The Return of Internet Gambling

CHAD PASTERNACK — In 2006, the Unlawful Internet Gambling Enforcement Act (“UIGEA”) took the online gaming community by storm and made wagering on games of chance illegal. Subject to the definitions of the statute, which forbid games predominantly subject to chance, online poker ceased to exist legally in the United States, despite requiring skill.

The UIGEA left many puzzled on the differences between games of skill and games of chance. While poker and blackjack were done away with, betting on fantasy football thrived. That minute difference between the two in the relative balance of skill and chance is enough to make one legal, one illegal, and many online gamblers frustrated.

To the titillation of many would-be Internet gamers, online gambling is making its comeback. Three states—Nevada, Delaware, and New Jersey—have now legalized online gambling on games of chance, which includes poker. From November 26, 2013, when the NJ law legalizing online gambling took effect, to years-end, over 125,000 accounts were created. In order to keep from violating federal law, however, state-legalized online gambling is only available to residents and visitors.

At this point, the focus is shifting away from changing the law at the federal level, to a state-by-state approach. This type of grassroots movement, albeit slower, is more likely to see success in the long run. The movement is looking particularly optimistic now that three of the world’s wealthiest hedge fund managers have placed bets on the success of online gaming. John Paulson, George Soros, and Leon Cooperman quietly became major shareholders in Caesars Acquisition Co., which owns Caesar’s online gambling assets.

The key, though, is winning support in states with major economies and population centers, such as California. But in California for example, despite interest from the state’s residents, there is strong opposition from the Indian tribes, whose wealth from their brick-and-mortar casinos yields them great influence in state politics. What this opposition truly shows is that there is high demand for gambling, and creating a legal outlet for online gaming means one thing to state governments: tax revenue.

As the popularity of online gaming in Nevada, Delaware, and New Jersey grows, and the revenue streams to the respective state coffers continues, other states will follow their lead. In order to help move the process along, groups like the Poker Players Alliance have sprung up to lobby for change in our nation’s online gaming laws. Although the future of online gaming is anything but certain, each additional state that legalizes games of chance is a victory for poker fans and online gamblers across the United States.

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