Online Poker Showdown: States Step Over Feds to Legalize iGaming

In the wake of a federal clamp-down on Internet poker, states are forging ahead with their efforts to explicitly legalize, regulate, and tax online poker. On Thursday, the Nevada state assembly unanimously approved legislation that would license and regulate online poker if and when the federal government explicitly legalizes online poker.

This stripped-down, caveat-laden version of the bill comes in the wake of the DOJ April 15 shutdown of prominent online poker rooms. Prior to “Black Friday,” several bills had been under consideration in the Nevada state assembly to legalize online poker, regardless of federal action.

The original bill, from which the current proposal was derived, would have given the Nevada Gaming Commission (NGC) the authority to develop and implement licensing procedures for interstate and intrastate gambling. Notably, the original proposal stated that the NGC could not deny operators simply because they had been operating in the states prior to explicit legalization — this is different from recent federal proposals which would have blocked foreign operators for at least two years or permanently if it is determined that they broke federal law by offering unlawful online gambling to Americans after the implementation of UIGEA.

Not surprisingly, PokerStars, one of the off-shore poker sites that was shutdown by the DOJ on Black Friday and would likely be barred from the U.S. under last year’s federal proposal to legalize online gambling. Reportedly, PokerStars contributed around $272,000 to political campaigns in Nevada, but most of the funds have been returned.

The approved bill calls for the NGC to develop rules for licensing and taxing by January 2012 which will be implemented only if the federal government passes legislation approving online poker.  This bill also requires that the online poker websites operate in a partnership with an existing gambling license holder or an affiliate that has been in business for at least five years.

And while Nevada has approved tentative plans for licensing and regulation of online poker, the District of Columbia is jumping in, regardless of federal legislation. Last month, D.C. regulators approved a budget proposal that included a provision allowing the D.C. Lottery to offer online gaming within the District. Congress had 30 days to respond, but did not.

After the time period for Congress to respond passed, D.C. legislators contracted Intralot, a company based in Greece, to develop and operate the poker software which will be available as early as June.

Michael A. Brown – D.C. Councilman Michael Brown, who pushed the online poker provision, estimates that D.C. online poker will bring in an additional $13-$14 million a year. Mayor Vincent Gray seems to support the move to legalize online poker.

“Assuming it’s implemented it would become a part of our lottery program and could generate additional resources for the District of Columbia as we continue to support ourselves,” said Gray.

While federal legislators remained mum during the official 30-day comment period, it is unknown if or how they plan to respond to the District’s attempt to offer online gaming since it appears that Department of Justice seems to believe it has a legal basis for shutting down such operations. One thing is for sure: online poker isn’t going away and if the federal government refuses to regulate the activity, the states will take it upon themselves to serve and protect their citizens… and get their cut of the millions of player-dollars that would otherwise disappear into the ether of the Internet.