Two Way Hard Three | Las Vegas Casino & Design Blog

Jeff's back and we're talking about poker again this time around. Since the last post went up, Nevada Governor Brian Sandoval has weighed in with a letter to the author of AB258 that makes his position fairly clear.

The letter is available here from the Las Vegas Sun.

What did the mainstream media miss when analyzing this development? Continue on for Jeff's take on how this impacts this issue.

Update: According to Channel 8, an amended version of the bill made it out of committee and is heading to the Assembly floor.

Recent actions by Nevada's top elected official reinforce the predictions I made in my last column about the likely course of events as the state Legislature considers a bill that would allow online poker sites to be licensed in Nevada.

Gov. Brian Sandoval told Nevada Newsmakers anchor Sam Shad on an April 11 television show that he thought state legislators should wait until federal law explicitly allows Internet poker before changing Nevada law to allow it here.

Sandoval understands the subject very well. He was the Nevada Gaming Commission Chairman when I started covering Internet gaming in 1999, then won election as the state attorney general in 2002 and was later appointed to be a federal judge. In addition to his televised statements the governor also sent a letter to Assemblyman William Horne, whose bill, AB 258, would direct the Nevada Gaming Commission to enact regulations allowing casino operators to establish online poker sites which would be able to allow play from jurisdictions where online poker play is not illegal.

In his letter Sandoval wrote: "As a former chairman of the Gaming Commission, I understand how important it is that any bill that reaches my desk not create disharmony between state and federal law on this issue. Thus, I would hope that any bill passed will not facilitate the legalization of online poker before the federal ban is lifted, or encourage any action that would hinder the United States Congress's efforts towards the lifting of the ban."
Sandoval, in acknowledging the Justice Department's past ruling that online poker violates federal law ('the federal ban," as the governor referred to it), reflects the position that Nevada regulators and most Nevada casino operators have (that federal law bans online poker), disagreeing with a few Nevada operators, quite a few gaming lawyers and many foreign online poker site operators who think that federal law does not ban operators from offering or players from playing Internet poker.

Horne's AB 258 also says that licensing can't be denied to online applicants solely because they accepted action from players from the United States. That provision would prevent regulators from refusing to license online poker operators like PokerStars, Full Tilt and others that take bets from the U.S., a provision Horne clearly intended to allow the world's biggest online poker sites to get licensed here.

Sandoval wrote Horne that: "I would ask, then, that online poker companies be licensed in accordance with the same standards we apply for traditional non-restrictive gaming companies. No separate or lesser form of licensure should be enacted."
That means that Sandoval doesn't think that lawbreaking online poker sites should get a free pass excusing them from having to defend their decisions to allow U.S. players to play poker for money on their sites.

Sandoval also implied that he wants to make sure that a law would not allow existing online operators to gain a first-mover advantage against Nevada operators: "It is essential to the growth of our economy that we maintain a competitive gaming market. I would therefore ask that any bill passed not afford a competitive advantage (or disadvantage) to any gaming company or existing online poker company. Legislation on the subject of online poker represents the first steps on new ground. It is important that we begin from equal footing."

The upshot of Sandoval's letter is that Horne's bill, as is, has zero shot at becoming law. Sandoval would insist on federal action before Nevada allows online poker (a big hurdle, as I wrote in my last column). Sandoval also wants, if the federal hurdle is cleared and Nevada enacts a law allowing online poker licensing, regulators to be able to consider whether existing online applicants violated the law by allowing U.S. action. That's bad news for PokerStars, Full Tilt and others, and possibly bad news for Nevada-licensed operators who hope to partner with them when online poker is legalized.

Separately, the fact that PokerStars paid for "fact-finding trips" for at least three legislators will be another obstacle to passing a bill favorable to the sites that still accept U.S. action. Trips by Horne and Assemblyman Kelvin Atkinson (Commerce Committee chair) to London and Senate Majority Leader Steve Horsford to the Bahamas will bring additional scrutiny to AB 258 and to the legislators' actions in its support.

-- Jeff Simpson, April 2011


Read archived comments (7 so far)
April 12, 2011 11:39 AM Posted by Dave

What I don't understand is that, according to Section 5362 of UIGEA, it is lawful for states to allow intrastate online gaming as long as they have age- and location-verification systems. So Nevada really doesn't have to wait for the federal government to act:

If I was running a Nevada casino, I'd want to pass AB 258, work on getting the systems perfected with in-state customers, prove that online gaming can be conducted without scandal in the US, then press for federal action.

April 12, 2011 2:50 PM Posted by Paco

Online Poker Could Become Lawful in US Capital of Washington, D.C.
by Next Week

Lawmakers have until April 14 to object to a budget that permits Washington, D.C.’s lottery to operate a poker website accessible only inside district boundaries. While the population of the US capital is just shy of 600,000, becoming the first jurisdiction in the United States to legalize Internet poker would be seen as a huge step for the industry.

Two states, New Jersey and Iowa, failed to pass similar intrastate legislation last month. Nevada, Florida and California are still debating the idea.

April 12, 2011 2:59 PM Posted by Jeff Simpson

Dr. Dave, you're right about the intrastate possibility. The market is obviously small, but Nevada's population certainly has a high per capita propensity to gamble.
In 2001-2, when NV regulators were considering whether to allow Internet gaming after state lawmakers passed an enabling bill, age- and location-verification systems were significant issues, but the federal ban was the biggest hurdle.
AB 258 would have to be amended even more than it already has, and even then an intrastate system would have to compete against the much bigger player pools offered by offshore companies that take bets from the U.S.
I'm not sure how much interest operators would have in such a limited market. My hunch is the big Nevada players prefer to wait until they have access to players outside the state as well as inside. (They could have pushed for legislation in '07 and '09 as well, but didn't).

April 13, 2011 1:04 AM Posted by Paco

My understanding was that the bill was written to allow the companies to expand into nearby states if they legalize internet poker.

April 13, 2011 6:53 AM Posted by Jeff Simpson

I'm waiting to see the amended text of AB258 to see what language has changed (aside from the directive that federal approval must precede state action, reported from Carson City). I'll post a comment when the amended bill is posted on the legislative site, here:
The key elements I'm looking for are the provisions designed to allow Nevada licensure for PokerStars, Full Tilt and other U.S.-facing poker sites. If those elements have also been removed, the bill has a chance for passage in both chambers and Sandoval's signature. That would set up Nevada to quickly ramp up its regulatory regime if (and it is a BIG if) and when federal action allows online poker operators, regulation and licensing.

April 13, 2011 8:30 AM Posted by Jeff Simpson

Paco, yes the original bill, as I noted in my column in early April:
"At the state level, Nevada lawmakers are now considering a bill (Assembly Bill 258, or AB 258) that would direct the Nevada Gaming Commission to enact regulations allowing state casino operators to establish online poker sites which would be able to allow play from jurisdictions where online poker play is not illegal."
The comment above was referring to Dr. Dave's comment (first in the string) suggesting an intrastate regulatory regime as a placeholder in preparation for eventual federal approval and interstate/international operations.

April 15, 2011 1:59 AM Posted by Jeff Simpson

The Sun's D.C. reporter tackles the federal aspect of the story: