I also read it as a tax on rake. Also wouldnt it be cashouts and not net winnings reported to IRS? The provision for that seems to be added to the "reportable payment" section of the code.

But yeah an Office of Online Poker Oversight would be created under Dept of Commerce. The executive director of this office would then choose some groups to issue licenses and regulate.

That's how I read it too, tax on rake.

I also understood it to be cashouts reported, not net winnings.

no, but the blueprints for our new colosseum look good.

Would the American online poker market be jailed like France and Italy or would international players be welcomed?

Just got home and will dig in on the bill. Hope to post full cliffs later tonight. Of course, with the site tax on gross revenues rather than deposits and no player penalties, I'd say offhand it is definitely supportable.

Was this intentionally released or did it leak out? I wasn't expecting to see the actual text until after the election.

Is it better for it to be a tax on deposits or on rake?

If it is deposits and not rake, wouldn't the winning poker players pay less in taxes because they deposit less, and wouldn't it be a good thing?

Can anyone aware me

Deposits > rake. Thus you would prefer a tax on rake. The tax is paid by the sites, not the customers.

So 450 day blackout at which point the first licenses can only be issued to a casino, race track, card room, or licensed manufacturers of casino equipment. After 2 more years, then licenses *might* be opened up to others.

Also interesting that a condition of being unsuitable for a license is "knowingly accepts or knowingly has accepted bets or wagers on sporting events", but no mention that i see of accepting poker bets. I'm not seeing the bad actor clause that was mentioned earlier. If it is in there, could someone point it out to me please.

Gotcha - yeah the deposits would be much higher than the rake, so we're talking about a huge difference in tax.

Before everyone gets excited about this, federal poker is a trainwreck waiting to happen. I have written extensively about this. I would love the PPA to address these issues:

1) Feds don't have any precedent to offer or benefit from gambling and the courts are clear gambling falls under state rights/10th amendment. How is this different?

2) States still have to opt in, so after a massive federal fight it is still ultimately up to the states. Why bother? I guess a few extra states may come in but it will be doubtful that it convinces many other states. States can already pass online poker today if they wanted.

3) Not allowing states to offer any other online gambling clearly violates 10th amendment - what are they thinking?

4) It seems the federal act excludes state lotteries either early or entirely. How do you think Delaware and Maryland will take that? Aren't they for sure going to fight that? Those are just two states that come to mind right away.

5) Why do we need the feds to tax 2%? What are they providing? Aren't they just another hand in the cookie jar?

6) What about tribal gaming? It seems to me the IGRA attaches to internet gambling, if it didn't they would already be doing it. Tribal states have a potential nightmare on their hands if there is both commercial and tribal gaming. I have not seen anything in the draft that really addresses that.

7) Even if this passes, the state lotteries, anti gambling lobby, and 10th amendment activists are sure to take this to court. I cannot see how the feds prevail either. While this drags out in the courts states will sit back and watch because law says they can't develop their own online poker. They are not going to want to waste time and money on a new system that might ultimately become useless if the feds prevail. I would imagine it would take 2-3 years to run this through the court system, making federal online poker 3-4 years out if it is legal at all.

8) The location of the server getting 30% is nonsense. No non casino state is going to go for that. Sure, they can add them, but we are talking about finding politicians in states like MS/TN/GA/SC/UT/AL to vote on this today and they won't.

Why would anyone want this scenario over state by state? Especially considering you are already having to go to state legislatures to opt in. It is like it adds massive, potentially illegal, red tape to something that seems to be so obviously a state issue anyway.

Can someone clear up where I am wrong here?

The question is, who regulates the internet? Since the internet is interstate by nature, we need a federal bill.

It makes a nationwide network available much quicker. If we go state by state, there is going to be a lot of intrastate only poker, which would suck outside of a couple of states. Instead of having to draft their own legislation, come up with their own regulatory body, and appease all the competing interests, it comes down to a yay or nay. That speeds things up by light years.

I'll need you to explain this to me. I understand that gambling has typically been left up to the states, but I don't recall the 10th amendment saying that only the states are allowed to regulate gambling.

This does seem to be a problem. What I'm hoping is the lotteries are left out so they have something to bitch about that we can give them back later...ie a negotiating tactic.

There will be a federal regulatory body and enforcement.

The tribes have come out in favor of a federal solution, because they, like the casinos, don't want online slot machines to kill their business.

