Friday’s dropping of the full 73-page text of the proposed Reid-Kyl online poker legislation brought plenty of weekend headlines throughout the poker world. Most of these pieces contain statements attributed to Poker Players Alliance officials to the effect that “player penalties have been removed” from Reid-Kyl. This assertion is, in equal parts, false and misleading.
A hilariously leading poll question created by the PPA’s Rich Muny at 2+2. Muny’s accompanying text blatantly steers responses towards “Yes” by adding this: “This is likely our last shot at a pure federal bill. If nothing passes this year, this fight probably moves largely to the states. Once enough states have authorized online poker, future legislation will be limited to authorization of interstate compacting and perhaps to provide a framework for that. So, what do you think?”
There is no evidence that any player penalties have been “removed” from Reid-Kyl, nor is there any indication that this version of the bill is, in any significant way, different from the bill summary leaked to the world a couple of months back.
That the PPA seems to be taken credit for something that does not exist calls into question their agenda and their reasons for continuing to push this legislation. I may be in the minority, but I’m against Reid-Kyl. I continue to think this bill is bad news for poker players and is undeserving of the public’s support. Reid-Kyl, if it passed, would be very bad for the hundreds of American online grinders who have temporarily relocated overseas to play on other sites.
However, that’s the second half of the story. First, it’s important to understand exactly what’s wrong with Reid-Kyl, and look at where all the weekend reporting went awry.
If we take a closer look at this weekend’s updates, we can see the disinformation starting to spread. Here’s a key line from Chris Grove’s piece published at pokerfuse on Friday, referencing a quote from the PPA’s Rich Muny:
“According to Muny, the full draft of the bill does not differ significantly from the summary that circulated in September, save one critical change: Language regarding player penalties has been removed from the bill.”
Really?
Okay, exactly what language was removed?
Grove cites this, in the very next paragraph, taken from the original Reid-Kyl summary:
“To deter U.S. players from patronizing illegal sites, the bill makes explicit that any property involved in or traceable to a gambling transaction in violation of the new act (including winnings) is subject to forfeiture.”
Grove then goes on to quote Muny, who said, “It’s very clear and explicit that there are no criminal penalties for players,” Muny said. “They knew we would likely oppose a bill with player penalties and were willing to answer us on that.”
Well, hold on there, bucko. Nowhere in the original Reid-Kyl summary is there any mention of criminal penalties for players. The very same passage that Grove quoted talks about civil penalties, not criminal ones, as if he failed to comprehend the distinction.
In fact, soon after the piece’s publication, commenter “TAMiller” noted that the very same language is present in the current version of Reid-Kyl that was released on Friday, which I confirmed myself on Saturday:
SEC. 204. BETTOR FORFEITURE.
“(I) Any property, real or personal, involved in a transaction or
attempted transaction in violation of section 103 of the Internet
Gambling Prohibition, Poker Consumer Protection, and Strengthening UIGEA
Act of 2012, or any property traceable to such property.”
That’s the same essence as paraphrased in the earlier summary, and it is a civil player penalty, which contradicts Muny’s subsequent line that, “They knew we would likely oppose a bill with player penalties and were willing to answer us on that.”
They answered, alright. They said, “No.”
So now the PPA seems stuck in a lie, apparently trying to pretend that they actually did something, and that player penalties were removed, when nothing of the sort appears to have occurred. And that in turn begs a greater question: Why is the PPA trying so hard to sell players on a bad Reid-Kyl bill that they’re now steering the conversation away from the possible civil player penalties contained within?
There are lots of things wrong with Reid-Kyl besides the horrible player-forfeiture provision, but that alone should render this a dealbreaker.
Did criminal penalties against players even exist in Reid-Kyl at the time of the earlier summary? We have no way to know for sure, and the PPA has provided zero evidence that they actually helped with the “removal” of anything at all.
What is clear is that the PPA is trying to sell this as a good bill, tossing out the boogeyman of “Yeah, but it could be worse.” Reid-Kyl might not contain any criminal penalties for players, but the 2011 opinion by US Attorney General Eric Holder has already stated that the playing of online poker has never been illegal at the federal level, for US citizens. Operating a poker site, yes, but playing, no.
Thanks for nothing, PPA. But wait, it’s actually worse.
What the Reid-Kyl bill does, for the first time, is criminalize online-poker playing by US citizens for the first time, even if no actual “criminal” penalties are called for by the bill, only civil forfeitures.
How the bill gets around the prospect of having to deal with bringing US players to court is simply to define unlicensed, “offshore” sites as illegal, and institute an extra five-year lockout period for any site that accepted US business post-UIGEA, which includes PokerStars.
Next, Reid-Kyl takes a step that would potentially deny players participating on offshore site due process. By including language that ties all that poker-game action on “illegal” sites to existing money-laundering and terrorism statutes, and declares transactions to and from those sites to be in violation of US law, such seizures could be done without trial.
US authorities might not want to bring American online players to court. But they can seize the money, and this bill creates that framework.
Is such a grim prospect really likely? “Subject to seizure” is itself a point of debate. The player-forfeiture provisions of Reid-Kyl have been addressed and quickly pooh-poohed by PPA representatives in various discussions on poker forums in recent days, despite the fact that players’ personal bank accounts could never be designated as a safe haven (as noted by a couple of forum posters with the ability to think for themselves) for funds previously defined as connected to money laundering or terrorism.
