Federal Versus State Regulation Of Online Poker
There has of course been a lot of talk about finally regulating internet poker in the United States. While most people have been focusing on this happening at the Federal level, with several bills being introduced to Congress, most notably by Rep. Barney Frank, I have said all along that this alone won’t bring about any regulated poker.
The role of the Federal government in all of this has always been their finally choosing to stand down and not look to interfere in the matter. In theory, it is true that there could be some federal scheme to regulate online poker, but in reality that is no more than a pipe dream right now.
Individual states hold the right to regulate interstate commerce, by way of the Constitution and its division of powers. The Federal government has the power to regulate interstate commerce, that which passes across state lines. However, the gambling itself would first need to reside within a given state, and this would produce the effect of having the Federal government as an overseer, should some aspect of the gambling be of the interstate variety.
For example, in the recent case of the state lotteries of New York and Illinois using an out of state payment processor, this aspect of the operation does potentially come under Federal regulation. In the recent case, the Department of Justice has finally decided that the Wire Act does not apply to non sports betting forms of internet gambling, then at the present time, the states are free to do whatever they want, as there is no current legislation regulating it.
At The Federal Level, It’s A Matter Of Non-Interference
On the other hand, it would be difficult to even imagine a purely federally regulated online gambling operation. This once again becomes a question of venue, and if the venue is in a particular state, the state itself has the essential regulatory power. When you add in the fierce opposition to online gambling that has emerged from more conservative politicians and states, to the extent that attempts to even have the Feds back off a little on their war against online gambling have clearly failed.
However, the role of the Federal government here is one of overseer, as the legal domain of each state ends at its borders, and when matters cross state borders, this is where the Feds come in. A lot of their role here is as a mediator, to ensure that all interests are protected.
In the case of internet gambling though, there is no clear role for them at present and the best situation we can hope for is that they step aside and allow each state to use reasonable measures toward self regulation.
Given the recent news here, remarkably, we have now achieved what Barney Frank and others have sought, and more, as their goal was to get the Federal government out of the business of interfering with people being able to play poker online. This obviously is a huge step.
State Regulated Internet Poker May Soon Be A Reality
What role that the Federal government may play in all of this is an interesting topic though and it remains to be seen what response we may see if and when state level regulation becomes a reality. Some states have made it clear that they are looking to recruit players beyond their borders, and it’s certainly in their interests to do so.
In order to prevent disagreements among states, schemes have been proposed where other states would have the option to opt in or out of the original state’s regulated scheme. It is not unreasonable that states may be able to decide these matters among themselves, although if any conflict did emerge, it would be the role of the Federal government to mediate them, and they would do so by way of new legislation, which may even include a prohibition on interstate gambling.
We have been very fortunate to have state lotteries being brought into the fray which has resulted in the Department of Justice finally declaring existing legislation such as the Wire Act and in turn the force of the UIGEA to the extent that it relies on the Wire Act to be of no effect. In other words, they finally have admitted that there is no federal legislation in effect which prohibits forms of online gambling other than sports betting.
So this has opened up a big door in terms of certain states’ willingness to enter the online poker arena, as they have been under threat by the Department of Justice to reconsider, and these threats have all been based upon the alleged applicability of the Wire Act.
So What About The UIGEA?
In the aftermath of all of this, the UIGEA still remains in effect as far as its prohibiting financial transactions involving illegal online gambling. By way of the Wire Act, illegal gambling would include bets on sporting events, but given that the DoJ has now stated that this Act is limited to sports betting, this changes everything.
So as far as online poker goes, the UIGEA is limited to transactions occurring or involving those few states who have legislation prohibiting online poker. Obviously, states looking to regulate online poker would not have such legislation, and they can also easily steer well clear of states that do, should they decide to expand their operation beyond their borders.
So there really isn’t anything stopping individual states from finally bringing regulated online poker into reality. While the events of Black Friday ground the progress that had been made to a halt, this recent ruling by the DoJ has not only re-opened the door, it has opened it much further than it has ever been.
The State of Nevada, who have been a leader in seeking state regulated online gambling, have immediately recommenced their preparations for regulation, and the expectation is that they will be rolling this out sometime in 2012. There still is concern about federal interference, although these concerns have now seemed to ease to the point where they no longer are seen as any real impediment.
So we’ll have to keep a close eye on what ends up happening here in Nevada and elsewhere, as the new reality sinks in more, but it appears very likely that we’ll finally see the breakthrough that we have been waiting for all this time, and a big foot may indeed get into a very heavy door that has very recently become much lighter.