Posted on September 17, 2012 by AIGA News Editor
Dave Palermo: Reid/Kyl might be ‘pretty good for tribes.’
A summary of Internet poker legislation proposed by Senate Majority Leader Harry Reid (D-Nev.) and John Kyl (R-Ariz.) leaked to the press last week lost significance when Reid began bickering with Republic colleagues on the Hill, likely dooming chances for passage of the bill.
With Reid squabbling with Kyl and Sen. Dean Heller, (R-Nev.) and channeling his focus on Rep. Shelley Berkley’s (R-Nev.) senatorial bid, Internet poker may not appear high on the congressional agenda before the November elections or the lame-duck session to follow.
The vast majority of American Indian tribes would prefer congressional action on cyberspace gambling vanish from the political radar.
“Most tribes would like to see iGaming go away, at least for a while,” said Ehren Richardson, an online consultant for the National Indian Gaming Association (NIGA), the tribal casino lobby and trade association.
But while indigenous governments long feared a Reid/Kyle bill would be a disaster for tribal gambling and a potential erosion of Indian self-governance, lobbyists don’t believe legislation outlined in the leaked summary is all that bad.
“Frankly, I think it [Reid/Kyl] is pretty good for tribes,” said a prominent Indian lobbyist who, like others who agreed to discuss the summary, requested anonymity.
“In fact, I think it’s excellent.”
A significant component of Reid/Kyl is it prohibits lotteries from offering online games that “mimic a slot machine or other casino games.” A Department of Justice opinion allows state lotteries to offer online games, a competitive threat to both tribal and commercial casinos.
“That’s something that would be well-received by the brick-and-mortar [commercial and tribal] casino industry,” a tribal regulator said. Many tribes fear online gambling beyond poker will encroach on their land-based casinos.
The summary states “authorization for online poker is strictly limited and the bill contains a mechanism to create barriers to future expansion to other forms of Internet gambling.”
Internet cafes are also prohibited.
At the very least, Reid/Kyl appears to be a far better starting point for negotiations than an August bill drafted by Sen. Daniel Akaka (D-Hawaii) and the Committee on Indian Affairs.
“The Akaka bill is a non-starter,” said NIGA Executive Director Jason Giles, largely because of regulatory provisions which, among other things, require elected tribal officials to undergo background investigations, a slap in the face of tribal sovereignty.
Tribal officials may find Reid/Kyl difficult to swallow, particularly those justifiably concerned with such pan-Indian issues as self-governance and tax exemptions.
But political consultants contend crafting a federal scheme for Internet poker that recognizes tribes as domestic governments and preserves tax exemptions while allowing tribes to accept wagers from off their reservation jurisdictions is, indeed, a difficult task.
Bills proposed by Reid/Kyl and Akaka specify that the U.S. Department of Commerce serve as the federal umbrella regulatory agency for Internet poker by tribal and state governments and commercial licensees. In Reid/Kyl, the agency would be called the Office of Online Poker Oversight (OOPO).
Tribes are opposed to Commerce Department involvement in Internet regulation, claiming the agency has no experience working with sovereign nations and would delay tribal entry into the cyberspace gambling market.
Tribes prefer the National Indian Gaming Commission (NIGC) – the federal agency for some 460 tribal casinos in 28 states – serve as the federal agency overseeing tribal Internet gambling.
Unlike the Indian Gambling Regulatory Act (IGRA), which governs tribal casinos on Indian land, tribes are generally not allowed under Reid/Kyl or Akaka’s legislation to serve as primary regulators for Internet gambling.
“It [Reid/Kyl] doesn’t accept that tribal regulatory agencies are capable or objective enough to regulate their government gaming,” said a tribal regulator who requested anonymity.
By the same token, states, as the primary regulator of government lotteries, are also not allowed to regulate cyberspace gambling.
“[Reid/Kyl] infringes on the sovereignty of both” state and tribal regulatory agencies, the regulator said.
“The tribal gaming commission is still going to play a role in background investigations for vendors, making sure everything is tested and operated with integrity,” a lobbyist said.
“They’ll still play a regulatory role. But there will be a federal umbrella agency [Commerce Department] that will regulate all Internet gaming.”
However, a significant component of Reid/Kyl directs Commerce to “designate qualified bodies” to serve as regulators, including states, NIGC or tribal gaming commissions which, although not allowed to regulate their own tribal operations, could regulate other tribes.
In addition, at least four “benchmark” agencies would regulate the industry while OOPO is being established, a process that will likely take up to two years. The bill requires no licensees to be operating “until at least 15 months” after legislation is enacted.
“Failure by the Commerce Department to issue regulations by that date will result in automatic adoption of the first benchmark qualified body’s regulations,” the summary states, a specification that likely will give Nevada’s regulatory agency a head start in issuing licenses. Nevada has already established regulations and begun licensing commercial casino companies.
“This is Reid’s nod to the commercial gaming industry and Nevada regulators,” a tribal official said.
“I can guarantee you the OOPO, unless they adopt Nevada’s regulations, are not going to develop their own regulations within six months,” a tribal regulator said.
“They’ll adopt Nevada’s regulations.”
In designating agencies to assist in regulating the industry, Reid’s staff is reaching out to tribal demands that NIGC be given a role in a federal scheme to regulate Internet poker.
But while NIGC has gone to great lengths to consult with tribes and streamline regulations, it has made no effort to draft model legislation or take a leadership role on Internet wagering, the most important gambling regulatory issue to confront tribes since enactment of IGRA 25 years ago.
“(NIGA) has spent nearly three years consulting with tribes [yet] I have not seen any leadership in terms of trends in gaming,” a former staff member said.
“It’s clear that as with everything else, technology continues to … creep into gaming. I don’t think any of the senior staff at NIGC have discussed this fact.
“[It’s] kind of a bummer.”
Reid/Kyl says states may opt out of a federal regulatory scheme for Internet wagering, but tribes in states that opt out are not allowed to opt in.
That’s a clause in Reid/Kyl that should anger tribes. But IGRA also prohibits tribes from engaging in gambling if it is not otherwise legal in the state in which they are located.
A major upside to Reid/Kyl is the fact Internet poker legislation is designed as a regulatory act and not a revenue generator.
There is no taxation of tribal Internet wagers, but licensees are to collect a 16 percent “activity fee” that is kicked back to state and tribal governments with a small percentage paid to the OOPO. The fee is similar to what casino tribes now pay to NIGC for regulatory duties.
Tribal political consultants are diligent in monitoring potential Internet legislation. Several have met with Reid’s staff.
Reid and his staff huddled with a dozen largely Southern GOP leaders at the Republican National Convention in Tampa, Fla., to discuss online gambling.
Several of those at the meeting guffawed when Reid’s staff mentioned that recent court rulings defined poker not as gambling, but a game of skill.
The GOP representatives gave no indication they would support the Reid/Kyl initiative.
“The meeting didn’t go over very well,” a tribal lobbyist said.
