Legalizing online poker looks like a long shot

By Karoun Demirjian

Thursday, Dec. 9, 2010 | 3 p.m.

Senate Majority Leader Harry Reid may not admit it publicly yet, but it appears the eleventh-hour push to legalize online poker during the lame duck is all but dead.

Lobbyists from the gaming industry had been pushing Reid to include the measure as an addendum to the tax cut extension being worked out in Congress during the session. But even they, apparently, were never convinced the measure would pass.

“We thought we’d have a vote, it would get voted down, and that would be it,” said one source in the gaming lobby.

That plan, however, depends on Reid’s ability to bring it up as an amendment to the tax bill.

Two weeks ago, it appeared that Democrats would work out a compromise with Republicans to bring some sort of tax compromise to the floor. Such an agreement would have allowed amendments, including the poker bill.

But hopes diminished late last week after Republicans refused to accept a deal that would have allowed each side to raise their proposals absent the threat of a filibuster. Reid then kept the Senate in over the weekend to vote on two Democratic proposals to cap tax-cut extensions at income levels of $250,000 and $1 million — but neither passed.

Reid appeared to lose the reins of the debate further on Monday, when the president unveiled a compromise that Republicans praised.

Holding the keys to that agreement — in the Senate at least — is Jon Kyl, the man the GOP’s caucus assigned to hash out the details of an agreement with the Obama administration’s top financial advisers.

Kyl “would object to slipping an unrelated online poker bill into a bipartisan agreement to extend tax rates for American families,” according to a spokesman for the senator. On Wednesday, he told Politico there was “zero chance — no chance whatsoever” that the poker proposal would enter the tax deal.

Congresswoman Shelley Berkley, who supports a legalization of online poker and as the House representative for the largest swath of Las Vegas has been closely watching the process, said she does not believe Kyl will budge, effectively killing the measure’s chances. “He is creating challenges that may not be surmountable,” she said Wednesday night.

That leaves Reid with few options. But even if Reid is still hoping to work out a deal, it’s not clear where he would be able to slip it in.

While some Democrats have advocated adopting the president’s proposal, a strong chorus of voices from the caucus are pushing to pick it apart through amendments that have a lot more support and urgency, nationally, than poker legalization.

Democrats are concerned not only by the full extension of all tax cuts for the next two years — an end-game that many were expecting — but also at the reduction of the Social Security payroll and estate taxes, and the absence of programs like the Section 1603 research and development program, a creation of the stimulus that let companies monetize tax credits for solar energy projects.

While it’s possible for Reid to secure an amendment on poker legalization, he would likely have to expand the bill to accomplish that to gain any Republican support. That would mark another shift in policy for the majority leader, who only a few months ago decided that he supported online poker — but not other online gambling.

The gambling industry was, collectively, one of Reid’s largest financial backers during the 2010 midterm elections, and the online poker bill tops the legislative agenda for several of the casinos that were in his corner.

There’s also several factions of Republicans who don’t support the idea of online gambling on moral and fiscal grounds as well.

On the House side, the three top Republicans from the committees of jurisdiction on online gambling — Spencer Bachus from Financial Services, Lamar Smith from Judiciary, and Dave Camp from Ways and Means — drafted a letter to Senate Leaders Reid and Mitch McConnell last week, urging them to drop any plans to do a sped-up legalization of online poker.

Time is of the essence to the industry.

Next year, those House Republicans move into the majority, and once they do, hopes for online poker legalization are essentially dead.

It was a Republican Congress that set this into motion in 2006, when they passed the Unlawful Internet Gambling Enforcement Act — the law that made it illegal to process financial transactions online for the purpose of gambling.

It’s not just the lobbyists who see the writing on the wall. Sen. John Ensign, who has expressed concerns with the policing element of the changeover — making sure that underage gamblers aren’t allowed to play — but has not issued a final verdict on the draft bill currently circulating, said odds of legalizing poker next year are “pretty slim.”

In the meantime, there’s still a draft bill circulating. It outlines a system in which states, in cooperation with the federal government will license companies to become online poker brokers, and then share the profits. The industry is currently worth about $25 billion, with 15 million customers.

“Quite a bit of care and effort went into drafting that legislation,” said a source in the gaming lobby. “The hope was it would be done with the least amount of publicity possible...the real threat to the bill is press coverage.”

If Reid can’t slip it quietly into the tax package, he hasn’t completely exhausted his options. There are a few other big bills kicking around Congress in the next 16 days before Christmas — not the least of which is a federal budget.

The proposal is aided by the fact that it’s a revenue-generator for both states and the federal government, making it possible to attach to federal spending legislation.

While trying to attach an amendment to the continuing budget resolution is no easier, it’s technically possible to slip it into the continuing resolution before it comes to the floor. The House only yesterday passed a resolution to send to the Senate.

But that would require the support of Appropriations Committee Chairman Daniel Inouye of Hawaii — who it just so happens, has spent the past several years working to get native Hawaiians recognized as Native Americans are, expressly so they too can operate casinos.

Inouye has opposed efforts in the past to introduce gambling to Hawaii, but has not commented on Reid's specific proposal — or even discussed it with the majority leader.

But as things stand, it appears that no agreement or promise has been made between Reid’s office and the gaming industry — whose executives appeared to have largely given up hope Thursday.

The president doesn’t appear interested in making this issue a priority either, lobbyists said. Though they expected he would not have a problem signing a legalization of the measure into law if it passed, because it is important to Reid.