The following is an update on federal and state Internet gaming legislative proposals, as such legislation may potentially affect Indian tribes.

Federal Law Background

In legislative action taken on the eve of its mid-term election recess in 2006, Congress enacted the Unlawful Internet Gambling Enforcement Act (UIGEA), 31 U.S.C. §§ 5361-5367, as part of unrelated homeland security legislation known as the SAFE Port Act. Rather than targeting Internet gaming operators or players, the UIGEA restricts and/or prohibits financial institutions from processing “unlawful Internet gambling” transactions, and provides civil remedies and criminal penalties for violations.

The UIGEA left the promulgation of regulations interpreting exactly which transactions are prohibited as part of “unlawful Internet gambling” until 2007. The administrative process for issuing those proposed and final regulations was not completed until 2008, with the final regulations taking effect in January 2009. However, full compliance with the regulations was postponed and not required until the regulations finally became fully enforceable on June 1, 2010. Before the regulations were implemented, domestic financial institutions took a conservative approach that they would not risk prosecution and would not process any transaction that potentially violated the UIGEA. As a result, Internet gaming shifted off-shore, ultimately creating a multibillion-dollar industry.

Federal Legislative Proposals

While the UIGEA was being implemented, Rep. Barney Frank (D-MA) took up the issue of legalizing Internet gaming. Rep. Frank has long tried to repeal the UIGEA and last year attempted to replace it with legislation – known as the Internet Gambling Regulation, Consumer Protection, and Enforcement Act (H.R. 2267) – that would legalize, regulate through the issuance of operator licenses, and permit the taxation of Internet gaming. H.R. 2267 contained provisions permitting tribes and states to opt out, i.e., giving them the ability to refuse those Internet gaming operators with federal licenses the right to offer such gambling within their tribal territory or state, respectively. Frank’s bill was approved by the House Financial Services Committee last summer but did not move any further during the last Congress.

Also in the last Congress, Rep. Jim McDermott (D-WA) introduced H.R. 4976, the Internet Gambling Regulation and Tax Enforcement Act of 2010. Rep. McDermott’s bill would have amended the Internal Revenue Code to impose a federal tax on domestic licensed Internet gaming operations permitted under Rep. Frank’s bill. The McDermott bill also would have imposed a punitive federal tax on unlicensed domestic Internet gaming operations. However, the bill never made it out of committee.

The most-discussed proposal to legalize and regulate Internet gaming during the last Congress (and still discussed, because of the potential for reintroduction) was a proposed bill to legalize Internet poker only that Senate Majority Leader Harry Reid (D-NV) circulated last December. Though the bill, entitled the “Prohibition of Internet Gaming, Internet Poker Regulation and UIGEA Enforcement Act,” was never introduced, it did serve as notice that Reps. Frank and McDermott are not the only Congressional proponents of federal Internet gaming regulation. Many in Indian Country, including the National Indian Gaming Association (NIGA), felt that Reid’s bill put Indian tribes at a competitive and regulatory disadvantage relative to Nevada casinos and the state of Nevada. Sen. Reid’s bill would have, among other things, imposed a 20 percent license fee on all operators, including tribal operators; defined the entities capable of regulating Internet poker and issuing licenses in such a way as to give Nevada (along with perhaps New Jersey) a virtual monopoly on Internet poker, or at least a significant head start of a couple of years to build up market share ahead of tribes; and permitted the breach of tribal exclusivity provisions in gaming compacts by means of Internet poker, without requiring compact renegotiations to address that breach.

In the current Congress, Congressman John Campbell (R-CA) introduced on March 17, 2011 an identical version of Rep. Frank’s bill from 2010. Campbell’s bill, H.R. 1174, known as the Internet Gambling Regulation, Consumer Protection, and Enforcement Act, would permit all forms of gambling except sports betting. Rep. Frank, whose bill Campbell supported last year, is the leading co-sponsor of Campbell’s bill. Campbell’s support for the Frank bill last year infuriated then-Ranking Member and current Chairman of the Financial Services Committee Spencer Bachus (R-AL), who is a staunch opponent of Internet gaming. Upon introduction, H.R. 1174 was referred to the Committees on Financial Services, the Judiciary, and Energy and Commerce. It has been further referred to the House Financial Services Subcommittee on Financial Institutions and Consumer Credit, the Judiciary Subcommittee on Crime, Terrorism, and Homeland Security, and the Energy and Commerce Subcommittee on Commerce, Manufacturing, and Trade. There has yet to be any hearing or debate on the bill.

