In a recent policy conference held in Washington, DC, a debate as to whether online poker will likely be regulated at the state or Federal level raged on. Right now, the industry in the United States is about as dicey as it gets and riddled with cashout problems. Meanwhile, states like Nevada, California, and Iowa, as well as the Federal Government, have been looking at ways to raise revenue and protect consumers. The question is whether there’s ample liquidity in the U.S. to support 50 fragmented markets.

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Iowa State Senator Jeff Danielson (pictured) was among those in attendance in DC and told the crowd in a panel about legislative challenges, “Iowa has every form of gambling out there, from 18 publicly licensed casinos to three Indian facilities to a lottery to one of the most liberal social gaming policies in the country.” Iowa was one of the first states to legalize riverboat gaming.

While many states are looking to raise revenue, Iowa has no budget deficit and is in the black for the year. “We don’t have a budget problem,” Danielson explained. “Our impulse is not to regulate online gaming for revenue. I think that’s the last reason to contemplate it. As technology explodes, I want every Iowan who wants to avail themselves of [online gambling] to be able to do so safely and securely.”

On the same panel as Danielson was U.S. Digital Gaming Executive Vice President and General Counsel Melissa Riahei, who told the assembled crowd, “It’s not a one-size-fits-all solution. A state like California [has] tribal casinos, card clubs, and a lottery. All of them have to be taken into consideration for a centralized solution. You also have to take into account the population to determine the model.”

Greenberg Traurig Director of Governmental Affairs Dan Walsh (pictured) reinforced the notion that poker should be treated differently than other forms of gaming: “We’re talking about poker. With regards to poker, liquidity is the key consideration. Even California, as big as it is, is one-tenth of the U.S. market. There’s no way without Federal legislation that state licensing will be successful. Players will continue to go to unregulated sites.”

Danielson responded by reminding his fellow panelists that forcing Congress’ hand is a monstrous task: “Congress is so boggled up, they can’t even pass gas, let alone a good bill. What are the states supposed to do? We have an obligation as states to experiment. It’s better to be caught trying than to do nothing.” Danielson added that his job as a lawmaker was to focus on policy, not liquidity.

When states like Nevada begin doling out licenses, there’s a question of whether the U.S. Department of Justice will respond. Will the DOJ intervene and put an end to state-run models, or will the government allow states to have internet gaming sites? Walsh admitted, “If the DOJ didn’t use the Wire Act on Black Friday, I don’t know when they’re going to use it. The DOJ hasn’t involved the Wire Act in cases other than sports betting when it was going to go to a jury.”

Perhaps complicating matters even further is the departure of arguably the top internet gaming proponent in the United States, Barney Frank (D-MA, pictured), who recently announced that he won’t seek reelection next year. Commenting on the loss of Frank, Walsh observed, “He’s been a tremendous asset, but in his committee, there hasn’t been a lot he can do. I don’t think his retirement has a huge impact on the process.” Frank is the Ranking Member of the House Financial Services Committee, which staunch gaming opponent Spencer Bachus (R-AL) chairs.

The panel discussion then reverted back to liquidity, with Riahei advocating a network of states working together in a similar setup to Powerball: “In smaller states, you need to have a statute whereby you have a network.” Danielson added, “The pay market is a tiny sliver of what we should be looking at… Markets expand. The poker market has surprised us all with its veracity. If the market doesn’t catch on, we’ll come back and discuss.”

In a later session, one panelist gave his take on liquidity: “If you’re not sure about liquidity, start with games that don’t require liquidity. Then, gauge the market and expand to poker, Bingo, and other games that require players.” Games where liquidity isn’t a factor include blackjack, roulette, and other house-backed products.

Today’s Facebook question centers on whether you think internet gambling and online poker should be regulated on the state or Federal level in the USA. Vote here.