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An Unlikely Bond; Online Poker and Horse Racing

An Unlikely Bond; Online Poker and Horse Racing 0001

In recent months, online poker has found a surprising ally in its quest for licensing and regulation in the U.S.

Horse racing and poker have a lot in common as games where money is risked and many hours are spent analyzing results to try to gain an edge. But the two games found each other at odds in late 2006 when the Unlawful Internet Gambling Enforcement Act passed Congress.

Horse racing had a long-established lobby on Capitol Hill that was able to secure a carve-out next to state lotteries and fantasy football in the legislation. Poker was just building a presence in Washington D.C. and lacked the clout to put up a fight.

With horse racing sitting in the catbird seat while online poker scrambled below, it didn't appear as though the two industries would ever be best buds. Ironically, poker has its old nemesis, the Department of Justice, to thank for bringing it a powerful partner.

Horse Racing already had its victory in Congress in 2000 — the one poker is fighting for now — when it was able to amend the Interstate Horseracing Act of 1978 to include wagers transmitted by telephone or other electronic means. The Department of Justice, however, continued to insist that the Wire Act outlawed horse racing wagers made over the Internet. The Wire Act is the same law the Department of Justice uses to argue that Internet Poker is illegal.

While the Department of Justice had yet to make a move on the horse-racing industry, the threat was enough for the horse-racing lobbyists to see an opportunity in the new bills to license and regulate online poker.

The National Thoroughbred Racing Association joined forces with the Poker Players Alliance and were brought to the table when Sen. Robert Menendez's bill was being drafted. The Internet Poker and Games of Skill Regulation, Protection and Enforcement Act includes provisions that would clarify the Wire Act does not apply to horse racing, that financial transaction providers will have a safe harbor for processing wagers under the Interstate Horseracing Act and that horse racing won't be double-taxed or over-regulated under the new legislation.

Because of the danger of banks and credit-card companies overblocking horse-racing transactions under the UIGEA, the NTRA then joined the PPA in petitioning the Treasury Department and Federal Reserve Board to delay the compliance date for the regulations. Six congressmen from Kentucky, a state that hadn't been friendly to poker but that loves horse racing, wrote a letter supporting the petition. The late push helped secure the six-month delay.

"They've been tremendously helpful," PPA executive director John Pappas said of the NTRA. "I know they did a lot of outreach to members of Congress. They delivered at least a few letters to the Treasury and Federal Reserve Board that the PPA alone couldn't have secured. I think they've added a whole lot. We look forward to working with them."

In recognition of the horse-racing lobby's support and strong influence in Congress, the PPA will try to get Rep. Barney Frank (D-Mass.) to make manager's amendments on his bill in the House to reflect the horse-racing provisions in the Senate bill prior to a markup in the Financial Services Committee.

Then the horse-racing lobby will make a strong teammate in trying to push legislation through. In the words of Humphrey Bogart in Casablanca, I think this is the beginning of a beautiful friendship.

"The horse-racing guys need our support and we need their support," Pappas said.

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