Harry Reid has failed those who wanted to see the federal government regulate online gambling. He first attempted to insert an online poker bill into the tax cuts legislation, but then decided against it as the legislation became too polarized and contentious. It became clear that attaching another controversial bill to it would doom the bill.

After that, the thought was that Reid would attach the online poker bill to the omnibus spending bill, a $1.1 trillion spending bill full of earmarks that basically would have been like another failed “stimulus” bill. Luckily, Republicans were able to block passage of that bill and all of its wasteful spending. In the process, though, it looks like Reid’s online poker bill has nowhere to go. Reid and proponents of the bill have now all but admitted that it has zero chance of passing. So now what?

First of all, as I have been saying, if you are relying on Harry Reid to save you, you are going to be really disappointed. Many now believe that Reid, who once publicly opposed all forms of online gambling, was simply bluffing about his online poker bill. He used it to get the support of special interest groups who got him reelected, but never really planned to pass it. I don’t know if that’s true, but I know that I can’t think of a good bill that Reid has ever sponsored and passed.

A lot of online poker players are now down about Reid’s failure, but they shouldn’t be. The interesting thing about all of this is that, even though the government won’t regulate online poker, it is still perfectly legal to play poker online in the United States. In fact, it always has been.

The federal government has used the Unlawful Internet Gambling Enforcement Act (UIGEA) of 2006 as a de facto ban on online gambling, but if you actually read the law, you’ll find that it does no such thing. Courts have ruled that UIGEA does not ban any activity. All it does is allow the government to prosecute and seize funds from financial institutions involved in “illegal” online gambling, though the law does not specify what forms of online gambling are illegal.

UIGEA doesn’t specify what forms of internet gambling are illegal, but the Interstate Wire Act of 1961 does. The Wire Act is the only law that bans any form of electronic gambling at a federal level. That law, passed before the first online casino or online poker room launched, states that it is illegal to use a “wire communication facility for the transmission in interstate or foreign commerce of bets or wagers…on any sporting event or contest.”

Some in the government have tried to make the argument that the Wire Act bans online poker and online casino games. They lost that argument. The Supreme Court has never ruled on that subject, but the U.S. Fifth Circuit Court of Appeals has, and the highest court to rule on the subject stated that the Wire Act only pertains to sports betting. Therefore, the Wire Act doesn’t ban online poker or online casino games.

So what does ban those games? Nothing, at least at the federal level. Some states, such as Washington, have laws specifically regarding online gambling, but most do not. In most states, it is completely legal now to visit an online casino or online poker room. Not only that, but in many states, such as Pennsylvania, the courts have ruled that poker isn’t gambling at all, since it is a game of skill and that state defines gambling as wagering on a game of chance.

So what does all of this mean? It means that regardless of the repeated failures of the likes of Harry Reid and Barney Frank, depending on where in the U.S. you live, online poker rooms and online casinos are most likely already legal.

Last week, I commented on the reports that Harry Reid had been secretly conducting back-room deals to regulate online gambling at a federal level. The idea is to attach the gambling legislation onto a must-pass bill, such as the tax cuts.

New Jersey is well on their way to passing a law to legalize and regulate intrastate online gambling within its borders. California is considering following that same path. Reid, long in the pocket of the Las Vegas casinos, has always been opposed to online gambling because of the thought that it would hurt the gambling industry on the Vegas Strip. However, recently Reid seems to have taken the position of if you can’t beat them, join them. Of course, if you join them, make sure you also beat them.

There isn’t a whole lot of information on Harry Reid’s proposed online gambling regulation, partly because the bill is so secretive and, despite Obama’s promises of transparency, most people (including members of Congress) don’t find out what’s in a bill until after it passes. One thing that is said to be in the bill, though, would give Vegas casinos an advantage in the online gambling market.

It is being reported that Reid’s bill would make online gambling legal in all 50 states. However, it comes with the stipulation that for casinos to offer online counterparts, they must have been in operation for at least five years. That would give the casinos in Las Vegas and Atlantic City an advantage over casinos that have recently opened in other states.

The problem, and the question about whether or not Reid’s bill would be unconstitutional, has to do with states’ sovereignty. Most U.S. states don’t have any laws specifically regarding online gambling, but a few states, such as Washington, specifically ban the action. It seems that Reid’s bill would attempt to override Washington’s ban, though from a constitutional standpoint Washington’s state law trumps federal law. Because it doesn’t involve interstate activity, the federal government has no jurisdiction. That problem could be solved if Reid’s bill has an opt-out clause, though, where individual states can opt out of legalizing online gambling.

