Some Financial Impacts of Harry Reid's (Still Kicking!) Internet Poker Bill

After a wild afternoon yesterday, it appears that Harry Reid's internet poker bill is still alive and making the rounds on Capitol Hill.

Some interesting commentary this morning comes courtesy of Forbes.com. That's where Michelle Minton penned a piece entitled, "Legalizing Online Gambling is a No-Brainer". Minton is someone without a dog in this fight -- she's the director of insurance studies with the Competitive Enterprise Institute, a non-profit public policy organization dedicated to the principles of free enterprise, limited government and individual liberty.

Free enterprise and limited government? The Reid bill? I'd guess Minton hasn't read a copy of the bill. Still, she's probably correct that the Reid bill would create jobs, and she almost has to be correct about the revenue and tax generation benefits of the bill.

Last night at the Bellagio (where the WPT Five Diamond final table was taking place) the Reid bill was a lively topic of conversation. Opinions are mixed on (a) whether the bill is #goodforpoker and (b) whether it can (or will) pass. People who are among the most nervous about the bill are the media -- many of whom work for sites that derive large chunks of their revenue from affiliate marketing. If the Reid bill passes and existing operators are forced to leave the biggest online-poker market in the world for 15 months, affiliate revenues will drop drastically. In fact, there's no guarantee that affiliate marketing would come back in its current form at the end of that time.

Rakeback is another financial item that might wind up a casualty of the Reid bill, especially in a U.S. market where the barriers to entry would be impossibly tall for all but the largest casinos. Why offer rakeback when there's only 1 or 2 other sites you're competing against? Some might argue it's long time for rakeback to go away anyway, having out-lived its usefulness to existing online poker sites as the market has matured. If rakeback did die a quiet death after the black-out period, the bottom line of U.S. online pros would suffer.

So keep the status quo, some say. Don't change online poker just yet. Keep using the existing legally-gray system. The problem there -- I have read and heard from multiple sources that it's getting harder and harder to find reputable payment processors for the sites to work with. I don't have any direct knowledge on the issue but common sense would dictate that the payment processing mess isn't going to get any *better* under the existing UIGEA. It can *only* get worse.

Just some financial food for thought as we all continue to watch Washington closely.