Online Poker Should be legalized in the USA

This is an opinion article inspired by a thread that I read over at

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

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.

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