States bristle at Reid’s push to legalize online poker in lame-duck session

A push by Senate Majority Leader Harry Reid (D-Nev.) to legalize online poker in Congress’s lame-duck session could run into a buzz-saw of opposition from state legislatures and governors.

State officials are bristling at the possibility of being preempted by the federal government in their own efforts to legalize some forms of online gaming, and are particularly concerned about how Reid’s bill could affect their lotteries.

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James Ward, a committee director at the National Conference of State Legislatures (NCSL), said his members were frustrated by Reid’s proposal. 

“It’s frustrating because they are overseeing a successful stewardship of the gaming industry,” Ward told The Hill. “It’s not clear why any federal intervention is necessary. ... It’s a sensitive topic for the states any time you talk about preemption.”

States aggressively defended their turf last year as the Democratic leader and the failed “supercommittee” considered online gaming legislation, and could go on offense again if Reid moves legislation that they see as threatening their plans. 

Delaware and Nevada have authorized some form of online gaming, and legislatures in at least seven other states have introduced bills to legalize in some shape as well, according to the NCSL. The push to legalize online gambling comes after the Justice Department found last year that the Wire Act only prohibits online gambling on sports, which opened up avenues for other games of chance, including state lotteries.

A spokeswoman for Reid said the Senate leader is aware of the states’ concerns and is open to more input from legislatures and governors.

“We have consulted extensively with a variety of stakeholders about the bill —including many states. We have indicated to all that our door is open to continuing conversations,” said Kristen Orthman, the Reid spokeswoman.

Supporters of Reid’s effort said the states’ concerns are addressed by a provision in the bill that would give states the chance to opt in to the federal regulatory regime for online poker.

“I think this provides sovereignty to them,” said former Rep. Jon Porter (R-Nev.). “You need to provide some consistency and a threshold, but this does allow states to opt out. … You need to make sure that every state — large states and small states — has this opportunity.” 

Porter is the head of Porter Gordon Silver Communications and is registered to lobby for the Poker Players Alliance, which has advocated for online gambling.

Lotteries will likely have considerable pull in the debate. Margaret DeFrancisco, co-chairwoman of the government relations committee at the North American Association of State and Provincial Lotteries (NASPL), said state lotteries raised more than $20 billion in 2011 for a variety of causes, including education, parks and senior citizens.

“It’s all money that the states absolutely rely on,” said DeFrancisco, also president and CEO of the Georgia Lottery Corporation, adding that the Internet would be another avenue for states to sell lottery tickets.

“It’s another sales channel. We don’t want to be restricted by the federal government telling us what gaming policy should be in the states,” DeFrancisco said. 

Legislation has been introduced in the House by Rep. Joe Barton (R-Texas) to legalize online poker. Reid’s bill has not yet been introduced, though he has worked with Sen. Jon Kyl (R-Ariz.) on the legislation. 

Reid’s bill would ban all forms of online gambling except for Internet poker and would allow state and tribal lotteries to sell tickets online. The bill does have some limits, however, such as not being able to create Internet games that imitate slot machines or other casino games, according to a summary obtained by The Hill. 

Lottery officials said they are wary of Reid’s proposal.

“The summary that we have seen is not terribly friendly to lotteries. … It’s very restrictive,” DeFrancisco said. “We don’t want and we don’t need any federal legislation concerning lotteries. Period.”

Last year several governors, such as Maryland’s Martin O’Malley (D) and Idaho’s Butch Otter (R), wrote to members of Congress — including the failed “supercommittee” — saying states should be able to regulate their own gaming. They also expressed worries about federal legislation interfering with lotteries.

This year, the National Governors Association wrote to congressional leaders to say that gambling regulation “has historically been addressed by the states” and that federal legislation would need state input. Further, the NCSL and the NASPL passed resolutions this summer calling on Congress to respect state sovereignty when it comes to overseeing gambling.

Reid’s critics say the push to ban all forms of online gambling except for poker seems designed to save his state’s gaming interests. 

“This seems to be something just for Nevada. But for lotteries, we represent almost all of the country,” DeFrancisco said.

Porter argued Reid’s bill is not just about protecting Nevada’s huge casino industry, since gaming has spread to several states. 

“It’s not just about Nevada anymore,” Porter said. “That expansion of gaming is one of the reasons I think it could pass, because it means more of an acceptance by states and residents since it’s everywhere now.” 

Porter said casinos realize that they need to get into the online-gambling world.

“Our industry doesn’t want to end up like the newspapers or the music industry,” Porter said. “The Web is what is happening right now. … We understand it’s coming. We think to do it right, it should be done federally.”

Porter said he hopes there is momentum for Reid’s bill after the election. Reid is expected to push for his bill any chance he gets, including the lame-duck session.

“I think, absolutely, there is momentum, and I’m hoping there is a push, but it’s very unpredictable,” Porter said. “We are closer today than we have ever been.”