News analysis: US gaming gets political
What appeared to be a strong partnership between Harry Reid and Jon Kyl to smooth the path to a federal online poker bill has begun to show cracks in recent weeks.
To say Senate Majority Leader Harry Reid and Senate Minority Whip Jon Kyl’s federal online gambling bill was highly anticipated would be an understatement. For many in the industry, the politicians from opposing parties represented the final chance to get a law passed in Congress.
The pair have seemingly forged a strong relationship in recent months despite differing motivations, with Reid aiming to help Nevada strengthen its position as the country’s gambling hub and Kyl keen to strengthen the Wire Act. Negotiations have continued behind the scenes to finalise the details of the bill they hope will garner enough cross-party support to make it through to a vote in Congress.
But, politics being politics, the relationship has recently shown signs of strain, with Nevada Senator Dean Heller, the man charged with recruiting Republican support, speaking out against Reid and accusing him of prioritising the success of Democrat Shelley Berkley “ standing against Heller in the state Senate elections “ ahead of the bill’s success. A win
for Berkley would smooth the path for Reid to retain his much-loved role in charge of the Senate.
Heller told the Las Vegas Review-Journal: “We have a major problem, in that Harry Reid would rather have Shelley Berkley win this race than have this bill pass. I told the industry that three months ago. And if someone would have told me this was going to happen right before the election I wouldn’t have been surprised. And I’m not surprised. This is all politics.”
The bill, as many predicted, permits onlinepoker, online lottery ticket sales and off-track horserace betting. Likely to be introduced after the 6 November presidential election in the lame duck session, which ends on 31 December, the Internet Gambling Prohibition, Poker Consumer Protection and Strengthening UIGEA Act of 2012 also proposes a reversal of the Department of Justice’s opinion of the Wire Act in December, which opened the door for states to legalise egaming individually.
Reid is believed to have gained the support of 45 Democrats in Congress for his legislation and set Heller a task of securing the votes of 15 Republicans, which would ensure a majority should the bill be introduced before the October recess.
Public disputes
Yet, in the first of a series of public wranglings, Heller wrote to Reid criticising the deadline he set to muster the required support, claiming that it not only was too soon, it had not even been agreed in the first place. Heller argued the legislation should initially be introduced in the House, rather than the Senate, which Reid pointedly disagreed with, wanting to retain as much control over the bill’s progress as possible. Arizona senator Kyl waded into the disagreement, standing up for his fellow GOP member by saying “if the Senate acts first, the House will feel itself jammed, and [the bill] wouldn’t go anywhere”.
In the midst of this political gunfight, the details of the long-awaited bill were leaked “ supposedly by Heller’s staff “ with many people suspecting the Republican of doing so in order to exact revenge on Reid. One prominent gaming lobbyist, however, told eGR that while the political tug of war isn’t helping matters, the biggest hurdle for the bill at this point is the current congressional schedule. “I think the compressed and hectic nature of any lame duck session is much more of a hurdle than some spats between Reid and Heller. They are basically done for this month, off to the campaign trail and then the election, which leaves the lame duck, which will either be very unproductive or focused very much
on expiring tax and economic issues.
“Furthermore, an online poker bill will not move as a standalone bill; it needs something larger to which it can be attached. I am not sure that such a legislative vehicle will present itself in the lame duck for inclusion of an online poker bill. I don’t think that those recent spats mean much other than some campaign needling. I don’t think there is much closed door activity now; the focus here is increasingly on the campaigns. Everything else will have to wait until after Election Day.”
Opposition
Under the proposed legislation, states will have the chance to opt-in to a licensing scheme, with Native American tribes only having the opportunity to offer online poker if the state in which they operate has opted-in. Yet we can be sure tribes won’t go down without a fight. The Senate Committee on Indian Affairs drafted its own proposed bill in July, written in language that explicitly protects their own business interests they fear will be damaged bywidespread egaming, and are likely to oppose Reid and Kyl’s efforts.
