NY Times Says Gaming Profits Won’t Be Enough; Online Poker No Sure Thing
New York Times Reports Intrastate Gaming Profits May Not Be Large Enough To Solve Problems
By Earl Burton
Earl writes for the super poker website www.pokernewsdaily.com
The New York Times is reporting that some states, while willing to open the doors for online gaming and poker within their borders, will not see the windfall revenues that would be necessary to solve critical budget issues.
The article, written by New York Times writer Michael Cooper, examines the profits that states that are considering legalizing and taxing internet gaming might be able to pull in. Cooper starts by detailing out how the lotteries of different states – and especially the multi-state lotteries such as PowerBall and the Mega Millions – now draw in around $18 billion per year four decades after their launch. The money that the states would make from online gaming and poker, however, would be much less, Cooper observes.
Cooper looks at the latest study by the state of Iowa, which found that the taxation of online gaming and poker would not make a significant mark in budget considerations. The Iowa Racing and Gaming Commission study suggested that a licensed online gaming operation in the state of Iowa could pull in somewhere between $13 and $60 million annually from regulated online gaming inside the state. With the state tax rate in Iowa of 22%, that would result in somewhere between $3 million and $13 million into the state coffers.
When it comes to the state of California, the most populous state in the United States, the profits of online gaming might be larger, but would not even impact the significant budget shortfall that the state faces. Supporters of the legalization, regulation and taxation of online gaming in the Golden State say that it would bring in between $100 million and $250 million per year. Those profits, however, pale in comparison to the state budget shortfall, which is expected to reach $9.2 billion this year.
Still, the impact of online gaming and poker regulation in California would help, according to Cooper. He quotes California State Senator Lou Correa as saying, “$250 million will buy you a lot of teachers. Half a billion buys you even more teachers. The budget deficit is tremendous, but you take $500 million here, $500 million there, and pretty soon you’re talking (some) serious money.”
What may be significant in the discussion regarding the legislation of online gaming and poker could be the proposals to follow what happened with the lotteries. While an individual state may not have a sizeable enough population to make online gaming profitable, if they were able to enter into multi-state operations – as many in the legislatures and legal committee believe may be allowed – then the profits could be maximized, much like the lottery system that has grown over the past forty years.
The thing that may thwart the individual states is the potential for legislation from the federal government. Although there is only one bill from Texas Representative Joe Barton even being discussed in the House of Representatives (where it has not come for a vote), Senator Harry Reid made noise over the past weekend in stating that discussion in the Senate is “making progress” and that the issue of regulation of online gaming should be left to the federal government, rather than the states.
“We cannot have a series of laws around the country related to gaming,” Senator Reid stated to Gambling Compliance on Sunday following an appearance on the political talk show “Meet The Press.” “I know a lot about gaming (and as) a former chairman of the Nevada (Gaming) Commission, I think it’s very important that we have a national law.”
Senator Reid has joined with Senator Jon Kyl, the outgoing senator from Arizona who has long been against online gaming, in pushing the discussion of regulating the online gaming market in the United States, but it is unknown how close they actually are to any proposed legislation.
Although Nevada has regulations in place for a legalized online poker market, licenses have yet to be issued. No state has, as of yet, moved forward with any plan regarding online gaming. So who will get there first – the states or the federal government – in solving the online gaming question?
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Editorial: Regulated Online Poker For The U. S. In 2012 A Difficult Bet
By Earl Burton – Jan 15th, 2012
The opinions in this editorial do not reflect the positions of the ownership or management of Poker News Daily.
Since the announcement came down in December from the U. S. Department of Justice, changing their stance on the usage of the Wire Act of 1961, the online gaming world – and particularly the online poker community – has been abuzz as to a fully regulated and licensed online poker world coming back to the United States in 2012. Unfortunately, that will not likely happen on the federal level during the course of the coming year and, even on the state-by-state level, it still could be a difficult bet.
