Don’t Hate the Player—or the Game

Sure, Harry Reid’s push to legalize online poker is a favor to the casinos that helped get him re-elected. But it’s also good policy.

Harry Reid

In poker, the cards dealt after the opening round of betting are called “the flop.” In politics—at least when it comes to Harry Reid—it’s called the flip-flop.

Politico reported on Tuesday that Reid was trying to stuff President Obama’s tax cuts package with a bill that would legalize online poker. (Reid has since backed off.) This wouldn’t be such a big deal, except that Reid has opposed legalization in the past. What changed his mind? Could it be the hundreds of thousands of dollars Las Vegas casinos contributed to his re-election campaign? Yeah, probably. But that doesn’t change the fact that legalizing online poker is long overdue.

Let’s start with the most obvious reason to permit online poker: It happens anyway. An estimated 7 million Americans already log on to poker sites every month, according to one study. But the sites they visit operate outside the purview of U.S. law because they’re located offshore. That means players aren’t protected from fraud or cheating. If they get fleeced by another player, their only recourse is to complain to the site. Gambling sites like Poker Stars and Full Tilt Poker are self-policing. If someone’s perpetrating a fraud scheme, it’s up to the sites to punish them. They usually do—after all, they want to protect their reputations—but it’s not a foolproof system. When an employee at a site called Absolute Poker allegedly cracked the system and looked at everyone’s cards, he was caught, but the money he won by cheating wasn’t recouped. If one of the poker companies disappeared tomorrow and took all its customers’ money with it, they’d have no recourse.

Reid’s bill would bring all this activity under the regulatory umbrella: Set up a licensing system, create standards for who can play, and enforce the rules.

Legalizing the game would also raise tax revenues. The Joint Committee on Taxation scored an online gambling bill sponsored by Rep. Jim McDermott, D-Wash., as generating $42 billion for the federal government over 10 years, and $30 billion for state and local governments. That’s probably a little high, since it would legalize not just poker but all Internet gambling and since it assumes all 50 states opt in, says John Pappas, executive director of the Poker Players Alliance: “I think more realistic is between $15 and $20 billion over a 10-year period.” That’s not going to eliminate the deficit. But it’s enough to make lawmakers look twice. Whatever the tax revenue, critics of online gambling argue that the social costs of legalization could be even higher. Chad Hills, a spokesman for Focus on the Family, pointed to an admittedly rough estimate that legalizing online gambling would create $25 billion annually in social costs—aggregate losses from bankruptcy, crime, and other negative impacts of gambling addiction.

The simplest argument for online poker is the libertarian one: You should be able to do what you want in your home, as long as it doesn’t hurt anyone else. But critics turn that argument on its head. The fact that online gambling is so accessible, they say, makes people all the more vulnerable. “Online gambling brings casinos into your living room, into schools, into businesses and libraries,” says Hills. It’s true—increasing access to poker could create new problem gamblers. The Web also lessens the social pressures against gambling, like the shame of losing money or the friend who leans over and tells you it’s time to quit. Critics also envision a world in which kids can get ahold of their parents’ credit cards and gamble away their life savings.

But, again—sorry to belabor this—this doesn’t describe some freaky future. It describes the status quo. People who want to gamble online can and do without any oversight. If online gambling were regulated, it could have built-in safeguards. A player could set loss limits for himself beforehand, for example. Or sites could monitor betting patterns to detect problem gambling and warn bettors when they appear to be heading off the deep end. (Some sites already have these safeguards—but they’re not required.) The Reid bill would also direct some of its tax revenue toward gambling addiction services. Of course there’s no way to force players to stop playing—but, again, that’s no different from Vegas.

Current online gambling law is in shambles. The prevailing rule, the Unlawful Internet Gambling Enforcement Act of 2006, doesn’t explicitly ban online gambling. It merely prohibits banks from allowing money transfers to and from sites engaged in “unlawful Internet gambling.” But it doesn’t define what “unlawful Internet gambling” is. Instead, it leaves banks to determine which transfers are legal and which ones aren’t. Banks respond to that ambiguity by overregulating, just to be safe. The Department of Justice isn’t much help, either. DOJ has argued that online gambling is illegal under the 1961 Wire Act, but the 5th Circuit Court of Appeals rejected that interpretation in 2002, determining that the Wire Act covers only sports betting, not other kinds of gambling like poker. * A new online gambling bill would clear up the gray area by explicitly saying what’s legal and what’s not.

Just to be clear: Reid isn’t proposing to legalize all online gambling—only poker. It’s a key distinction. Poker isn’t a game of luck like slots. Luck plays a role, but skill is also involved. Betting on games that require skill is generally more protected by the law than games of luck. Even so, most states already allow games of luck. Forty-six states and jurisdictions have lotteries. Almost every state permits some combination of casinos, horse racing, or dog racing.

Poker advocates get all romantic when talking about their favorite pastime. It’s part of our great nation’s history, the fabric of our culture. Our president plays it, for heaven’s sake. But they also have a vested interest in legalizing the game online. “There would be a huge influx of casual players, of fish,” says one Washington-based professional poker player who asked not to be named because his primary source of income—online poker—may not be legal. “It would be really good for me from a financial standpoint.”Like Slate on Facebook. Follow us on Twitter.

Correction, Dec. 16, 2010: This article incorrectly stated that the Wire Act was passed in 1964. ( Return to the corrected sentence.)