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'Silver --e State' introduces gaming-changing legislation with lnternet poker biil.

.n the United States, currently falls explicitly forbids sportsbetting, even though betting Notable irnprovement " :, a legal grey area: there are no federal laws on football, basketball, and other games is legal in This provision is a marked departure from an

I ' - "ritlv prohibiting Internet poker play, but the state. bili passed by the Nevada 'tr: are not any laws that speciflcally legalise or The preamble to the Nevada bill states that legislature back in 2001, which conflned licensees r.:r-late it either. In recent months, there has been legal Internet poker could beneflt Nevada's ailing to those who ou,ned actual casinos with non- : rr of legislative action on the state and federal economy and adds that Nevada could utilise current restricted licenses. By contrast, this bill would allow ',.: :rom law makers attempting to lay out, in technology to limit the gambling sites to places non-US based companies, including the current :,: -r and lvhite, how and iflnternet pokerwill be where it is legal. The bill deflnes "lntemet poker" market leaders in online poker, to operate in the I ; ,:l in the United States. While a federal bill and as "any of the card games commonly referred to as state, keeping them at the top ofthe Nevada market. ", .:al state bills have died on the vine, it appears poker which is played by trrro or more persons who It is not surprising, therefore, that the lobbying ";: .- is only a matter of time before Internet poker wager against each other and not against the person force behind the bill is Rational Entertainment ,, :ie made legal by one of the states active in operating or offering the game and in which success Enterprises Ltd, which does business under the t r. .ssue. With activity in at least four legislatures over the long-term is determined by the skill of the name PokerStars, a popular online poker site. .:; ;:rd the country, the candidate for first place playerl' Longtime proponents of legalised online For offshore poker operators, this provision of '.: -i€s or an almost daill basis. poker have similarly defined poker as a game ofskill, the Nevada bill is also a considerable improvement '.1 rt recently, an Iowa bill seeking to legalise arguing that such a deflnition excludes poker from from the federal legislation proposed last year by .r -:e gambling stalled out before it even got to the ambit of various federal laws that prohibit online Nevada Senator, Harry Reid. Unlike the Nevada bill, i r,'r 2r 5 and f,,{szns Committee vote before the gambling transactions. the federal legislation, which also sought to legalise ",,: leglslature. The District of Columbia has also The bill gives the Nevada Gaming Commission online poker, was largely backed by casino interests. -:-,luced an amendmentto the DC FiscalYear 20II the responsibility of adopting regulatlons to The legislation included language that excluded : r:+t Support Act that would allow the DC lottery police online poker, including age veriflcation, offshore operators upfront, allowing only existing . r:ninister online poker by deflning the DC lottery geographical verifi cation, "appropriate safeguards casinos, horse tracks and slot-machine makers to ,-,:rude "both games of skill and games of chance" to encourage responsible gaming", and standards operate online poker websites for the flrst trvo years i-i: .llo\\ing the games to be played over the Internet guaranteeing network security, player privacy, and after the bill passed. , i-- r1 the Districl The amendment was expected the games'honesty. Further, the bill makes clear Under the federal bill, online poker sites that ;=s its first and most important hurdle before who is eligible for an online poker license. A key currently cater to American players would need ;naess on April I 2011, but the specific regulations feature of the bill states that the Nevada Gaming to temporarily shut doum their US operations .r"i:t: ihe amendment remain to be defined. Commission cannot deny licenses to online poker for l5 months after passage ofthe bill or risk not operators operating in the United States after being able to ever obtain a license to operate in \,evada the passage of the Unlawful Internet Gambling the United States. Many poker players were upset *:, ,. \evada state lawmakers are trying to take Enforcement Act in 2006. which bans financial by this provision, viewing it as unfairly beneflting "i: ead on regulating Internet poker. By legalising institutions from processing online gambling Nevada casino giants over their favoured gambling t :e poker, the proposed Nevada law, Bill AB258, transactions. The bills text reads: websites. The federal bill, however. died last r -.d create the flrst intrastate Internet gambling "The Commission may issue a license as an December, leaving the door open for states like ''s:re in the nation, and, unlike the casino-friendly operator of Internet poker to a person or an afflliate Nevada to introduce their ow,n legislation allowing ":,.:al legislation that failed last year, will allow of a person who has been licensed to operate offshore companies to enter the market. : ir.ore poker companies that currently service the lnternet poker by a recognised body of another Another key aspect of the Nevada bill is that it i :arket to operate in the state. jurisdiction with llcensing requirements that are allows Nevada companies to take bets from outside \er ada, with its major casino industry, has long similar to the licensing requirements of this state the state, provided that other jurisdictions have {r. a leader in gaming regulation. Lastmonth, and who has successfully operated Internet poker legalised such bets. Speciflcally, the bill authorises r.8258 r would take that interest a step further pursuant to such a license for at least two years the Commission to enter into "compacts" with -.eulating Internet gaming in the state. The before the date on which the application for the other jurisdictions where interactive gaming is not . :rorvever, only applies to online poker and license is submittedl' prohibited, thus, permitting games and poker pots

