Thursday, July 29, 2010

More on H.R. 2267

Yesterday I reiterated my opposition to any federal licensing scheme for online gambling on general principle.

I should have also added that an independent, sufficient reason to be opposed to the idea is that the last thing this monstrously money-addicted Congress needs is another new revenue source; we should be looking for every possible way to starve it rather than feed it. That the current bill is picking up supporters who like it purely for the fact that it gives them more of our money to spend is alarming, though misguided people and groups (such as the Poker Players Alliance) are using this as a selling point.

Here's a snippet from the New York Times demonstrating this mindset:

Supporters of legalization said fiscal considerations played a role in
their thinking. “I was looking for the money,” Representative Jim McDermott,
Democrat of Washington, said in an interview. He sponsored the companion measure
to allow taxation of Internet gambling; he wants to dedicate the money to

Representative Brad Sherman, Democrat of California, said in an interview
that the money was an attractive source of financing for other programs. “We
will not pass an Internet gaming bill,” Mr. Sherman predicted. “We will pass a
bill to do something very important, funded by Internet gaming.”

He added, “Forty-two billion dollars over 10 years has an

This is just wrong. First, any tax and licensing fees should be no more than required to operate the regulatory body. Second, at a time when Obama's budget projections show a tripling of the federal debt to more than $15 trillion by 2020, compared to 2008 levels, it is simply insane to be thinking of doing anything with new revenue other than trying to reduce that number. Using it for yet more new spending commitments is so fundamentally irresponsible from a fiscal and public policy standpoint that any member of Congress advocating it (as, e.g., Sherman and McDermott above) should be impeached and removed from office--or maybe just shot where he stands.

Along the same lines, states that don't opt out of the federal plan will be able to tack on their own taxes, which causes the same problems for both the profitability of the game and for overstretched state budgets as I have outlined at the federal level.

But what I really wanted to address in this post is this offhand remark from a Wicked Chops Poker post of earlier today: "The bill, which ... definitely falls under the 'Good for PokerTM' category, would effectively undo the UIGEA and make all online gambling, except sports betting, legal at the federal level."

Good for poker? "Definitely"? Let's consider that.

Now there is no state or federal tax taken out of cash pots or tournament payouts that I win. Under H.R. 2267 there will be. (OK, technically the taxation part will be under a separate bill that is still in committee. But it is unthinkable that 2267 would pass without that part coming along for the ride. Also, having not read that companion bill, I suppose it's possible that the taxes will come out of deposits rather than individual bets or pots. Same difference.)

Now online poker sites do not report one's winnings or losses to the IRS. Under H.R. 2267 they will.

Now I can play on Full Tilt Poker, PokerStars, Ultimate Bet, Bodog, Cake network, etc. Under H.R. 2267 those sites would not be available.*

Now I can bet on sports through any number of online sites. Under 2267 that will not be possible.

Now I can fund at least some online poker accounts via credit card. Under 2267 that option will be taken away.

Now I can play online even if I'm behind in child support payments. Under 2267 that will become illegal.**(As a matter of general principle, you tell me how the status of my child support payments is any business of either the federal government or Party Poker.)

Now I can easily transfer to or receive from friends funds from my online poker accounts. Under 2267, that freedom will almost certainly be eliminated, due to the anti-money-laundering requirements.

So, Wicked Chops Entities, can you explain to me how any of these things makes my life as an online poker player better, i.e., how these provisions are "definitely...Good for Poker"?

*PokerStars seems oddly confident that it will be able to become a licensee under this bill. Similarly, the blogger for Doyle's Room is calling this bill "a great success for legalized poker in the U.S." I don't know what they are seeing or thinking that escapes me, because it sure looks to me like they would be excluded. Even if they somehow were to get past being able to prove that they had never violated any state or federal law with respect to online gaming (itself a dubious proposition, given the Justice Department's interpretation of current federal law and several state laws that are pretty unambiguous), I simply can't believe that they would be willing to move their entire operation to the United States, as would be required for licensure. By the way, this is another problem with the whole idea of licensure: Every jurisdiction wants the businesses it regulates to be physically within its borders. FTP and Stars simply cannot simultaneously be wholly located within the borders of the U.S. AND France AND England AND Italy AND every other nation that wants to regulate and tax them. This trend will inevitably lead to the unnecessary balkanization of the online poker world.

**My friend Shamus reads this provision as saying only that one cannot obtain a license to operate an online gaming site if one is behind in child support payments. Though the wording of the amendment is clumsy, I think that's pretty clearly wrong. It doesn't say that the licensee must not be behind in child support payments; it says that the licensee is required not to take bets from any person who is behind on child support payments.


Cardgrrl said...

"Every jurisdiction wants the businesses it regulates to be physically within its borders. FTP and Stars simply cannot simultaneously be wholly located within the borders of the U.S. AND France AND England AND Italy AND every other nation that wants to regulate and tax them. This trend will inevitably lead to the unnecessary balkanization of the online poker world."

Multinational corporations manage this just fine. Ebay, Google, Amazon... they all do exactly this. I don't see why balkanization is a likely outcome.

Gnome said...

A few points:
_ While "starving the beast" reduces the government's income, it doesn't necessarily reduce the size of government. In fact, it could make things worse by raising the deficit:
( and (
_ Dedicating the $42 billion projected 10-year revenue gains to pay off the nation's longterm debts wouldn't make much of a dent in the $15 trillion 2020 deficit. Broad policy change _ not online poker taxes _ is needed to reduce the deficit.
_ A strong argument can be made that regulating and legitimizing online poker is good for the game in the United States because it helps ensure we'll continue to be able to play it. Until poker is regulated, it will always be in danger of government prohibitions and crackdowns.
_ I've read that taxes would amount to 6 percent of deposits. It is not the same difference as taxing cash pots and tournament payouts. As a winning player, I very rarely make deposits.
_ Online sports betting is already illegal under the Wire Act, so I don't understand how this legislation would make it more illegal.
_ Internet poker players are obligated to pay taxes already. Forcing online sites to report that information is simply enforcing existing law.

Short-Stacked Shamus said...

Sorry... I summarized Amendment 13 too hastily and thus incorrectly in my post. I've since edited to correct.

Gnome said...

A little late, but here's a "starve the beast" link I wanted to include: