Boycott is the only way...not all poker just the big weekend tournaments.

[/ QUOTE ]

I think the path to online poker in California, is via the large B&M Cardrooms.