Former U.S. Senate Majority Leader, Reid-Kyl online poker bill co-sponsor Harry Reid dies at 82

Haley Hintze Author Photo
Haley Hintze
Posted on: December 29, 2021 20:02 PST

The former Majority Leader of the U.S. Senate, Harry Reid (D-Nevada), passed away on Tuesday at age 82. Reid served as a U.S. Senator representing Nevada for 30 years, from 1987 to 2017. He was the Senate's Majority Leader for eight years, from 2007 to 2015, and continued as the Senate Minority Leader for two more years, until his retirement in 2017.

Reid died from complications of pancreatic cancer, with which he was diagnosed in 2018. He has experienced frail health during his final years in office, though after being diagnosed with cancer, he received an experimental treatment that led him to his briefly being declared in remission. However, the pancreatic cancer, one of the forms of the disease with the lowest survival rates, soon returned.

Reid was born in Searchlight, Nevada, in 1939, and rose from a modest upbringing to become one of the canniest and most powerful American politicians in recent decades. He was lionized as a progressive, though he compromised and negotiated those beliefs frequently. Reid was a champion of Nevada's gambling interests, and though he once played a prominent role in U.S. online-poker legalization efforts -- and sponsored the controversial Reid-Kyl bill -- his commitment to online-poker legalization remained an open question.

The late Senator was also dogged by rumors and accusations of scandal and corruption throughout his career, though the accusations never stuck. That corruption included his involvement with online poker's possible legalization at the federal level.

Reid delivered on promise to sponsor online-poker measure

How forthright Reid was to the cause of U.S. online-poker legalization depends on how one interprets several connected events. In 2010, Reid was feted at a fundraiser held at the Golden Nugget in Las Vegas, which was in large part hosted by Full Tilt Poker. (That's Reid at right, along with FTP bosses Ray Bitar and Howard Lederer.)

In a presser accompanying that fundraiser, Reid promised to sponsor the sort of online-poker legalization bill that FTP's owners longed for. In retrospect, it was a fool's errand; Full Tilt was already squarely on the Department of Justice's radar, along with several other U.S.-facing online poker sites, and in April 2011, the infamous "Black Friday" crackdown occurred.

The DOJ's pursuit of Full Tilt and other offshore processors can be traced back to at least 2007, and it involved the DOJ's repeated takedowns of third-party payment processors who created banking channels to move money between U.S. poker players and the various sites.

It's difficult to imagine that Reid, then the Majority Leader, knew nothing about the DOJ and related Federal Trade Commission (FTC) investigations involving online poker. It's also unlikely Reid lacked awareness about the simple truth regarding federal gambling measures: Since gambling in the U.S. has always been a states-rights issue -- and Reid was a long-time champion of Nevada's rights in that area, including sports betting -- he likely knew such a federal online-poker measure was all but impossible.

Nevertheless, Reid accepted the online poker world's financial and political support, the latter through the now-defunct Poker Players Alliance (PPA), and promised to sponsor a bill. In 2012, he teamed up with one of the U.S.'s most prominent anti-online-gambling politicians, U.S. Senator John Kyl (R-Arizona) to deliver, as promised, the "Reid-Kyl"legalization bill.

The bill, of course, was dead on arrival. Among other critical flaws, the original Reid-Kyl language called for criminal penalties for gamblers who participated on offshore sites. That criminal threat disappeared when the bill finally made it to Congress, when forfeiture of bettors' funds was the preferred penalty. And, as many pundits noted, this was despite the growing claims that it wasn't illegal at all to play on such sites, an argument later borne out when New Jersey successfully fought and overturned the 1961 Wire Act.

Reid, though, noted that he had made good on his promise, fruitless gesture that he almost surely knew it to be. The bill's immediate failure also defused any tensions between Reid and the U.S.'s number-one online-gambling foe, Nevada casino magnate Sheldon Adelson. Adelson spent tens of millions of dollars influencing elections from the local to the federal levels. Reid himself was perhaps too powerful for Adelson to attack directly, but Adelson applied pressure through alternate channels, by threatening to yank all financial support given from his Las Vegas Sands Corporation to the American Gaming Corporation, the country's largest pro-gambling-industry lobby. Reid worked closely with the AGA on many issues over the year, but Adelson's financial threats neutered the AGA for many years on anything connected to online poker.

The alleged $2M FTP bribe to Reid

There was far more to the story of Full Tilt Poker's dalliance with Harry Reid and the hoped-for legalization of online poker at the federal level. Strong evidence emerged years after Black Friday and the Reid-Kyl fiasco that FTP had done more than just host a fundraiser; they'd funneled two million dollars into Reid's pockets through back channels.

The primary source for the allegations was the so-called twelfth "Black Friday" defendant, Utah businessman Jeremy Johnson. Johnson had worked with several of the third-party payment processors and was part of a grand network helping Full Tilt and others move money into and out of the U.S.'s electronic banking system. The reason Johnson wasn't charged along with Black Friday's other 11 individual defendants is that he was already up on charges from the FTC involving his crooked direct-marketing businesses. Johnson freely commingled the funds and other resources between his direct-marketing and online-poker business schemes, and the direct-marketing scams came first, so his remained an FTC, rather than a DOJ, case.

One of the first major outlets to report on the possible scandal involving Reid, Full Tilt, and the $2 million in dark money was published by the Salt Lake City Tribune in late 2016. The article details how a check in that amount originated from a Swiss business front owned by Full Tilt, went to a prominent L.A.-based gaming attorney with instructions to be forwarded to Reid's people, and was eventually deposited into an entity called Searchlight Holding, Inc. (Searchlight, Nevada, as noted above, was Reid's birthplace.)

Johnson made the FTP scheme involving Reid public as he fought his own legal battles, which also linked to several prominent Utah politicians. Many related facts and allegations emerged in even greater detail in some of Johnson's and third-party processor Chad Elie's ongoing court depositions. Despite the seeming smoking gun, however, there was never any indication that the DOJ or state-level officials investigated the corruption accusations levied against Reid.

From the legalization standpoint, it didn't matter anyway. Full Tilt collapsed after Black Friday amid a gaping hole of fraud, Johnson went to prison on the FTC case, the PPA collapsed for lack of funding, and the whole Reid-Kyl bill sank without even a Congressional hearing. Reid, though, soldiered right on until his retirement in 2017.

Featured image source: U.S. Senate Press Room