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Pappas Discusses Intrastate Online Poker and the UIGEA

PPA Excutive Director Weighs In on Critical Issues Facing the Industry

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Poker will be a major issue on Capitol Hill soon, says John Pappas.Earlier this week, PPA Executive Director John Pappas said that he remained optimistic that significant progress regarding Barney Frank’s poker bill would likely come this spring, if not by the end of the month. Below, he answers questions on other federal legislation, the UIGEA, and the chances intrastate online poker regulation will come before federal regulation.

Part 1 of the interview can be found here.

Stephen A. Murphy: Does the PPA have an official position on the Bipartisan Tax Fairness Fairness and Simplification Act?

John Pappas: We support the underlying provisions related to internet gaming. On the overall bill, we don’t have an overall position. I can tell you that from what I’ve learned, that bill is far from being fast-tracked. It doesn’t have broad support in the Senate, but from our perspective, it’s very favorable to see lawmakers, particularly bi-partisan lawmakers, add internet gaming as a “pay-for” and I think that’s a sign of things to come.

SM: If these Senators are OK enough to include internet gaming for their bill, why wouldn’t they come on as co-sponsors for Senator Menendez’s bill?

JP: That’s a fair question, and it’s a question we’re trying to get answered. I don’t have the answer for that, but one of the arguments could be — and again, I’m purely speculating — the Menendez bill, which is only for internet poker, may not yield as much revenue as something more broad-based, like the Barney Frank bill. If their purpose is to use this as pay-for for revenue, they may want to the get most revenue as possible and put side by side, Mr. Frank’s bill is probably going to raise more revenue.

SM: June 1, the new deadline for when banks must comply by the UIGEA, is less than three months away. Barring significant progress on Frank’s bill, do you expect another push for another delay?

JP: Irrespective, the PPA intends to file another petition. We are going to put the same energy that we did with the last petition.

The concerns that were raised last time — there is no definition of “unlawful internet gambling” — none of that has been fixed. So, if they were willing to extend it to six months to have Congress act and Congress hasn’t acted, we hope that they will grant another extension. But there’s no guarantees, so we’re going to work just as hard as we did for the last petition and actually twice as hard, because our opposition won’t be caught flat-footed this time.

SM: What do you believe would happen if June 1 came and the UIGEA was not delayed again?

JP: That’s kind of the $65 million question. No one can predict what will happen to the marketplace. I suspect that it’s going to become more difficult for players to get on and off their accounts, although the UIGEA would not affect payouts, it would only affect deposits. It might be a little harder, and those obstacles might keep the casual player off the sites, so I think you’ll see less play and less opportunity because the lesser skilled players, who might be new to the game, aren’t going to jump through the hoops to get money onto the sites.

Will internet poker be gone as we know it? I don’t think so. I think it certainly will continue to thrive; it just may not grow at the rate it has been growing.

Not just Congress is interested in poker.SM: Let’s talk a little bit about intrastate online poker. A variety of states have been talking about it — California, Florida, New Jersey, and Iowa. Can you talk about an ideal intrastate online poker system that the PPA would support?

JP: Let me preface this by saying that our ultimate preference is federal regulation that allows a multitude of states to operate under a regulated system. And those players would be able to play with those players and across the globe. That is our ultimate goal and we think it provides the best player experience for the consumer.

There are very few individual states that could have the liquidity — and that’s even questionable — to sustain an intrastate model, California and Florida being two of those states that could potentially have that liquidity.

What would the PPA look for? I think it’s simple. We’d want a competitive marketplace. The idea of a sole internet poker provider from a consumer standpoint is a non-starter. Consumers today have a multitude of choices.

The idea that they are just going to build an online site and that players are going to simply migrate there is difficult.

We think from a players’ perspective, while we encourage state-licensed sites and new entrants into the marketplace, instead of the states trying to build it and have the players come, why don’t they go to where the players already are, similar to what they did in the UK where they white-listed reputable jurisdictions and set up their own regulatory regimes as well. I think that would be a more preferable model to the consumer.

We still have the big problem that the game would be limited to just the people within the four corners of that state. I think that’s going to be a hard pill to swallow for the players. There’s going to be a lot less opportunities for them to play, less selection, fewer stakes. I think they’ll be disappointed in the product, and that’ll guide them to continue playing on offshore, unregulated sites or just not play at all. The state in the end would be the loser here because all of that promised revenue would never materialize.

SM: Which of those four states is the furthest along to actually passing something?

JP: Well, Florida is the only state that actually has the bill introduced. At the federal level, we’ve been working at this since 2007. Unless politics doesn’t play a role at the state level, I think there’s going to be an uphill battle from now until election day for them to get a bill passed through and signed by the governor when this is really the first time that state legislatures have begun contemplating this.

So I think there’s still a lot of work that needs to be done at the state level, and we’re hopeful that the PPA can continue to influence the debate before they go in the wrong direction. I truly, truly believe all the promise of revenue for the state is going to be all for naught if they don’t create a model that’s going to be consumer-friendly.

SM: Which do you expect to come first — federal legislation or state legislation in regards to online poker regulation?

JP: I think it’d be difficult for states to enact interstate regulation by the end of this year. It is our goal to have something passed at the federal level this year. I think it’ll be a race to see who gets there first.

In a federal scenario, states that are looking to do this for revenue purposes are going to have a much easier time getting revenue through the federal bill than they would by starting this from scratch in their own state.

Not to discredit the efforts that are being pushed at the state level, I know there are very competent folks who are working there on these bills, but I just have a hard time believing that they will be signed into law by the end of this year. And they probably will say the same thing about our efforts in Washington, D.C. but we have legislation with multiple co-sponsors, and a motivated chairman, and a Congress that is seeking ways to pay for things, as well as an industry in Las Vegas that’s essentially circling the drain. They need some sort of help and this would be a huge boost to them.

Check back to CardPlayer.com for all the latest developments involving the PPA and the poker bills in Congress. Click here to read Part 1 of this interview.