Will ‘Harrah’ Reid’s online poker bill win the Congressional pot?

harrah-reid-online-poker-billNow that everyone’s had a moment to study the latest draft of Sen. Harry Reid’s Prohibition of Internet Gambling, Internet Poker Regulation, and Strengthening UIGEA Act of 2010, (which can be read in full here) the burning question on everyone’s mind is, of course, by what catchy acronym are we going to refer to it? PIGIPRSUIGEAA? How about just PIG?

The current scuttlebutt is that Reid will attempt (before the lame duck session of Congresss ends Dec. 17th) to staple his PIG onto the tax bill that Obama and the Republicans have just finished thrashing out. Obviously, this has a ring of poetic justice for all who grumbled when Sen. Frist used the same tactic in passing the UIGEA, and has many anti-gambling Republican hypocrites who celebrated Frist’s ploy in 2006 now crying crocodile tears.

The takeaways of the latest version of Reid’s bill are thus: following passage of the bill, all operators interested in applying for a license would have to exit the US market within 30 days. Then there would be a 15-month period in which nobody would be allowed to offer online poker to Americans. Precisely what Reid expects US-based players to do during these 15 months is unclear, but we’ll come back to this in a bit.

Following this ‘dead zone,’ there will also be an additional two-year exclusion for companies who have not owned/controlled a casino or racetrack in the five years prior to making their application. So homegrown casino concerns get a leg up while Full Tilt, PokerStars et al (plus Zynga, Facebook, Google) would be shut out for a total of 39 months following the bill’s passage. Not for nothing are some anti-gambling Republicans referring to the Nevada senator as ‘Harrah Reid.’

The question now arises as to whether this two-year exclusion might be skirted if a major land-based casino company were to acquire or assimilate an existing online poker company, but we’re sure savvy lawyers are already parsing the bill’s wording for wiggle room.

When issued, licenses will be for a five-year term. States which currently offer no legal gambling will have an opt-in clause; those who do currently offer gambling will have an opt-out clause. There will be a 20% tax on rake — six percent of this will go to the feds, 14% to the states. The hardware infrastructure for licensed operations must be located within US borders. The US player base is to be segregated from the rest of the poker world, much like a .fr site, for at least three years following the issuing of the first license.

Operators who continue to serve US customers after the blackout period goes into effect face prison sentences of up to five years, plus fines of up to $1m per day and forfeiting 50% of their rake to the IRS. Of course, the temptation to provide a lucrative lifeline to the poker-starved masses might prove too good an opportunity to pass up for some operators with bigger balls.

And so, with the clock ticking, the Congressional horse trading/back scratching begins in earnest. Estimates of Reid’s gambit getting enough senators on board to ensure its passage are at best 50/50. Of course, the usual anti-gambling suspects like Sen. Jon Kyl (R-AZ) have already expressed their determination to kill Reid’s baby in the womb. But there’s also a host of Democrats none too pleased that the tax bill to which Reid hopes to attach his baby extends the Bush-era cuts even for the super wealthy – a perk Obama pledged to kill while campaigning for the Oval Office. These irate Dems may find the notion of tacking on an unrelated gambling bill the straw that broke their spineless backs.

For the record, Calvin Ayre is predicting that this bill won’t be passed in this lame duck session, and as this bill is poker-only, it wouldn’t affect other channels in any way. It will also have no impact on the majority of international companies that currently offer services to the US market, as they will never be given a license, giving them zero justification for even going through the motions of applying for one. So it will be business as usual for them, plus they should be able to offer a product that is more competitive than anything the US companies can offer. It’s also interesting to note that this bill appears to offer the potential to let non-US residents play on these systems — you know, the same thing that the international companies are now allowing US residents to do, which has the US doing back flips under international law.