The PPA line is that such seizures are unlikely to occur, but if that is true, then Section 204 should read “SITE FORFEITURES,” not “BETTOR FORFEITURES”. Given that the DOJ, FBI and other federal agencies have already demonstrated their ability to shut down payment channels, this Section 204 of Reid-Kyl, “BETTOR FORFEITURES,” ought not to even exist. There is no reason for the section’s inclusion other than to create the prospect of seizures from players themselves, rather than sites.
But according to the PPA, that’s not going to happen.
Better we should buy the PPA’s pig in a poke? It’s like the old saw: Should I believe them or my own eyes?
Tell the hundreds of high-stakes online players who have temporarily emigrated from the United States to other countries to continue playing at PokerStars and other sites that Reid-Kyl calls for player forfeitures, this for the first time ever under US law, but they shouldn’t worry about it. The real story here is that if Reid-Kyl passes, they will face an impossible situation.
Is It Legal To Move To Play?
Is it legal for these players to have moved elsewhere to continue to play? I am not a lawyer, but the general consensus is yes. Remember the Holder opinion, which asserts that the playing of online poker by Americans is presently legal.
If it’s legal to play, it doesn’t matter from where one plays. That includes the use of VPN-style hookups, not that I’ve ever done it or recommend it.
However, sites themselves have different concerns, quite apart from worrying about the rights of players from another country. Offshore sites that don’t service US players do so because of the existing prohibitions against these sites serving the US, except it’s not the prohibitions, it’s the seizures. US laws do not apply to these non-US corporations, but the DOJ’s demonstrated willingness and ability to seize hundreds of millions from electronic funds-transfer channels has had the desired chilling effect in most cases.
Citizenship and residency are two separate and distinct concerns. That’s important to remember. Most sites do not require proof of citizenship as a requirement for opening an account. Instead, they require proof of residency, which provides them with a legal escape clause but should never be construed as being an equivalency to any country’s own laws. Virtually all sites contain TOC language stating that players are required to adhere to their own jurisdiction’s laws regarding gambling.
Players, though, are widespread in thinking that moving to Canada or Europe somehow exempts them from US law, and such is not the case. Right now it’s legal for these players precisely because there is no applicable US law regarding online poker, and that would change for the worse with Reid-Kyl.
The United States is also one of a handful of nations with laws that state it is illegal for its citizens to travel abroad to partake in activities which are expressly illegal within its own borders. The classic example is usually that of Americans traveling to Holland and stopping in at legal marijuana shops to sample the warez.
Yes, it’s illegal for Americans to do so. It’s virtually unenforceable, however, and that’s why it’s not prosecuted.
Foreign-earned income, however, is another matter. US tax codes consider money earned by Americans abroad as every bit as taxable as that earned domestically. There is no difference.
Let’s now take an example of an American online poker player who’s currently moved overseas to play. If Reid-Kyl were to be passed in its current form, then all money this player would earn on a given site — let’s call it “SokerPtars” — would be defined as illegal, because all transactions on the site are done between the site’s software and its players. And it wouldn’t matter a bit if the player was actually playing from Malibu, Vancouver, Bonn or Timbuktu.
Instead of this income being subject to taxation at a standard rate, perhaps 30%, then 100% of this income would be subject to possible US seizure, along with any other assets that were purchased with money that went through an account receiving funds from this imaginary SokerPtars site.
It’s sort of the same way that the DOJ is trying to seize Howard Lederer’s homes and cars, including a California ranch that seems to be only one quarter owned by Lederer and his wife, Susan, and that is actually family property coming from her side of the relationship. That the DOJ is targeting that asset shows how such a law could be used.
Returning to our imaginary grinder, even if he wanted to be honest, he would be induced otherwise by Reid-Kyl. Simply by declaring his income in the normal manner, he’d be acknowledging that he had participated on one of these offshore sites.
Possible Repercussions
The possible repercussions of that aren’t hard to see. The example player we’ve created would be faced with a handful of options upon Reid-Kyl’s passage, none of them good:
- Immediately abandon all play on offshore sites and return to the US;
- Attempt to hide and/or not declare income earned on offshore sites;
- Declare profits as these online players do today, as earned income, and pray they’re never, ever questioned;
- Remain permanently outside the US, and attempt to keep one’s assets beyond US reach. That’s not even a possibility for most of these players, who have relocated on temporary work visas. It would also preclude hundreds of America’s best young poker players from returning to play in such glamorous events as the WSOP.
That’s one dead end after another. It’s also not economically feasible for these players to return to Nevada en masse and play only against one another. The player pool is not large enough to support them. Nope, what Reid-Kyl does to dedicated American online players is attempt to force them out of a job.
But hey, I hear In-and-Out Burger is hiring.
All this stuff is getting the hard sell at the moment, part of a bill being backed by an organization that claims to be supporting the players’ interests. Really, PPA?
The reality here is that high-stakes players should be screaming at the PPA to disavow Reid-Kyl, and that’s why the spin from the organization has been so rapid and disinformative, to stave off that pushback. It’s fortunate that the bill’s real prospects for passage are much lower than the “coin flip” odds claimed by its supporters.
Accepting the spin served up by a lobbying organization at face value is quite often a recipe for disaster, and this past weekend, the collective poker media ran a lot of stories regarding Reid-Kyl and its supposed removal of “player penalties” without doing too much homework.
The real story about Reid-Kyl is that it’s not much good at all, despite what you might read to the contrary. If that means letting the battles to legalize poker go to the states, then that should happen, too.
The argument seems to be that this bill is better than no bill at all. I disagree; no bill at all is much better than the future under Reid-Kyl.