On June 16, Rep. McDermott introduced H.R. 2230, the Internet Gambling Regulation and Tax Enforcement Act of 2011, with Reps. Campbell and Frank serving as initial co-sponsors of the bill. Upon introduction, the bill was referred to the Ways and Means Committee and the Committee on Education and the Workforce. H.R. 2230 is a slightly revised version of the online gambling tax bill that Rep. McDermott introduced last year to supplement Rep. Frank’s proposed bill to authorize and regulate online gambling. Rep. McDermott’s current bill is drafted to serve a similar purpose with the current online gambling bill introduced by Rep. Campbell.

If Rep. Campbell’s bill were passed to authorize online gaming, Rep. McDermott’s bill would impose tax reporting requirements for online gambling site operators and assess taxes on both patron winnings and on the operators themselves. The biggest criticism of Rep. McDermott’s bill is that the operator taxes would be based on the account deposits of online patrons, not the net revenues of operators, and would be assessed regardless of whether the patron wins or loses or even if they decide not to gamble. The bill currently sets the federal tax rate on operators at 2 percent of all monthly deposits made by customers, but prohibits the further assessment by the operator of the tax on the actual deposit accounts. Unlike last year’s bill, which automatically included states and tribes in the federal scheme unless they chose to opt out, under the current bill states and tribes must opt into the federal plan. Upon opting in, they will be able to assess an additional tax on operators of 6 percent of all monthly patron deposits originating within their jurisdiction. Assuming players gamble all of their deposits, it is estimated that the McDermott bill would equate to a federal tax of approximately 40 percent of revenues, with additional taxes assessed by states and tribes. This means that operators would have to charge domestic players a significantly higher commission to cover the tax than the 5 percent of total prize pot commission typically charged by offshore and European operators.

Rep. McDermott has stated that he is willing to revise his bill, including the tax on deposits, but is first urging passage of Rep. Campbell’s bill to authorize online gambling. H.R. 2230 would also impose a 0.25 percent excise tax on all authorized online wagers and a 2 percent excise tax on unauthorized wagers. Another change in this year’s McDermott bill is that unlicensed online gambling operators would be hit with a much higher tax penalty, now set at 50 percent of monthly patron account deposits.

On June 24, Rep. Joe Barton (R-TX) introduced H.R. 2366, an alternative to Rep. Campbell’s Internet gambling authorization bill. Rep. Barton’s bill is titled the “Internet Gambling Prohibition, Poker Consumer Protection, and Strengthening UIGEA Act of 2011” and would authorize Internet poker only. Upon introduction, the bill had 11 cosponsors, including Reps. Frank and Campbell, and has been referred to the same committees and subcommittees as the Campbell bill. Rep. Barton’s bill gives states and tribes the right to opt out of the federal structure, but doing so would make them ineligible for any potential tax revenues. The legislation would require the owners and operators of online poker sites to be qualified and registered by a state or tribal gaming commission, and this licensing requirement would apply to both domestic and foreign operators so long as the bets or wagers are initiated or received in the United States. The license application would have to be submitted to the regulatory agency of the state in which the computer servers are located. (The bill is not clear if this provision also applies to servers located on tribal lands.)

