Kentucky is poised to work toward legal and regulated online poker in 2020.
Just a few years ago, most experts in the field would have said that Kentucky was one of the least likely states to consider – much less actually legalize – the game. And not many people could have predicted that the son of former Kentucky Governor Steve Beshear, the one who famously seized dozens of online gambling domains and sued PokerStars, would be one of its most ardent cheerleaders.
While 2019 has been a wild year for many in politics and governance around the world and notably so in the United States, Kentucky is no different. And it is ending 2019 with every intention of moving toward a plan for gambling expansion in the state that will include poker.
Solid 2019 Progress
Technically, the path toward legalization began in late 2018. Kentucky Attorney General Andy Beshear, Steve Beshear’s son, announced a plan to help solve a pension funding problem, one that was the worst of all 50 states.
His multi-faceted plan included gambling reforms, including casinos, sports betting, fantasy sports, and “preparing for the eventual legalization of online poker.”
Beshear instructed the General Assembly to pass legislation to this effect, dedicating all revenue to Kentucky’s pension systems.
By the beginning of February, a group of 15 lawmakers – a bipartisan group of Representatives led by Rep. Adam Koenig – introduced HB.175. The bill was to legalize online sports betting, fantasy sports, and poker. And it was put up alongside HB.190 to full-fledged commercial casinos in the state, expanded gaming at racetracks, and sports betting.
Weeks later, the bill passed the House Licensing, Occupations and Administrative Committee. But a short legislative session and not quite enough support in the legislature killed the bill when time ran out in March 2019.
Beshear in Charge
It soon became clear that Beshear was running for the governorship of Kentucky. And as he began debating incumbent Governor Matt Bevin, Beshear proclaimed expanded gambling to be the only solution to the pension problem. He also noted the benefits it would bring to Kentucky’s tourism industry.
Bevin only responded with false claims about the dangers of gambling and no alternative funding ideas.
The campaign was contentious, but Beshear emerged victorious.
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Gambling on Front Burner
Not even waiting for the new year to begin, Rep. Koenig decided to file a bill request on December 5 (though it didn’t become public until December 19). The bill is very similar to the 2019 legislative effort to legalize poker, fantasy sports contests, and sports wagering at horse racing tracks, sports venues, and online or by mobile devices.
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The 79-page bill, which will likely be HR.364 is “an act relating to wagering and making an appropriation therefor.” The legislation specifies everything from the accounting of revenue and distribution of funds, licensing, and oversight to penalties and term definitions, amending current law as necessary.
Section 33 of the bill defines online poker as follows:
“Any form of poker, including but not limited to Five Card Draw, Seven Card Stud, and Texas Holdem, at locations removed from other players via the internet through the use of computers, smart phones, or other types of electronic devices. Online poker shall not include video lottery terminals or slot machines using electronic representations of cards in a game of chance in which skill does not play a part.”
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This specifically designates poker as a game of skill.
The Kentucky Lottery Corporation will oversee the licensing and regulation. Much of the text puts poker alongside the state’s lottery for all intents and purposes.
Some key points about online poker:
--Players 18 and over will be able to play.--Geolocation software will ensure that only people within the geographical confines of Kentucky can play.--Age verification will ensure that no one under 18 plays.--Security and accounting standards will be required.--License applicants must not have been convicted of a UIGEA (Unlawful Internet Gambling Enforcement Act) violation.--License applicants must pay an initial licensing fee of $250,000.--Licenses will be valid for one year and can be renewed annually for $10,000 each year.--Licensees will pay a gaming fee of 6.75% of net poker revenue monthly.--Licensees are not absolved of liability “incurred due to litigation with the Commonwealth over internet poker domain names.” Licenses will be suspended until a final judgment is issued for the improper use of internet domain names until all fines and fees are paid in full.
Holding a Grudge
The Commonwealth of Kentucky still holds a grudge against PokerStars and all online gambling sites involved in its domain seizure case.
Sections about the UIGEA violations and litigation about internet poker domain names is aimed directly at PokerStars.
It all started in 2008 when then-Governor Steve Beshear ordered that 141 online gambling-related domains be seized and put under the supervision of the state. All sites that continued operating in the US market after the UIGEA passed in 2006 were targeted, from small sites to the big ones like PokerStars and Full Tilt Poker.
The case became a very contentious one that involved accusations of censorship and demands for internet freedom. It dragged on for years until Beshear settled with PokerStars and Full Tilt in 2013.
But it was not over, as a state judge ruled in 2015 that PokerStars (then owned by Amaya) owed $870 million in penalties to the Commonwealth of Kentucky. This was for the losses incurred by Kentucky residents who played poker on PokerStars between 2006 and 2011 (Black Friday).
The case ultimately went to the Kentucky Court of Appeals, which ruled in December 2018 that PokerStars did not owe the money. The ruling reversed the original online domain case.
It is unclear what litigation is ongoing, but the bill clearly refers to something awaiting a final judgment, alluding to PokerStars and the case that started more than a decade ago.
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