The Influence Industry: Poker lobby pushes for legalization in wake of indictments

Online poker fans are calling it “Black Friday”: On April 15, the Justice Department charged the owners of three of the world’s largest Internet gaming companies with bank fraud and gambling offenses, shutting down their Web sites and freezing bank accounts around the world.

Now, poker advocates in Washington are attempting to turn the bust to their advantage by renewing a push to legalize online poker in the United States.

The Poker Players Alliance, a lobbying group backed in part by overseas gaming interests, has unleashed a blizzard of telephone calls and e-mails to lawmakers in the past two weeks arguing that the criminal case against PokerStars, Full Tilt Poker and Absolute Poker shows the need for a legalized system.

The effort has growing support from major Nevada casinos that see an opportunity for a lucrative new market. Advocates are also dangling the prospect of billions of dollars in potential federal tax revenues at a time of fiscal distress in Washington.

“We’re trying our best to make lemonade out of the lemons,” said John Pappas, the poker group’s executive director and chief lobbyist. “I think now more than ever, people realize that the status quo is not going to work. We need legislative clarity so that there is a U.S. regulated marketplace for poker.”

The debate centers on 2006 legislation that effectively bars Internet gaming by prohibiting banks, credit card companies and other financial institutions from processing online gambling transactions.

In the April 15 indictment, federal prosecutors in New York alleged that owners and founders of the three poker companies tricked — or in some cases, bribed — U.S. banks into processing gambling payments by making them seem as though they were for pet supplies, flowers or other legitimate products. All three of the companies involved, which have denied wrongdoing, are based in offshore gambling havens.

“Foreign firms that choose to operate in the United States are not free to flout the laws they don’t like simply because they can’t bear to be parted from their profits,” U.S. Attorney Preet Bharara said when the indictments were filed.

Opponents say the case illustrates the perils of legalizing poker or other online games of chance in the United States.

“When you’re dealing with a criminal enterprise, you should not be surprised when you are cheated or taken advantage of,” said Rep. Spencer Bachus (R-Ala.), a longtime foe of online gaming. “For years, I have been warning about the particular dangers illegal Internet gambling poses, especially to our young people, many of whom are becoming addicted to gambling at increasing early ages.”

But to many gaming advocates, the case actually provides an opportunity — in part, by effectively removing PokerStars and other foreign competitors from the U.S. market.

Executives at Caesars Entertainment Corp. and Wynn Resorts, for example, have suggested that now might be the time to push for legalization and regulation of online poker games. And Senate Majority Leader Harry M. Reid (D-Nev.), who won reelection in November with strong support from casino interests, appears to agree.

“I hope we can get something done,” Reid told the Associated Press this week. “It’s something that has to be regulated. The commodity is cash, and we have to be very, very careful that we do it the right way when it deals with interstate commerce.”

Gambling and casino interests spent nearly $30 million on Washington lobbying last year and rank as major donors to both parties, according to disclosure records. The Poker Players Alliance is planning a “fly-in” this month to allow the group’s supporters to meet with key lawmakers and staff members on Capitol Hill.

“From a grass-roots perspective we think there is a real opportunity here,” Pappas said. “The Justice Department action has been a real wake-up call.”

Events spur lobbying

A flurry of news events led to surges in lobbying on abortion, gun and labor issues during the first three months of the year, according to new disclosure data.

The Center for Responsive Politics, which tracks lobbying and campaign finance reports, said abortion rights advocates spent more than $530,000 on lobbying from January through March during the fight over whether to restrict Planned Parenthood funding. The amount is double what abortion rights groups spent in the first three months of the previous Congress.

Gun control groups also stepped up their lobbying in the wake of the attempted assassination in January of Rep. Gabrielle Giffords (D-Ariz.), CRP said, and labor organizations increased their Washington spending amid broad challenges to their bargaining rights in Wisconsin and other states.

Overall, however, CRP said the pace of lobbying so far this year is likely to be lower than it was in the final frantic months of 2010.

Deputy Editor, National Politics
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