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Online Poker Should be legalized in the USA

This is an opinion article inspired by a thread that I read over at v7n.com/forums/

First of all this is not a blanket endorsement of online gaming though I think that may be a good course of action. What it is a call for the legalization of online poker playing. Poker as it played in every casino I have been in is a much different game than most casino games. The house has no advantage or stake in the outcome. They are simply providing a service shuffling and dealing the cards. The players pay for that service upfront as a percentage of the total wagers on the game. The players are competing with each other based on skill and some will say luck.

I must bore you with a little background so that you can understand my full reasoning. Gambling is not illegal in the US, in my and many other states. The promotion of gambling is not legal anywhere unless state/local law allows it. A few our states including Kentucky have a most favored status for what in my opinion are two of the most rigged gambling devices ever conceived: lotteries and pari-mutuel betting on horse and harness racing. The odds for one are ridiculous and on the other the payoff is computed on the results with the house taking its cut off the top.

In my mind there is no difference between sitting down and playing a game of poker with my friends online or at home. One is legal and the other is not. Can you tell me why?

I have a common sense solution that would help both state and federal budget problems. So common sense you most likely will never see it discussed.

My solution to the problem is for the Federal government, though the existing Treasury Department, to issue federal gaming licenses. Players like me could buy a license allowing play for money at any legally licensed by the USA, online site. The online suppliers would need an operator license. The user fee should be minimal $10-$25 per year. The operator licenses should cost considerably more but remain reasonable for the projected sales volume. The higher cost would keep the fly-by-night sites offline and illegal. Only sites licensed by the US would be allowed to accept ACH, cash advances and credit card transfers from US card and bank account holders. To protect the banks and CC companies all such transfers would be considered cash advances and not subject to chargeback unless fraud was involved in the transaction.

The licensing revenue should be shared with the states. My initial opinion is that 100% of the user fees should be paid to the state of origin. The operator fees should be split 80% to the Federal government, 5-10% distributed equally to the participating states and 10-15% distributed to the states on a pro-rata basis based on origin of the enrolled users. The equal distribution part would allow the smaller population states to get a fairer share of the pie for agreeing to the plan. The split percentages are all subject to negotiation and yes I realize they add up to more than 100%.

This would be a Federal license. States would not be required to participate, but any state who did not accept the provisions would not get any of the user fees or the pro-rata share of the operator fees. All states whether participating or not would be precluded from bringing any action in Federal courts against any federally licensed online operator.

To obtain a Player license the US citizen/resident must provide a valid TIN number to the licensing authority, the US Department of the Treasury. By using the Treasury Department as the licensing agency it would be a very simple matter for the winnings reported using the player’s license number to be correlated to the proper tax ID number. States not electing to participate would be precluded by federal law from collecting any income tax on the potential winnings but all states would receive a federal report of winnings from the Treasury Department for the winners in that state.

The IRS already has very detailed regulations in place for what winnings need to be reported and the threshold amounts which trigger reporting requirements for the various types of gambling. For more information, direct from the IRS visit http://www.irs.gov/instructions/iw2g/ar02.html

Licensed operators would not be allowed to accept any deposit from a US resident who did not provide a valid US license number.

Operators must file yearly W-2G returns for all withdrawals that are in excess of cumulative deposits to any account. For security reasons these W-2G forms would contain only the license number, would be mailed and emailed to the account holder of record. With modern computers this is no where near a burdensome as they will protest that is. It would be a requirement of the license! They will find a way to make it work or not get a license. This would make it quite easy for federal, state and local taxing authorities to get their rightful share.

An additional safeguard of not allowing a login after the mailing could be checking a box that the W-2G was received or you can not play again.

This type of law would allow any legal poker/ casino operator who paid the license fee to provide online gaming. I would hope that the Commonwealth of Kentucky would see the advantages to such a plan and provide the necessary structure for the tracks and any legal casino in Kentucky to profit from it. It my wildest dreams, I would see some savvy lawmakers leading the challenge and enacting the necessary laws.

