Blog post from Dr. Pauly

Cliffs: States' mounting debts and underfunding of pensions mean finding places to raise money, such as online poker. However, there's a bill in Congress that could allow states to declare bankruptcy.

Thoughts?

While it's tempting to play the "regulating and taxing the online poker industry will help balance budgets" card, it's a terrible idea IMO.

First of all, implicit in this line of argument is that online poker would otherwise be banned. Like smoking or drinking or live gambling, it's viewed (correctly or incorrectly) as a vice, and smokers / drinkers / gamblers treated as poor saps who deserve to be taxed for their stupidity. This hurts the cause in the long run, as every time anyone needs money, there will be a pool of people who are viewed as "highly taxable." Over time, taxes will become ridiculous as people try to tax these vices to death. Poker advocates should steer as far from this line of argument as possible, because there's long-term harm in it.

Second of all, the amount of money that's available is miniscule compared to what is needed; the size of the market total is single-digit billions per year, which means that even if there were a 10% rake for the government (a tripling of most current rakes), you're looking at hundreds of millions of dollars in income, spread across the entire US. Deficits are billions and tens of billions, so even an industry-killing rake would help a percent or two.

Third, this argument fundamentally does not address the concerns of those who oppose it. Social conservatives object to gambling not because it doesn't raise enough money, but because it harms the children. So by touting how much money it's going to raise, you don't diminish the size of the very vocal opposition. The key argument here is that there are plenty of existing safeguards around kids doing stupid stuff online; online poker would present no more danger than teenagers stealing their parents' credit cards and compulsively shopping. In the end, reducing the opposition to online poker is going to be more beneficial than increasing the proponents, because there are a limited number of people who are going to be excited by or actively support online poker. The goal should be to minimize the number of people who object, and have everyone else be neutral / indifferent.

If, and only IF, the NJ bill becomes law and 2 or 3 other states really do move in that direction then I think perhaps yes. States may want to start-up a lottery style online poker game.

WV in fact is interested according to a news article from a month or so ago.

For many or at least some the lottery model may be an only option. I base this on WV where I live. Without a clear ruling that poker is a game of skill, that leaves only chance / casino games as an option. Here in WV are classified as a "lottery". In WV only the state lottery can "own" games even though we have 4 racinos and one casino, the state owns all the games and leases them to the casino.

Of course, a state could simply declare poker a skill game and maybe have it excluded from the wire act and UIGEA. This would or could be an option for states with the predominance test.

The trouble with state owned here and even licensed games is states treat them as cash cows, raking 35-45 percent then requiring income tax be paid on the profit that is left.

There would be much opposition from the right.

Kevmath:

The New York Times article on possible state bankruptcy legislation is especially interesting. It's fairly obvious that a game of political "musical chairs" is underway. Members of Congress, who are surrounded by approximately 80 new Tea Party zealots, (excuse me, I meant to say "colleagues"), in the House - and folks like Rand Paul in the Senate - do not want to be put in the position of being forced to bail out any of the states. They got all the "bailout backlash" they could stand a few years ago. None of them want that monkey on their back so the trick is to shift that burden onto Governors and/or bankruptcy judges. Republicans in Congress cringe at the thought of Rush Limbaugh lambasting them for even thinking about bailing out states in order to pay the overly generous pensions of overindulged (overpaid) public employees. Much better to let these states go bankrupt rather than bail them out the way they bailed out Wall Street, AIG, the banks, and General Motors. But that's the rub ... I can already hear Democrats and liberals, (many of them catching hell from worried firefighters, teachers, and police officers - not to mention state retirees), complaining to their Republican colleagues "Why is it that you guys were in favor of bailing out Wall Street bankers, but you turn a cold shoulder to firefighters, teachers, and police officers?" The Republicans will stare back at these pleadings and say nothing. None of them want to face a primary challenge from a foaming-at-the-mouth Tea Party challenger in 2012. (What's the old saw? "All politics is local.")

Whether all this fiscal duress results in the legalization of internet poker in some of these states - and that turns out to be a good thing - depends. It depends on how severely these states choose to soak poker players. If California and New Jersey do what France has done to their internet poker players, then it's a disaster. The states themselves could be very disappointed if they screw it up and players avoid these "legal" sites in droves. I suppose time will tell.

Former DJ

Your author is right , its a band-aid, if its just a band-aid. Partnering with marijuana, its a start. The crux of the problem is government is swollen with pension obligations that are crushing. In most states you can retire around 49 with military+sicktime with cadillac insurance until Medicare and a db pension. In the modern real world most people have only social security as a garunteed benefit, and rely on 401ks, IRAs, and other investments. It would cost a political party's life, but one or the other needs to stand up to the states and force government employees off db pensions onto 401ks and to accept picking up the tab themselves for health care instead of forcing the uninsured to pay for their welfare cadillac plans. When the first one comes on its knees to beg, probably Illinois, that should be the first unnegotiable demand. It would be prudent as well to forbid elected officials to negotiate with unions.

The other side is to force local governments to raise revenue in sustainable, profitable ways. You can tax medical marijuana to death, or you can have a commercial, regulated marijuana market with jobs in farming, transport, manufacture, marketing, and retailing. The old model of criminalize, monopolize, and patronagize needs to be killed off. Poker should be cast in the same way. It probably applies more to B&M than online, but it works the same. A competitive, monopoly-free structure where people have real jobs dealing at tables in bars that can serve drinks all night is much better than a citywide or statewide monopoly that increases the waste in a councilperson's budget and lines the pockets of his donors. If the local poker club can run satellites to weekend tournies online all week, you can have larger fields. If you regulate in a careful manner to require real people in well-paid jobs, you can have a homeowning taxpayer to add to your revenue base. Poker is not a panacea, but treat it in a sane way, it can add to a local and national economy. I hate to lump poker in with the "video lottery" or "sweepstakes" machines, but they are an example of what can be done. Strip malls have an extra tenant, convenience stores have added extra employees, and local media has paying advertizers. The machines may be a total ripoff and tax on idiots, but local economies can see the benefit. 1 direct job from that pitiful a form of gambling results in how many added jobs, or jobs that might have been slashed were kept? Poker is a much more sustainable and popular gambling game. In your run of the mill, cash-strapped 100k person sprawl-zone, a 10 table poker room upstairs from a sportsbar, tapped into the virtual poker world, could add as many as 50 direct jobs. Ask your budget director buddies what 50 new jobs is worth to a tax base on the municipal lvl. You can't get those jobs with some half-ass, poker is evil, you can only do it here 9-9 legislation the same way you can't have a thriving addition to coffers from three hundred dollar an ounce medical pot.

The current grasping at any straw on the way down while we allow ourselves to be ruled by the greedy and the stupid won't help online poker.