Rep. Barton’s bill includes a broad definition of poker that could in theory cover other types of card games, as it defines poker as “any of several card games in which players compete against each other, and not the person or entity hosting the game (sometimes called “the house”), and that over any significant interval, the outcome of a poker game is predominantly determined by the skill of the participants.” Perhaps because of this lack of clarity, the state and tribal licensing agencies are given the authority to determine whether a game qualifies as poker in the first instance. The bill also defines a “casino gaming facility” to include facilities previously licensed by a state or tribe with 500 or more gaming devices in one physical location. Although the language of the bill is not clear, it appears that only these facilities, along with qualified race tracks and card rooms, could receive licenses, meaning that smaller casinos and individuals would not be eligible for licensure. A new federal gaming commission would be created to oversee regulations and implementation of the bill, and there are various penalty and enforcement provisions as well as provisions addressing problem gambling. Of particular note, the bill includes provisions to take into account existing non-Internet tribal gaming operations under the Indian Gaming Regulatory Act. It explicitly states that the Internet games authorized by the bill are not to be considered either Class II or III games and that no renegotiation of a tribal compact would be required for a tribe to operate Internet poker under the bill. The bill has received the strong support of, and in fact was drafted in collaboration with, the Poker Players Alliance.

The Nevada casino-dominated trade group, the American Gaming Association (AGA), has stated that it will not support Congressman Barton’s Internet poker bill and will instead push new legislation this fall that would favor Nevada and New Jersey as licensing and regulatory authorities in a future U.S. online gaming market. The AGA-backed poker-only bill also is expected to differ from the Barton bill on how resulting tax revenues would be split at the federal and state levels: taxes would be divided between the states where the bettor and the regulator are located, with the federal government only receiving the income tax on winnings. The bill would require state legislatures and/or governors to affirmatively opt into the federal regulatory scheme to permit their residents to gamble online, and those online operators who accepted wagers from players in the U.S. after passage of the UIGEA in 2006 would not be eligible for licensure for a minimum of two years.

At the end of June, in an apparent response to the push to legalize Internet gambling and the growth of other gambling outlets, Congressman Jim Moran (D-VA), along with Reps. Frank Wolf (R-VA), Shelley Berkley (D-NV), and Alcee Hastings (D-FL), introduced H.R. 2334, the Comprehensive Problem Gambling Act of 2011. The bill would for the first time authorize federal support for the prevention and treatment of problem and pathological gambling, with the Substance Abuse and Mental Health Services Administration (SAMHSA) serving as the lead agency. The bill has been referred to the House Energy and Commerce Subcommittee on Health.

On July 14, Sen. Harry Reid (D-NV) and Sen. Jon Kyl (R-AZ), who helped win enactment of the UIGEA in 2006, wrote a joint letter to U.S. Attorney General Eric Holder regarding recent events in the online gambling industry. The letter opened with a request for an explanation of federal prosecutors’ indictments of online gambling operators, including PokerStars, Full Tilt Poker and Absolute Poker, on April 15 (so-called “Black Friday”) and May 23, given that the Justice Department seemingly allowed these and other online operators to expand over the past several years without incident. The letter also expressed concern with state efforts to legalize intrastate online gambling, including through state lotteries, and requested that the Justice Department reiterate its “longstanding position that federal law prohibits [all forms of] gambling over the Internet, including intra-state gambling (e.g., lotteries).” While some read the Reid-Kyl letter to call for a crackdown against online gambling, others read it to simply ask for the Justice Department’s position on online gambling and tougher enforcement against those operators deemed illegal under that position. In fact, some sources speculate that Senators Reid (always a strong advocate on behalf of his home state casino interests) and Kyl (who is retiring) may be working with both the American Gaming Association and Rep. Barton to forge a compromise online gambling bill to be introduced this fall. There is also talk that Senator Reid may be attempting to insert federal online gaming authorization language in the bill to be drafted by the so-called debt-reduction “Super Committee” appointed in August by congressional leaders. This chatter has heightened because Senator Kyl is a member of the committee.

