As drafted, bill would divide the tax haul between Washington and state governments

A financial analyst with Washington contacts placed the odds of the lame-duck Democratic Congress passing Harry Reid’s online poker legalization bill at one in three. Bill McGill of Philadelphia-based Janney Capital Markets made the prediction to The Philadelphia Inquirer.

Another analyst, Edward Mills of Richmond-based FBR Capital Markets, told the newspaper, “Negotiations are very active.”

Reid is busily using his influence as Senate majority leader to try to get the bill through before the end of the session next week. Legalization of online gambling is a top priority for the Las Vegas casino corporations that constitute the most powerful business bloc in Reid’s home state and who supported him in the re-election he eked out in November despite their mostly Republican ties.

Reid’s bill would overturn the Unlawful Internet Gambling Enforcement Act, passed in 2006 by the last Republican Congress in 2006, which affirms the federal government’s longstanding ban on Web gambling by prohibiting U.S. financial institutions from processing money transactions related to the activity.

Reid’s bill was expected to contain language that would allow only existing U.S. casinos, racetracks and slot-machine makers to operate online poker for the first two years after the bill passes. The bill would also outsource oversight to state regulators, another move supported by the casino industry, which has always opposed federal involvement.

The bill as drafted would divide the tax haul between Washington and the state governments.

However, given the controversial nature of Internet gambling, getting the bill passed was by no means certain as of this writing, and it was speculated that Reid would look to attach it to must-pass legislation such as the tax bill.

But powerful Republicans on Capitol Hill - among them Senate whip John Kyl, House Banking Committee Chairman-in-waiting Spencer Bachus and House Ways and Means boss-apparent Dave Camp - oppose the bill.

But Senate Republican leader Mitch McConnell of Kentucky was a “wild card,” Mills told the Inquirer. McConnell is beholden to his state’s powerful horseracing industry, and it might be difficult for him to oppose it, the analyst said.