A month ago, the New York State Senate Finance Committee passed a bill which would legalize and regulate online poker in the state by a vote of 27-9. This followed a unanimous vote to the affirmative in the Senate Racing, Gaming and Wagering Committee this February. This is excellent progress in an effort that stalled out last year, which has made poker fans optimistic that online poker legalization is in sight in New York. The bulk of the rules and regulations were fairly standard, but on Monday, additional language was added that threatens to slow things down.
Just before the required third reading of Senate Bill 3898 in the New York Senate, an amendment was tacked on that inserts the dreaded “bad actor” clause into the legislation. Such clauses are designed to prevent any online poker operator who accepted bets from people in the U.S. after the passage of the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA) from being able to be granted a license in the new regulatory environment.
Where we have seen this most often is in California, where hard-line Native American tribes have been insistent on a bad actor clause, as they are trying to acquire as large of a piece of the online poker pie as possible.
It is commonly believed (for good reason) that such bad actor clauses are not there to protect consumers from “bad” operators, as lawmakers would like us to believe, but rather to protect local casinos and online operators from having to compete with PokerStars, the online poker giant.
Below is the “bad actor” clause of the amendment, which lays out situations in which a potential operator may be considered “unsuitable” for licensing:
(f) Whether the applicant:
(i) has at any time, either directly, or through another person whom it owned, in whole or in significant part, or controlled:
(A) knowingly and willfully accepted or made available wagers on interactive gaming (including poker) from persons located in the United States after December thirty-first, two thousand six, unless such wager were affirmatively authorized by law of the United States or of each state in which persons making such wagers were located; or
(B) knowingly facilitated or otherwise provided services with respect to interactive gaming (including poker) involving persons located in the United States for a person described in clause (A) of this subparagraph and acted with knowledge of the fact that such wagers or interactive gaming involved persons located in the United States; or
(ii) has purchased or acquired, directly or indirectly, in whole or in significant part, a person described in subparagraph (i) of this paragraph or will use that person or a covered asset in connection with interactive gaming licensed pursuant to this article.
Note the date listed above: December 31st, 2006. The UIGEA was passed in the fall of 2006 and the end of that year is almost always the cutoff for similar “bad actor” clauses. Any operator – PokerStars was one – who continued to serve customers in the U.S. after that date was obviously doing so after the UIGEA passed, though the official compliance date was not until June 1st, 2010.
Most operators withdrew from the U.S. market after the UIGEA passed. Of the major ones who stayed – PokerStars, Full Tilt, Absolute Poker, and UltimateBet – only PokerStars still exists (Full Tilt is just a skin of Stars now) and is therefore the one clearly being targeted by the “bad actor” clause.