After months of negotiations, Senate Majority Leader Harry Reid, D-Nev., and Senate Minority Whip Jon Kyl, R-Ariz., appear to have come to an impasse over how to move Internet gambling legislation.

Kyl and Reid have been working on draft legislation that would allow for the legalization of online poker while tightening restrictions on other forms of Internet gambling. Reid has been pushing Kyl and Sen. Dean Heller, R-Nev., a key backer of the legislation, to help round up GOP support for the draft bill to help overcome a likely filibuster in the Senate.

But after Reid set a Monday deadline for gathering the necessary votes to move the legislation before the Senate recesses for the elections, Kyl and Heller are now saying they believe the House needs to act first before the Senate takes up the issue.

“By far the best strategy is to start a bill in the House … and have Reid and Heller who are supportive of the poker exemption … to do that in the Senate, then send it back to the House,” Kyl told National Journal on Tuesday. Kyl was the Senate author of a 2006 law that barred banks and others from processing payments for online-gambling bets.

The 2006 law has been put into doubt after the Justice Department last fall issued a new interpretation of the 1961 Wire Act, on which the 2006 anti-net gambling law is based. Justice said the Wire Act applies only to sports betting and not other forms of gambling, including online gaming.

In response to this and calls from some gambling interests to legalize online poker, Reid and Kyl began talks earlier this year on Internet gambling legislation that aims to address both issues. They have finished work on their draft bill but are now at odds on how to advance the legislation.

In a letter to Reid on Monday, Heller argued that the House should take up legislation that would fix the loophole created by the Justice Department’s new interpretation of the Wire Act and then send the bill to the Senate where Reid and Heller can attach an amendment that would clear the way for the legalization and regulation of online poker. Unlike other forms of gambling, supporters argue that online poker is a game of skill and less prone to fraud since participants play against each other and not the operator of the game.

“Since the root of the problem is the DOJ opinion, it is important to address that matter,” Heller wrote Reid. “Congress must put federal law on a sounder and firmer footing. The problem should be addressed by both chambers in a way that maximizes the chance for passage of meaningful legislation that will resolve this issue for our state.”

Kyl said that House Republicans will not trust any bill Reid pushes through the Senate first. “That’s the problem,” he said. “If Reid just tries to force something through the Senate with poker in it, the House is gonna figure they’re being jammed.”

In a letter to Heller late Tuesday, Reid appeared to reject having the House take up the bill first. He noted that the House could start its recess next week and not return until after November’s election. At the same time, he claimed Heller was not holding up his pledge to round up GOP votes.

“In May, you agreed to help me cement Republican support for the bill in the Senate,” Reid wrote. “Since then, you have been unable to garner the necessary Republican votes to pass this bill. As a result, we are at a standstill. And every day we stand still, Nevada’s workers, its economy, and its gambling industry suffers.”

Kyl, however, said he and Heller “have talked to over half of our conference” and expect strong GOP support if the bill emerges from the Senate.

Kyl and Heller’s House-first approach appears to have taken Rep. Joe Barton, R-Texas, the leading proponent of online-poker legislation in the House, by surprise as well.

“There’s not and never has been a definitive agreed-on plan between the proponents in the House and the Senate. But there has been kind of a gentlemen’s agreement, an understanding that it would originate in the Senate simply because Senator Reid’s the majority leader and he has a working relationship with Senator Kyl,” Barton, who has introduced his own bill that would legalize online poker, said in an interview on Tuesday.

Despite this, Barton said he has been urging the House Energy and Commerce Committee to mark up his bill so that the House could be prepared to act if the Senate moves legislation. House Energy and Commerce Chairman Fred Upton, R-Mich., told National Journal before the August break that he was waiting on the Senate to act first.

While both Reid and Kyl say they would like to address the issue this year, election-year politics appears to be complicating their efforts. Heller is facing a tight race to win a full Senate term after being appointed last year to fill the seat of Republican John Ensign, who resigned from the Senate in the wake of an ethics scandal.

“I did not want this issue to become political in nature, but I cannot stand by while you abdicate your responsibility as a U.S. senator representing Nevada. Nevadans deserve someone who will fight for them,” Reid wrote.

Kyl, however, said that Reid’s attempts “to put political pressure on Senator Heller” are not constructive because he's suggesting he will paint Heller as ineffective on an important state issue if the bill does not pass.

“The key question is, does Senator Reid want the bill more, or does he want to elect his Democratic colleague more?” Kyl asked.