Tribes could put crimp in push to legalize online gaming

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Members of Congress are seriously considering the potential implications of legalizing online gaming, including adopting regulations to police the industry in committee hearings in the Senate and House this week. But the results in one committee seem to be throwing cold water on the momentum that was growing behind a bill in the other.

The Senate Indian Affairs Committee met with experts Thursday to discuss what legalization would mean for Indian tribes, who according to one speaker budget 40 percent of government expenses from gaming revenues.

“It’s a direct threat to the economic growth in Indian country ... and at a risk to tribal communities and the tremendous growth that has occurred in Indian country and surrounding territories,” Glen Gobin, vice chairman of the Tulalip Tribes, told the panel.

As Gobin sees it, Indian tribes are at a double disadvantage, both in terms of time — getting an online operation up and running would likely take tribes much longer than the casinos, he explained — and branding.

“To think my tribe is going to compete with someone like Harrah’s on the Internet?” Gobin said. “There’s no name recognition ... so my customer base is severely diminished.”

But tribes involved in gaming have an even bigger problem with the primary bill the House is considering: It charges online operators fees, but Indians tribes are supposed to be exempt because their revenue is used to fund government services.

“The (Barton) bill fails to treat tribes as government operators,” said Ernie Stevens, chairman of the National Indian Gaming Association. “The bill would violate the Indian Gaming Regulatory Act, which recognizes that tribes use revenues for government purposes — doesn’t tax them.

“It’s extremely important that tribes not be subject to outside taxation,” testified Penny Coleman, who spent most of the past two decades as chief counsel for the National Indian Gaming Commission. “They’re not using the money for million-dollar CEOs, they’re using the money for their government programs.”

It’s the latest complaint against the House’s premiere poker-regulating legislation — the one that will doubtless be at the back of everyone’s mind in today’s hearing before the House Energy and Commerce subcommittee on Commerce, Manufacturing, and Trade, even though its chief author and co-sponsor won’t be testifying about it.

Gaming legislation that can pass Congress is still very much a work in progress, but Texas Republican Rep. Joe Barton and chief Democratic co-sponsor Rep. Shelley Berkley of Nevada have had a poker-only bill put to paper since summer.

Though the discussions this week are about online gaming writ large, poker-only is an important restriction for any legislation that stands a chance of making it through both houses of Congress, because in the Senate, Democratic Majority Leader Harry Reid and Republican Whip Jon Kyl — acknowledged by all as being the key participants in the final handshake on any deal — don’t want legalization to go any further than that.

But in the wake of a springtime scandal that put three online poker operators under federal investigation for everything from breaking the Unlawful Internet Gaming and Enforcement Act to operating a Ponzi scheme, Barton’s bill became tainted goods due to its close association with the Poker Players Alliance — and the PPA’s close funding with some of the bad actors.

PPA chairman and former U.S. Sen. Alfonse D’Amato addressed that situation head-on Thursday before the Committee on Indian Affairs.

“We saw a shocking situation where $150 million of poker players’ money was improperly distributed ... that’s why there’s a crying need to have federal intervention to see that consumers are protected,” D’Amato said. “I think revenues are secondary.”

D’Amato also countered the Indian gaming advocates’ contention that they would be at a disadvantage compared with other potential licensees if Internet poker were legalized.

“We believe that there are Indian tribes today that ... in pooling together can more than adequately compete,” he said. “The Mohegans and the Oneidas, if they got together? They could compete with any casino.”

But last month D’Amato had his day testifying before the House subcommittee that’s discussing online gaming again today — an occasion when subcommittee Chairwoman Rep. Mary Bono Mack said Barton’s poker legislation wasn’t ready to be trotted out to the debt reduction super committee as a potential source of new revenue, as its backers had been hoping.

Now, Mack’s committee appears to have moved on — and onto a broader conversation that, by the witness list, almost looks as if they’re preparing to start from scratch.

The hearing, which will focus on regulating online gaming, pits Republican Rep. John Campbell of California and Democratic Rep. Barney Frank of Massachusetts — both advocates of legislation that would legalize all forms of gaming, not just poker — against Republican Rep. Frank Wolf, who vehemently opposes such measures.

Meanwhile, Nevada Gaming Control Board Chairman Mark Lipparelli will be joining American Gambling Association CEO Frank Fahrenkopf, New Hampshire Lottery Commission Executive Director Charles McIntyre and Rachel Volberg of the University of Chicago’s National Opinion Research Center to weigh in on the merits of legalizing and regulating the online gambling market.