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Nevada Pols Try to Close the Online-Poker Door on PokerStars with AB114 Measure

Nevada politicians continue working on the latest series of amendments to their existing online-poker law, with the latest proposals spelling dire trouble for any plans online giant PokerStars has of returning to the state any time soon.

vegas-signThe latest version of Nevada’s Assembly Bill 114 (AB 114) was sent to the state’s Assembly Committee on Judiciary on Wednesday, along with a complete version of the proposed revisions to the existing code that brought an ugly Valentine’s surprise Stars’ way.

Still around as part of AB 114 are the changes reported last month, in which Nevada seeks to get rid of existing legal code requiring them to refer to possible federal regulation of online poker before seeking to make deals with other states.  With federal-level regulation back to the starting blocks, Nevada no longer has the need to wait on the feds to market its own sites, once those sites (still under development and testing) are finally up and running.

That part was no surprise.  What was a surprise when the full bill was revealed was the “bad actor” provision, which would lock out any previous US-facing companies who served US customers after December 31, 2006, and which would deem them unsuitable for an additional ten years.

A new Section 3 proposed to the existing NRS (Nevada Revised Statutes, or Nevada’s laws as they exist on the books) would add several paragraphs of code to define new categories of covered persons and assets, designed to identify and designate individuals and companies who would be included in the bad-actor code (found a little later in AB 114).  The definitions are a little bit wordy and cumbersome as they go about defining several categories, but for the sake of completeness, here they are.  (Hint: You can skip over them to the summary just below if you wish):

Chapter 463 of NRS is hereby amended by adding:…

… Sec. 2.   “Covered asset” means any tangible or intangible asset specifically designed for use in, and used in connection with, the operation of an interactive gaming facility that, after December 31, 2006, operated interactive gaming involving patrons located in the United States, including, without limitation:

1.  Any trademark, trade name, service mark or similar intellectual property under which an interactive gaming facility was identified to the patrons of the interactive gaming facility;

2.  Any information regarding persons via a database, customer list or any derivative of a database or customer list; and

3.  Any software or hardware relating to the management, administration, development, testing or control of an interactive gaming facility.

Sec. 3.   1.  “Covered person” means any person who:

(a) Has at any time owned, in whole or in significant part, an interactive gaming facility or an entity operating an interactive gaming facility that:

(1) After December 31, 2006, operated interactive gaming involving patrons located in the United States; and (2) Acted with knowledge of the fact that such operation of interactive gaming involved patrons located in the United States;

(b) After December 31, 2006, acted, or proposed to act, on behalf of a person described in paragraph (a) and provided, or proposed to provide, to such person any services as an interactive gaming service provider, with knowledge that the interactive gaming facility’s operation of interactive gaming involved patrons located in the United States; or (c) Purchased or acquired, directly or indirectly:

(1) In whole or in significant part, a person described in paragraph (a) or (b); or

(2) Any covered assets, in whole or in part, of such person.

There’s more to the definitions, but that’s the guts of it, a defining of both the individuals and corporate entities who might have serviced US residents for online poker after 2006, as well as language designed to prevent the use of a new business or brand name or the simple sale of mailing and customer lists to a third party, for the purpose of recruiting those customers and starting anew.  Both “covered persons” and “covered assets” are thus defined.

The real payback comes in how those definitions are to be used, and that comes later in AB 114.  The kicker here I’ll add bold emphasis to, just to make sure you see it:

(a) A covered person may not be found suitable for licensure under this section within 10 years after the effective date of this act;

(b) A covered person may not be found suitable for licensure under this section unless such covered person expressly submits to the jurisdiction of the United States and of each state in which patrons of interactive gaming operated by such covered person after December 31, 2006, were located, and agrees to waive any statutes of limitation, equitable remedies or laches that otherwise would preclude prosecution for a violation of any provision of federal law or the law of any state in connection with such operation of interactive gaming after that date;

(c) A person may not be found suitable for licensure under this section within 10 years after the effective date of this act if such person uses a covered asset for the operation of interactive gaming; and

(d) Use of a covered asset is grounds for revocation of an interactive gaming license, or a finding of suitability, issued under this section.

Note the passage again.  In other words, a site such as PokerStars (and/or its executives), would have to proactively contact each and every one of the 50 US states, in addition to  the US feds, and waive their own right to various defenses available to them under the law.  And by my read, they’d have to do this before even being considered for licensure, their application otherwise being automatically denied.

As poison pills go, that one’s the general size and shape of a UFO, with grappling hooks attached just to make sure it doesn’t get passed too easily.

There seems to be little doubt that these provisions were inserted at the behest of Nevada’s existing land-based casinos, many of whom are well underway with their own sites, and want nothing to do with a ready-made and proven moneymaker such as PokerStars stepping in to a newly legalized market.

AB 114 already lists 12 of Nevada’s 42 state Assemblymen as sponsors, with eight of 21 Nevada state Senators already on board as joint sponsors.  Here’s the list:

Assembly:

William C. Horne (D-Las Vegas)

Marilyn Kirkpatrick (D-North Las Vegas)

Jason Frierson (D-Las Vegas)

James Healey (D-Las Vegas)

David Bobzien (D-Reno)

Paul Anderson (R-Las Vegas)

Andy Eisen (D-Las Vegas)

John Ellison (R-Elko)

Lucy Flores (D-Las Vegas)

Cresent Hardy (R-Mesquite)

Pat Hickey (R-Reno)

Randy Kirner (R-Reno).

Senate:

Kelvin Atkinson (D-North Las Vegas)

Ruben J. Kihuen (D-Las Vegas)

Moises Denis (D-Las Vegas)

Debbie Smith (D-Sparks)

Mark A. Manendo (D-Las Vegas)

Aaron D. Ford (D-Las Vegas)

Scott Hammond (R-Las Vegas)

James A. Settelmeyer (R-Minden)

Minden and Sparks are both Reno/Carson City area; by an odd coincidence, I’ve driven through both in the past week.  One would look at the lists and theorize that the latest changes are driven by the big-city casinos in Nevada and their local-favorite politicians, but almost all of Nevada’s population lives in those two areas anyway.  That part’s something of a moot point.

More telling is that the support appears to be partisan, and in the case of the Senate, already encompasses eight of 21 seats, not far from a majority.  AB 114, poison pill aimed at Stars or not, has a decent chance of moving on to Governor Brian Sandoval’s desk in the very near future.

How PokerStars then reacts will be the interesting part of the equation.  Stars has clearly made New Jersey the hub of their return-to-the-US efforts, there to show their corporate value and civic responsibility.  If there’s one that’s sure, however, it’s that Stars will have no intention of prostrating itself before 51 different state and federal governments in the manner the Nevada proposal would demand.  More likely a lawsuit against the seeming future Nevada law would ensue than PokerStars would go into states such as Washington and Utah and say, “Here we are; flay us at your leisure.”

Politics as usual as Nevada.  And the latest leaves PokerStars on the outside, looking in.

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