In the last days of July and during Congress’ month-long August recess, stakeholders in the online gaming debate spent time preparing their messages for a push prior to the Congressional year-end adjournment. On July 26, the National Indian Gaming Association (“NIGA”) held a tribal leader seminar and the Senate Committee on Indian Affairs held a roundtable discussion pertaining to Internet gaming. Furthermore, on August 22, the NIGA Sub-Committee on Economic Development and Internet Gaming met in Prior Lake, Minnesota, in the Shakopee Indian Community, to discuss federal legislative proposals for Internet gaming and their possible effects on Indian Country. At this meeting, the Sub-Committee adopted the following six amendments it said must be included (in principle) in any federal Internet poker bill:

  • The term “casino gaming facilities” must be defined to include any class II, class III or Internet gaming operation that is, or may be, operated by an Indian tribe.
  • The class of qualified regulatory bodies in any Internet gaming bill must include all Indian tribes that engage in, or may engage in, class II or class III gaming facilities, including Internet poker, and it must provide that such tribes have a right to own, control, or operate a facility that engages in casino gaming or Internet gaming, including Internet poker.
  • Any Internet gaming bill, including Internet poker, must provide that the NIGC shall be the exclusive federal agency to provide oversight of gaming activities by Indian tribes in lieu of oversight by the Office of Internet Poker Oversight or the Secretary of Commerce. This shall not be in derogation of tribal governments’ rights to regulate Internet gaming.
  • Any Internet gaming bill that affects Indian country must recognize that Internet gaming revenues generated by an Indian tribe are subject to the IGRA restrictions on the uses of net revenue under 25 U.S.C. § 2710(b) and (d), which states that net revenues from any tribal gaming are not to be used for purposes other than (i) to fund tribal government operations or programs; (ii) to provide for the general welfare of the Indian tribe and its members; (iii) to promote tribal economic development; (iv) to donate to charitable organizations; or (v) to help fund operations of local government agencies. Tribal government revenues shall not be subject to federal or state taxation or license fees.
  • Any Internet gaming bill that affects Indian Country must provide that nothing in the bill will supersede the provisions of a tribal-state compact approved under IGRA pursuant to 25 U.S.C. § 2710, and it must provide that Indian tribes are not required to renegotiate their tribal-state compacts.
  • Upon enactment of any Internet gaming legislation all federally recognized tribal governments shall be eligible to license, operate, and regulate Internet gaming, subject to tribal governmental regulatory systems.

These six amendments were presented to the NIGA member tribes on August 31 for comment.

Meanwhile, on July 27, a new coalition calling itself FairPlayUSA made its public launch, with the mission of promoting a federal regulatory scheme for online poker in the United States. The coalition describes itself as a group of “law enforcement officials, consumer protection experts, poker players, companies in the commercial gaming industry and other Americans concerned about Internet gambling.” FairPlayUSA promotes a federal regulatory scheme for Internet poker, as opposed to a state-by-state approach that would permit localized intrastate gaming. Although it bills itself as a grassroots organization, much of FairPlayUSA’s funding comes from Caesars Entertainment and MGM Resorts in Las Vegas. There is also speculation that FairPlayUSA is associated with the American Gaming Association (AGA), given both groups’ similar anti-intrastate online gaming stance and recent hints by the AGA that it may push another congressional bill this fall to establish a federal regulatory scheme. In mid-September, the AGA released its own online poker Code of Conduct, outlining the measures it thinks are necessary to institute an effective nationwide regulatory system.

Finally, on October 7, the Senate Committee on Indian Affairs held an oversight hearing on e-commerce and Internet infrastructure in Indian Country. Witnesses testified that economic development activities, including Internet gaming, require high-speed Internet connectivity, and that without broadband Internet access Native communities cannot use technology to expand economic opportunities or increase public health and safety. On the issue of Internet gaming, Seneca Nation President Robert Porter asserted that tribes are fully capable of operating online gaming sites in light of their extensive regulatory experience under the Indian Gaming Regulatory Act and also criticized the lobbying efforts of commercial casinos to encourage Internet gaming legislation that unfairly benefits commercial casinos at the expense of tribal gaming operations. Michael Pollack, Managing Director for Spectrum Gaming Group, also testified, arguing that the legislative policies toward Internet gaming, whether at the state or federal level, should be coordinated with existing policies for brick-and-mortar casinos to maximize the job-creating benefits and other real-world growth potential of Internet gaming.