KEEP Board Discusses Gaming Options

The Kentucky Equine Education Project (KEEP), the lobbying group for the Kentucky horse industry held a board meeting earlier this week to discuss the proposed options for expanded gambling in Kentucky and other issues.

According to former Governor Brereton Jones, the chairman of KEEP, one of the options they discussed was amending the state's lottery law to permit local option votes to video lottery terminals, or slot machines, in counties where there are currently racetracks. He compared this to a vote on a wet/dry issue such as counties do for liquor. Chairman Jones did say KEEP has not taken a position on the proposal.

Another possibility the KEEP board is considering is "Instant Racing". Instant Racing is an electronic VLT type game where bettors make pari-mutuel wagers based on the outcome of "reruns" of randomly selected horse races. The games are in use at the Oaklawn Park Race Track in Arkansas.

Senator Thayer has reportedly asked Attorney General Jack Conway for an opinion on whether it is legal for Kentucky racetracks to add these machines and said he has drafted legislation to allow the games should it become necessary.

Republicans Keep Control of the Senate

After the pro slots Democratic candidate, former state Representative Jody Haydon, was defeated last week in a special election for 14th District seat, the continued Republican control of the state senate looks like a sure bet. The result of that election is that Damon Thayer's Constitutional Amendment bill looks like the only one that has a chance to get out of committee in the senate in 2010.

Former attorney general and current Speaker of the House, Greg Stumbo has said he will not present another bill for electronic slots at the tracks unless he feels it can make it to the floor of the senate. His bill last year was approved by the house and did not make it out of committee in the Senate.

The tracks are not in favor of Thayer's bill because it requires a statewide election, then local option elections and most of all because they would have to compete for the licenses.

Thayer is the chairman of the Senate State and Local Government Committee and believes he has the necessary 23 votes to put his bill on the floor of the state senate.

Constitutional Amendment Bill Pre-filed By Senator Damon Thayer
On Thursday November 5, 2009 Kentucky State Senator Damon Thayer (R) Georgetown appeared on Sue Wylie's radio program on WVLK radio and announced his intentions to pre-file a bill calling for a constitutional amendment authorizing and allowing up to seven video slots facilities in Kentucky.

If passed by the legislature the amendment would appear on the November 2010 ballot. The amendment if approved by the voters would call for a local option election in each of the seven counties that currently have tracks to decide if they wanted to have slots facilities.

The licenses would then be sold to the highest bidder in order to raise the maximum amount of revenue for the state. The facilities could be a stand alone facility and would not necessarily be located at existing tracks.

By including the local option voters would have two chances to vote expanded gambling down.

Our understanding in that he did in fact file the short 2.5 page bill right after leaving the radio program.

Ohio Voters Approve Casino Gambling
On Tuesday 11-3-2009 Ohio voters approved casino gambling for the state of Ohio. This was the fifth time the matter had been on the ballot. Recent polls had indicated that around fifty-seven percent of voters were in favor of the casino gambling. The actual vote was 53% voting in favor of approving.

Casinos have now been approved for Cincinnati, Cleveland, Columbus, and Toledo.

So yet another border state to Kentucky has approved casinos.

Kentucky Supreme Court Hears Arguments in Domain Seizure Case.
The Kentucky Supreme Court heard arguments from attorneys for the state and attorneys for online casino operators this week. The issue to be decided is whether the state has the rights to seize the domain names of the casinos that did not block Kentucky users.

The circuit court approved and ordered the seizure but the Kentucky Court of Appeals reversed that judgment and ruled that the state did not have the legal right to seize the domains. The state then appealed this decision to the Supreme Court of Kentucky.

Most legal experts believe that the appeals court ruling will be affirmed and the Commonwealth of Kentucky has no legal right to seize a domain controlled by an out of state owner.