Perhaps, but if they don't pass it and it goes state by state, it still eventually ends up in court (commerce clause) and we will eventually need a federal bill. The idea here is a federal framework to allow the states to license online poker.

I agree. For clarification, the feds would get 2%, the regulators state would get 4.2% and the state where the player is located would get the other 9.8%. I would like to see the regulators cut get chopped to at least 2% or no licensing fees.


This has been discussed over and over. The reason we don't want to go state by state is because we could end up with state controlled monopolies putting forth an unbeatable game. We also don't want to sit around and wait for the sates to make interstate compacts to pool their players. It is also not so obviously a state issue. We are definitely dealing with interstate commerce here.

Complete stupid question. If they tax the rake, and that is paid by the site not the player, won't the sites jack up the rake? Won't that make it even tougher to beat the games?

Sure.

I don't think so.

Sure they do. There's ample legislation banning forms of interstate gaming, like the Wire Act and Illegal Gambling Business Aact. There's federal enabling legislation like the Interstate Horse Racing Act. And, there's federal authorizing legislation like the Indian Gaming Regulatory Act.

Going state by state would be a long, tough fight. Many states that may opt into a federal bill would be hard pressed to create a regulatory body and to develop the expertise required for authorized online poker.

As players, a state-by-state solution would likely be suboptimal. Liquidity would be lower and, in many cases, I'd expect higher rakes caused by limited competition and even the potential of lotteries operating online poker as monopolies.

The Tenth Amendment states that powers not enumerated by the Constitution are retained by the states and the people. The enumerated power Congress would use for this legislation is the power to regulate interstate and international commerce -- the same commerce clause that authorizes the Wire Act and many other laws on this matter. And, unlike many federal power grabs, the Internet actually is interstate by its very nature.

Speaking of the commerce clause, many state plans would require state-to-state trade barriers, where a state that chose to socialize its online poker by giving it to its lottery would expect Congress to stop out of state online sites from offering services to that state's residents. IMO that would be akin to a state socializing its automotive sector and banning importation of cars from neighboring states.

Probably

Administrative costs. In the prior bills, their cut was much more.

PPA has worked closely with tribes. Some are for this and some are not, but their needs have been heard throughout the process.

We'll see. They weren't going to court over the Wire Act.

I'm sure they'll figure out ways around that.

Why is it obviously a state issue? Does your state assert a right to regulate the Internet? Mine doesn't (though my governor does ). Regardless of what happens, Congress will be left holding the enforcement bag.

Yes, in rereading that section it definitely appears to me to be a tax on rake (and tournament buy-in fees).

-- Russ Fox

Of course sites will pass on the taxes to the players, but there really isn't a no-tax option. Our goal is to keep it as low as possible, which is what we have with the 16% here.

Considering what US-facing sites have had to spend to move money to US players, I imagine this solution may be cheaper for sites.

One more thing....many in Congress are very unhappy with the idea of states offering online casino gaming. They fear what they call "a race to the bottom" and states promoting these gaming sites they way they promote lotteries. If PPA is not on offense on Capitol Hill (which has been our best defense), it's very possible that they've move to expand the Wire Act. The GOP platform has a plank calling for just that, in fact.

And, if you're expecting those in Congress who claim fidelity to the Tenth Amendment to help out, take a look at who supported the Professional and Amateur Sports Protection Act.

From the proposal, it's not only net winnings but many other items are reported:

I would have much preferred to see only net gambling winnings reported. For amateur gamblers who live in bad tax states, it's quite possible that until state tax law is changed (as it has been in Ohio for state taxes but not city taxes beginning in 2013) online gambling will not be playable.

-- Russ Fox

+1 to this. It will certainly be cheaper than it was for the sites in the few months leading up to Black Friday. I recall reading somewhere that the sites were paying upwards of 30% to move money to and from the United States. So a 16% tax plus whatever it costs to move money (at most what, 3%?) is going to be a lot cheaper.

I don't speak for the whole PPA here, but I will give you my views.

People can make theoretical constitutional arguments ad nauseam. In evaluating these constitutional theories it is important to remember that ultimately this issue will be resolved under the commerce clause. If it is constitutional for the federal government to prohibit you from growing wheat on your own land for your own family to eat because that act affects interstate commerce ... (and the Courts have said it is) ... then it is up to you to explain how anything conducted over the internet cannot be included as within Congress' power to regulate interstate commerce.

