Internet gambling operators who took bets from Americans received some surprisingly good news this month. First Nevada regulators approved a partnership between Caesars and subsidiaries of 888. Then Steve Wynn announced he will work with PokerStars in the hopes of setting up PokerStarsWynn.com, to take online poker bets from U.S. players.

888 abandoned the American market when the UIGEA was passed in 2006. But, the federal Department of Justice had indicated it wanted to prosecute anyone who ever operated Internet poker rooms open to Americans players, even if they had stopped taking bets from the U.S. Nevada casinos and regulators had taken the same position, that online poker was illegal gambling. Yet both the Nevada Gambling Control Board and the Nevada Gaming Commission declared 888 suitable to do business with one of its largest licensees.

The decision by Wynn was even more startling, because PokerStars still takes bets from residents of the U.S. It is also significant because Wynn had been absolutely opposed to all Internet gambling only a few years ago, and his major focus is on Asia. If an operator as smart as Steve Wynn thinks now is the time to push for legalizing online poker, then now might very well be the time.

But what about PokerStars' supposed ongoing violation of American gambling laws? There is a precedent that indicates Wynn may be correct in thinking that is not going to be a problem.

The two major arguments against licensing a company that is presently taking poker bets from America is that it is involved in illegal gambling, and its illegal gambling gives it an unfair advantage through customer lists and brand name recognition over law-abiding gaming companies that haven't been taking online bets.

These arguments seem to win the day when wide-open licensing was under consideration in France. French lawmakers at first argued that any company that took bets from residents of France could not get a license. Then they proposed an official “time out.” Operators would only be able to apply for a license after removing themselves completely from the French market for 18 months. This idea of a "time out" was included in the bill introduced by Sen. Harry Reid during the December 2010 lame duck session.

But, in the end, both banning and a "time out" lost to what amounts to a general amnesty. French authorities were won over by the counter-arguments: It was unclear under French and particularly EU law whether licensed non-French online poker operations could be prosecuted, so it was unfair to penalize operators who had not been convicted of anything. More importantly, French gaming regulators and operators became convinced that they needed the experience and expertise of the largest Internet gaming companies.

This echoes the decision made in the early 1950s by Nevada regulators that they would ignore convictions for illegal gambling by applicants for the first state licenses. The theory was that since all casino gambling was illegal in the U.S., only criminals had the experience to run casinos. There actually is some evidence that only experienced casino operators could stop cheats and insider theft. But the second state to legalize casinos, New Jersey, felt the market would take care of the problem. They reasoned, correctly, that dealer schools would open up and experienced operators would come from other parts of the world.

It is difficult to predict who will win. Will there be a general amnesty, à la France, or will the door be slammed shut on everyone who might have been involved in even technically illegal gambling, as in New Jersey? The answer will determine the winners and losers. A company that took sports bets from the U.S. will probably never get a license. But as for the others:

The operators who are presently taking poker bets from U.S. include PokerStars, now partnered with Wynn, Absolute Poker, Full Tilt and Ultimate Bet -- all with present name recognition. The operators who pulled out of U.S. would have to build back market share: 888 now with Caesars, Party Poker and bwin, Hollywood Poker. Less fortunate are those who never took bets from the U.S. and therefore are unknown to Americans. I believe the Swedish company Entraction, who plans to enter the U.S. market, is in this position.

Who is Wynn right? In the spirit of almost full disclosure, I have been hired as an expert witness by someone involved in a lawsuit with Wynn. But that doesn't mean I would ever like to bet against anyone with as much foresight, and luck, as Steve Wynn. (E-03.28.11)


I. NELSON ROSE

© Copyright 2011. Professor I Nelson Rose is recognized as one of the world’s leading experts on gambling law and is a consultant and expert witness for for players, governments and industry. His latest books, INTERNET GAMING LAW (2nd edition recently published) BLACKJACK AND THE LAW and GAMING LAW: CASES AND MATERIALS, are available through his website, www.GamblingAndTheLaw.com.