The other problem is the five-year rule. That rule is for the blatant purpose of putting some states at a disadvantage for the benefit of other states. For example, Pennsylvania, who only recently allowed full casinos, would be ineligible for online gambling. If Pennsylvania wanted their casinos to offer gambling websites where U.S. citizens in any state can play, the federal government would have jurisdiction, because it would fall under the interstate commerce clause of the Constitution. However, if Pennsylvania aims to simply allow intrastate online gambling, the federal government has no say in what they do. Therefore, if Reid’s bill attempts to restrict the state from that activity, the bill is unconstitutional.

None of this comes as a surprise. It certainly wouldn’t be the first time that Harry Reid has pushed for and passed a law that flagrantly violates the Constitution. You can always give Reid the benefit of the doubt and assume that he doesn’t know what the Constitution says. After all, a lot of his actions, such as accidentally voting against his own bills, suggest that he is senile. If Reid’s bill does pass, it will be interesting to see if other states fight back.

Harry Reid got to keep his job. Yeah, I know. I was as surprised as you were. In an election where Republicans had a historic sweep of Congress – the most one-sided midterm election in 70 years – you had to assume that Harry Reid would be unemployed in January. I mean, he had to be.

This is a guy who is so senile that he often votes against his own bills. That includes the healthcare reform bill, which he considers his crowning achievement. Reid voted against it initially and had to have a colleague remind him that since it is his bill, he probably meant to vote yes. This is a man who said that the entire world would be in a depression if not for him! It’s also a man with an approval rating in the 30s! For Reid to win, that would mean that lots of people who hate Harry Reid would have to vote for him.

Apparently, that’s what happened. It helps that, in a clear violation of federal law, labor unions in Nevada required their members to vote in the election and provide proof to their employer that they had voted. And in case you’re wondering, yes, they were also encouraged to vote for Reid. It also helps that electronic voting machines in Nevada had Reid’s name automatically checked by default. The technicians for those machines are members of SEIU, the largest labor union in the nation, but I’m sure that’s a coincidence.

Fair or not, fraud or not, the sad truth is that Harry Reid gets to keep his job as Senator for the state of Nevada. It is not yet determined whether he will remain the Senate Majority Leader, because a few not-yet-decided races could give the Senate to the Republicans. If the Democrats retain control of the Senate, though, what does that mean for online gambling?

It’s not good. Harry Reid is in the pocket of the Vegas casinos, many of which oppose online gambling. For that reason, Reid has said many times that he didn’t support any of the online gambling bills currently in Congress. He considers them a threat to Vegas casinos and has said that he would not support any legislation that was a threat to them. Since he is the Senate Majority Leader, that carries a lot more weight than if he was just another Senator. If he maintains that position and the Democrats maintain control of the Senate, they are unlikely to push hard for legislation opposed by their leader.

Also, as Leader, one of his jobs (along with the Majority Whip) is to organize his party and unify them on bills. There’s a good chance he would use his persuasion to make sure not enough people vote on a repeal of UIGEA, if such a bill were to come to a vote. In short, Reid keeping his job is bad for the country in a whole lot of ways, one of those ways being that any anti-UIGEA legislation is likely to die in the Senate.

Harrah’s seems a little desperate right now. With chances of online gambling legislation passing in the U.S. continuing to dwindle, Harrah’s threw one last Hail Mary. The move is unlikely to do anything but throw some of their money away, but in desperate times, you have to try something, even if it isn’t likely to work.

Harrah’s Entertainment has contributed $75,000 to the Patriot Majority Political Action Committee, a group dedicated to getting Senate Majority Leader Harry Reid re-elected. Harrah’s hope is that the money will help do two things: help Reid keep his job and convince him to approve of online gambling in the U.S. If the money only does one of the two things (or neither), then the money will have been wasted.

While most Las Vegas casinos oppose online gambling, feeling that it is a competitor that would take money away from them, Harrah’s was the first to come around. Taking an “if you can’t beat them, join them” approach, the casino chain decided to open their own online casinos. Those online gambling websites are not available to American customers and only operate in regulated online gambling jurisdictions. Harrah’s is hoping that the passing of regulation in the U.S. would drastically increase their online customer base. With millions already invested in online gambling, they have a lot to lose.

