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Originally published Saturday, August 4, 2012 at 3:17 PM

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Online gambling: Tribes now look to cash in

While still wary that online gambling will cut into their casino profits, many tribes now see legalization as inevitable. So they are lobbying Congress for a say in how online gambling might be regulated.

McClatchy Newspapers

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WASHINGTON — Fearing they may get left behind in the rush to expand legalized gambling to the Internet, more U.S. Indian tribes are lining up to back online poker and angling for new ways to cash in.

Consider the Tulalip Tribes in Washington state: Eight months ago, tribal secretary Glen Gobin told Congress that the Tulalips opposed any kind of Internet gambling, regarding it as a threat to their two casinos. But on July 26, he told a Senate panel that tribes now "must have equal footing to participate" and that Congress should consult with them before junking a 2006 ban against online gambling.

"Glen is a realist," said W. Ron Allen, chairman of the Washington Indian Gaming Association, which represents 27 federally recognized tribes.

John Pappas, executive director of the Poker Players Alliance, a lobbying group that represents 1.2 million members across the country, said it's "definitely safe to say that the tribes' position is evolving on a federal solution."

Many tribes still oppose Internet gambling because they worry that gamblers would be less likely to go to casinos if they can stay home and play for money on their computers.

But with many of them now regarding legalization as inevitable, Allen predicted that there will be "less reluctant resistance" as tribes realize that there's little hope of stopping the push for legalization in Congress.

"Inevitably, they're going to pass something," he said. "I think tribes as a general observation would prefer that it not happen, but tribal leaders are being realistic."

Oversight alternatives

With online gambling expected to quickly become a new cash bonanza, a feud has already developed on Capitol Hill over who should regulate it.

So far, two competing plans have emerged.

The first, favored by the Poker Players Alliance, would allow the U.S. Department of Commerce to certify states to regulate online poker.

The second, favored by Gobin and many other tribal officials, would leave the oversight to the National Indian Gaming Commission, the federal agency that regulates the gambling operations of 237 tribes. It's headed by Tracie Stevens, a member of the Tulalip Tribes appointed in 2010 by President Obama.

The battle pits two big spenders against each other.

Since 2007, the Poker Players Alliance has spent more than $7.6 million on lobbying, and it ranks fourth overall this year among gambling interests, according to the Center For Responsive Politics. And the alliance has given thousands more to federal candidates, more than $174,000 in the last election cycle alone. When Democrats controlled the House in 2010, the alliance steered 77 percent of its contributions to the majority party, but with Republicans now in charge of the House, its contributions are nearly evenly split between the two parties this year.

The tribes spent more than $20 million on lobbing last year and have contributed nearly $58 million to federal candidates since 1990. More than two-thirds of that money has gone to Democrats.

Jon Porter, a former member of Congress who now lobbies for the Poker Players Alliance, said that legalized online poker could help both commercial casinos and the tribes. And he predicted that both will face a much greater threat from states that move to expand their lotteries to include online slot machines. But he said Congress should accept the fact that Americans will gamble on the Internet.

"It's clear that any industry which fails to embrace the Internet is doomed to failure," Porter said. "Think of the struggles that newspapers have been going through, or how long it took the recording industry to effectively sell digital music."

Online crackdown

The pressure on Congress to act has grown since April 15, 2011, a day the gamblers call Black Friday, when the Justice Department shut down the three largest online poker sites operating in the United States — PokerStars, Full Tilt Poker and Absolute Poker — and charged their officials with bank fraud and money laundering.

That caused hundreds of professional players who lost money in the shutdown to move to Costa Rica, Mexico, Canada and elsewhere to gamble. On Tuesday, the Justice Department announced a $731 million settlement with two of the companies — PokerStars and Full Tilt Poker — that will require them to forfeit their assets to the government and allow players who lost money to seek compensation.

The issue took on more urgency in December, when the Justice Department said it would apply the major anti-gambling statute, the Wire Act, only to sports events and races. Many said that cleared the way for states to begin legalizing online gaming without having to worry about federal laws.

Since then, two states — Nevada and Delaware — have already approved online gaming.

Pappas said the move by the states has spurred the tribes to rethink their early opposition.

"They are not comfortable with the idea of having to go to a state to get licensed," he said. "But now states ... are beginning to move forward, and tribal casinos could be left in the dust."

At a hearing of the Senate Indian Affairs Committee on July 26, Bruce Bozsum, chairman of the Mohegan Tribe in Connecticut, said tribes are likely to get a better deal if the issue is resolved by Congress, not the states.

"Tribes should be extremely hesitant to entrust their economic futures to the tender mercies of the 50 states, many of whom are still in financial crisis and looking for new sources of revenue," Bozsum said.

Action might be near

The issue could come to a head on Capitol Hill in the next few months.

In the House, Pappas said, backers already have enough votes to overturn the six-year-old ban on Internet gambling. A bigger battle is expected in the Senate, where the poker players group is counting on Democratic Senate Majority Leader Harry Reid of Nevada to pass a similar bill before the end of the year.

In the latest move less than two weeks ago, Hawaii Democratic Sen. Daniel Akaka, the chairman of the Senate Indian Affairs Committee and a close ally of the tribes, unveiled a draft of his Tribal Online Gaming Act of 2012. It would allow federally-recognized tribes to apply for licenses to operate online gaming.

Akaka suggests that the department create a new Office of Tribal Online Gaming.

But Gobin said that assigning regulation to any federal agency other than the National Indian Gaming Commission would be "burdensome and duplicative."

And Elizabeth Lohah Homer, an attorney and a member of the Osage Nation who served as the commission's vice chair from 1999 to 2002, warned that giving the job to any other agency "could prove disastrous" because of the long time it takes — years, or even decades — to get established.

Allen, who's also the chairman of the Jamestown S'Klallam Tribe in Sequim, said the Washington state tribes have created a task force to study online gaming.

Allen predicted that online gaming would have an impact on tribal casinos, but he said it's impossible to know the full effect. And he said that many people will still want to go to casinos to eat, drink and watch entertainers.

For now, Allen said, there are many unanswered questions: Would a federal law allow only online poker or other games as well? And what would a federal law mean for a 2006 state law that imposes criminal penalties on those who play online poker or place any kind of wager on the Internet?

"Is poker the camel's nose in the tent, or is the whole camel coming in?" Allen asked. "We don't know. And does the federal law trump the state law? The rules would change, but there are some serious unknowns here."

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