Online Casino Spotlight

The Unlawful Internet Gambling Enforcement Act went into law at 10 a.m. ET, Friday, October  13^th, 2006. This law was paired with the Security and Accountability for Every Port Act (SAFE Port Act) and added at the last minute. The report was passed by Congress on September 30^th, 2006 and later signed by President George Bush.

Provisions

This act essentially prohibits the transfer of funds from financial institutions to illegal Internet gambling websites excluding horse racing, fantasy sports and online lotteries. Penalties include the criminalization of the owners of those sites accepting funds from bettors. Those operators that are effect by this act include:

• Those that knowingly accept wages
• Those in the business of illegal gambling
• Those sponsoring online gaming that violates federal and state laws
• Those accepting gambling funds from credit cards, EFT’s and checks
• Those in connection with a bettor

The ban became effective immediately upon approval. Ironically, the actual participation in online gambling or betting is not illegal, simply funding it is. This targets financial institutions, credit card companies and other online banking companies. Also, internet service providers were required to remove sites that displayed hyperlinks to gambling websites.

Industry responses

Many advocates against this bill argued that since poker is a game of skill, it should be excluded from this bill. Each state determined that this did not hold water. A study was conducted and decided that any game that contains 51% chance, is considered a game of luck and is therefore part of the bill. One solution is for online poker operators to present a statistical analysis based on hands played to prove this idea.

The most common response from publicly traded gambling websites is that they’ve stopped taking bets from United States customers. On the other hand, non-publicly traded websites continue to take bets from United States customers despite the law. Although they are out of the country, it is still an illegal act within the United States.

At the time, the largest internet poker company, Party Gaming Plc lost 60% of their stock worth within 24 hours of this bill being enforced. With millions of players, this showed the number of United States customers involved in some form of online gambling.

Although there are plenty of online gambling sites still available to United States customers, this act resulted in a huge loss for many publicly-traded companies. It’s likely that online gambling will always be available, but as laws become tougher, workarounds will need to be created.

Since the passage of the Unlawful Internet Gambling Enforcement Act in 2006, U.S. crackdowns on online casino operators catering to American citizens have become somewhat commonplace. That said, with two big regulation bills currently under scrutiny in Congress, many online gambling enthusiasts were hopeful that such events were a thing of the past. Hope again American gambling fans, because we’ve got some bad news.

House Resolutions 2266 and 2267 proposing the reversal of the UIGEA simultaneous to the legalization and regulation of online gambling in the U.S. were on the agenda for a House Committee meeting on April 16, but the bills were pushed off the agenda in lieu of what committee members deemed to be more pressing economy-related matters.

The UIGEA is scheduled to go into effect on June 1 of this year. The act was originally scheduled to go into effect in 2009 but the implementation was delayed to give the necessary government bodies time to review HR 2266 and HR 2267. With the new deadline rapidly approaching and no new hearing yet scheduled, many proponents of online gambling are concerned that the U.S. will return to its restrictive online gambling policies.

Until the UIGEA is implemented, the U.S. government has no official stance on online gambling, but many state and federal offices have used the preexisting Wire Act to prosecute casino operators and funds transfer service companies for sending and receiving money to and from American residents for the purpose of gambling online. In fact, on April 16 an Australian payment facilitator named Daniel Tzvetkoff was arrested in Las Vegas amidst allegations of processing almost half a billion dollars in illegal online gambling payments.

If the BetOnSports case which just wrapped in January is any indication of how the U.S. legal system plans to treat such operators, then Tzvetkoff could be in big trouble. BetOnSports founder Gary Kaplan and CEO David Carruthers received four years and three years respectively for encouraging their company to accept payments from American banks. Both men were likewise fined a combined total of more than $70 million.

What do the legislation delays and operator crackdowns mean to the common player? If you’re not American, then neither scenario will affect you. If you are an American gambler, you cannot be prosecuted for playing real-money games online, but funds that are in transit to or from an online casino could be seized by a government body. That’s what happened to hundreds of American players when the Southern District of New York seized more than $30 million last year. None of the funds have as yet been returned to the account holders.

The new American gambling resolutions have been pushed back once again, and the deadline for implementing the UIGEA is drawing ever closer. Many American online gambling advocates thought that 2010 would be the year that the U.S. finally rescinded the UIGEA and legalize regulated online gambling. Lately American gambling industry insiders, operators and fans are sounding a lot less optimistic, and now it looks like their neighbors to the north may get the job done before the U.S. government does.