Michael Lombardi, chairman of the Augustine Band of Cahuilla Indians Gaming Commission, which is a member of the California Online Poker Association (COPA), says the bill will face “massive” opposition from tribal groups. “We believe the bill is still in play. Is the bill good for tribal country? It might be good for about half a dozen but the rest get screwed, and anyone from tribal country lobbying in Washington for this bill is a traitor. Our (COPA’s) main objective is to protect our own interests in California; we’ve seen this coming for years and we know it really only benefits a handful of major brands in Nevada.”
Tribal groups will hope their ally in the House of Representatives, California Republican Mary Bono Mack, will stay true to her word that should the bill reach her commerce, manufacturing and tradecommittee, she will ensure Indian tribes will have the ability to opt out and retain control of their own egaming future.
Lombardi also suspects Reid, along with Nevada powerbrokers, has a certain strategy in mind “ alluded to in the bill’s licensing scheme “ planned to suit the large, entrenched casinos. “The bill allows for other states to form compacts and I can envisage a scenario that mirrors the Powerball model [the interstate lottery combining lotteries from 41 US jurisdictions] whereby Nevada acts as the central hub and other states simply sign up to be part of it. And there is no place for tribal casinos in this model.”
In the charismatic figure of New Jersey State Senator Ray Lesniak, who for the past three years has been pushing for the regulation of not just online poker but other forms of egaming in his home state, Reid and Kyl’s bill faces staunch opposition.
When the details of the bill were leaked, Lesniak swiftly appealed to New Jersey’s Congressional and Senate delegations, including Governor Chris Christie, to help fight the bill in Washington. “Reid’s bill would do serious damage to Atlantic City’s chances of recovering from its slump,” he says.
“I still intend to achieve my plan to regulate online gambling in New Jersey as soon as possible, which would attract an additional $200m of gross revenues a year for the casino industry and also present a huge opportunity to allow the casinos to market Atlantic City to new customers over the internet. Kyl and Reid are trying to take that away from us.
“The original intent of Reid was to have federal gaming centred in Nevada. He hasn’t achieved that so he is now trying to stop states like New Jersey from going forward with regulation of their own, which would make his job far more difficult in the future.”
Last hope
With a handful of federal bills having already failed to gain traction, for those still gunning for Congress to regulate online gambling, the partnership of the powerful Reid and the retiring Kyl is seen as the final hope of getting the job done. Congress has been under pressure to act for several years, with many arguing that a state-by-state regulation model is an unnecessarily messy and fractured solution to solving the problem.
Indeed, Kyl and Heller aren’t the only Republicans to try to clear a federal path, with Texan Congressman Joe Barton introducing his own poker-only bill in June 2011. And despite the opposition mentioned, a federal take on online poker legislation has attracted a great deal of support from other quarters, many of whom argue that states aren’t equipped to handle the complexities of overseeing a online gambling market.
The Poker Players Alliance, whose executive director John Pappas has called for Congress to introduce a blanket law to ensure a minimum level of protection for players, has been a vocal advocate. “The PPA continues to support a federal solution for an online US market because we believe this is thebest path forward for the government to establish a
consistent and regulated marketplace, while offering an authentic poker experience for Americans to play online,” Pappas told eGR in August.
Meanwhile, some of the country’s largest and most powerful casino groups will be right behind Reid and Kyl’s efforts. According to sources, Nevada Senator Brian Sandoval has held urgent talks with Vegas stalwarts Steve Wynn and Sheldon Adelson to get behind Reid’s bill, while Caesars, a dominant presence in Nevada and Atlantic City, has previously lobbied hard for a federal bill alongside the likes of MGM. Both know such regulation would see them
extremely well-positioned to leverage their strong brands and lead the online poker market.
Unfortunately for those banking on a clear path to federal online gambling law, the public spats have dampened hopes of a resolution this side of Christmas, with attention now turning to the middle man, Dean Heller. If he and Reid can put their political differences to one side, and his argument wins over enough influential Republicans, progress may be in touching distance.
But as the gaming lobbyist says: “It’s important to note that the draft is just a draft. Should it get some traction, the real negotiating will start… then the horse trading will really begin. The draft is the first step of a long game.”