Yesterday
the Nevada Gaming Commission unanimously
approved regulations that will allow online poker and other
forms of Internet gambling within the state’s borders. The Wall
Street Journal
reports that “the new rules were designed to put the state in a
position to move quickly to become the center of a lucrative new
part of the gambling industry should Congress pass one of several
laws overturning the ban on Internet wagering, making the state the
de-facto national licensing body.” In the meantime, poker sites
with Nevada licenses, which could be operating by the end of next
year, will be limited to players in Nevada. Licensees will have to
satisfy regulators that they have a reliable system for excluding
out-of-state customers. The Journal says it’s not
clear the Nevada market is big enough on its own to attract much
interest:

Mr. Bronson’s company, U.S. Digital Gaming, estimates a network
of online-poker sites would need at least 70,000 active users to be
viable and would likely be able to get to that size within 1½
years, producing about $180 million in revenue. Getting there isn’t
a sure bet. Before a federal government crackdown on allegedly
illicit poker websites this spring, the state had around 25,000
online-poker players, according to PokerScout.com, a website that
tracks online-poker play.

Even if Congress does not act, it should be possible to enlarge
the market without violating federal law. Why can’t Nevada-based
sites serve customers in other states where online poker is legal?
While the Wire Act of 1961
prohibits using “a wire communication facility” to accept bets
“on any sporting event or contest,” offering online poker is a
federal offense only when it violates state law. The Justice
Department claims otherwise, but it has never successfully used
that theory in court. In 2002 the U.S. Court of Appeals for the 5th
Circuit ruled
that the Wire Act applies only to sports betting, and all of the
Justice Department’s online gambling cases have either involved
sports betting or hinged on violations of state law. (Last April’s
indictment
of 11 people associated with PokerStars, Full Tilt Poker, and
Absolute Poker, for instance, cites violations of New York
law.) If several states agreed among themselves to allow online
poker—so that sites based in Nevada, say, could serve customers in
Arizona and California—what legal basis would the feds have to
interfere?

Nevada is not the only state where poker sites could soon be
legal. The New Jersey legislature seems likely to legalize
the business, assuming if it can find a route that satisfies Gov.
Chris Christie’s constitutional objections. The
Journal notes that California, which should have
plenty of poker players even if out-of-state customers are barred,
is also mulling legalization.