Tuesday, December 14, 2010

good cliff notes on the reid bill

since I've thrown out a lot of my own opinions I thought it would be helpful if I put a the latest FAQ concerning the Reid bill that were posted on 2p2. The following was posted by PokerXanadu in this thread (link):

Note: These answers are based on the most recently publicly available draft of the Reid bill. The final bill may contain some differences.

When will this bill be voted on?

We don't know yet when, or even if, this bill will be up for a vote. Senator Reid has been expected to attach this bill to some other must-pass bill during the lame-duck session of Congress this month. It takes a lot of political maneuvering to accomplish this and it is unclear yet whether or not he will be able to do so. The three likely bills that might be used are the Bush tax-cut extensions, the omnibus spending and the defense budget bills. The attachment and vote is likely to take place in a very short period ot time, making it likely that we will have only hours warning, if any, to know the final wording of the bill before it is passed.

How will licensing work?

Many current state gaming regulatory bodies will be eligible to become a "Qualified Body" that is authorized to license and regulate US iPoker sites. Those that currently regulate 5% of the total US gaming revenue (NV & NJ) are automatically designated as a QB upon notice to the Secretary of Commerce of their intent to do so. Those that regulate at least 0.5% of total US gaming revenue (IN, IL, CT, MI, MO, MS, LA, CO, NY and IA, plus maybe some others I haven't noted) will be eligible to apply to become a QB once the federal regulations for iPoker are issued (6 months after enactment of the bill).

NV & NJ will be able to license and regulate iPoker sites whether or not the federal government issues iPoker regulations in a timely manner. They are also the only QBs that will be authorized to license sites which offered iPoker in the US prior to enactment of this bill, or any site which buys such or uses such as a supplier of software, hardware or services.

Who is eligible to apply for and receive a license?

Initially, any US casino or racino that has at least 500 slot machines, any US race track that has run at least 250 days of live racing over the past 5 years, and any slot machine manufacturer who supplied the qualified casinos or racinos are eligible to apply for an iPoker license. After two years, the Secretary of Commerce can open licensing to other appropriate companies, including foreign sites, subject to the normal regulation development process of public notice and comment.

When will the initial sites be issued a licensed?

The QBs are instructed to issue as many licenses as possible simultaneously 15 months after the bill is enacted. The intention is to make a simultaneous launch of licensed sites to create a multi-site competitive market to the benefit of consumers (the players). Sites can become operational for play-money games and advance promotions before the launch date.

Who can provide the software, hardware and services for licensed sites?

Any provider, including current offshore sites and current play-money sites (like Zynga Poker), can apply for a Certificate of Suitability to become a vendor to licensed sites. Licensed sites can also purchase such companies, or some of their assets, and remain licensed.

What happens during the period prior to the launch?

Current sites must cease US operations within 30 days of enactment of the bill, or they will become ineligibile to ever receive a US iPoker license or Certificate of Suitability. The bill does not enact until 30 days after it is signed into law, so the sites effectively have 60 days total to cease their US operations. US player account balances will remain available for withdrawal for two years, after which the funds are placed into escrow in the US for safe-keeping and dispositon by the Secretary of Commerce.

Can US players play on offshore sites during this 14-month blackout period?

It will not be illegal for US players to play on such sites. It will be illegal under US law for such sites to offer play to US players. Since such sites will be ineligible to ever receive a US license, many of the current offshore sites will become unavailable to US players. Those that remain will have difficulties providing deposit and withdrawal methods to US players, probably more so than currently. But, some play will no doubt be available as long as there is a market for it.

Who will be able to play on US licensed sites?

Initially, anyone physically located anywhere in the US, except in an opt-out state (see below), will be able play on any US licensed site. After 3 years, the Secretary of Commerce can open the market to additional foreign jurisdictions, including combined player pools at the sites. There will no doubt be much lobbying pressure from the sites and players to do so. The Secretary needs to ensure that such additions of foreign players takes place only in locations where it is legal for the foreign players and only if doing so does not endanger the consumer protections of the US iPoker regulations. Therefore, it is likely to include only jurisdictions where there is existing government licensing and regulation, under mutual agreement between the US and such governments (imo).

