On August 6, 2009, New Jersey Senator Robert Menendez introduced a bill (S8309). Also this week, a Canadian was indicted in New York federal court for processing $350 million in poker and other payments to player. What’s the connection? These two events neatly juxtapose the current posture of law enforcement against the likely future of online poker.
In the last session of Congress, Rep. Robert Wexler and Sen. Robert Menendez introduced internet skill/poker legalization bills that went nowhere. The current bill would impose a 10% tax on all player deposits and the proceeds would be split evenly between the federal government and the state where the player was situated. The bill requires that all license applicants demonstrate suitability, solvency and social responsibility, three criteria that I discussed in my interviews at CardRunners. The Menendez bill is different from Rep. Barney Frank’s bill, which would legalize all qualified online gambling operators except for sports wagering and should be in the spotlight again in September.
A number of commentators on these recent bills have remarked that prospective tax revenue flowing from online poker is too juicy for the state and federal governments to pass up, particularly in these times of high deficits. When forced between cutting spending and raising taxes, it is nearly axiomatic that most of our elected officials demonstrate bipartisan support for the latter over the former. Generating new tax revenue should be attractive to Washington and cash-strapped states, but beware the government agency that is at least one step removed from real-world fiscal problems and the political implications that follow them: the U.S. Department of Justice, and its state counterparts.
Consider the state of Washington, for example, where online poker playing is criminalized as a class C felony, equivalent to rape. In Rousso v. Washington (2009) a poker player/lawyer challenged unsuccessfully the constitutionality of this bizarre law, largely because it interfered with interstate commerce.
In North Dakota, an attempt was made to legalize interstate state licensed poker. The bill died when the U.S. Justice Department declared in 2005 it would be unlawful. In California an intrastate poker bill died in the past legislature partly due to U.S. Justice Department opposition. In the near future, an intrastate online poker regulation bill should be introduced and stands a better chance of becoming law because of California’s desperate financial situation and the Obama Administration’s policy of not interfering in intrastate matters.
The U.S. Justice Department in June seized over thirty-million from payment processors in poker player monies going from the operator to the player. The U.S. Justice Department has long insisted that all interactive gambling, including poker and interstate horse racing (which currently exists in about 29 states) was illegal. In seizing the monies the Justice Department did not rely on UIGEA for various reasons and instead utilized the Anti-Gambling Business Act and the Anti-Money Laundering Act, which are “catchall” statutes. The seizure is being contested by the effected payment processors and by various pro-poker groups.
I mention recent prosecutorial actions and the legislative developments to illustrate the fact that two trains are on a collision course. One is winding through congress, and the other is driven by The Prosecutor. Somebody is bound to get hurt.