There are three major problems facing them, though. Firstly, Harry Reid, who is both Nevada’s representative in the Senate and the Majority Leader, opposes online gambling. He has said many times that he does not support any gambling regulation bill present on Congress. Being a sleazy politician, it only takes money to change Reid’s mind on a subject he has a “firm” stance on, but I’m not sure if $75,000 is enough. The second major problem is that there’s a good chance Reid will be unemployed soon. Polls show that he is deadlocked with conservative Republican Sharron Angle, who is sure to hit even harder on Reid’s liberal record on the tail end of her campaign. The third and biggest problem is that, with Congress in recess, the only chance for the gambling legislation to pass this year is for it to pass during a lame duck session, which seems unlikely. With all of that working against Harrah’s, it makes you wonder why they don’t wait until January and start trying to influence the winner of the election.

Not long ago I warned our readers to not be too confident in the overturning of the Unlawful Internet Gambling Enforcement Act in the United States. There are simply too many reasons the legislation in Congress could fail, as it did last time Barney Frank tried to get it done. I’m not the only one who thinks so.

Tony Cabot, founding member and former president of the International Masters of Gaming Law Association, agrees with me. Considered an expert on gambling legislation, Cabot believes that no law will be passed on a federal level that legalizes and regulates online gambling. Barney Frank has already pushed his House bill back and it likely will not be heard on the floor this year. Expect the same from Menendez’s similar Senate bill. In both cases, online gambling is simply not a priority, with the no end in sight to the recession and no prospect for the creation of new jobs in the near future. In addition, with the administration focusing on healthcare reform, there simply isn’t the time or energy to devote to a bill that would have a minor impact on the economy.

If the bill isn’t passed this year, though, it could be dead, according to Cabot. Next year is an election year and no politician is going to want to give their opponents ammunition by backing a controversial subject like gambling. I agree. Not only that, but the reason Barney Frank is so confident that he will succeed this time where he failed in the past is because he has strong support from Congress that has a strong Democratic majority. However, if the politicians hold off on the legislation until after the 2010 elections, the Democrats could lose that majority and therefore, online gambling would lose its support. Midterm elections are always unfavorable to the party in the White House, and with the approval rating of Obama and Congress plummeting, many experts predict a huge shakeup on Capitol Hill.

Another reason Cabot provided for a lack of optimism is that some online casinos are against the legislation. Yes, you read that correctly. According to Cabot, some of the online casinos that are already dealing with American customers are against repealing UIGEA because it would give them more competition in the market. Some fear that they will even be denied licenses to operate in the United States. Likewise, land-based casinos in the country, especially in Las Vegas, are divided on the issue. Some want online gambling legalized because they want to expand into the online realm. Other casinos are against online gambling because they see it as competition. Senator Harry Reid of Nevada, who is basically a puppet of the Vegas casino lobby, has refused to pick a side on the issue.

Cabot gave 20 to 1 odds for the success of Barney Frank’s bill, but thinks legislation at the state level is much more likely. Sorry to be a buzz kill, fellow gamblers. I’ll try to have better news tomorrow.

Joe Brennan, chairman of internet freedom lobby group Interactive Media Entertainment & Gaming Association (iMEGA) has downplayed reports that they are losing the battle against the Unlawful Internet Gambling Enforcement Act (UIEGA) in the courts.

While Democratic Representative Barney Frank has introduced a bill that would repeal the act, which is really Title VIII of the SAFE Port Act of 2006, iMEGA is taking no chances and is challenging it in the courts, claiming that the title is unconstitutional. Brennan calls the act, which prohibits financial institutions transferring money to unlawful Internet gambling sites, unconstitutional. The problem, according to Brennan, is that the language is too vague and no definition was given by Congress as to what constitutes “unlawful Internet gambling.” Only four states have laws that specifically prohibit online gambling. For the other 46, according to Brennan, a reasonable person has no way to tell whether or not they are breaking the law.

Brennan has a point. If there is no definition provided in the act that explains what gambling is legal and what is illegal, how can someone be expected to obey the law? Even if there was a clear definition, it seems a little hypocritical for the federal government to ban online gambling when 43 states have a state-run lottery, some of which can be played online. Not surprisingly, Nevada is one of the states that does not have a lottery, and Senate Majority Leader Harry Reid, backed by a powerful Las Vegas casino lobby that does not want competition, has blocked attempts to legalize and regulate online gambling in the past. If Frank’s bill passes the House, however, Reid will have a tough decision to make, as his Nevada constituents seem to be split on the issue and his approval rating is already in the gutter.

If Frank’s bill passes both houses, Brennan’s lawsuit against the Department of Justice will be unnecessary. However, after the government froze over $30 million in funds to be payed out to winning players of several online casinos, the debate has heated up. The 27,000 players awaiting their earnings don’t want to wait for Congress. Neither does Brennan.