icanr ngBusiness ' lssue 68 . IVay/June 201 1 . 61 -I\ + 10

to be shared among these jurisdictions. Ifplayers "The proposed le$islation has encountered are playing in other jurisdictions, Nevada will collect a 4 percent gross gaming revenue tax, on top vi$orous opposition from existing casino of which the player3,urisdiction would presumably owners who feel the Nevada legislation is layer its own ta,x. Under this system, Nevada stands to gain millions in tax revenue, along with a host of too liberal when it comes to allowin$ foreiffn- new players who do not live in Nevada and would otherwise not play there in absence ofthe new law. based companies, Iike PokerStars arrd FuII Tilt Poker, to obtain operating licenses." Partnerships The bill also opens up the possibility of partnerships between established Nevada casinos under a federal regime, rather than a state-only the association noted that the Department offustice poker as violating and major offshore poker operators. Leading system. Unlike Caesars Entertainment, MGM Resorts has clearly stated that it views online prohibis up to the introduction of the bill was news of a has not entered into any deals with online poker the federal Wire Aclwhich the operation partnership between Caesars Entertainment, which companies, but has been approached by Intemet of certain betting businesses in the United States. poker owns and operates the annual World Series of poker companies about establishing a partnership Although testifoingthat no online operator prosecuted the Wire Act, the Poker, and 888 Holdings PLC, an Israeli company thatwould utilise the MGM Resorts brand. has ever been under that offers online poker, sportsbetting, and casino The Poker Players Alliance (PPA), the leading association maintained thatthe Depatment of ]ustice ofonline games in Ita\ France and the United Kingdom. poker grassroots advocacy group with more than has not retracted its position onthe illegali$ that Short\ after the introduction of the Nevada bi1l, one million members nationwide and more than poker. The association however, acknowledged federal level the Nevada Gaming Commission approved the 16.000 in Nevada alone, has commended the should online poker be legalised on the partnership. This announcement was followed by Nevada State legislatures efforts to legalise and the Wire Actwould no longerbe a concem a similar announcement that Wpn Resorts Ltd regulate online poker. Although it still prefers a had formed a strategic alliance with PokerStars in federal bi1l. the PPA has stated that the new Nevada Fate poker which the two companies would jointly service the bill "is the best attempt at the state level to address At this point, the fate of the Nerada Intemet game changer US market via PokerstarsWyrn.com when, and if, a the consumer concerns wlth intra-state regulationl' bill is uncertain. The bill is cenainly a regulatory scheme is established. On March 24, 201I, Nevada State Assembly for offshore online poker operators who would from the market Aweeklater, , another leading online |udiciary Chairman, William Horne, hosted have been temporarily excluded poker operator, announced that it had forged a an informational hearing on the online poker under the previously proposed federal legisiationlet pamlership with Fertitta Interactive, an entity set up bi1l. Supporters of the bill noted that Nevada is offshore operators are not the only ones who stand legislation. The legislation by Station Casino Ing to operate in the United States a longstanding leader in the gaming industry to gain from the Nevada ifthe tegal climate changes. For these top online poker and that it has licensing authorities in place will open up a whole new market to bricks-and- poker play to operators, gaining the backing ofland-based casinos to regulate online poker operators. Committee mortar casinos to offer millions of have visited the could ensure they are well positioned should a state members were, not surprisingly, interested in players who would not otherwise itself are also evidenl or federal regulatory scheme be implemented For the the economic benefits of the bill as well as any state. The benefits to the state generate dollars land-based casino oumers, these shategic alliances potential harm the bill may pose to existing as online poker would millions of of for the state something that Nevada's wouldmean access to a multi-billion dollar industry bricks-and-mortar casinos. The committee was tax revenues - thatwould only grow if the currentlegal environment also very concerned with the security of online ailing economy could really use right now. pass the Intemet changes. Note: Following indictrnents against gaming, especially with the potential for underage If the Nevada legislature does to on PokerStars and Fuli Tilt these respective partnerships players obtaining access to the sites by using their poker bill, it will certainly drive other states iump it does not, another state have been terminated parents' identification. To help counteract those the regulation bandwagon. If concerns, the committee heard testimony from is likely to pass similar legislation, as the legalisation o{ Terrestrial opposition a third-party security vendor who explained the online poker appears inevitable at this point I But not all land-based casino ov,ners are in favour veriflcation systems it would employ to confirm

1 201 1 the of the Nevada legislation. The proposed legislation a player's age, including requiring players to use Following events of Friday, April 5, , strategic alignments between Wynn and Pokerstars has encounteredvigorous opposition from existing Sklpe to show a government-issued identiflcation and Fertitta Enterprises (Statlon Casinos) and Full Tilt casino ou,mers who, despite supporting the card. The vendor representative further testifled Poker have been terminated. legalisation ofonline poker under Senator Reids that he was not aware of even one instance in hil[, feel the Nevada Iegislation is too liberalwhen whlch an underage application was approved system. it comes to allowing foreign-based companies,like under its veriflcation Jeff lfrah is the founding panner 0f lfrah PLLC, a PokerStars and Full Tilt Poker, to obtain operating The Nevada Resort Association testifled against Washington-based law firm that c0unts several high licenses. Even Caesars Entertainment has criticised the Nevada bill, explainingthatthe economic beneflts profile lnternet gaming organizattons as its clients. Jefl the \er ada bill stating that the focus of legislation of legalising online pokerwould come partia\ atthe llrah serves as legal counsel t0 the Interactive Gaming should be an inte$tate. not intrastate. regulation and cost of players'visits to bricks-and-mortar casinos, with Council, a Canada-llased trade association. an cost to casino shows and restaurants that licerusing n-gim-a \IG\I Resoru. htemational has ancillary Rachel Hirsch is an associate at the firm, ast erpres-sea -; a$.:. :-: :aea-iL-i a::i :egulanon poker players might have otherwise visited In additioq

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