Nevada Legalizes Online Poker

Yesterday the Nevada Gaming Commission unanimously approved regulations that will allow online poker and other forms of Internet gambling within the state's borders. The Wall Street Journal reports that "the new rules were designed to put the state in a position to move quickly to become the center of a lucrative new part of the gambling industry should Congress pass one of several laws overturning the ban on Internet wagering, making the state the de-facto national licensing body." In the meantime, poker sites with Nevada licenses, which could be operating by the end of next year, will be limited to players in Nevada. Licensees will have to satisfy regulators that they have a reliable system for excluding out-of-state customers. The Journal says it's not clear the Nevada market is big enough on its own to attract much interest:

Mr. Bronson's company, U.S. Digital Gaming, estimates a network of online-poker sites would need at least 70,000 active users to be viable and would likely be able to get to that size within 1½ years, producing about $180 million in revenue. Getting there isn't a sure bet. Before a federal government crackdown on allegedly illicit poker websites this spring, the state had around 25,000 online-poker players, according to PokerScout.com, a website that tracks online-poker play.

Even if Congress does not act, it should be possible to enlarge the market without violating federal law. Why can't Nevada-based sites serve customers in other states where online poker is legal? While the Wire Act of 1961 prohibits using "a wire communication facility" to accept bets "on any sporting event or contest," offering online poker is a federal offense only when it violates state law. The Justice Department claims otherwise, but it has never successfully used that theory in court. In 2002 the U.S. Court of Appeals for the 5th Circuit ruled that the Wire Act applies only to sports betting, and all of the Justice Department's online gambling cases have either involved sports betting or hinged on violations of state law. (Last April's indictment of 11 people associated with PokerStars, Full Tilt Poker, and Absolute Poker, for instance, cites violations of New York law.) If several states agreed among themselves to allow online poker—so that sites based in Nevada, say, could serve customers in Arizona and California—what legal basis would the feds have to interfere?

Nevada is not the only state where poker sites could soon be legal. The New Jersey legislature seems likely to legalize the business, assuming if it can find a route that satisfies Gov. Chris Christie's constitutional objections. The Journal notes that California, which should have plenty of poker players even if out-of-state customers are barred, is also mulling legalization.