Open Letter to Governor Cuomo – Online Poker

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Dear Governor:

With the decision made as to where to locate the “Vegas style” casinos in New York State, it is now time to consider how online poker might be introduced in the state. Each of the three entities chosen to develop a full scale casino can initiate marketing and revenue generating activities while the physical construction of the facilities is taking place. There are several, already-established, online poker rooms that the casino developers can partner with in order to get a professional, proven website up and running and generating revenue.

New Jersey has already legalized online poker and has seen slow but steady growth in the nascent gaming sector. The state has already seen two of the more popular online poker rooms ‘share liquidity’ – meaning that they will allow players from each site to compete in games against each other increasing the prize pools and improving the customer experience.

Tens of thousands of New Yorkers have played online poker in the past and want the opportunity to enjoy the game they love, safely and legally. In addition to serving customers and building their brand, the new casino operators will have the opportunity to engage with potential visitors thereby strengthening their business. The state  would benefit by collecting taxes on the  online revenues.

New York State should be fully committed to ensuring the success of these new enterprises in any way possible. Legalizing online poker and allowing these entities to be the initial purveyors of this type of gaming is a definite step that the state can take now to show how important these new tax revenue generating enterprises are to New York.

Respectfully,

New York Poker Players

Independent Testing Labs | Nevada Online Poker

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In June of this year The Nevada Gaming Control Board approved two separate companies to act as independent testing labs for interactive gaming. The companies are Gaming Laboratories International, LLC and BMM International, LLC. The Silver State is exhibiting an encouraging amount of forethought as it forges a regulatory framework for online poker.

Outsourcing this work has several important benefits. First, the pace of technological change in both software and Internet access technologies is so fast that government employed regulators will have a very difficult time keeping up. They lack the resources and expertise that super specialized technology companies have. Regulators will be able to leverage this expertise and focus on enforcing rules, setting policy, staying current with the innovations and broad trends in the industry, and certifying the independent testing labs.

According to newly passed interactive gaming laws in Nevada, manufacturers will pick up the costs off the testing labs. Once the equipment or software platform has passed this round of testing it will face a final round of examination by the Gaming Control Board Staff.

The survival of online poker industry will fully depend on the security and fairness of the game. The old world/first wave of illicit poker sites that dominated the early 2000s will not suffice in the new era of legal, state (or federally) sanctioned, and taxed poker. Online poker, with real money wagering, is legal in Nevada now. It will be subject to fierce scrutiny and there will be zero tolerance for shenanigans by site owners and cheaters.

Independent testing labs will be expected to constantly test the security of sites and will be responsible for identifying potential vulnerabilities as early as possible. One can envision these companies tenaciously working to find weak points before the criminals and fraudsters have a chance to exploit them.

The first two companies approved by Nevada have longstanding reputations within the gaming industry. Gaming Laboratories has, over the past two decades, tested and certifed gaming devices in hundreds of gaming jurisdictions worldwide. Interactive gaming and online poker are relatively new fields, however the company does have some experience in testing online gaming systems. Both companies are gearing up for this new business by expanding their facilities and hiring more staff.

Nevada Online Poker Regulations

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A Closer Look at ‘New Regulation 5A’, Nevada Gaming Commission

When the proposed New Regulation 5A was put forth by the Gaming Control Board in 2011, it identified the key aspects of online poker from a governing body perspective. Whatever the rules and regs that had been followed in the past, by the Alderney Gambling Control Commission (British Channel Islands), or the Kahnawake Gaming Commission (Mohawk Territory in Canada), the Nevada version will surely and quickly become the gold standard. In this post we’d like to take a look at some notable parts of the regulations.

First off, it is made clear that for any interactive gaming system to operate legally in the state it must first be approved by the gaming commission. The minimum internal controls are referenced in parts 5A.060 and 5A.070 with regard to security protocols, most importantly the requirement that a list of persons with access to any part of the system must be maintained with the Gaming Control Board. Player verification is also covered in this section and more fully in 5A.110 (including age and location verification).

To address concerns over the possibility of money laundering using online poker accounts, 5A.120 prohibits money being transferred into an account from one financial institution and then subsequently withdrawn out to another institution. Nor can players transfer funds, via their online accounts, to any other players.

Probably the most important section of the document to poker players, in the wake of the Full Tilt and Absolute Poker scandals, is 5A.125 which sets forth the reserve requirements for player accounts. By law, the operator of a poker site must maintain a reserve in “cash, cash equivalents, an irrevocable letter of credit, a bond, or a combination” to protect players’ funds. The reserve has to equal the sum of all combined player funds held in interactive gaming accounts. This demonstrates the importance of player/consumer protection to Nevada’s gaming commissioners. The section goes on, in great detail, to provide specifics on how the funds are to be maintained, and if necessary drawn upon at the behest of the chairman.

Reserve requirements need to be calculated by each licensed online poker site on a daily basis. If the value of the reserve is not sufficient to cover the requirement in any 24 hour period, the site has to: 1) notify the chairman in writing; and 2) indicate the immediate actions that will be taken to correct the deficiency. All records regarding the reserve and player funds have to be examined by a certified public accountant on a monthly basis, and the findings have to be reported to the board. This type of required financial backing and oversight is what players who entrust their money to sites deserve.

These are just a few highlights of the main topics covered by Reg 5A. For those interested in learning more, the full text of the regulations can be found here.

Pre Election Federal Online Poker Status

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With less than a month to go until the presidential election (when 1/3 of the Senate and all of the House will also be in play) the subject of an online poker bill at the federal level is either heating up or cooling down, depending on one’s perspective. For those expecting a bill to be drafted and acted upon quickly, the process has been mired in political squabbling that only Washington insiders could ever hope to understand. Proponents of federal legislation in Nevada see the window of opportunity to maintain the Silver State’s preeminence in the gambling industry as closing while competing states move forward with their own plans to set up online gambling intrastate.

A spate of recent news seems to indicate that Senate Majority Harry Reid’s poker bill will be teed up during the lame duck session after the election. Politicians’ pet projects often follow this route before they find their way attached to some other, more significant piece of legislation that is likely to pass. This was the strategy employed when online poker legislation was attached to a broader Internet security bill.

Opponents of the bill that have dug into the details argue that the bill actually limits states rights because it includes a ban on any other type of casino gambling online–other than poker. This is a direct result of the involvement of the large casino operators based in Las Vegas. Allowing states to offer any and all types of traditional casino games over the Internet is seen as a mortal threat to brick and mortar casinos. Poker is different, with a completely different demographic and the major casino operators want a piece of this business.

The battles continue to be drawn along very specific lines between the various interest groups. In Nevada, regulators want to maintain the state’s role as the leading authority in all things gambling while Las Vegas based casinos want to establish a dominant position in this potentially lucrative new industry. However, elsewhere around the country, state legislatures, state run lotteries, and Native American casino interests are opposed to the Reid bill. On this particular issue, the lame duck session may prove to be not so “lame”.