The Canadian Gaming Summit is in Calgary, Canada this week and the online gambling industry’s leading officials have all gathered to talk about making Canadian online casinos a reality. While online gambling itself is not illegal in Canada – either explicitly or implicitly as it is in the U.S. – operating online gambling establishments inside the country is. Since online gambling is a $1 billion industry in Canada, even without Canadian sites, it’s easy to see how opening the door to native operators could be profitable for the country and some of its tech companies.

The Canadian government currently has a laissez faire policy toward offshore operators that does little to protect Canadian players. The Interactive Gaming Council, whose president is the lead speaker at the Summit this week, would like to see the government get more proactive about online gambling by attaching new regulations to any Canadian operating licenses. While profit potential is of course a driving factor, many Canadians believe that legalizing native operators would also offer security benefits to the large number of citizens that already play online.

Proponents of online casino licensing in Canada believe that the existing population of gambling citizens will be more likely to play at sites that they know are licensed and regulated by the Canadian government, and that the government can do more to fight the growing gambling addiction problem if it approaches it from the source.

Under the country’s current online gambling policy – or lack thereof – Canadian citizens are free to play what they like, where they like and when they like. The government has absolutely no involvement in the industry, regardless of how its citizens are affected. That means that Canadian players that choose a less than reputable casino and suffer from identity theft can expect no legal recourse via the Canadian government. It’s gamble at your own risk, but many citizens feel that it’s time for their country not only to claim its share of the revenue but to protect the growing contingent of online Canadian gamblers.

If you are an avid online gambling fan that’s concerned about the recent player account seizures, or alternately if you’re afraid to play online because you’re not sure if it’s legal, then you’ve probably spent some time pondering the title question. Is online gambling really illegal in the United States? Surprisingly, there is no easy or obvious answer.

The Unlawful Internet Gambling Enforcement Act

UIGEA was passed in 2006 as part of the SAFE Port Act. The very name of this law implies that gambling is illegal in the United States, and yet even the UIGEA is somewhat vague about the country’s stance on online gambling as a whole. That’s because the UIGEA only specifically regulates American financial institutions’ involvement with online gambling; it does not address player limitations.

To date, no American players have been arrested for gambling online. In fact, most U.S. poker pros are open about how much money they earn playing online poker. The catch is that any American player caught transferring online gaming funds through their bank account could lose that money permanently to the U.S. government (and even some states).

Currently there are several bills circulating through the upper levels of the U.S. government that aim to regulate and legalize online gambling, but even as they are being considered other departments continue to seize online gambling funds. Oddly enough, while some officials work hard to discourage participation at online casinos and poker rooms, other forms of online gambling like off-track horse race betting are patently legal. Likewise it is legal to place bets via online sportsbooks based out of some states.

Further Online Gambling Clarification

There is currently no legislation that prohibits Americans from playing real-money casino games online. What is illegal is transferring online gambling funds through American banks. Because the United States has legally pursued not only the banks that have ignored these laws but the online casinos, sportsbooks and poker rooms too many gambling sites no longer offer their services to American players. That said, many other casinos target their sites to an American crowd.

It’s a confused topic that many gambling industry insiders believe may be solved within the year. In fact, late in 2009 the implementation of the UIGEA was pushed back an additional six months while Congress considers the pros and cons of legalizing the practice of online gambling instead of banning it.

In the late 1990s, online gambling exploded onto the scene, attracting players from around the world.  Unfortunately, these glamorous virtual casinos also attracted individuals who should not be gambling, kids especially. 2006 marked the year the United States made its attempt to ban online gambling, passing the Unlawful Internet Gambling Enforcement Act that essentially barred casino operators from doing business with the financial institutions that process transactions for American players.  Soon thereafter, several of the leading online casino operators and their software providers left the market by refusing to service U.S. customers.  Be that as it may, online gambling still exists and the tech savvy kids of today can find their way around preventative measures in order to participate.

Regardless of the UIGEA and the legalities surrounding the industry, online gambling is an issue parents need to pay attention to.  Due to the prevalence of the internet and computing in general, gambling online is something that literally done for hours at a time in secrecy.  It can deliver a pure rush of adrenaline to anyone kid who plays, especially when considering that they are free of the interruptions that could occur when trying to gamble offline.  Sadly, many kids have learned the hard way that online gambling is a fast way to part with money they really cannot afford to lose.  Underage gambling can lead to a wide range of problems in the future and put a tremendous strain on the affected family.

