2001

H.R. 2267: Internet Gambling Regulation, Consumer Protection, and Enforcement Act, 2009. http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=111_cong_bills&docid=f:h2267ih.txt.pdf 

In May 2009, Rep. Barney Frank (D-Mass) resurrected a bill similar to one he was unable to pass in the previous congress. HR 2267, or the Internet Gambling Regulation Consumer Protection and Enforcement Act, “would establish a federal regulatory and enforcement framework under which Internet gambling operators could obtain licenses authorizing them to accept bets and wagers from individuals in the United States.” Currently slated for the September session, many poker players are betting that this bill will finally legalize their Internet gambling. One of the other two bills that join HR2267 is HR2266 (Internet Gambling Regulation and Tax Enforcement Act) with the purpose of framing the regulation and taxation of this new enterprise; namely, “a 2 percent fee (i.e. federal tax) on all deposits.” The third counterpart, the Reasonable Prudence in Regulation Act, is the last ditch effort to stall the UIGEA, which calls for a one-year delay in date for compliance.

In Frank’s own words, “The government should not interfere with people's liberty unless there is a good reason. This is, I believe, the single biggest example of an intrusion into the principle that people should be free to do things on the Internet. It's clearly the case that gambling is an activity that can be done offline but not online.” Most advocates point to the revenue stream this bill would create, while opponents argue “legalized online gambling is a ‘clear danger to our youth’ and encourages gambling addiction at a young age.” However, Frank’s response to this claim is “The notion that a society should prohibit something entirely because of the possibility that children will abuse it is a terrible blow to liberty.” The authors have stressed that the bill includes safeguards to prevent underage or compulsive gambling and protect consumers who gamble online.

Until the bill comes to session, lobbying efforts have been promised by the Poker Players Alliance that include a $3 million campaign. HR2267 moves contrary to the traditional prohibitive stance the government has taken to online gambling. In an economic downturn, it’s no surprise that novel revenue streams become more appealing, which makes passing the Internet Gambling Regulation Consumer Protection and Enforcement Act a no-brainer. According to Harrah's Entertainment's senior vice president of communications and government relations Jan Jones, "We really believe this industry already exists. It just exists in a wild west setting. If you say you care about protecting children and fraud and money laundering, then the only way you can put those protections in place is to put in a strong regulatory frame."

European Commission, Directorate-General for Trade, "Report to the Trade Barriers Regulation Committee," Brussels, 6-10-2009. http://trade.ec.europa.eu/doclib/docs/2009/june/tradoc_143405.pdf

The 2006 UIGEA not only scared American companies from facilitating gambling online by US citizens, but it also sent international shockwaves in the gambling industry. Specifically, European companies were forced out of the US market but “still suffer legal proceedings by US authorities based on their past activities on the US market.”

The report published June 10, 2009 by the European Commission is the result of a formal examination procedure filed in 2008 following the complaint lodged by the Remote Gambling Association. The report “concludes that US laws deny access and discriminate against foreign suppliers of gambling and betting services inconsistently with US WTO obligations.” In response, the US is trying to withdraw from the trade obligations, but has been unable to formally do so. However, as the report notes, “a withdrawal only affects future access to the market, but does not allow the US to disregard its obligations in respect of past activities.” These past activities affect “revenue and stock market value lost by affected companies.” One of the fundamental reasons why this dispute is taking place, is indeed the fault of the US government for not clearly defining their laws, namely in the ambiguous Wire Act. As outlined by the Commission, “EU companies thought that it was legally possible to supply Internet gambling services in the US, given the lack of clarity of the domestic legal framework.” As a result, even though the European companies began withdrawing in 2006 as a response to UIGEA, the US pursued these companies for their pre-2006 activities in a discriminatory fashion.

“Internet gambling is a complex and delicate area, and we do not want to dictate how the US should regulate its market,” said EU Trade Commissioner Catherine Ashton. “However, the US must respect its WTO obligations. I hope that we will be able to reach an amicable solution to this issue.”

