Editorial: Congress must reverse foolish online poker policy

Businesses need customers to stay in business. And because of the federal government’s nanny-state ban on interstate Internet gambling, Nevada’s promising online poker industry doesn’t have enough customers to sustain competing companies.

Ultimate Gaming, which 19 months ago became the nation’s first legal, regulated, real-money online wagering website, announced Friday that it was shutting down. The company, launched by majority owner Station Casinos, Inc., couldn’t come close to revenue projections because federal law allows online gambling only within the borders of each of the 50 states. Although Ultimate Gaming said it had customers create accounts from all 50 states and many other countries, each of those customers had to be in Nevada physically to use the site.

Thus, the full reach of a world-changing technology that gives even the smallest home-based business a global customer base has been denied to companies that clearly have great global demand for their product.

After all, just 3½ years ago, Americans enjoyed playing real-money online poker with friends, family and complete strangers from everywhere. Then, in 2011, the Justice Department swooped in and closed online poker operators with heavy-handed force under a flawed interpretation of the 50-year-old Wire Act. Later that year, the Justice Department clarified its action by ruling that online poker was just fine, provided games weren’t played across state lines.

Prohibition didn’t halt the use of alcohol, it hasn’t reduced demand for illegal drugs, and it hasn’t stopped online poker play. To this day, Americans continue to play cards on unregulated, off-shore poker websites.

Nevada retains the gaming industry’s gold standard in regulation, so the 2013 Legislature moved quickly to allow online poker within the state’s borders, passing enabling legislation in a single day. Companies invested heavily in the technology with the hope that multistate compacts, allowing states to pool their players, or congressional action legalizing and regulating interstate online poker would reward their risks. But Congress isn’t eager to turn back the clock, and thus far only two other states — New Jersey and Delaware — have legalized online gaming.

The closure of Ultimate Gaming leaves Caesars Entertainment’s WSOP.com, affiliated with the World Series of Poker, and the South Point Hotel Casino and Spa’s Real Gaming as the only two real-money poker websites in the state. As reported last week by the Las Vegas Review-Journal’s Howard Stutz, Ultimate Gaming Chairman Tom Breitling said federal restrictions “created an extremely cost-prohibitive and challenging operating environment.”

Unfortunately, it’s going to stay that way until federal law changes. Online poker is not a threat to the republic. Congress should recognize the overwhelming stupidity of this policy and reverse it as soon as possible.