Casino giants face long odds for online poker

WASHINGTON -- Nevada casino giants hoping to cash in on the Internet suffered a setback when provisions to legalize online poker weren't included in a year-end tax bill to be voted on next week.

Sen. Harry Reid, D-Nev., turned away from the tax bill as a vehicle for the legislation he had drafted after running into a wall of opposition erected by Sen. Jon Kyl, R-Ariz.

Senior Reid aides notified allies on Thursday the tax bill was a no-go, according to Capitol Hill and industry officials.

With time growing short in a lame-duck session, Reid, the Senate majority leader, is said to be seeking other bills to which he might attach the poker provisions.

A Reid spokesman confirmed Friday "the poker language will not be in the tax bill."

The Senate is expected to begin voting Monday on the year-end tax bill that was negotiated by President Barack Obama and congressional Republicans.

A summary of the 44-page bill Reid released Thursday evening contained no mention of poker. Likewise, a poker provision could not be found in the text of the legislation.

Gaming analyst Brian McGill confirmed that the tax bill was silent on poker. In a research report Friday morning, McGill issued a pessimistic outlook.

"Senator Reid really must try to appease both MGM and Harrah's, who made financial contributions to his re-election campaign," said McGill, an analyst for Janney Capital Markets. "Therefore, we expect that Reid will continue to publicly say he is working on the issue until the lame-duck session ends.

"However, our contacts continue to tell us there is a very slim chance the bill will pass in this lame-duck session. We would put the odds at passage at less than 10 percent now. If the bill does not pass in the lame-duck session, there is zero chance it will get passed in 2011," McGill wrote.

Kyl is a longtime opponent of gambling over the Internet and supported the 2006 law that sought to outlaw the practice. While online gaming has continued to proliferate, he has said there is "zero chance" he would allow an amendment to the tax bill to make any form of it legal.

Reid's Internet Poker Act of 2010 proposes legalizing online poker at the federal level. Online poker sites wishing to operate in the United States would have to obtain a five-year operating license and pay a 20 percent tax on all deposits.

For the first two years, licenses would be issued only to current U.S. casino or racetrack operators and casino slot machine manufacturers.

Reid in a statement Thursday said the bill "is good for the country and for Nevada." Millions of Americans gamble at unregulated poker sites, he said, while his approach would provide assurance the games "are fair and honest."

The gaming industry's lobbying group Friday issued a statement supporting Reid's bill.

"This is tough law-and-order legislation that puts in place a solid regulatory framework and legal oversight that will prevent illegal activity and protect the estimated 15 million Americans who already are playing poker online," said Frank Fahrenkopf, president and CEO of the American Gaming Association.

In a report this week, Union Gaming Group LLC estimated legalized online poker could yield more than $1 billion in earnings in its first year, with 90 percent or more of the take accruing to fewer than a dozen licensees.

MGM Resorts International and Caesars Entertainment Corp. (formerly Harrah's Entertainment) are positioned to see the most benefit, the report said.

Executives from those companies, which have long political ties to Reid, reportedly have been involved in drafting the poker legislation.

Contact Stephens Washington Bureau Chief Steve Tetreault at stetreault@stephensmedia.com or 202-783-1760.