Preventive Tips

If you want to keep your children protected from online gambling, take note of the following:

Remind them that gambling on or offline is illegal for anyone under the age of 18.  This is the case in all 50 states even before the UIGEA was enacted in 2006.

Explain to your kids how internet casinos are in the business to make money, emphasizing that they stand to lose far more than they win.  There are actually quite a few kids as well as adults who still do not realize this.

Let your kids know that by acquiring gambling dept, they could be hindering their ability in the future to go to college or even get a loan for the car they always wanted.  Even as an adult, gambling debt can end up damaging your credit rating.

Keep a close watch on your credit card bills.  Players typically use credit cards to wager online and if an anxious kid doesn’t have their own, yours could be the next best alternative.

Lastly, if you are truly concerned about your kids gambling online, consider installing an internet filtering program.  When configured properly, this type of software will prevent them from gaining access to online gambling sites.

Conclusion

It is relatively easy for kids to find their way to an online gambling site these days.  However, this act is illegal, which is why online casinos do not accept memberships or facilitate transactions for minors.  The reputable gambling operators take all the necessary measures to ensure kids are not participating on their sites.  As a concerned parent, it up to you to play your role and make sure these efforts are not in vein.

The long awaited regulations of the Unlawful Internet Gambling Enforcement Act have been postponed for six months from December 1, 2009.  Joe Brennan, Chairman of Interactive Media Entertainment and Gaming Association, informed the online gambling industry after the Federal Reserve and U.S. Treasury Department decided to delay the hearings.

The news came just a week before the hearing that was scheduled to be held by the House Financial Services Committee concerning two online gambling bills presented by Massachusetts Democrat Representative Barney Frank.  These bills could change the entire landscape of the online gambling industry, particularly the one that aims to undo the UIGEA entirely.  The UIGEA was enacted in 2006 after the industry was somehow connected to an unrelated port security measure spearheaded by Senate Majority Leader and Tennessee Republican Bill Frist.  Unfortunately for U.S. players, the SAFE Port Security Act was passed unanimously in the Senate.  With everything put on hold until next year, the fate of Franks bills is up in the air.

Regarding the hearing, which was to be held Thursday December 3 in Room 2128 of the Rayburn House Office Building, Michael Waxman, a spokesman for Safe and Secure Internet Gambling Initiative, reported to Poker News Daily that Barney Frank is demonstrating his commitment to changing the government’s perception on internet gambling.  He mentioned how the Chairman is looking to replace the failed attempts at prohibition with a viable regulatory framework that protects the consumer.  Waxman noted that Congressman Frank’s dedication is further indicated by strategically scheduling the hearing and approaching it on the heals of a push for the reformation of the U.S. financial industry, which is what the committee has been focusing on exclusively over the past six months.

As it stands now, the six-month delay will take online gambling regulation to June 1, 2010, just before election season rolls around next year.  Although pressing issues such as the slumped economy and healthcare have understandably hogged the spotlight since more than a year ago, online gambling just may have its day to shine in the sun.

When breaking the news, Brennan shared his thoughts by saying how encouraging it is to see that things are moving in the right direction, yet still unfortunate that it took this long. He also mentioned that hopefully one of Frank’s bill, which already has 63 co-sponsors, can at least be heard in the next months.

Neither Federal Reserve Chairman Ben Bernanke nor U.S. Treasury Secretary Timothy Geithner were available for an official comment on the delay at press time.  The PPA (Poker Players Alliance), National Thoroughbred Racing Association, the American Track Operations Association and members of the Kentucky Congressional delegation all filed petitions to the two government officials in letter asking that regulation of the UIGEA be instated in one year.  Alabama Republican Congressman Spencer Bachus and Arizona Republican Senator Jon Kyl asked Bernanke and Geithner to uphold the original December 1 compliance deadline but it was to no avail.

The mounting cards are starting to reveal that California could be the first state in the nation to take advantage of fully regulated and legalized internet gambling.  It has recently been reported that a new draft bill is floating around with intentions of allowing online poker within confinement of state borders.  Under the direction of Lloyd Levine, the state had previously explored whether it could legalize the act of wagering poker online due to the presence of the Unlawful Internet Gambling Enforcement Act.  With a draft bill officially known as the California Online Poker Enforcement Compliance and Consumer Protection Act in circulation, it looks as if the state is now moving forward to take the steps actually needed to legalize online poker.

