Senator Reid of Nevada and Senator Kyl drafted the Internet Gambling Prohibition, Poker Consumer Protection and Strengthening UIGEA Act of 2012 to firm up rules regarding online gambling. Currently, the bills that prohibit Internet gambling are governed by the 1961 Wire Act and the 1970 Illegal Gambling Business Act. When they were written, computers were new and not part of the average household, and the Internet was relatively unheard of outside of an educational setting where schools used it to link to other school's networks.
One thing the act hopes to improve are online poker sites. Off-track horse betting is currently legal per the Interstate Horseracing Act of 1978, so that act remains in place. Licensed poker will now be offered at licensed websites. Sites that offer online gambling without a license will be fined.
Online poker will become legal in states that opt-in or in tribal lands. This is why so many casinos are filing to get licenses to open up online poker sites. Players must reside in the state where the casino is located. The money earned at the online poker site will pay a 16% online poker activity fee. Of this fee, 14% goes directly to the state or tribe and 2% goes to the federal government. This will end up bringing in plenty of revenue for states and tribes who are in need of a stronger tax base for city or tribal programs and expenses. Theoretically, if the revenues are high enough, taxpayers could see a break in property taxes in the long run because their state has a new source for revenues.
Online lottery ticket sales are another benefit. States and tribes will be able to sell “tangible” lottery tickets online.
Online casino games, such as slots, bingo, table games, and video poker, are still effectively banned under this act. For U.S. citizens who win money at illegal online casinos, or sites that offer the games illegally, the act makes it clear that the winnings are subject to forfeiture and fines can be imposed.
Winners at online poker sites will have to declare their winnings as income on yearly taxes. Winnings will be reported to the IRS by the bank that processes the payments for the online poker site.