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Rounders Rejoice: Online Poker May Soon Be Legal in US

Poker players based in the US took a hit last spring when the Department of Justice shut down several major poker sites as the result of an in depth investigation.  Before this day, which American poker aficionados dubbed Black Friday, online poker occupied a legal gray area, which didn’t keep millions from logging on to attempt to pad their bankrolls.

Poker, back on!

To be fair to the DOJ, the shuttering of PokerStars and FullTiltPoker was not completely about snuffing out poker.  It was about people using these sites to launder money and for other shady dealings that didn’t have anything to do with playing cards.  FullTilt customers felt the less-than-honest business practices firsthand when the site was shut and players were unable to withdraw their cash because it was not in FullTilt’s accounts.

Black Friday left card players stuck at home games, casinos or second rate sites that are ignoring the DOJ’s efforts.  Social conservatives support keeping online poker off the internet, while supporters continue to argue that it is a game of skill that shouldn’t be grouped with other forms of pure-chance gambling.  Neither side has put forth a game-changing argument.  But, the almighty dollar might make it possible for US residents to lose their hard earned cash on the virtual felt before too much longer.

Nevada is hoping to offer in-state online poker on heavily regulated sites that are operated by brick-and-mortar casinos and card-rooms.  The plan will most likely be up for a vote in the state later this year.  Players who are residents or visitors will most likely have to give identification and tax information before playing.  Given online poker’s past popularity, this should be a big tax earner for the state.  That is where the almighty dollar comes in.  Unless Romney and Santorum falter and Ron Paul wins the presidency (come on, you’d vote for him, admit it), any nationwide legalization of poker seems far-fetched at this point.  But some bills are being tossed around congressional offices and poker and gaming groups are hiring lobbyists to keep the discussion going at a national level, perhaps pitching online poker as part of the solution to the national debt crisis.  Harry Reid, the senate majority leader, has long been a proponent of some sort of online poker legislation, but after the laundering debacle and FullTilt’s shenanigans providing opponents with an I-told-you-so defense, any legalization will come with super-strict guidelines and security measures.

If poker becomes legalized, it will most likely first happen state-by-state.  Seeking revenue in tough times, New Hampshire, Illinois, New Jersey, Iowa and a handful of other states are seriously looking into some form of legalized online gambling, with tax revenue as the primary motivation.  Heavy regulation including taxation on winning and stringent identification processes are likely to greet rounders lucky enough to be in one of these vanguard states.  They’ll be playing again, but may have to be thinking about tax issues each time they go all-in.  Of course, legally, US-based players were supposed to claim all winnings before Black Friday, but will now basically have the process taken care of for them.  Those who still want to thwart state and federal taxmen will have to stick to home cash games or low-limit card-room games.

Of course, for people who want poker to be seen as a legitimate skill game that good players can earn a living from, taxation and regulation might be a welcome step.  There will be no need to worry about whether or not a site will pay out winnings when you request them.  There may even be a mandated payout period so that players will know exactly when they will get their hard-won cash.  One potential pitfall could be the tax rate.  It would make sense to treat poker winnings as income and tax them accordingly, but perhaps states or the feds will have  a higher rate in mind: some sort of sin tax like cigarettes or alcohol.  This won’t affect casual players too much, but will be a serious downer for pro and semi-pro players who will basically have a higher income tax than everyone else.

One thing seems certain: the lure of easy tax dollars is too much for states to ignore for too much longer.  In tough economic times, income is income, no matter where it comes from.


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About Josh Lew Josh Lew lives in the Midwestern US when he is not traveling. He is a columnist for Gadling and has contributed to Hackwriters and Skive Magazine.

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