POSTED: 09:24 a.m. HST, Apr 29, 2011
LAST UPDATED: 09:27 a.m. HST, Apr 29, 2011
LAS VEGAS >> The indictments that led to three major online poker companies shuttering U.S. operations have provided an opening for American casinos to cash in on an industry worth an untold billions of dollars.
Casinos want to fill the void created by the crackdown to create their own online poker sites should the game become legal in the U.S., giving them tens of thousands of potential consumers who have seen their pastimes and livelihoods eliminated by the prosecutions.
Their argument: Americans are playing poker online despite attempts to stop them, so why not allow legitimate casinos to offer the game? They also argue that governments could clearly use tax revenue from poker games.
The push has gained momentum in the last week after billionaire casino mogul Steve Wynn and his counterpart at Caesars Entertainment Corp. spoke out in favor of clarifying federal laws to explicitly allow Internet poker.
Their advantage — if lawmakers ultimately see things the same way — is that it's unlikely PokerStars, Full Tilt Poker and Absolute Poker will be allowed back into the U.S. market while their executives face allegations of bank fraud, money laundering and running illegal gambling businesses.
Caesars CEO Gary Loveman told The Associated Press after penning an op-ed on the subject this week that the timing is right for casinos to publicly make their push.
"Our industry has to modernize itself in a way that allows its services to be provided electronically and not in these massively expensive brick-and-mortar facilities," Loveman said. "To speak to a younger audience, this is increasingly necessary."
Internet gambling was effectively banned in 2006 by a federal law that prohibited banks and credit card companies from processing payments from gambling companies to individuals. But it didn't clearly state what kind of gambling was illegal, and many believe it left the door open for states and companies to consider the issue.
"The policy up to now, which is no surprise to anybody, has been murky and arcane. Arcane is a good word from the SATs that means mysterious and unfathomable," said Wynn, the chief executive of Wynn Resorts Ltd. Wynn Resorts had a deal in place with PokerStars to partner in offering online poker to Americans if federal laws changed, but nixed the arrangement the same day the indictments were announced.
"Most everything in Washington is mysterious and unfathomable," Wynn told investors last week as his company reported its first-quarter earnings. "We're trying to figure out what the hell the public policy is and then we can have a corporate policy."
The Department of Justice has yet to pursue legal actions against anyone for playing poker based on the 2006 law. The recent charges dealt with allegations that the poker sites were creating third-party operations that tricked banks into thinking gambling transactions were legitimate.
"The word 'indictment' is not one that you take lightly. However, what they're indicting was the illegal activity of foreign operators in the United States," said Loveman. "The solution to that problem is not simply to send our law enforcement people out chasing foreign operators. The solution is to take a very simple pastime that's been around this country for hundreds of years, and allow licensed, regulated providers to provide it."
Senate Majority Leader Harry Reid, a former Nevada state gambling regulator who supported the 2006 law, shares that sentiment. Reid attempted to push a bill to legalize online poker at the end of last year, but it fell short. He said it's important that online poker is legalized in the next couple years.
"I hope we can get something done," Reid told the AP. "It's something that has to be regulated. The commodity is cash and we have to be very, very careful that we do it the right way when it deals with interstate commerce."
Players have heard that before, and while many have followed legislative developments, others didn't care as long as they could access the gambling sites.
John Pappas, executive director of the Poker Players Alliance, said the indictments served as a wakeup call.
"They feel like they've been trampled on by their government here, and they want to restore what they were enjoying," Pappas, whose Washington-based group of poker players pushes for legalization of online poker.
Alexander Ripps, a legal analyst for Gambling Compliance, a Washington firm that gives independent analysis of gambling markets and regulation, said companies like Caesars and Wynn have embraced the idea of online poker, while others have started to consider the issue because they think regulation is inevitable no matter what they think. Other smaller casinos fear that online poker will hurt revenue from their existing operations. American Indian casinos, which take in about the same amount of revenue as commercial casinos in the United States, have widely different views about online poker because of various issues, Ripps said.
Loveman and Pappas each said they prefer federal legislation over separate state-by-state laws because the business requires as many players as possible to make financial sense.
But Pappas said that the longer lawmakers wait, the tougher it will be to make online poker a success in terms of raising tax revenues.
"If lawmakers are serious about job creation and economic growth and reducing the deficit, we are handing them something on a silver platter that can help with all three," he said. "Any lawmaker who shies away from this issue — they'll be put on notice come Election Day."