11/22/2012 12:07PM

Poker bill could shuffle up online gambling deck


Racing industry lobbyists will be keeping a close eye on Washington, D.C., during this year’s lame-duck session because of a push for a bill that would allow states to legalize online poker.

The bill has a decent chance to pass, according to lobbyists. Many supporters believe a bill expanding Internet gambling would only draw enough votes to pass during a lame-duck session, when support for the legislation isn’t likely to damage to election campaigns. In addition, the re-election of Sen. Harry Reid of Nevada to the position of Senate Majority Leader has emboldened supporters. Reid is the sponsor of the bill, in partnership with Sen. Jon Kyl, a Republican from Arizona who is retiring at the close of the session. Bipartisan support for the bill might not last past the 2012 session, so supporters want to strike while the iron is hot.

“Things that had to happen in the election happened,” said one lobbyist who spoke on the condition of anonymity. “Obama got re-elected, and Reid is still the majority leader. With Kyl retiring, we might not have a Republican champion next year.”

Reid, a Democrat whose constituents include the powerful casino lobby in his state, will control the bills that get heard in the Senate during the session, and some supporters believe he may attempt to attach the bill to legislation that will be up for quick passage if and when Republicans and President Barack Obama reach a deal on how to address the so-called “fiscal cliff.”

For the racing industry, passage of the bill would mean racing would face legal competition in the online marketplace for the first time. Gambling on horse races remains the sole legal online wagering practice in the U.S. because of a federal carve-out that racing has enjoyed since the establishment of laws prohibiting all other forms of online gambling.

Some supporters, however, contend the creation of legal poker sites would benefit horse racing, citing the anecdotal evidence that there is crossover between poker players and horse race bettors, unlike lottery or slot-machine players. As the theory goes, the legalization of online poker would allow horse racing sites to market online gambling on horse racing to a new audience.

The bill is supported by the American Gaming Association, the largest group representing gambling companies in the U.S. It is also being pushed by Churchill Downs Inc., which is eager to expand its existing online gambling platforms – twinspires.com and Luckity.com – to a potentially far more lucrative market.

Earlier this year, Churchill purchased a poker media company along with its related websites. In a prepared statement, the company said it is “supportive of federal legislation that would restrict online gaming to licensed, regulated operators.”

The National Thoroughbred Racing Association, which oversees the Thoroughbred industry’s federal lobbying efforts, has not taken a position on the poker bill, said the NTRA’s president, Alex Waldrop. However, the NTRA has indicated to lawmakers that if the poker bill were to come under consideration, it would need to contain provisions that would protect and enhance Thoroughbred racing, including language eliminating withholding requirements for large winning wagers, an increase to the tax-reporting threshold for large payouts, and clarifications on the legality of both international and interstate simulcasting. The NTRA made a push for similar provisions in 2010, when Rep. Barney Frank began a lame-duck push for a bill allowing for federal regulation of online gambling.

Waldrop said racing lobbyists have told lawmakers the poker bill needs to contain language providing for a “mitigation fund” if racing’s existing online gambling business is negatively impacted by the legalization of poker. It’s unclear how such a fund might be set up, but it could require online poker operators to set aside some of their profits as payments to account-wagering operators if betting through the sites declines after poker is legalized. (One lobbyist said the mitigation fund is a longshot at best, saying the argument behind the provision “is not resonant anywhere.”)

Although the bill would remove federal prohibitions on online poker, it would still reserve the power to authorize the practice to state legislatures. If a state were to legalize it, betting on any site would be restricted to residents of the states that authorized the practice.

The bill includes a restriction that would prevent any company from opening a poker site within 15 months of passage of the federal legislation. The restriction was added to “ensure a level playing field and prevent any one licensee from acquiring a ‘first-mover’s advantage,’ ” according to a summary of the bill circulated by supporters.

Opponents of the bill include the National Indian Gaming Association, which fears an expansion of online gambling would put its members at a disadvantage when competing with huge multinational corporations. In addition, some states that are opposed to the federal government deciding gambling policy have offered some objections, according to lobbyists.

Passage is almost certainly tied to successful negotiations over the fiscal cliff. Legislators are not expected to pass any bill other than general housekeeping issues until such a deal is reached. If a deal is not reached before the end of the session, it’s unlikely that any other legislation will get passed.

“It’s such a fluid situation right now that it’s very difficult to handicap,” said one lobbyist.

A racing official with close ties to lobbyists, speaking on the condition of anonymity, said that it’s unlikely the poker bill would be attached to any of the spending or tax bills that might accompany a deal over the fiscal cliff, since the negotiations are supposed to be “clean,” without any horse trading over unrelated issue. But Waldrop said he could not rule out the possibility the poker bill might be attached as a rider to one of the bills.

“I’ve heard it both ways,” Waldrop said.

Whatever the case, officials don’t expect the bill to pass after any lengthy debates or discussions. Instead, if leadership in both houses agree to support the bill, it will probably be fast-tracked in the waning days of the session, when legislators and the public are eager to start their holiday vacations.