Harry Reid blames Nevada’s other Senator for online poker failure
Details of a push in the Senate reveal much about the status of federal efforts.
Nevada’s two Senators are embroiled in a public spat over a plan to enact federal online poker legislation. On one side of the conflict is Harry Reid, the Democrats’ Majority Leader in the Senate. On the other side is Dean Heller, a new Republican Senator who is up for reelection next month. Majority Leader Reid is frustrated that the Senate failed to pass an online poker bill, and he blames Senator Heller for the failure.

The spat reveals much about the online poker discussion in Washington. Evidently Senator Reid has been working hard off the Senate floor to gain support for a draft bill. He worked with Senator Jon Kyl earlier this year to craft language that was acceptable to Senator Kyl. Having satisfied the objections of Senator Kyl is itself a small victory because he has been one of the strongest opponents of online gambling in Congressional history. (Incidentally, Senator Kyl can be of no further assistance next Congress because he has not sought reelection.) 

Then in May, Senator Reid reached across party lines to ask Senator Heller if he would help get more Republican support for the bill. The alliance makes sense because Nevada companies stand to benefit from the plan, probably more than any other state.
Today, however, the two Senators disagree about what took place between them. For whatever reasons, Senator Heller would not or could not deliver enough Republican support, and now Senator Reid is making a public issue of it. He has gone so far as to turn over e-mails between their two offices in an effort to demonstrate Senator Heller’s inability. 
According to a letter written by Senator Reid to Senator Heller:
For over a year I have been working with Senator Kyl on a bill that would prohibit internet gambling while legalizing and regulating online poker. Senator Kyl and I completed this bill earlier this year. In May, you agreed to help me cement Republican support for the bill. Since then, you have been unable to garner the necessary Republican votes to pass this bill. As a result, we are at a standstill. And every day we stand still, Nevada’s workers, its economy, and its gaming industry suffers. (Sept 11, 2012)
Source: http://media.lvrj.com/documents/Reid_ltr_Heller_09121.pdf 

Elements of the Reid-Kyl plan? 
Amid the fiasco, a curious unofficial document purporting to be a summary of the Reid-Kyl plan has circulated. Although we highlight important points of this summary, we stress that some level of skepticism is necessary because no one can verify this document’s authenticity. The summary is not in the form of actual statutory language but instead is some person’s interpretation of what the bill’s statutory language would accomplish. Although the summary document appears thorough, informed, and precise, we do not know who wrote it or how accurate their interpretation is. The actual statutory language of the Reid-Kyl plan is not circulating publicly.
But if the summary document is indeed authentic, here are some important points it proposes: 

Commerce Department: Authority to oversee online poker would belong to the U.S. Commerce Department. The Commerce Department would have power to promulgate regulations, which would likely include provisions related to minimum operating standards. The Commerce Department would create an Office of Online Poker Oversight to carry out its duties. 

Regulation by the states: The summary of the plan proclaims that its approach its “state-focused.” A state can only participate if its legislature first opts into the program by enacting enabling legislation. For states that do, the Commerce Department would delegate some of its own licensing authority to qualified regulatory agencies of the states. These qualified state agencies probably would be expected to ensure that their licensees comply with the minimum operating standards promulgated by the Commerce Department.
Participation in the federal program would be the only option available to states seeking to regulate online poker. A state would not have the option of creating its own intrastate network because a separate provision of the Reid-Kyl plan would tighten the federal prohibition on gambling to specifically include intrastate online poker that is not operated through the federal program. 

Tribal Participation: The Commerce Department would delegate some of its own licensing authority to qualified tribal agencies in the same way that it does to regulatory agencies of the states.
A tribe could also become a licensed operator, but it cannot regulate itself. A tribe would have to apply for a license either from the qualified regulatory agency of the state in which it is located or else directly from the Office of Online Poker Oversight. A tribe can only participate as an operator if the state in which it is located has opted into the federal program. 

Lottery Participation: Lottery organizations would be able to participate in the program as poker operators. Presumably, state lotteries are what the summary has in mind when it mentions “state-controlled entities or tribes that themselves want to operate online poker.” Entities such as these would have to apply for a license either from another qualified regulatory agency or else directly from the Office of Online Poker Oversight. 

Taxes: A 16% “online poker activity fee” would be payable by all licensees.
Of that, 14% is due to the states or tribes and 2% is due to the federal government.
Of the 14% due to states or tribes, 70 percent is allocated to the customer’s state or tribe. The remaining 30 percent is allocated to the state or tribe in which the regulating body of the licensee is located.
Copy of the source document here: Unofficial US Regulation Summary
 

Don’t bet on lame ducks
The coming lame duck session after the elections will present one final opportunity to attach online poker language to a larger bill, but a coordinated effort seems unlikely in the Senate, given what has transpired between Senators Reid and Heller. But of course anything can happen in American politics, as anyone who remembers UIGEA knows well. We think the more likely scenario is that next Congress the Reid-Kyl plan will serve as the one and only starting point for discussion. 

About the author
Bradley Vallerius is an Illinois attorney specializing in remote gambling issues.