State Legislative Proposals

Despite past and current legislative proposals to authorize and regulate Internet gaming, the UIGEA is still governing law for now. However, the UIGEA’s prohibitions aimed at curbing Internet gaming have a carve-out that permits such gaming if it occurs wholly within one state. That carve-out has led to a movement in several states to create in-state-only Internet gaming sites, i.e., to authorize intrastate Internet gaming within their borders.

New Jersey

On March 4, New Jersey Governor Chris Christie vetoed a bill, S.B. 490, that would have made New Jersey the first state in the country with intrastate Internet gaming. The bill, introduced by state senator Raymond Lesniak, would have permitted casinos in Atlantic City to offer a full range of virtual casino games, including but not limited to poker, over the Internet. The state legislature approved S.B. 490 by a very wide margin in both chambers (29-5 in the senate, 63-11 in the assembly). In his veto statement, Governor Christie explained that he disapproved of the bill because (i) it lacked restrictions to prevent commercial establishments, such as nightclubs and bars, from offering “Internet café” gaming outside of Atlantic City; (ii) it would require that Internet gaming revenues subsidize the state’s declining horseracing industry; and (iii) the state’s constitution limits casino gambling to within the boundaries of Atlantic City, requiring a voter referendum to expand gaming over the Internet to other parts of the state.

At the end of July, in apparent response to the joint letter by U.S. Senators Harry Reid and Jon Kyl to the U.S. Department of Justice asking DOJ to clarify its position on intrastate Internet gaming and prevent state efforts at legalization, state senator Lesniak likewise wrote a letter to DOJ asserting that states have the right to offer online gambling within their own borders under the federal UIGEA statute. On August 25, Lesniak unveiled new online gaming authorization legislation, S-3019, and established a timeframe to have the bill moved through both chambers of the state legislature by year’s end. The bill is in most respects a reiteration of his bill from earlier this year, with some newer provisions to address the Internet café issue. The bill still subsidizes the state’s horseracing industry, but those funds would now to be taken from the brick-and-mortar casinos that operate the online games rather than directly from the online gaming revenue.

California

Two Internet gaming bills were considered in California this year: S.B. 40, a poker-only bill, and S.B. 45, which would authorize poker and other games. S.B. 40, introduced by state senator Lou Correa, was amended twice during the legislative session. In its most recent form, S.B. 40 would allow intrastate Internet poker licenses to be awarded to any business entity owned by a person or entity eligible for licensure under the California Gambling Control Act, any business entity owned by a federally recognized Indian tribe in California with a gaming ordinance approved by the Chairman of the National Indian Gaming Commission, or any business entity owned by a combination of such tribes or persons or entities eligible for licensure under the Gambling Control Act. There would be no specific limit to the number of licenses to be granted. The actual number would be determined by the number of potential licensees, but each applicant would be eligible for only one license and each license would authorize only one website. Any individual or entity accepting online wagers from players within the United States subsequent to enactment of the UIGEA automatically would be deemed unsuitable for all purposes and therefore ineligible.

The bill also would require applicants for and recipients of California intrastate Internet poker licenses to pay application and license fees, and the California Gambling Control Commission to promulgate emergency regulations following the bill’s passage. (Under previous versions of the bill, the California Department of Justice, Bureau of Gambling Control, would have been responsible for promulgating regulations.) Only non-banked, non-percentage poker games played under the same rules and collection procedures as currently permitted in California brick-and-mortar facilities would be permitted. Finally, if federal law authorizes interstate or international online gaming, the California State Legislature and Governor would be required to opt California out of any such scheme, to the extent possible. S.B. 40 was endorsed and supported by the California Online Poker Association (COPA), which includes approximately 13 card rooms and 30 tribes, with the Morongo Band of Mission Indians and the San Manuel Band of Mission Indians being among the larger gaming tribes in the coalition. The California Nations Indian Gaming Association (CNIGA) and the California Gaming Association, which represents the state’s card clubs, also endorsed S.B. 40.

