Tribes fear that legalizing online poker would hurt casinos

McClatchy NewspapersJuly 29, 2012 

This is the third in an occasional series of stories on Indian tribal casinos.

Since he dropped out of Seattle Central Community College, Alex Fitzgerald said, he’s found the good life: winning more than $2.5 million as a professional online-poker player and quickly becoming one of the hottest young gamblers in the world.

Poker, he said, is his passion and his profession, and he studies it every morning. But he’s doing it in Costa Rica. He said he must play on foreign land because online poker is illegal in the United States, after the Justice Department shut down the three largest sites on Apr. 15, 2011, a day known among gamblers as Black Friday.

“I can never live in my country of birth again without giving up the only job that has consistently fed me since I was a teenager,” said Fitzgerald, who’s 24.

One thing might change that: Congress could legalize online gaming, allowing at least 150 U.S. poker players who’ve fled the country to return. While the poker industry is lobbying hard to make that happen, it’s the ultimate nightmare for many U.S. Indian tribes, who fear that it could destroy their $28 billion-a-year casino business.

While no vote has been set, poker lobbyists have lined up backing from the nation’s most powerful senator, Majority Leader Harry Reid of Nevada, who once headed his home state’s gambling commission. They’re banking on Reid to muscle a bill through by the end of the year, reversing the ban approved in 2006.

To help get the job done, the Poker Players Alliance, a lobbying group that represents players across the country, is leading a national grass-roots campaign, urging its 1.2 million members to flood Congress with letters, emails, phone calls and tweets. In May, the group joined nearly 20 members of Congress at a retreat for House of Representatives Republicans in Florida, hosting a poker and casino night and posting photos on its website that showed lawmakers crowded around a table learning the finer points of Texas Hold ‘em. Rep. Joe Barton, a Texas Republican who’s a respected poker player in his own right, is leading the House effort to pass a bill.

While Black Friday angered poker players, they scored a win in December, when the Obama administration announced a move that could go a long way toward legalizing online gaming. The Justice Department said it would apply the major anti-gambling statute, the Wire Act, only to sports events and races, clearing the way for states to begin legalizing online gaming without having to worry about federal laws.

Two states, Nevada and Delaware, already have done so. New Jersey could become the third this year.

John Pappas, the executive director of the Poker Players Alliance, said legalization of online gaming was inevitable now that the Obama administration had “opened the door.” He’s backing a plan that would allow the Department of Commerce to certify states to regulate online poker, while allowing them to go beyond their own borders to accept bets from players.

“There needs to be some sort of clear statute: What is unlawful Internet gambling, and what is lawful Internet gambling?” Pappas said.

Legalization is a worrisome prospect for many tribal officials, who predict that most gamblers would be less likely to drive to casinos, often found on isolated tribal lands, if they could play for money on their home computers.

On Capitol Hill, where congressional committees have been debating the issue for months, tribes have been busy trying to line up votes.

“We see legalization of Internet gambling as a direct threat to the economic growth in Indian country, and we do not support any proposals that legalize Internet gambling,” said Glen Gobin, an officer with the Tulalip Tribes in Washington state.

Others are moving to make sure the tribes will have the upper hand in running online poker. 0n Thursday, Hawaii Democratic Sen. Daniel Akaka, the chairman of the Senate Indian Affairs Committee, unveiled a draft of the Tribal Online Gaming Act of 2012, which would allow federally recognized tribes to apply for licenses to operate online poker.

Akaka, who’s regarded as a close ally of the tribes, is seeking reaction from tribes and other senators before deciding whether to formally introduce the measure.

Robert Odawi Porter, the president of the New York-based Seneca Nation of Indians, said “a thousand flowers bloomed for Indian nations” after Congress allowed tribes to enter the big leagues of gambling in 1988. At a Senate Indian Affairs Committee meeting in February, he said online gaming threatened tribal sovereignty and the tens of thousands of jobs the casinos had created.

But Porter said that if Congress insisted on approving online gaming, lawmakers at least must allow tribes to help write the rules and take the lead in running the enterprise.

Online poker, which is already legal in 85 countries, has the potential to change the rules of gambling forever, much as online shopping reshaped the retail industry.

“Anybody who’s in the gaming business today and isn’t seeking to take their business online is really going to be left in the dust, just like the booksellers were and just like the music industry was,” Pappas said. “Gaming is going to be the next wave.”

The poker players say the tribes already have too much influence. The players are particularly irked with legislators in Washington state and with Democratic Gov. Chris Gregoire for approving a state law in 2006 that imposes criminal penalties on those who play online poker or place any kind of wager on the Internet.

Art Reber, a retired professor from Point Roberts, Wash., who co-wrote the book “Gambling for Dummies,” called the law “one of the stupidest things on the planet.” He said that while it clearly was aimed at protecting the tribes, Indians didn’t deserve special protection in the gambling industry, regardless of how they were mistreated in the past.

Critics say it would be a big mistake for Congress to scrap the 2006 federal law, the Unlawful Internet Gambling Enforcement Act.

“Online gambling is the very worst-case scenario, and the reason is because if you open online gambling, there are no rules anymore. There’s no stability,” said John Kindt, a gambling researcher and professor of business and legal policy at the University of Illinois.