On the federal level, there has been a great deal of discussion regarding the subject of legalized online poker. A House subcommittee held two hearings on the subject during the fall of 2011 and those hearings were somewhat positive, with everyone in attendance seemingly agreeing that regulation was a necessity. With that said, the only legislation that is currently being proposed – Texas Representative Joe Barton’s “Internet Gambling Prohibition, Poker Consumer Protection, and Strengthening UIGEA Act of 2011,” or H.R. 2366 – has not been acted upon either by the House subcommittee or even seen movement towards a full vote in the House.
The hearings also brought out some of the issues that online poker regulation will face in its attempt at passage. The Indian tribes, for whom brick and mortar casinos has been a goldmine, aren’t keen on the regulation of the industry because they will not have the financial ability to be a major player, unlike the gaming companies in the United States and their billion-dollar bankrolls. Even the gaming companies of Las Vegas, who would figure to be the frontrunners for any potential licenses, can’t seem to get on the same page regarding the subject (more on that in a bit).
The proposed Barton Bill may also be something that online poker fans wouldn’t want. A close look at the bill’s title states it “strengthens the UIGEA.” Under the Barton Bill, if an online gaming or poker operation wasn’t licensed by the federal government, it would be an “illegal” operation and subject to blocking and/or seizure by the U. S. government (no word on how they would handle players on such sites). Thus, there would be a handful of operations that American customers would be able to play on and, more than likely, they wouldn’t be the recognizable online poker company names in the industry at this time. (Add in the “opt-out” option for individual states and the customer base goes down even further.)
Even if Representative Barton’s bill was to get out of committee, there are still major hurdles that it would face. The Republican dominated House has several stalwarts against online gaming in general in the form of House Majority Leader Eric Cantor of Virginia and Spencer Bachus of Alabama, who have been the most vocal in their opposition. Because of their positions, they can block legislation that they disagree with from coming to a floor vote in the House.
If the Barton Bill would somehow work its way out of the House, the Senate would then have to take up the subject. Without corresponding legislation in the Senate, however, it is unlikely that it would even come to the floor in any manner. As such, the Barton Bill would languish in the purgatory of Congressional procedural process.
Alas, it is also a Presidential election year. While we involved in poker do not believe that the online version of the game is a grave threat to America, simply taking a stance on the subject – whether through a Congressional vote or even a stance in an e-mail to a constituent – could sway a potential voter’s opinion of a candidate (the entire House is up for reelection, while one-third of the Senate is looking to get reelected). Thus, it is highly unlikely that the federal government will make any moves towards online poker regulation during the course of 2012.
So what about the potential for state regulation of online poker? For that to actually come into play, the potential licensees for such operations – currently existing gaming companies or poker rooms – would have to get on the same page regarding the subject. In Las Vegas (where the NGC has regulations ready to go for an intrastate operation), the major players have been divided.
While Caesars Entertainment’s Gary Thompson and MGM Resorts CEO James Murren have been actively advocating for online gaming in the United States on the federal level (Murren actually is on record that online gaming regulation “will pass” in 2012), the M Resorts president Anthony Marnell and Las Vegas Sands CEO Sheldon Adelson have been just as vociferous as to their opposition (Adelson, a major Republican contributor, stated he had a “moral opposition” to internet gaming). The gaming companies would also rather see the legislation of the industry on a federal ground, rather than having to compete for fifty different sets of regulations regarding the industry.
In California, the largest state in the United States and one that has dabbled with online poker regulation, Democratic Governor Jerry Brown is “skeptical” that any potential revenues from gaming regulation would be substantial. On the state level, the poker rooms (which figure to have the financial capability of opening up online poker rooms) and the Indian tribes are warring as well, due to the Indian tribes not having the financial ability to compete on the level of the established poker rooms.
Other states, including New Jersey, Iowa and Florida have all flirted with the regulation of the industry, but nothing has come of those flings as of yet.
All of the current hubbub regarding online gaming – and, in particular, online poker – regulation should continue to brew throughout the coming year. Nevada may move forward with its intrastate network (and potentially other states), but it would be an option that its citizens may not partake of, especially when they can just go around the corner from their home and find a game. While the DoJ decision on the Wire Act has opened the door for so much, there will probably be very little done regarding the regulation and licensing of online gaming and poker operations in the United States for the entirety of 2012.
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