Answers to Questions Surrounding Online Poker Regulation

Posted by James Guill on Sep 01, 2011 Posted in Poker News | 4 Comments »

Last week, Steve Ruddock wrote an article entitled “Why Online Poker Has Been Doomed in the U.S.”  In that article, he posed three questions that he now suggests is the true crux of the argument.  Today, I will give my opinions on those questions.

Question 1:  “Why is the government saying it is ok to gamble virtually anywhere in the United States, but no online?”

Actually, it is not legal to gamble in all 50 states.  Each state determines their own policy whether or not they will allow legalized gambling, lotteries, etc.  Some states, including Washington State have specifically outlawed online gambling.

Even if Congress were to pass a law stating that online gambling is ok, the states will likely still have the option to opt out of the law.  In other words, this is essentially a states issue.

As such, I think that if we begin to see more states embrace online gaming, we will begin to see a shift in Congress.  Remember thought that 13 states are against it.  That is already a big hole to climb out of.

Even if Congress passed the law, it still will not be legal to play online poker in all 50 states.

Question 2:  “Why is the government passing up the tax revenue and job creation benefits of legalizing online poker in the US?”

How many jobs do you think this will really create?  The majority of companies that will host online poker sites will be overseas.  A good chunk of the jobs created will be in other countries.

With that said, legalized online poker will create a noticeable number of new jobs in the U.S.  However, I don’t see it being enough to force Congress’ hand.

As to why Congress is passing up on the tax revenue, I still think that at a core level it comes down to moral and social stigmas placed on online gambling in general.  For many states, online gambling is still looked down upon.  Many congressmen would be going against the beliefs of their core constituents if they were to jump on board the online gambling bandwagon.

In other words, they are more concerned about keeping their own jobs and towing their moral lines than they are with what might be good for the country.

Question 3:  “Why is the government not regulating this industry; insuring the safety of the players who do participate in these games?”

There are a lot of factors that they have to consider with online poker legislation.  First, do they really exempt it from online gambling.  Can it really be consistently proven to their satisfaction that poker is not based enough in luck to constitute gambling?

Next, how will regulating online poker impact the already existing markets in states that have live gambling.  There are many areas that still claim online poker will actually hurt the economy.

Again, there is the social and moral implications to regulation.  Poker is still viewed as a shady industry, and sadly there is plenty of evidence to back that point up.

Also, just saying “let’s legalize poker” and passing a law is not enough.  The framework of how we will regulate the industry will still need to be setup.  Organizations need to be setup, regulations need to be created, and the people need to be put in place.  Even when Congress passes any type of online poker bill, it will still be months, maybe even years before the first hand will be legally dealt in a government sanctioned game.

Essentially, when it comes to online poker, the only thing I can recommend to players is to be patient.  Will online poker legalization happen?  I think it will, but not as quick as many people think.  My line is still 2013 to 2014, and even then, I think you will see up to half the country still opt out.

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4 Responses to “Answers to Questions Surrounding Online Poker Regulation”

  1. Steve Ruddock says:

    My rebuttal to your rebuttal 🙂

    #1 — But it is ok to gamble virtually anywhere in the US. Forget the fact that only 7 states don’t have lotteries and that 34 states license casinos. Even if your state disallows gaming there is no law stopping you from crossing into a state that does offer a state-run lottery and buying a ticket, or travelling to a casino in Connecticut from Massachusetts.

    #2a — Ah, but you are forgetting the huge number of professional online poker players (probably near 100,000 [1% of the estimated 10 million online player in the US] that earn some amount of income from online poker), the industry around them (***that would be us***), as well as the few hundred people each site would have to hire locally (I believe Full Tilt employed over 500 people in Ireland). I would estimate that figures will show at least 100k jobs and probably closer to 250k jobs would be created by legalizing online poker.

    #2b — I noticed you glossed over the tax revenue part there, changing the subject to morality 🙂

    #3 — this is exactly my point. the government needs to get on with it and do their actual job, which is necassary regulation. the longer they drag their feet the worse it gets. If instead of UIGEA in 2006 we were handed a regulatory framework it would be fully in place by now with most of the kinks worked out!

    I’ll take the under on a bill making it through Congress by 2013, and the under again on 25 states opting out.

  2. James Guill says:

    #1 – And that is what will happen with those playing online poker after it becomes legal. They will play in states where it is legal.

    #2a. I think your estimation is way over in that category. I won’t get into a debate on what makes a true professional, but I think that number overall will be more like 50k.

    #2b. Yes, I changed it because that what it is for some.

    #3. I don’t disagree with you there. But this is the government we are talking about….

    I hope you are right about the under. I don’t think you will be…but I hope you are.

  3. Steve Ruddock says:

    Adding to point 2a: The debate about what makes a professional ($20k/year, $50k/year, $100k/year) is irrelevant, because regardless of the amount you make from online poker you are SUPPOSED to declare it on your taxes. So if you were to take the top 100,000 winners in online poker my estimation is that they are averaging amongst them <$25k per year. Whether you want to call them a professional player or not is a matter of semantics, at the very minimum it's a part-time job --which counts as employment 🙂 This doesn't even inclue the secondary jobs that would be created. Just like the people who make nuts and bolts that are used at GM and Ford, there is an entire industrial structure that has formed around online poekr sites. From affiliates, to content writers, to SEO specialists, these people are employed because of, or making a good deal of income from, online poker. If online poekr legislation wasn't in the works there is no way all of these lobbying groups would be sprouting up backed by major casinos (privately of course). You also wouldn't have Steve Wynn, Ceasar's , and other major players ready to throw their lot in --writing op-eds, forming alliances with overseas busineeses, etc.

  4. James Guill says:

    My rebuttal to your rebuttal with a side of fries and now including a crazy critter.

    I agree with half that last statement. Support jobs for the sites will definitely be created.

    However, I disagree with the average of $25k per year from online poker winners. I would estimate closer to $5k.

    At the same time, remember that self-employment is considered a business, which means paying taxes, including what a normal employer would pay. That is one reason you don’t see many winners pay taxes.

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