December 9, 2010

 Washington, DC – Nevada Senator Harry Reid today made the following statement on the online poker bill he is working to pass.

“The online poker bill I am working on is good for the country and for Nevada.  Under the status quo, Internet poker is played by millions of Americans every day in an essentially unregulated environment, meaning no protections for minors, no respect for State law, no assurance that games are fair and honest, and no one to turn to if you’re defrauded.  Additionally, neither federal nor State governments collect a dime of revenue from this multibillion dollar Internet poker industry.

“The legislation I am working on would get our collective heads out of the sand and create a strict regulatory environment to protect U.S. consumers, prevent underage gambling, and respect the decisions of States that don’t allow gambling.  Experienced regulators already trusted by millions of Americans will maintain oversight and reputable operators with proven track records will provide a secure gaming environment for Americans.   Finally, the revenue and jobs from this multibillion dollar industry will stay where it belongs – here in America.

“I still have serious concerns about legalizing the broad range of casino-type gambling through the Internet.  The bill I am working on would make all other types of Internet gambling clearly illegal, while increasing penalties and strengthening the ability of law enforcement to shut down illegal sites.”

Following is summary of the online poker bill:

Brief Summary of the Internet Gambling Prohibition, Poker Consumer Protection and Strengthening UIGEA Act of 2010

            Online websites offering Internet poker and similar games have raised both consumer protection and enforcement concerns among Federal and State governments for over a decade.  Millions of Americans play online poker regularly, yet there is no U.S. regulatory structure to ensure the games are fair, that operators are screening underage players, and to prevent Internet gambling in States that do not wish to allow it.  The Unlawful Internet Gambling Enforcement Act (UIGEA) of 2006 was enacted to strengthen enforcement, but more is needed.  The Internet Gambling Prohibition, Poker Consumer Protection, and Strengthening UIGEA Act would provide a strict new regulatory framework overseen by proven regulators:

Place a Tough New Ban on Online Gambling Generally
            This bill makes it unambiguously illegal to offer Internet gambling services without a license issued under the Act.  Licenses are available only for Internet poker.  Upon passage, sites offering unlawful online gambling services would have to shut down within 30 days or be blacklisted from the licensing program forever.  Operators that ignore the new online gambling ban will face severe civil penalties and stronger criminal penalties.

Substantially Strengthens Enforcement of the Unlawful Internet Gambling Enforcement Act
The bill provides a critical new tool for the enforcement of the Unlawful Internet Gambling Enforcement Act (UIGEA).  The Treasury Secretary will be required to compile a blacklist of unlicensed Internet gambling sites with which payment processors are prohibited from dealing.  This list will be distributed to the financial services industry, will be regularly updated, and will help prevent unlawful Internet gambling enterprises from operating in the dark corners of the online gaming marketplace.

Strict Regulatory Framework for Internet Poker ONLY
            The bill establishes a program to issue licenses for Internet poker.  To prevent “gaming” of the system, the bill provides a strict definition of “poker” and allows regulators to review whether a given game offered by a licensee satisfies the definition.  Online poker operators, their management teams, and their significant vendors will be subjected to tough “suitability” reviews and ongoing suitability standards.

Time-Tested Gaming Regulators
            Since creating a new federal licensing regime for Internet poker will pose complex challenges, this legislation relies on the experience of time-tested gaming regulators.  State and Indian Tribes with an established track record of providing a well-regulated gaming market will take the lead in the new online gaming regulatory network. 

Specifically, under the new regulatory structure, the Secretary of Commerce would designate as “Qualified Bodies” state and tribal regulatory bodies with significant experience regulating gambling.  The Secretary would ensure that these Qualified Bodies do not have conflicts of interest and meet minimum standards, based on the standards and practices used by the toughest and most experienced gambling regulators in the country.  Additionally, the Office of Internet Poker Oversight, which is created by the Act, is designated as a Qualified Body for Indian tribes (though tribes may go to any Qualified Body).  These Qualified Bodies would be the primary regulators and issuers of licenses.  The Secretary would then serve as a backstop to oversee the Qualified Bodies and ensure there is no “race to the bottom” among regulators.  No Qualified Body may issue a license for 15 months to ensure that all Qualified Bodies have an opportunity to get their regulatory regimes in place before any issue licenses issue.    

Focused Regulators, Responsible Licensees
            It is important in the early years of the new legal, licensed Internet poker market that the regulators focus on protecting American consumers, not the intricacies of gaming law in numerous foreign jurisdictions.  Accordingly, for the first three years, licensees may take play only from players in the United States.  Additionally, in the first two years, licenses are limited to entities that already have proven track records of complying with strict gaming regulatory regimes.  The risk that such licensees would lose their very valuable gaming licenses ensures that these entities will have a strong incentive to strictly comply with the regulatory regime.  

Hold Internet Poker Operators Accountable
            This legislation requires licensees to establish vital consumer protections that prevent underage wagering, ensure safe and fair games, and provide safeguards for compulsive players.  Licensees also have to address the concerns of law enforcement by establishing controls to prevent money laundering and fraud while protecting the privacy of players.  The bill establishes a new list of persons self-excluded from playing Internet poker and promotes responsible gambling.

Respecting State Decisions Whether to Allow Internet Poker 
            Under the current environment, Internet gambling takes place in every State of the Union because the operators have no incentive to comply with State law.  The bill would restore power to the States by giving them the opportunity to decide if they will allow Internet poker.  Licensees must prevent gambling in states that have opted-out.

Respect the Role of Tribes in Gaming
            This legislation respects the sovereignty of Native American Tribes and preserves the important role they play in the gaming industry.  It recognizes the authority of Tribal courts and Tribal law on tribal lands.  Under the same rules applicable to States, the legislation would allow gaming Tribes to serve as “Qualified Bodies” – with the ability to issue licenses.  Under the same rules as applicable to casinos, gaming tribes would be able to serve as licensees.  The bill does ensure that there are no conflicts of interest, however – States and tribes may be regulators of Internet poker or licensees, but not both.  The bill requires the Secretary of Commerce to meaningfully consult with Native American Tribes during the implementation of the new federal regulatory regime and makes it explicitly clear that it has no effect on the Indian Gaming Regulatory Act.

Provide Much-Needed Revenue to States and Tribes
            The bill sets up a special licensing fee for Internet poker services, with most of the revenue being directed to the State or Tribe of the player, a smaller portion to the State or Tribe of the regulator, and a smaller portion to fund the federal implementation of the bill and enforcement of UIGEA.

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