Updated: December 8th

Speculation about online poker legislation in the USA reached a fever pitch over the weekend. On Friday December 3rd, the Wall Street Journal released a report that Harry Reid was attempting to attach pro-poker regulation to must-pass legislation before the end of the lame-duck session (December 31st but likely before the Christmas break). I really hesitate to make a blog post about this topic because there seems to be a lot of noise and the situation is very fluid. In the end I thought I could get everyone up to speed on where things currently are, since online poker affiliates who cater to USA players could profoundly be affected (good and bad). This thread on 2+2 is probably the best place for general chatter if you want to follow on a minute by minute basis. You can guarantee within 1 minute of news breaking it will be there. We will also keep everyone updated at PAS.

According to some of the more “in the know” posters from the 2+2 thread, the bill’s chance of passing is around 30%-50%. It looks as though if it passes, it will be attached to must-pass legislation, similar to how UIGEA was passed, possibly as part of a package in the Bush tax-cut extensions bill that has been getting a lot of attention in the United States. Because the end of lame duck session is fast approaching, we should know within the next two weeks one way or the other how this will shake out. In 2011, it is believed that the legislative environment will be notably less friendly to poker. This might be regulated poker’s last chance for years in the US.

Major Parts of the Bill As it Currently Stands

Below I have compiled a run-down of the important points of the bill as I currently understand the legislation. Obviously, there is going to be much more to a bill that will have dozens of pages, but this hits home on the basics:

--The bill would clarify UIGEA and make it illegal for any site to accept USA players without a license.
--There will be a 15 month blackout period from the time the bill is passed until sites could accept USA players with a license. There were rumors that this may be lowered but it’s still included in the most recent drafts of the bill.
--Although not a part of earlier draft bills, sites that leave the USA market within the allotted time may reenter the market after the blackout period (they previously had to wait an additional time frame). This is widely believed to include PokerStars and Full Tilt, which will almost definitely abide by the temporary ban. UPDATE: This has changed again, and probably wont be changed back. They will likely have to wait additional time, along with other foreign operators before reentering.
--There is a 20% tax on collected rake and tournament fees that the poker site would have to pay. This bill does not appear to add any additional tax burdens on the player.
--At first, the bill would only allow Americans to play against other Americans, although the possibility is left open that this will be addressed again at a time in the future. This would be similar to the French and Italian models. So, for now, no international player pools.
--A handful of states will automatically be opted in based on if they currently offer live commercial poker. States can opt-in if they are not in the list and can also opt-out. The relevant part of the bill that addressed automatic state opt-ins:

Section 101(7)
"Currently, no law permits the offering of poker online; however, at
least 15 states permit licensed commercial gaming or, at a minimum,
poker, including California, Colorado, Delaware, Florida, Iowa, Kansas,
Michigan, Mississippi, Missouri, Nevada, New Jersey, New Mexico, Ohio,
Pennsylvania, and West Virginia."

Section 8204:
"Any State not identified in Section 101(7) of this Act
shall be deemed to prohibit the bets and wagers authorized
under this chapter"

Some Thoughts

It seems odd that in a bill like this they would have such loose language in Section 101(7). At the very least, the language of "at least 15 states" indicates there might be more automatic opt-ins. Granted, I don't have much faith in a bunch of states opting in on their own, but maybe the draw of increased tax revenue will be enough for cash-strapped states.

One purpose of this bill is to "clarify" UIGEA. What it does is make internet poker sites that accept US players after the bill passes 100% illegal under the law. If the past is any indication of future results, PokerStars and Full Tilt will leave the USA market in hopes of coming back 15 months later (or less if the language changes). Without any inside knowledge, my guess is that Merge and Cake are coin flips to leave (may depend on how likely they think they can get a license) and Cereus and Bodog will probably stay (I'm mostly using each site's previous handling of state issues to come up with these estimates). A site like Bodog or Cereus should be HUGE benefactors until the license system is in place. This alone would be a great argument for a decreased blackout period. FWIW, reports from the 2+2 thread indicate that Poker Stars and Full Tilt are actively supporting this bill (the benefits of offering online poker in a regulated market far outweigh the loss of revenue for up to 15 months). The reports of Howard Lederer's pro-Harry Reid robocalls before the November elections make a bit more sense now.

This bill "as-is" is definitely not ideal. Between state opt-ins (opt-outs are preferable) and a possible wait of up to 15 months, a lot of players are going to be shut out and better off under the status-quo. This will apply for at least the short term, and possibly long-term in states that have no hope of ever opting in (Utah, for instance). As I said above, I think some states were erroneously not included in the automatic opt-in list, but maybe there is something I am missing. That being said, there does seem to be a consensus that this is a fairly player-friendly bill and pretty close to the best that players could reasonably expect without a victory in the courts.

Affiliates will have some interesting questions to ask themselves if this passes. Do you continue to accept USA players during the blackout period? Will you get your Full Tilt players back under your tracker if/when they get a license? Do you get your old American players back from sites such as Party Poker if they come back? Will there be rakeback? Will affiliates even exist?

We can speculate but I don’t know if anybody knows the answer to these questions yet. The only thing I can suggest is to “Buckle up” if this thing passes.