Reid deals online poker plan

Senate Majority Leader Harry Reid, D-Nev., who has opposed online gambling in the past, has begun circulating a draft bill to legalize online poker.

If passed, the bill would benefit some of Reid's biggest backers during his recent re-election campaign, an industry analyst noted.

During his re-election campaign, one of those corporate supporters, Caesars Entertainment Corp. formerly Harrah's Entertainment Inc., was forced to defend itself after internal e-mails among casino executives and a Reid campaign staffer appeared to show the executives orchestrating an effort to get employees to vote for Reid.

Reid staffers and supporters of legalization have been touting that the bill will provide consumer protection for poker players and generate much needed federal and state tax revenues.

The draft bill would legalize only online poker; sports wagering and other forms of gaming would still be illegal.

"We have no comment on this," Reid's spokesman Tom Brede said Friday.

According to the draft of the bill obtained by the Review-Journal, Reid is considering language that would allow only existing casinos, horse tracks and slot-machine makers to operate online poker websites for the first two years after the bill passes.

The bill would also outsource oversight to state regulators and as drafted would send taxes on wagers to both federal and state governments. It also provides guidelines to websites concerning the prevention of compulsive gaming and underage wagering.

The bill as currently written has picked up support from several of the largest casino companies in Las Vegas.

"We definitely support federal licensing, regulation and taxation of Internet gaming with the revenues shared by both state and federal governments," said Rob Meyne, vice president of corporate communications at Boyd Gaming Co.

Meyne said states should have the right to opt out of offering legal online poker, but "if they choose to opt out they should loose their share of tax revenues."

Alan Feldman, a spokesman with MGM Resorts International, said for several years the company has believed online gaming should be "legalized, regulated and taxed." He said every day millions of U.S. residents are engaged in online gambling without consumer protections and no minimum standards for licensing or operations.

"There may be any number of technical or language issues with which we might disagree, but on the whole, this effort seems to us to be a comprehensive and appropriate balance between creating jobs and generating badly needed tax revenues for states and providing significant structure and rigor to the licensing and operations of online poker sites," Feldman said.

Guy Thompson, a spokesman with Caesars Entertainment, declined comment Friday, citing federal regulations following the company's recent debt-swap exchange.

But the draft bill has already drawn fire from congressional leaders.

Three House Republicans sent a letter Wednesday to Reid and Minority Leader Mitch McConnell, R-Ky., seeking to delay the legislation from coming to a vote during the lame-duck session. Congress appears to be in session until Dec. 17.

"Congress should not take advantage of the young, the weak and the vulnerable in the name of new revenues to cover more government spending," Rep. Spencer Bachus, R-Ala., wrote.

Rep. Dave Camp, R-Mich., and Rep. Lamar Smith, R-Texas, joined Bachus in his opposition to the draft measure.

"We are also concerned that this new rush to embrace Internet casino gambling might be partially motivated by one of the gravest sins that afflicts this Congress: desperation for more tax dollars to pay for ever-increasing federal spending."

Reaction to Reid's proposal from fellow Nevada lawmakers has been mixed.

"We are in discussion to see if this legislation can be drafted in the right way to guarantee that children are prevented from participating and so that only legitimate businesses can engage in this type of activity," Sen. John Ensign, R-Nev., said in a statement.

Rep. Shelley Berkley argued legalization would "open the door to new business opportunities for companies involved in gaming and other states."

"Congresswoman Berkley supports the legalization of Internet gaming and believes Congress should act now to put new regulations in place," said David Cherry, a spokesman for the Democrat. "She has also been an outspoken critic of the current ban on Internet gaming and has co-sponsored legislation that would replace the failed law now on the books."

Online gambling in the United States was banned in 2006 with the passage of the Unlawful Internet Gambling Enforcement Act, which critics say drove online casinos offshore.

The act forced U.S. banks and credit card companies to block electronic transactions to Internet gambling businesses, prohibited the use of checks to fund online accounts and included language that Internet service providers could be required to block access and remove links to gambling websites.

"This measure seeks to correct what was approved in 2006. It's stunning to me that some in Congress believe that the status quo is acceptable," said John Pappas, executive director of the Poker Players Alliance in Washington, D.C.

This legislation would overturn the bill approved four years ago. The Poker Players Alliance argues the bill sent an estimated 10 million U.S. poker players to offshore sites.

What makes this effort different from previous attempts to legalize online gambling? Reid's bill has the backing of Nevada's gaming industry, according to a gaming industry analyst.

"Sen. Harry Reid is seeking agreement with vital players in Congress to attach an online poker bill, potentially within the Bush tax cut bills," said David Bain, an analyst with Sterne Agee.

Bain said major beneficiaries of an online poker bill would be Caesars Entertainment, which has been vocal in its intention to further monetize its World Series of Poker brand. MGM Resorts International possesses a database of almost 60 million people and is a well respected and trusted gaming brand, Bain said.

MGM openly supported Reid's re-election. Recently, CEO Jim Murren said that if Reid had lost re-election, an Internet gaming bill "would have been DOA for a decade."

Stephens Washington Bureau chief Steve Tetreault contributed to this report. Contact reporter Chris Sieroty at csieroty@reviewjournal.com or 702-477-3893.