Haley Hintze, "Payment Processor Files Against U.S. for Return of Seized Online Poker Funds" PokerNews.com, 7-13-09. http://www.pokernews.com/news/2009/07/payment-processor-files-return-seized-online-poker-funds-6939.htm

On June 10, 2009, authorities from the U.S. Department of Justice’s Southern District of New York froze more than $30 million in the accounts of payment processors that handle the winnings of thousands of online poker players. This unprecedented action marked the first attempt by DoJ to enact the 2006 UIGEA. According to the news reporting that day, “In a letter dated Friday and faxed to Alliance Bank, the prosecutor said accounts held by payment processor Allied Systems Inc. are subject to seizure and forfeiture ‘because they constitute property involved in money laundering transactions and illegal gambling offenses.’” Although the money belonged to individual players, poker sites decided to step in and cover all the losses suffered by the payment processing companies in order to ensure a smooth experience by their clients, i.e. the players. These poker sites were going out on a limb to keep credibility established in their business but eventually someone was going to have to reimburse them, right?

One month after the seizure, some payment processors filed a suit against the DoJ that claimed the legal action was unwarranted. One company is asking a federal judge “to order the return of approximately $14 million it believes was improperly seized by authorities.” Interestingly, “The majority of the funds seized belonged to individual poker players themselves, who could not, according the statute involved, have violated the law.” They also declare that online poker is not illegal gambling, as outlined in their 40-page motion that argues “why poker should be treated legally as a game of skill.”

This trial is currently under way.

Public Law 109 - 347 - Security and Accountability For Every Port Act of 2006 or the SAFE Port Act: H.R. 4954 (S. 2008) (S. 2459) http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=109_cong_bills&docid=f:h4954enr.txt.pdf

Although the SAFE Port Act was mainly an anti-terrorism bill, the Unlawful Internet Gambling Enforcement Act (UIGEA) was tacked on at the last moment. The entire package was passed at midnight on the day Congress adjourned for the 2006 elections. Very few of the representatives had a chance to review the full bill and the UIGEA portion was not even included in the original SAFE Port Act passed by the Senate. The UIGEA was indeed a resurrection of the HR4411 IGPEA that failed in 1999 but several portions had been scrapped, namely any text relating to the Wire Act. Even though the UIGEA was signed into law in 2006, its provisions were marked for “notice of proposed rulemaking” that delayed any real legitimacy to the act until final regulations were released November 12, 2008 to become effective January 19, 2009. Additionally, due to the complicated enforcement issue the UIGEA placed on payment processors, compliance was not required until December 1, 2009. So even though the Bush administration had successfully passed an anti-gambling via the Internet bill, it took over three years to become effective, under a new administration that could possibly overturn the law.

While this bill does not expand the Wire Act provisions, it does add language to cover “interactive computer services” which obviously refers to the Internet. The real problem with the UIGEA is that it declares “unlawful Internet gambling” is illegal, but never defines Internet gambling. In an attempt to target poker and casino-style games specifically, the language expands on what is considered a bet or wager to include “games subject to chance.”  However, poker enthusiasts and advocates claim that poker is a game of skill and not chance.

UIGEA does affirm that one should ignore intermediary computers and look to the place where the bet is made or received. However, the main purpose of the bill is to force the financial institution to become watchdogs over transactions. This reason alone is why banks heavily lobbied against the bill. While the long-term consequences are yet to be seen, the immediate effects resulted in Neteller and several other prominent payment processors to unilaterally stop serving the gambling community. Of course, other processors gladly stepped up in this vacuum alongside poker sites utilizing workarounds through phone cards and other innovative approaches.

In re MasterCard Int'l, et al., 132 F. Supp. 2d 468, 472 (E.D. La. 2001). http://www.ca5.uscourts.gov:8081/isysquery/irlc1e/1/doc

This 2001 class action case targeted several banks and credit card companies (such as Mastercard and Visa International) for alleged unlawful interaction with Internet casinos per the Racketeer Influenced and Corrupt Organizations Act (RICO). However, the defendants were able to successfully move to dismiss the case. During the appeal hearing in 2002, the judge affirmed the previous decision.