The first part of the new draft bill dates back to January 15, 2009 and presents findings on the issue of online poker.  It explains how U.S. players spent billions of dollars in 2008, emphasizing that instead of furnishing the local economy, the money went to offshore operators in other countries.  The bill also states that it is in the best interest of California residents to license and regulate online poker sites, proposing a licensing and regulatory structure that would permit licensed and established operators to legally run these government-regulated operations.  California is currently licensing and regulating live poker games played within the state.  Unfortunately, it lacks the licensing system, regulatory structure and law enforcement mechanisms need to protect the millions of state residents who play for money online everyday.

Ultimately, California has the belief that online poker sites licensed in the state could benefit by offering the same types of games allowed in the land-based rooms.  They also believe that players would have better protection in licensed and regulated environments.  According to the draft bill, operators can only obtain intrastate online poker sites if they are a current gaming establishment licensed by the state and its tribes with gaming interest.  It has been reported that both the Bureau of Gambling Control and the Gambling Control Commission, both of which are divisions within the U.S. Department of Justice, will be responsible for devising a structure to ensure that licensing and regulation of intrastate poker wagering remains in line with the UIGEA.

The strength of this draft bill is great news for California gamblers, but there is still a lot of work that must be done.  There are numerous factors that need to be considering in order to ensure that both players and licensed establishments are truly located within California boundaries.  The mere involvement of the internet could make this a very steep hill to climb.  In addition, there must also be efficient guidelines in place to address issues such as compulsive and problem gambling, participation from minors and law enforcement to monitor the industry from within the state.  California seems determined to work out the kinks of internet gambling regulation so if they can make it work, this could mean positive change for the entire country.

The state of Nevada is the home of beautiful desert terrain, brothels and most notably, Las Vegas, now referred to by many as Sin City.  It is no secret that Nevada has become synonymous with gambling over the years.  With so many casinos and gambling establishments in the area, the prevalence of online gambling has sparked major competition on a state wide level.  And while you could say there is really no point in playing from your computer when you could easily venture to vibrant venues offering free alcohol and casino games galore, online gambling has managed to make its way into the homes of thousands of Nevada residents.  The more than one hundred sportsbooks and casinos may not like it but up to this point, they, like much of the rest of the world, have been powerless to stop it.  However, there are a few reasons why online gambling has still yet to explode as fast as eager players in Nevada would like.

Problems with Regulation

You might be surprised at the support internet gambling has garnered in recent times.  Several local governments are taking a closer look at existing laws while even some officials on the federal level are openly exploring ways to effectively regulate the industry.  In the state of Nevada, regulation and full legalization all rests on the shoulders of the Gaming Control Board and Gaming Commission, the two entities that would be responsible for adopting and enforcing the new provisions.  Unfortunately, there are currently three major roadblocks within the existing state legislation that might cause problems.

1.)  The first hurdle is the United States Department of Justice, an agency that would need to give Nevada regulators the green light and also one that is adamantly against online gambling.

2.) Second and very important, regulators would have to ensure virtual gambling technology that provides a reasonable level of protection to prevent minors from participating or stop online gambling in locations where the act is illegal.

3. Finally, regulators would have to make sure that internet gambling is consistent with the state’s public policy of maintaining the stability and success of Nevada gaming.  This is perhaps the biggest concern of all.

In 2001, a Nevada law was passed that authorized the state to at least explore the possibility of online gambling regulation. Now however, it looks as if legislators are holding back and observing the action of their neighbors.

America’s Online Gambling Capital?

California, the most popular state in the country and home to one of the world’s biggest regional economies, is currently lobbying strong for the regulation of online gambling.   The state is trying to leverage a sizable loophole in the UIGEA that will allow internet wagering to be legislated and fully regulated.  Due to its aggressiveness, many experts are predicting that California will eventually hold the title of America’s online gambling capital while Nevada sits back and watches.  There is a lot of tax revenue to be generated so if California succeeds, others will likely follow suit.

Over the last several weeks, the US government has been aggressively pursuing bank accounts that have been allegedly used for illegal online gambling. The most recent seizures were made public last week in documents released by Maryland’s U.S. District Court.