Keeping this short in light of the number of questions, the answer here is that it will be far easier to convince most states to opt into an established federal POKER ONLY system than it will be to convince states to create their own online gambling systems that include a fair deal for poker interests (i.e., interstate players pools and reasonable rake/taxes)

This is hardly a generally accepted point of view. The internet is different from B&M gambling and the Feds could probably regulate a national gambling system if they asserted the right to do so. Please, if they can stop folks from selling raw milk why not online poker? Also, this a repeat of question 1.

No doubt state lotteries that want to establish themselves online will oppose this bill, it gives them very little and the only compensation is that, other than poker and horse racing, they will have no new competition.

The problem is that the state lotteries 1) want a monopoly on all the online gaming in their state, 2) are inclined to take large percentages from their games with minimal customer support, and 3) will focus very little attention (if any) on good online poker because online poker will be their least profitable online game.

"Hey, you wanna do business in my territory, you gotta let me wet my beak."

There are some problematic provisions regarding tribes. Its not directly a PPA issue but in general the PPA supports the bill allowing for as much competition and participation as possible and that definitely includes the tribes. But even as written there are clear ways for the tribes to participate and benefit from this new market, it just should be more flexible and respective of tribal sovereignty in its details. Hopefully that part of the bill will be improved before final passage.

It is a Federal law. It goes into effect when the law says it does. If someone or something wants to challenge the law in court, of course they can. But if they seek to stop the law from taking effect, they need an injunction. Injunctions are not easy to get and require a much better case than that which might ultimately win after a trial.

Each individual lawsuit will probably be specific to the entity that brought the suit. So one also has to ask just how many states will really take this issue to court.

Its not nonsense if you live in one of the licensing states. Its also not totally inappropriate as there is a cost to doing effective licensing and regulation.


Because I think you seriously underestimate the difficulty of getting good online poker through a state by state effort.

The biggest problem, as I indicated above, is the fact that in most if not all places the primary motivating factor for legalizing online gambling will be REVENUE - not the fact that it is only fair to let online poker players play their game. IOW, try getting a state legislature to consider a poker system with a fair rake and interstate compact play when they can make instant millions simply by putting slots on line. ... Feel unimportant? Perhaps you should.

The bottom line difference is that moving state by state to get opt ins under a federal system that is POKER ONLY will be far, far easier than trying to get states to establish player-friendly online poker legislation as part of their expansion into online slots and casino games.

A lot of people seem to assume that if we go forward state by state we will be going forward with poker at the forefront. I truly doubt that. Nevada was poker only because there is no state lottery there and the law was written with anticipation of Sen. Reid's federal proposal. All the other states will either be "gambling is bad!" or "gambling is a cash cow!" - neither of those environments are favorable for good online poker.

This federal bill is not the end of the fight for good online poker. I will be the first to admit that it is far from what I want. But I will also say that this federal bill IS OUR BEST OPTION FOR GETTING THE MOST U.S. PLAYERS PLAYING IN THE SHORTEST PERIOD OF TIME. And I also believe that as we play and become more accepted we can then get an even better bills in the future. I could be wrong, but I do not see that as a reason to stop trying, not to not accept small steps forward.

Skallagrim

You are absolutely correct Russ, and I also would have preferred more (or less).

But it was a victory for the PPA that the law specifically requires the reporting of yearly net winnings/losses. It is essentially the go ahead to take the issue of how to report online poker winnings/losses to the IRS and the state tax agencies. IOW, once the tax authorities are told they will be given that number along with the others, we have to convince them that the "net result" number is the number to use.

Skallagrim

You're right, I missed that part. I stand corrected. I did see a section that said the site had to report all cashouts to the IRS too, and took that as being for tax purposes. Not going to look for it right now, but I will have to read it again later.

If a state wants to offer house banked games to residents of the state, there's absolutely nothing wrong with that. And the members of Congress that think its their right to legislate morality can suck it, quite frankly.

The professional and amateur sports protection act is a terrible abuse of federal power, but thankfully it appears there's finally a state with enough balls to challenge it.

Those are both 10th amendment issues IMO, but who knows what the courts will think. I'm sure a Judge could craft an absurd argument that banning sports betting within a state is interstate commerce.

Great posts Skall!