A separate California bill, S.B. 45, was introduced by state senator Rod Wright. Whereas S.B. 40 was a poker-only bill, S.B. 45 would permit any lawful gambling game in California to be played on the Internet (although practically speaking under current California law only poker and horseracing would be permitted). The state would auction off a limited number of licenses for the operation of Internet gaming sites. The bill would potentially allow licensure of large publicly-traded companies. S.B. 45 is a re-introduced version of a bill, S.B. 1485, that stalled in the California senate government operations committee in 2010, in part due to opposition from Indian tribes and organizations including CNIGA and the Tribal Alliance of Sovereign Indian Nations (TASIN).

In light of the two online gaming bills, California Senate President Pro Tem Darrell Steinberg established a working group of Senate staffers and tasked them with creating a single intrastate online poker bill for consideration. Although the working group made some apparent progress in bringing S.B. 40 and S.B. 45 together, on August 22, Steinberg released a letter stating that no Internet poker bill would be moving forward in the current legislative session, which ended on September 9. According to Steinberg’s letter, the legislation was tabled in hopes of reaching a compromise among stakeholders this fall and then introducing revised legislation in January 2012 when the legislature reconvenes. In furtherance of those plans, the General Assembly passed a joint resolution in early September calling on California’s Congressional delegation to provide for the right of the state to opt into or out of any federal online gambling system and to preserve the state’s right to conduct its own intrastate online gaming as currently permitted under the UIGEA.

District of Columbia

In April, the District of Columbia became the first jurisdiction in the U.S. to legalize intrastate online gambling. Last year the District’s City Council approved a 2011 budget law that included authorization of online games of both skill and chance for players within the District, as well as an online fantasy sports site. Under the law’s provisions, DC Lottery officials would choose the games to offer and implement necessary regulations. The time period for Congress to object to the law expired on April 7, giving the District the apparent ability to move forward.

Following the April 7 deadline, attention initially focused on how the District would structure and regulate its online gaming operations. Originally, the DC Lottery announced that it would kick off its online program with two demonstration games in late July and then release four more free games – Bingo, poker, E-Scratch Offs, and other random number games – by August 20, with the actual money wagering system set to go live on September 8. The program, known as iGaming, would allow players to log onto a secure site from certain government buildings, “platinum sponsor” venues such as hotels and other select areas, and eventually from their homes. The site would accept debit transactions only. All players would have to be located in the District and at least 19 years old, the idea being to exclude high school students but to take advantage of the college market. Gaming would be shut down between 4:00 and 10:00 a.m., and players would be monitored electronically and cut off if necessary. Concerned players could also ban themselves.

The District plan has not been without its share of problems. Officials could not resolve disagreements over which public spaces are suitable for online gambling. Also, one of the more controversial DC Lottery rules is that there will be no high stakes games, with a weekly player account deposit limit of only $250. Officials have described the low limits, along with the refusal to accept credit cards, as consumer-protection measures, but many people are wondering if the stakes are too small to generate much interest or revenue given that all players must be located within a District of only 600,000 residents.

The biggest and most recent issue is how online gambling became legal in the District in the first place, and that issue has now led to the postponement of the District’s online launch. No hearings or public debate were ever held on the issue until June 29, when a public hearing called by the Committee on Finance and Revenue gave District Council members and the public their first opportunity to question DC Lottery officials about the law. A heated discussion took place over the issue of the District offering what appear to be online slot machines – and the head of the DC Lottery was left trying to explain the fine line between random number-generated games, which are proposed as part of the District’s program, and the online equivalent of actual slot machines, which are not. After the June 29 hearing, the calls for more constituent input became apparent, and the DC Lottery agreed to meet with District Council members to organize community members in their wards. The DC Lottery originally planned to hold public hearings in each of the District’s eight wards in late summer to allow for a more thorough public airing of the proposed program. However, further complaints that resident attendance would be low due to summer vacationing caused the DC Lottery to postpone the hearings, now scheduled to take place this fall. On September 20, Council members Tommy Wells and Phil Mendelson introduced a bill to repeal the part of the DC Lottery law that authorizes Internet gaming.

