Friday, April 22, 2011

Online Poker Op-Ed

Here's an op-ed about the online poker shutdown by my friend Joshua M. Schindler, a poker player and attorney from St. Louis...

Federal authorities in New York targeted three online poker companies last week, handing down indictments accusing their principals of running illegal gambling enterprises. Although these companies have always maintained they are not violating United States laws because poker is predominately a game of skill, and therefore does not constitute gambling, all three companies responded to the crackdown on Black Friday by suspending all real money play on their U.S. web sites. Interestingly, however, the companies targeted by the indictments still accept money from players in other countries, such as Italy, which regulate and license online poker.

For years, American politicians from both sides of the aisle have sought to clarify the status of online poker. Initially, brick and mortar casinos as well as many labor unions opposed online poker because they feared that an increase in online play would cost people jobs in Nevada. This was the attitude of people like Senator Harry Reid until just recently. Now, however, Reid believes that online poker will cure the ills that have befallen Nevada. And Senator Reid isn’t alone. Political opposites such as Ron Paul and Barney Frank also support regulating online poker, as do a majority of major casino operators, such as Steve Wynn and Caesars Entertainment, both of whom initially opposed legislation.

With support growing among elected officials and established casino operators, legislation almost passed in Congress at the end of 2010 that would have legalized, regulated and taxed online poker. Unfortunately, the legislation was taken off the table because of other issues, including the fight over the continuation of the Bush tax cuts.

However, as dust settles from yesterday’s political debates, it is worth asking why politicians from both sides of the aisle supported the legalization of Internet poker in 2010. The answer, simply put, is that many politicians have come to understand that millions of people want to play poker online, and that if regulated and taxed, such play will generate billions of dollars of tax revenue at the federal and state level.

Today, as the debate in Washington increasingly focuses on finding the right mix of spending cuts and new revenue streams to reduce the federal deficit, the regulation and taxation of online poker deserves another look. In fact, given the long term fiscal position of the United States, legislation on this issue is inevitable.

And that is why the indictments infuriate me and why I appeared on the Final Table radio show recently to chide President Obama for the Department of Justice’s action in New York. I am disheartened because the Department of Justice accomplished nothing by the indictments except to delay the implementation of much needed legislation.

Unfortunately, there is still plenty of ignorance on these issues among the general public. For example, my comments on the radio prompted one listener to accuse me of being a Tea Party Fox News wannabe pundit. Lest the listener be concerned, I am not negotiating with Fox to replace Glenn Beck. In fact, I generally support the Obama Administration, and until the indictments last week, I did not understand the anger which appeared to fuel the Tea Party. But, these indictments, and the raw emotion which they invoked in me, do make me more sympathetic to the Tea Party, and make me realize how the government can take a simple problem, and make it so complex that it will take years to unravel and solve.

Yet, even with the current mess created by the indictments in New York, the contours of a broad solution are not difficult to discern. After all, there is a growing consensus that Internet poker should be regulated and taxed, and there is a growing need for the tax revenue it is bound to generate. While it is less likely that there will be any easy agreement over the fate of the current online poker giants, such as PokerStars and Full Tilt, whose operations were targeted by the feds last week, possibilities for compromise do exist. Although the law in this area is unclear, I believe PokerStars and Full Tilt will prevail in the courts. But even if their legal position is ultimately vindicated, the indictments on Black Friday have already demonstrated that their U.S. business strategy, which was based on a belief the feds wouldn’t shove, was a bad read. Therefore, a fair solution in the industry would banish PokerStars and Full Tilt from the U.S. market for a year to allow their competitors, who played it safe and didn’t ante up, to gain some customers and level the playing field.

I applaud both Mr. Bharara and the leadership of PokerStars and Full Tilt, in putting aside their differences over the indictments and working quickly to insure that customers who had money with these sites could get their money returned. This agreement also returned the domain names to these companies to allow customers outside the United States, where online poker is legal, to continue playing. Hopefully, Absolute Poker will reach a like agreement. However, these agreements are only one step, and a small one at that, in the right direction. The law in this area is unclear and the unintended result of the indictments is that thousands of people who depended upon online poker for their livelihood now are among the ranks of the unemployed, and millions of Americans lost the right to engage in their hobby of playing poker online.

A legislative solution cannot be achieved without true leadership. President Obama must step in and ask Attorney General Holder to stay legal proceedings, which would undoubtedly be acceptable to the poker companies, to allow the legislative process to run its course. This would have the added benefit of allowing Mr. Bharara and his office to focus their resources on more pressing matters, such as prosecuting those people who created the housing disaster and working to thwart domestic terrorism.

And what does the President get out of this? For starters, he gets the thanks of millions of American poker players, helps create thousands of new jobs and generates billions of dollars of additional tax revenue which can be used for things such as a High-Speed Rail system. What do the Republicans and Tea Party folks get? They prove that they care about the rights of average Americans to engage in their hobby without the interference of the government. The states will benefit as well, as they will get desperately needed revenue which can be used for a myriad of things, perhaps even rehiring teachers who were laid off because of depleted local and state revenue. And finally, we, the American people, will actually get to see a government and a judicial system that respects our individual liberties and functions the way they should.