Examining Possible Online Poker Regulation Scenarios In The US

By James Guill

The legalization of online poker within the United States has been hotly debated since the passage of the Unlawful Internet Gambling Enforcement Act in 2006. A topic that has been equally debated is the method of which online poker should be legalized. Below we take a look at the two primary solutions as well as the interstate solution.

Individual State Solution – State by State

The first solution to legalized online poker in the United States is legalization at the state level. At present, there are two states in the United States that online poker is legal with those being Nevada and Delaware.

As it stands at present, with state legalization makes online poker legal only within the borders of the individual state. A governing body in the state is in charge of overseeing the game. In Nevada, the Nevada Gaming Control Board is in charge of online poker where in Delaware, the state lottery will be in charge of running the sites.

Under state legalization, a player will only be able to play with other players that are within the borders of the legal state. All methods of deposits and withdrawals are controlled by the state and player to player transfers are not allowed.

Also, with state legislation there could eventually be up to 50 different sets of regulations that sites choosing to operate within the US. In addition, a license must be acquired in each state, meaning that an online poker company must pay licensing fees and go through licensing processes in each individual state.

Federal Online Poker Solution

A federal online poker solution is considered to be more of a blanket solution to the issue of legalized online poker within the United States. Under a federal solution, a government agency would be setup to oversee the practices of the individual sites within the United States.

Under such a solution, an online poker site wishing to operate within the United States would only have to hold one license and that license would be good for all states that choose to operate under federal guidelines.

A federal solution will also include a clause that will allow states to either opt-in or opt-out of such a solution. The state of Utah has actually proactively passed legislation that opts them out of any potential online poker legislation from the federal government.

Interstate Online Poker Solution

A solution that is likely to materialize absent a federal solution is an interstate online poker solution. Nevada is currently already exploring such an option. Under an interstate online poker solution, states that have already legalized the game can join together to share player pool in order to expand their respective markets. Such contracts would be negotiated by the individual states.

Such a solution does not give online poker sites a blanket license such as a federal solution, which means they still must be licensed in each state. However, it does make online poker legalization more appealing to smaller market states that may not be able to support the game on their own.

Note that the interstate solution is really just a extension of the state solution. Online poker must be legalized in the individual states in order for those states to participate.

Advantages and Disadvantages for US Regulation Solutions

There are indeed distinct advantages and disadvantages to each solution and let’s take a brief look at each.

Advantages to State Solution:

  • Increased state control over online poker
  • Increased revenue to the state in the form of fees and tax money

Disadvantages to State Solution:

  • Up to 50 different sets of regulations
  • Online sites must apply and pay for licenses in 49 states (Utah has already outlawed online poker)
  • Many state player pools will be unable to support online poker

Advantages to Federal Solution:

  • One set of regulations that each state can adopt and follow
  • Online providers only have to go through one process to be licensed
  • Nationwide player pool potential

Disadvantages to Federal Solution

  • Reduced state control
  • States do not benefit from licensing fees and get reduced share of tax revenue

Advantages to Interstate Solution

  • Increased player pools versus state solution
  • States can still control their regulations of the game
  • Online sites have greater exposure versus state solution

Disadvantages to Interstate Solution

  • Online sites still have to hold multiple licenses and juggle multiple sets of regulations
  • Player pools still limited over federal solution

Which is the Best Solution for Regulating Online Poker in the US?

When looking at the question of which online poker legalization scenario is best, the answer is really it depends on which angle you are looking at it from. If you are looking at it from the aspect of players and online poker sites, the answer would be a federal online poker solution.

If you look at it from the angle of states wanting to control their own sites and get the lion’s share of revenue, then a state option that evolves into an interstate option would be best.

The quickest solution is clearly the federal online poker solution as it would be a blanket solution for the nation. Many thought that the DOJ’s opinion at the end of 2011 stating that the Wire Act only applies to sports betting would usher in a bevy of states legalizing online poker. That has not happened as of yet.

Much like state lotteries, online poker legalization at the state level will likely continue to have slow growth. Many states will likely wait and see how Delaware and Nevada fare. Barring a federal solution, do not be surprised to see Nevada team up with other states that legalize online poker in the near future.

Regardless of which solution that one prefers, a solution to the legalization of online poker is coming. How that solution is devised remains to be seen.