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March-27-2007,
Poker Exemption to UIGEA May Not Serve Interests Of Sports Gambling Industry...By Jay Graziani

An article here at MajorWager.com nearly 5 months ago (http://www.majorwager.com/frontline-306.html) asked: "Can Online Poker Save the Online Gambling Industry in America?" This article mentioned a burgeoning group known as the Poker Players Alliance (PPA), as well as the increasing public acceptance of poker compared to other forms of gambling like sports betting or casino games. Recent events suggest that Internet gamblers agree that the poker angle is their best bet for legal reform, as they seem content in letting the poker players dictate the pace of resistance to UIGEA.

The PPA came together in 2005 as a backlash to legal efforts to restrict the growth of poker, particularly online. The group claims to have already influenced the political process - the defeat of online gambling opponent Rep. Jim Leach this past November has, in some circles, been attributed to negative press generated by the PPA. On March 5th, the PPA announced that former United States Senator Alfonse D'Amato had joined as Chairman. Not surprisingly, the positive press generated by this move caused a surge in PPA membership (reportedly now over the 200,000 member mark).

While D'Amato has stated that Congress should create a regulatory body for online gambling, the PPA is not focusing its efforts towards legalization of online gambling in general. In fact, the organization's publicly stated goal is to obtain a legislative exemption for poker within the structure of UIGEA, primarily by using the "game of skill, not game of chance" argument.

I find it hard to believe the new push towards a poker exemption will have any effect whatsoever. The "skill versus chance" argument does absolutely zero to address the stated concerns of regulators -- primarily the money laundering, problem gambling, and underage access issues. The UIGEA is not an anti-poker law or even an anti-gambling law. It is a "money laundering" law directed at financial transactions. It is not passing judgment on poker or any other game, and thus the "skill versus luck" argument is irrelevant in arguing against the UIGEA.

While success seems unlikely, a poker exemption to the UIGEA could potentially have benefits to the sports gambling community. It would mean we are one step closer to legalization (or decriminalization) of online gambling in America, and it would potentially act as a show of support for further legislation, including sports betting reform. It would give legitimacy to online gambling operators and the industry as a whole. And if, further down the road, an exemption allowed offshore money transfers to "approved" online poker rooms, it would possibly allow for the occasional "diversion" of funds to sports books by clever gamblers, possibly relieving some of the pressure currently being felt in the offshore money transfer business.

But a legislative carve-out for poker could in fact significantly impede the sports wagering industry in the long term. Most importantly, a carve-out could manifest itself in a number of ways, many of which may not benefit the majority of online gamblers. Intrastate gambling legislation (referring to internet poker contained solely within one State) seems like a simple concession, or at least as a way to defer the state versus federal government battle to another day. Gambling policy has traditionally been left to individual state governments, though in today's climate of near-absolute federal power, that is no longer a given. Intrastate online poker has been attempted before -most recently in 2005 in North Dakota, in a bill that sponsor Rep. Jim Kasper (R) plans to bring up again in the 2007 legislative session. For states that allow brick-and-mortar poker, jumping to an online platform might not be that much of a stretch, and much of the necessary regulatory structure is already in place to some degree.

Even the best-case scenario for an exemption -- completely open access to offshore internet poker -- might not solve the sports gambling problem. The sports gambling industry has a lot of other hurdles to clear besides just the UIGEA, with the Wire Act of 1961 and the Professional and Amateur Sports Protection Act of 1993 chief among them. Even if an exemption somehow, eventually allowed for legal transfer to offshore operators (an issue that would have to be addressed depending on the WTO ruling, due out any day), the U.S. government would certainly include in any regulatory scheme a prohibition against sports betting in order for an operator to be "licensed". The financial windfall to an offshore operator legally entering the U.S. market, as well as the potential for federal investigation and criminal and civil suits under regulation, would entice any operator to stick firmly to the rules and prohibit U.S. players from making sports bets or other illegal wagers.

Furthermore, individual state laws would still trump a federal exemption for players in those states. There are nine states with specific laws prohibiting online gambling (Illinois, Indiana, Louisiana, Montana, Nevada, Oregon, South Dakota, Washington, and Wisconsin). Furthermore, gambling laws in each state also control the games that may be played, and many of these apply specifically to poker or sports wagering. Just a year ago we were reading about home poker games being busted and charity poker events being shut down. Online poker is more problematic in resolving disparate state laws. Any eventual regulation scheme would have to account for the fact that you may not be able to play the same games online as your neighbor across the state line. It would also likely lead to an increase in anti-gambling legislative initiatives, particularly in conservative states.

Exemptions to the UIGEA are already in place for the gambling industry's biggest lobbyists: horse racing, tribal gaming, and lotteries. Fantasy sports games are even exempted. If poker manages to gain an exception, sports gamblers will be standing virtually alone in opposition to the UIEGA. With all other special interests satisfied, the chance of passing substantial internet gambling reform based on casino games and sports wagering alone seems very slim - the popular support is just not present.

Sadly, sports bettors may be better off placing their bets against the poker players this time. We might be better served by staying on the sidelines until a better legislative solution comes along.

03-27-07
Jay Graziani
MajorWager.com
graziani@majorwager.com



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