A bill currently on the floor of the Nevada legislature's getting a lot of attention. AB 258 would legalize online poker in the state of Nevada and, with the consent of partner states, outside it as well.I thought I'd look at the text of the bill and share my thoughts.
More after the jump...
Back in 2001, the legislature passed AB 578, which opened the door for existing casinos to get licenses to offer online gaming, should the federal government clarify its legal position. Since then, we've had UIGEA passed and federal approval seemed dead in the water. There was a little excitement around Harry Reid's bill last fall, but since then, the states have taken the initiative, with California, Florida, New Jersey, and Iowa all pondering different levels of legal online gaming.
Naturally, Nevada, with the largest commercial casino industry in the United States and a history of innovation in the gaming industry, has a definite interest in online gaming. And now's the time to act. I thought former GCB member Randall Sayre's comments were apt: by the time the legislature meets again, two years will have passed, and we will likely have been passed by. There will be a thriving online gaming industry somewhere in the US.
AB 258, which would enact "provisions governing the licensing and operation of Internet poker," looks to put Nevada at the forefront of online poker, preferring to inch into online gaming. Sports betting via account wagering on mobile devices is already here, more or less, but that's about it so far. Online poker would be a big step into the digital age for Nevada.
The bill would amend NRS 436, which governs gaming in Nevada, by adding the following statement:
The Legislature hereby finds and declares that:
1. Internet poker is widely played throughout the world;
2. Laws governing Internet poker have been unclear;
3. Technology now exists to limit the conduct of Internet poker to the State of Nevada and other jurisdictions where Internet poker is not prohibited;
4. The use of such technology allows Internet poker to be offered by licensees in Nevada in compliance with all applicable laws;
5. As a leader in gaming regulation, the State of Nevada has the capability to ensure that Internet poker is operated honestly and competitively and in compliance with all applicable laws, regulations and standards; and
6. Allowing licensed Internet poker sites to locate in and operate from the State of Nevada will benefit the economy of this State and assist in protecting consumers from criminal and corruptive influences that may be present in unlicensed and unregulated Internet poker sites.
All that seems fairly straightforward, and hard to argue with. 1-4 seem statements of fact that can't really be disputed, and if you believe Nevada's competent to regulate bricks-and-mortal casinos, then 5 & 6 don't seem like such a stretch.
From there, the bill offers definitions of "Equipment associated with interactive gaming," "Interactive gaming service provider," "Interactive gaming system," and "Internet poker," which is defined as, "any of the card games commonly referred to as poker which is played by two or more persons who wager against each other and not against the person operating or offering the game and in which success over the long term is determined by the skill of the player."
Then things get interesting: the bill charges the Nevada Gaming commission with adopting regulations to police online poker, including age verification, geographical verification (is the player in Nevada or Utah?), "appropriate safeguards to encourage responsible gaming," and standards guaranteeing network security, player privacy, and the games' honesty.
The bill specifies that operators who took bets while online poker was "unlicensed" in the US are not to be denied licenses for that fact alone. This is an important point, and probably the main reason the major Nevada casino operators are currently opposed to the bill (though Michael Gaughan's come out in favor of it).
It specifies that already-approved sports betting systems that use mobile and online devices aren't affected by this law.
Further, it makes it clear just who's eligible for an online poker license. In addition to the requirements spelled out in AB 578 (which confined licensees to those who owned actual casino with nonrestricted licenses), this bill adds:
The Commission may issue a license as an operator of Internet poker to a person or an affiliate of a person who has been licensed to operate Internet poker by a recognized regulatory body of another jurisdiction with licensing requirements that are similar to the licensing requirements of this State and who has successfully operated Internet poker pursuant to such a license for at least 2 years before the date on which the application for the license is submitted.
The tax rate on gross gaming revenues remains, as it is currently under the law, 6.75%.
The most interesting AN 258 does is open up Nevada companies to take bets from outside Nevada, provided other jurisdictions have legalized such bets:
The Commission is authorized to enter into compacts with other jurisdictions where interactive gaming is not prohibited, setting forth the manner in which the State of Nevada and such other jurisdictions will regulate and share tax revenues from interactive gaming operations between such jurisdictions and enforce criminal laws related to cheating, tax evasion or unlicensed interactive gaming, and authorizing the commingling of games and pots between such jurisdictions. Such compacts may be limited to Internet poker..
If players are playing in other jurisdictions, Nevada will collect a 4% gross gaming revenue tax, on top of which the player's jurisdiction would presumably layer their own tax.
Five years ago, I said in a Las Vegas Business Press column that this wasn't such a bad idea. I was talking specifically about sports betting, but it works just as well for poker:
Nevada casinos, which are already taxed, are able to succeed where state governments fail by providing legal sports betting to the public. With the advent of the Internet, these casinos have the potential to offer Americans everywhere the easy opportunity to bet legally on sports. Though most states would blanch at the thought of taxable gaming revenue leaching away to Nevada, there is room for compromise, possibly in the form of tax revenue sharing among participating states.
While it isn't likely that such a legalization scheme would become reality in the near future, it is certainly something that should be discussed. When considered rationally, any proposal that prevents millions of American from breaking the law -- by doing something that network television actively encourages -- can't be that outrageous.
So I think that AB 258 has a lot to offer: it gives Nevada the potential to be a leader in the US online poker market, and may generate additional gaming tax revenues for the state--something that's surely in high demand right now.
I think it's the best proposal for legalizing online poker that I've seen yet. It allows other states to opt in, and it respects their rights to continue to ban online poker should they choose. The legislature should seriously discuss this proposal. If they don't, another state is sure to rush in where Nevadans fear to tread.
If you are curious, here is the text of the bill for you to read yourself.