What states will opt out?

Initially, these states will automatically be opted in: California, Colorado, Delaware, Florida, Iowa, Kansas, Michigan, Mississippi, Missouri, Nevada, New Jersey, New Mexico, Ohio, Pennsylvania, and West Virginia. All other states will initially be opted out.

Until December 31st, 2011, any state may change their option status immediately by notice to the Secretary of Commerce. Such changes must be in accordance with state law, and cannot be determined by any state law that is already in existence prior to enactment of this bill. In most, if not all, states this means that a new law or public referendum must be passed to change the state's option status. After December 31st, 2011, changes to state option status work the same way except the change doesn't take effect until 60 days after notice to the Secretary or the date the new state law enacts, whichever is later.

Also, any state that enacts its own intrastate iPoker or iGambling legislation is automatically and immediately an opt-in state, with no further option to opt out.

There is much debate on which states will, in the end, be opt in states. Hopefully the easy revenue stream from licensed iPoker will encourage many states to be opt in, especially in these times of budget crises. Note that the only two choices any state will have is either to be opted in or to have a complete ban on all iGambling including intrastate (excepting interstate Horseracing wagering under the Interstate Horse Racing Act of 1978).

It is significant that any state that wants to offer any form of intrastate casino iGambling (like NJ is in the process of passing) must be an opt in to the federal iPoker system under the Reid bill. Any state with casinos are likely to receive pressure from these enterprises who do not want to miss this golden egg. Similarly, many state lotteries are looking to expand to iPoker and/or iGambling.

Can residents of opt-out states or foreign countries play in the US while traveling?

Yes. Play is only restricted by location of the player at the time of play, not by residence. In fact, there are no restrictions in the bill against opening accounts or making deposits or withdrawals based on either residence or location. US licensed sites can open accounts for, take deposits and send withdrawals to anyone anywhere in the world, including opt out states. The only thing these sites have to restrict is play based on location of the player at the time of play, which must be within the US and excluding opt-out states.

What is the government taxation under this bill?

Sites will be taxed at a rate of 20% of their gross gaming revenues (total rakes and fees). Current offshore sites consider this completely acceptable, and less costly than their current situation of high payment processing fees and funds seizures. With many licensed sites going live at the same time, open market competition is likely to keep rake low and player incentives high.

Of the 20%, 6% will go to the federal government, 9.8% will be distributed to the states according to the location of the players and the remaining 4.2% will go to the state where the site is licensed.

This tax is on the sites, not the players. States will not be allowed to levy any additional taxation on the licensed sites.

Will players have to pay income taxes?

Yes, players will be liable to pay income taxes on their winnings just as they are now. There is no additional income tax added by this bill, but sites will be reporting player gambling wins (and losses) at the end of the year. The sites do not have to do any tax withholding for US players as long as you provide them with a standard IRS W-9 Form, providing your Taxpayer ID Number and statement that you are not subject to tax backup withholding. Foreign players will be subject to 30% income tax withholding on winnings, unless exempted by tax treaty (and the player provides the site with the proper tax form).

Some states currently have income tax rules that don't allow players to deduct losses against their wins. Any such state that is an opt in will no doubt act to change this rule as they will want players to participate from their state. It will be self-defeating to state revenues from iPoker to be an opt-in state and keep such a tax rule.

What player aids, such as HUDs, will be allowed at licensed sites?

Any such software that is allowed according to the Terms of Service of the licensed site is fine. If it is prohibited by the TOS of the site, it will be against the law and anyone convicted of such cheating will be subject to fines and imprisonment, as well as permanently banned from iPoker at all licensed sites. Similarly, any cheating behaviour such as collusion which is against the TOS of the site will be a criminal offense under federal law. Bots will be against the law.

What is the age limit?

Players at licensed sites must be at least 21 years of age.

Are there any buy-in, stake or wagering limits?

No. The only such limits are those available for self-exclusion under protections for problem gaming. Any player can choose to impose such limits on their play, and to remove such self-imposed limits at any time.

What games are allowed to be offered by the licensed sites?

Any game of poker that is not house-banked is allowed. As long as the game is considered a poker game, and involves some application of skill, it is legal.

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