In short: “In this lawsuit, Larry Thompson and Lawrence Bradley (“Thompson,” “Bradley,” or collectively “Plaintiffs”) attempt to use the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. §§ 1961-1968, to avoid debts they incurred when they used their credit cards to purchase “chips” with which they gambled at on-line casinos and to recover for injuries they allegedly sustained by reason of the RICO violations of MasterCard International, Visa International, and banks that issue MasterCard and Visa credit cards (collectively “Defendants”). The district court granted the Defendants’ motions to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. We AFFIRM”

The judge wrote the following in his decision, “Because the Wire Act does not prohibit non-sports internet gambling, any debts incurred in connection with such gambling are not illegal.” Trumpeted by poker players unanimously, this case law set a precedent that although sports betting conducted over the Internet may be illegal, casino games are legal according to the Wire Act. The judge’s opinion was indeed influenced by previous attempts to expand the ambiguous Wire Act, as seen by his comments, “[T]he recent legislative history of internet gambling legislation reinforces the Court's determination that internet gambling on a game of chance is not prohibited conduct under 18 U.S.C. § 1084. Recent legislative attempts have sought to amend the Wire Act to encompass ‘contest[s] of chance…’ the ‘Internet Gambling Prohibition Act of 1999’ …sought to amend Title 18 to prohibit the use of the internet to place a bet or wager upon a ‘contest of others, a sporting event, or a game of chance…’”

Susan Schmidt; James V. Grimaldi (October 16 2005). "How a Lobbyist Stacked the Deck—Abramoff Used DeLay Aide, Attacks On Allies to Defeat Anti-Gambling Bill". Washington Post. p. A01. http://www.washingtonpost.com/wp-dyn/content/article/2005/10/15/AR2005101501539_3.html. 

Although this Washington Post article was written in 2005, the subject of the story centers on the 1999 Internet Gambling Prohibition Act (IGPA) that never came to be. IGPA was bill that cleared the Senate and "appeared on its way to passage by an overwhelming margin in the House of Representatives." Although a strong lobbying effort from the moral right and anti-gambling groups such as the Christian conservatives thought they had sealed the passage of this bill, political payoffs behind the scene derailed the process.

Even though the National Gambling Impact Study Commission’s Final Report gave fresh life to an anti-gambling bill, powerful lobbying efforts orchestrated by Jack Abramoff eventually scuttled the passage. These efforts employed a “win-at-any-cost strategy that went so far as to launch direct-mail attacks on vulnerable House conservatives” and included at one point, “circulat[ing] a forged letter of support from Florida Gov. Jeb Bush.” After the $2 million pro-gambling campaign defeated the bill, several charities tied to Abramoff and his accomplices helped launder the money.

This story serves as an example of how powerful lobbyists and corruption is capable of manipulating Capitol Hill and eventually national law. Although for the average gambler, they were never the wiser. Conservatives swore that they would one day resurrect the bill and that day eventually came also surrounded in controversy. [See UIGEA 2006]

American Gaming Association, Fact Sheet on Internet Gambling, accessed 7/20/2009: http://www.americangaming.org/Industry/factsheets/issues_detail.cfv?id=17

The American Gaming Association (AGA) presents a succinct review of the current disagreement between the U.S. Department of Justice and U.S. courts that have decided online gambling cases. They address most of the historic and current legal issues surrounding U.S. law in regards to online gambling. “Due to the divergent views of its members, the AGA is neutral on the issue of Internet gambling.” The following cases were described: Wire Act of 1961, Professional and Amateur Sports Protection Act of 1992, The WTO ruling of the U.S. violation of the General Agreement on Tariffs and Trade, the Unlawful Internet Gambling Enforcement Act of 2006, as well as the 2009  Internet Gambling Regulation Consumer Protection and Enforcement Act, Reasonable Prudence in Regulation Act, and the Internet Gambling Regulation and Tax Enforcement Act.

 

This factsheet is a good primer on the relevant background and current legal issues facing online gambling. It was a good place to start in order to be more informed when locating more substantive sources.

 

This project looks at the legislative history surrounding gambling over the Internet. Although gambling has been a part of human culture throughout the ages, several countries have attempted either to regulate or prohibit this behavior. Traditionally gambling took place in brick-and-mortar establishments where local law had clear jurisdiction; however, since the advent of the Internet gambling has moved into the borderless territory of cyberspace. A majority of this project evaluates recent attempts within the United States to enact legislation surrounding online gambling. Namely I will outline how the government's first attempt, retroactively invoking the 1961 Wire Act, remained weak in its ability to prohibit online poker until the 2006 Unlawful Internet Gambling Enforcement Act (UIGEA) made the processing of payments for online gambling illegal. Currently there is legislation slated for September 2009 that would repeal the UIGEA and move to regulate and tax rather than prohibit online gambling.