Frank Fahrenkopf Q&A

Frank Fahrenkopf, CEO of the American Gaming Association, talks exclusively to InsidePoker Business on the chances of online poker legislation in the US market. He discusses Full Tilt, taxes and the current mood in congress in a revealing and in-depth interview. To read the full interview register to receive your free copy of InsidePoker Business.

InsidePoker Business: Do you think the ongoing Full Tilt fiasco  is detrimental to the hopes of regulated online poker in the US?

Frank Fahrenkopf: I don't believe so. There are some who think it will give the anti-gaming people a soapbox to stand on to say that all forms of internet gaming are illegal. If I had to choose which way it cuts the most, I really think it's in favour of protecting American consumers. We know that they can pass any law they want and people are still going to wager online! They're doing so right now in the face of the Justice Department, who I think wrongly assert that the Wire Act of 1961 covers internet wagering outside of sports wagering.

IPB: Could you ever have envisaged such a fall from grace for Full Tilt?

FF: I can't really pass judgement on the individuals there. The only one I know from Full Tilt is [Ray] Bitar. He was very aggressive in the discussions that I'd had with him over the years that they weren?t doing anything in violation of the law and that they were strictly regulated. It kind of flew in the face of the allegations. We had Andre Wilsenach [CEO of Alderney Gambling Control Commission] on a panel at the Expo, who said that under the regulatory regime, any licensee is supposed to notify the Commission of any transactions which are out of the ordinary. They never told Alderney they were having trouble with the Justice Department.

IPB: You recently wrote a piece outlining a Code of Conduct released by the AGA for online poker companies. Was the code provoked by the events of the past year?

FF: I think so. This Congress that's sitting here in Washington now has over 100 new members who have no understanding of basic gaming issues, let alone internet gaming. We've spent a lot of time on Capitol Hill trying to educate them on the pros and cons. We thought the Code of Conduct was important to show our industry feels very seriously about tough regulation and making sure things are done in the right way. When you have the former head of the FBI saying we should pass legislation to regulate, when you have Tom Ridge, the former Secretary of Homeland Security saying this is important to stop money laundering, it's all part of the process of building the case.

IPB: Are the land-based casinos singing from the same hymn sheet now when it comes to online poker?

FF: Yes they are. Back during the Lame Duck session of Congress, that wasn't the case. There was a big dispute over the question of how businesses were treated if they got out before UIGEA was passed versus if they stayed after it was passed. Full Tilt had entered into an agreement with Station Casinos, who argued there shouldn't be a penalty box. That got Steve Wynn and Sheldon Adelson upset. Then earlier this year Steve did his deal with PokerStars and suddenly Steve has changed his position. As of now everyone is on the same wavelength. The AGA board is unanimously in support of where we're going.

IPB: Tax is an issue which is causing some problems for online poker sites in Europe, notably in France. What is proposed for US legislation?

FF: Some of the discussions here have been around deposit tax. On deposit, half would go to the state that was the regulator and half would go to the state where the bettor was. The federal government would only get income tax on the winnings. I can assure you that most people betting online offshore aren't reporting their winnings. Following the allegations against Full Tilt, most people probably won't leave a lot of money deposited, which could create a lot of liquidity problems.

IPB: There has been talk of the AGA endorsing a bill this year. Can you confirm this?

FF: Let me make it clear: we don't have a bill right now. There are two bills at the moment, three if you count the House Ways and Means Committee Bill. We?re not supporting or opposing any of them. We are hopeful that another bill will be introduced that we can support. I know that there was a lot of discussion during the Lame Duck session that Senator Reid was working on a bill, maybe Senator Kyl, but in this Congress I have not seen a bill.

IPB: Why is the AGA neither opposing nor supporting any of the current bills?

FF: We just don't feel they fulfil everything that ought to be in the bill. The Barton bill is close but in the Lame Duck session there were a lot of issues that we never reached closure on. I don't think it would be fruitful for me to go into those right now, but we think the key is the Senate. That's where legislation should begin if we're going to get it done.

IPB: You've mentioned in the past the need to get 'lucky' to get online poker legalised. What did you mean by that?

FF: If you were to ask me about the passage of a piece of legislation? having nothing to do with gambling, like an agriculture bill? I would have to tell you that the attitude in this Congress going into a presidential election year is so toxic between the parties, it's a constant battle. I think 13% of the American public approve of what Congress is doing. It's very difficult to judge whether any kind of legislation is going to get through, no less something as controversial as online poker.

IPB: If legalisation were to happen, what do you think would happen to the companies currently operating and taking bets from US players?

FF: I think it would be very difficult for them to get licensed. If legislation is passed, one of the things that has to be clarified is the UIGEA and what action is legal or illegal. If those companies continued to take bets, I happen to believe that the competition would eventually drive them out of business. I think Full Tilt ruined it for a lot of offshore companies. If you're a US citizen, you?re going to want to go with a name brand that you know. If it's a US company, you know it's going to be tightly regulated.

IPB: So you don't see a way back for companies like PokerStars, despite the possible revenue it could generate for the government?.

FF: I think it would be very difficult for it to get licensed. I don't want to sit and pass judgement but I don't think the revenue would be a factor, it would be past conduct.

IPB: What kind of position do you think online poker will be in this time next year?

FF: I know where I hope we'll be: putting in place a regulatory regime. I've been asked in the last week maybe 20 times what I think the chances are. I can't tell you. I'm not out there making predictions because these are not normal times in the US Congress. I've been in Washington 30 years and I've never seen it like this. We're going into a presidential election year where a change of three seats in the Senate will change control of the Senate from Democrat to Republican, so it's very volatile. All we're going to do is work very hard to tell the story, to try and educate people so that if the opportunity occurs, we'll be ready to support and try to get legislation passed. People in Congress very often oppose legislation not on its merits, but whether or not they like the person that introduced it! That's why I said we've got to be good but we've also got to be lucky.