Massachusetts

On September 8, Massachusetts State Rep. Dan Winslow filed an amendment to the expanded gambling legislation currently being considered in the state legislature to authorize and regulate Internet poker. The amendment would provide for the granting of five Internet poker operator licenses, each for a term of five years, in addition to the three brick-and-mortar casino and one slot parlor licenses already under consideration in the legislation. The pot in each game of online poker would be subject to a 10 percent house rake, with the state receiving 70 percent of the rake. Interestingly, Winslow is claiming that his Internet poker bill would authorize play not just within Massachusetts, but by players located anywhere in the world where poker is legal. His amendment would not immediately permit online poker but rather require the newly-created Massachusetts Gaming Commission to develop by July 31, 2012 model legislation and regulations to authorize and regulate Internet poker. The state House approved the gambling bill with Rep. Winslow’s amendment on September 14, and then sent the bill to the state Senate for consideration. The Senate Ways and Means Committee approved a nearly identical version of the House bill.

Nevada

In Nevada, three separate online gaming bills were considered during this year’s legislative session. The bill receiving the most attention was A.B. 258, which was read for the first time in the Nevada Assembly on March 10. As introduced, A.B. 258 would authorize Internet poker only, but it provided for interstate gaming networks with other jurisdictions outside of Nevada. The Nevada bill was initially opposed by several Nevada-based casinos, including Caesars Entertainment Corporation. The offshore online company PokerStars originally supported the bill as introduced because, unlike other state bills, it would prohibit Nevada officials from denying a license to an operator that currently or formerly served the U.S. market. That would greatly benefit offshore sites such as PokerStars, which have operated in the United States in a legal grey area since passage of the UIGEA. The Nevada Assembly Judiciary Committee, however, made subsequent amendments to the bill and the amended bill passed out of that Committee on April 12. The amendments stripped the non-discrimination provisions. They also directed the Nevada Gaming Commission to begin drafting rules to regulate online poker but stipulate that Internet gambling would not be implemented until sanctioned by Congress or the Justice Department. Furthermore, the amendments would require online sites to have a partnership with an existing non-restricted license holder or an affiliate that has been in business for at least five years. The bill as amended unanimously passed out of the Nevada Assembly on May 19, passed the Senate with slight amendments, and was approved by the Governor on June10.

The Nevada Gaming Control Board started drafting online gambling regulations even before the bill passed and on August 24 issued a draft set of regulations to gaming license holders statewide to solicit their input. Public hearings to air the regulations and gather input began on September 26. Regulators will make revisions to the proposed rules based on such input before submitting them to the Nevada Gaming Commission, which is expected to vote on the rules in December.

Other States – Florida, Hawaii and Iowa

Three other states previously considering intrastate online gambling – Florida, Hawaii and Iowa – have shelved their current attempts at actual implementation. In March, the Florida Senate committee on regulated industries approved an intrastate Internet poker bill, S.B. 812, to authorize three hubs to operate Internet poker on behalf of existing pari-mutuel providers in the state. In mid-April, however, the measure died in committee when the Senate Criminal Justice Committee could not overcome a 2-2 deadlock vote. Internet poker bills are expected to be reintroduced for consideration in Florida’s January–March 2012 legislative session.

Hawaii’s intrastate gaming bill, S.B. 755, which would have legalized both online and live poker in the islands, passed both the Economic Revitalization & Business Committee and the Judiciary Committee in March, but failed to get a hearing in the House Finance Committee by the required deadline during the first week of April. Another attempt to revive gambling legislation occurred in the waning days of the legislative session in April with the introduction of S.B. 1247. The bill would have established a gaming development district in Waikiki and granted a renewable 20-year license for one stand alone casino within the district, but the legislature failed to take up the bill prior to adjourning.

In mid-April, after failing to reach consensus, an Iowa Senate committee essentially killed that state’s intrastate online gaming bill, SB 458, by amending the bill to request a report from the State’s Racing and Gaming Commission on the potential impact of Internet gambling, rather than to actually implement it. The bill (retitled after amendment as Senate File 526) also included a voice amendment calling for a study by the state Department of Public Health on the societal effects of Internet gaming. The bill passed the full Senate on April 20. It was subsequently referred to and passed by the state House on May 3.