Reid-Kyl Bill Would Legalize Online Poker at Federal Level

by Ifrah PLLC

A draft of the online poker bill that Sen. Harry Reid (D-Nev.) and Sen. Jon Kyl (R-Ariz.) plan to introduce was released this week. The bill, known as the “Internet Gambling Prohibition, Poker Consumer Protection, and Strengthening UIGEA Act of 2012” would legalize online poker at the federal level, a step that became possible last December when the U.S. Department of Justice released an opinion stating that the Wire Act does not apply to online poker.

The bill provides an opt-in structure, in which states have to affirmatively choose to participate in the online poker program. A state would be considered to have opted in if it has passed a law legalizing online poker. Thus far, only Nevada and Delaware have passed such laws. An Indian tribe is considered to have opted in if a designated authority of the tribe submits written notice to the Secretary of Commerce saying so. Money could only be accepted from players located in those states or tribal lands at the time they are playing.

The bill would create an Office of Online Poker Oversight within the Department of Commerce to regulate the industry. The Secretary of Commerce would need to designate, not later than 270 days after the enactment of the bill, at least three state agencies or regulatory bodies of Indian tribes that are considered qualified bodies to regulate online poker. If there are not three bodies qualified, the Secretary will designate all state bodies that fit defined criteria including:

(1) A reputation as a regulatory and enforcement leader in the gaming industry.
(2) A strict regulatory regime.
(3) Regulatory and enforcement personnel with recognized expertise.
(4) Adequate regulatory and enforcement resources.
(5) Demonstrated capabilities relevant to the online poker environment.

In making determinations under those criteria, the Secretary is also to consider the number of years that the agency has directly regulated casino gaming, the size of the gaming market that has been regulated, and the demonstrated ability to evaluate complex gaming technologies, among other things.

No game other than poker would be allowed under the bill, even if it is licensed by the state. A state could still legalize other games under their own laws, but this law would not allow them to operate those games interstate. The bill has a carve-out that allows interstate bets on horse racing to continue to operate legally, as well as an exception to allow lotteries to sell tickets online.

The bill would impose a fee of 16 percent tax on revenues generated from online poker. The money generated from this tax would go to a fund known as the “Online Poker Activity Fee Trust Fund.” Seventy percent of the money in that fund would be given to the states or Indian tribal governments where the player was located at the time he played. The other 30 percent would go to the state that issued the license to the site where the money was generated.

For five years after enactment of the bill, no person may be considered suitable for licensing if the person owned or operated an Internet gambling site that accepted bets after December 31, 2006. Such persons are referred to as “covered persons.” Additionally, no assets that were used to take bets after December 31, 2006, can be used for five years after the bill’s enactment. This provision effectively excludes all companies that were shut down by the federal government on “Black Friday” in 2011.

An individual that is considered a “covered person” may apply for a waiver from the Office of Online Poker Oversight and would need to show by a preponderance of the evidence that the person did not violate, directly or indirectly, any provision of federal or state law in connection with the operation or provision of an Internet gambling facility. A similar waiver process exists for tainted assets. The bill also states that a previous criminal proceeding will not be considered in the waiver process.

The bill would prohibit the operation of public Internet parlors where devices are made available primarily for online poker.

There is no provision in the bill that requires a licensee to own a casino, a proposal that had been considered in some online poker legislation.

Criminal penalties of up to five years in prison can be assessed under the bill to operators that violate certain provisions.

We are glad to see that legislation that would legalize online poker is being considered on Capitol Hill and has reached a draft stage. This draft could change significantly over time, but the bill in its current form may face steep opposition.

Several objections are possible. First, many states have recently explored the idea of legalizing online poker, with the intent of possibly generating significant revenue. The language of this bill would take a significant amount of that potential revenue generated from online poker away from the states.

No state other than Nevada, Harry Reid’s home state, has developed its own regulations to govern online poker, or given the criteria listed in the bill, would be considered qualified to regulate online poker.  The state that issues the license gets 30 percent of the revenues generated from online poker, which would likely all go to Nevada. States may not support such a large percentage of the money generated going directly to Nevada.

In addition, the provision barring all operators who took bets after the enactment of the Unlawful Internet Gambling Enforcement Act of 2006 is too draconian and could be vulnerable to a constitutional challenge. Finally, the 16 percent fee on revenues generated from online poker is very steep and may face opposition from operators.

It also remains unclear what level of support an online poker bill would have in the lame-duck session of Congress. As Senate Majority Leader, Reid has the ability to dictate the legislative agenda to some extent, but it remains to be seen if he will be able to generate the votes needed to pass the bill. Kyl, although he will be retiring after this term, is the Minority Whip in the Senate and could also help rally support from Republicans. If it seems unlikely that a stand-alone online poker bill could generate enough support in Congress, there may still be an alternative. Perhaps the best chance of online poker legislation getting passed is to attach it to another larger bill, which is something that Reid can be influential in helping to achieve. It is a tactic that has been used in this context before, as in 2006, when UIGEA was passed as part of the SAFE Port Act, a bill that regulated port security.

Written by:

Ifrah PLLC

Ifrah PLLC on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.