Kindt, who testified before Congress in 2006 when members approved the ban, said electronic gaming was particularly addictive, calling it the “crack cocaine” of gambling. He said tribes were hedging their bets by opposing online gaming in Congress, but he predicted that they’re unlikely to take a financial hit and will be on the leading edge of the movement if it’s approved.

“It would be huge for every gambling establishment,” Kindt said.

The issue will force Congress to confront questions of whether tribes should be allowed to accept bets from gamblers who aren’t on Indian land. Many tribes already are pushing to buy new property and open casinos off their reservations, taking advantage of looser rules the Obama administration approved last year.

But critics say the 1988 law signed by President Ronald Reagan was intended to allow gaming only on Indian land as a way to promote jobs and economic development.

Some say that’s now an outdated idea.

“Such a limitation would be ludicrous and incompatible with the very nature of the Internet,” said Alex Skibine, a professor at the University of Utah’s S.J. Quinney College of Law in Salt Lake City. “The Internet is not land-based. It does not have geographical boundaries.”

On Black Friday, the Manhattan U.S. Attorney’s Office announced the indictments of the founders of the top three online-poker companies doing business in the U.S. The government seized the bank accounts of PokerStars, Full Tilt Poker and Absolute Poker and charged their officials with bank fraud and money laundering.

Fitzgerald, who’s been playing professionally since he was 18, said he’d lost $150,000 on Black Friday and that he held out little hope of getting it back.

“I really liked being an American up until this point,” he said “But it’s just very difficult to tell your family, `I can’t live near you anymore: I can’t conduct my business. I will have to completely change my life to play.’ And all I do is play a card game. I can understand if I was selling a drug or if I was doing something else a little suspect.”

Fitzgerald, who attended Inglemoor High School in Kenmore, Wash., now lives in San Jose, Costa Rica, where he’s come to appreciate the country’s people and culture and his proximity to the rain forest, mountains and beaches. And after meeting his girlfriend there, he said, he’s not about to leave. Besides, he’s not expecting Congress to approve online gaming anytime soon, saying that lawmakers will have a hard time overcoming the power of the tribes.

“The Republicans are hypocrites when they do not defend my right to conduct my own business yet claim big government is the root of all our problems,” he said. “And Democrats are just incredibly naive and impotent.”

Kristin Wilson, who owns a company that helps American poker players resettle in Costa Rica and other countries , said poker was a game of skill that was misunderstood: “A lot of people in the U.S. think that poker players are some sort of degenerate gamblers, when really they’re highly intelligent professionals. They didn’t come here to party, they came here to work.”

While many players are pessimistic that Congress will act, Pappas, of the Poker Players Alliance, said the stars might be aligning for the industry. He predicted that a bill would pass the House but said its passage was less certain in the Senate.

That’s where Reid comes in. He’s been working with Arizona Republican Sen. Jon Kyl this year to write a bill. Backers say the best chance to pass it may come during a lame-duck session, after the Nov. 6 elections, if Reid can attach it to a broader piece of must-pass legislation.

Reid hasn’t offered any specifics, but he said at a news conference this month that he needed backing from more Republican senators to advance a bill.

Proponents of a federal law say it’s important for Congress to act before too many states muddy the waters by passing different laws of their own. After the Justice Department issued its opinion on the Wire Act in December, I. Nelson Rose, a lawyer and law professor from Encino, Calif., told a Senate panel that the result will be “an explosion” of poker and other online games operated or licensed by states.

Some tribes already are getting ready.

In May, as California lawmakers considered a bill to approve online gaming, the United Auburn Indian Community signed an agreement with digital entertainment to have the gaming giant provide online poker services if a law is approved. David Keyser, the chairman of the tribe, which runs the Thunder Valley Casino Resort near Sacramento, said the tribe wanted to maximize potential revenue by getting on board early.

Studies show that while casinos have appealed most to older gamblers, online gaming could be a powerful draw for younger gamblers who grew up playing Internet games.

Reber, the Washington state retired professor, said other studies involving millions of players had shown that most gamblers preferred small stakes, which was why it shouldn’t be illegal.

“If you take a look at what goes online, you will find that it is overwhelming , and I mean crushingly overwhelming, like 99 percent of all online play is 5 cents, 10 cents,” he said.

If Congress approves online gaming, Reber said, it’s sure to lure in new gamblers who will see it as a novelty: “They’re going to give it a shot. They’re going to play for a little while because they’ve read these stories about people winning millions and millions, and they’re going to lose their 10 bucks and then they’re going to go away.”

Fitzgerald has no such plans.

He first played poker in his high school cafeteria at age 15, when his family depended on food stamps and faced the possibility of foreclosure on the family home. He said he never had the money to pay anyone if he lost, so he had to learn how to win quickly. And he said he’d decided to drop out of college after only one semester when he discovered that he could easily earn more than his professors did by playing cards.

Of the $2.5 million he’s won as a pro, Fitzgerald – known in poker circles as The Assassinato – claimed his biggest single prize in 2009, hauling in $222,000 at an event in Italy. He said he was happy to be in a business that didn’t discriminate, where the harder he worked the more money he made and “there’s no one holding me back but me.”

“The best poker player in the world can be any color, any sexual orientation or of any religion. . . . Nobody wins millions of dollars at poker because their dad is the president of a casino,” he said.

“Poker is a battle of wits, minds and heart. You may have a doctorate, you might be a titan in your field, you may be rich, you may outgun me in every other facet in life – but I will break you at a poker table.”

Expatriates play poker in Costa Rica


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