Six Wachovia Bank accounts were seized in last week’s raid. The accounts belonged to Forshay Enterprises, a payment processing company. In the documents, Forshay is listed as the owner of TransActSvc.com. These raids follow nine other account seizures that were secured in Maryland in July and August. In addition to Wachovia, accounts have also been frozen at First Premier Bank, Interstate Net Bank and Bank of America.

Federal agents in Maryland have also been involved in a case with ties to Bodog.com. In 2008, charges were filed against Michael Garone and Edward Coury. The two men have allegedly been involved in money laundering with supposed ties to Bodog.

Controversial legislation being enforced

The recent seizures are tied to the Unlawful Internet Gaming Enforcement Act (UIGEA). The legislation attempted to ban internet gambling but the policy has proved to be a controversial measure since it was initiated by the Bush Administration in 2006. Despite a transition in the White House this year, the government’s recent actions in Maryland are a sign that the raids are set to continue.

The vagueness of the law is problematic for everyone involved. On the one hand, court rulings have stipulated that federal laws restricting online wagering apply only to sports betting. However, the Justice Department has taken a broader view of the legislation. In their viewpoint, all forms of online gambling are illegal.

A reform bill could be the solution

There is hope that the UIGEA can be overturned. Massachusetts congressman Barney Frank has been trying to gain support for his online gaming bill since last year. The Democrat was unable to convince a Republican-led Congress to support the legislation in 2008. With Democrats now leading Congress, the bill has a better chance of getting approved.

Frank’s Internet Gambling Regulation, Consumer Protection and Enforcement Act (H.R. 2267) would license and regulate online poker and internet gambling for US residents. While he has secured nearly 60 co-sponsors to support the bill, the legislation is a very minor issue in the political landscape at the moment. Issues related to the nation’s struggling economy and health care reform are overshadowing other bills that are being proposed in Washington. It appears doubtful that Frank’s bill will be approved by the end of this year.

There is some light at the end of the tunnel. The controversies that have arisen over the last three years have drawn enough attention to ultimately overturn the UIGEA bill. There is little doubt that online gambling will continue to grow in the next decade. Frank’s legislation would help to remove the vague nature of what is currently being enforced. While it may take a backseat to the economy for awhile, online gambling reform is on the horizon.

Supporters of online gambling suffered a crucial blow in the ongoing fight for regulation.  This past Tuesday, a U.S. appeals court in Philadelphia ruled in favor of the Unlawful Internet Gambling Enforcement Act against the iMEGA (Interactive Media Entertainment & Gaming Association) in a 3-0 decision.  According to a few legal experts following the case, the court ruling should come as no surprise.

Joe Kelley, a Buffalo State law professor, explained that whenever you contest an act of Congress, you have an uphill battle on your hands and an incredibly long shot at winning.

Of all the arguments made, the iMEGA emphasized that the UIGEA was a violation of privacy rights outlined in the Constitution.  The online gaming trade body sited two cases in which the UIGEA infringed on privacy, using Lawrence vs. Texas and Reliable Consultants Inc. vs. Earle as its examples.

However, Judge Dolores Sloviter, who had the final say on the matter, didn’t leave any assumptions in regard to the decision to dismiss the iMEGA’s claims.  She firmly stated that the organization’s dependence on the aforementioned cases were misplaced and ultimately, irrelevant.  According to Sloviter, both the Lawrence and Earle cases specifically involved state laws barring certain forms of consensual sex between adults in the privacy of the home.  In regards to the UIGEA, she noted that even in the confinements of the home, gambling does not have the same constitutional magnitude of those individual cases.

While the court rejected all attempts and arguments by iMEGA’s high powered attorneys, there is one glaring loophole in the ruling that could give online gamblers and operators a small ray of hope.  In justifying the legality of the UIGEA, the appeals court did not find anything in the legislation that makes any form of gambling in the United States illegal.  Instead, the ruling verifies that similar to the Illegal Gambling Act, the UIGEA is only in place to enforce existing gambling laws.  Because there are currently no federal laws prohibiting online gambling, it can be concluded that the act only applies to online gamblers who reside in states that have laws in place against wagering over the internet.

The court applied the “reasonable man” test, a commonly used legal method asserting that the legislation could be perfectly comprehended by an individual of normal intelligence.  It then went on to specifically apply the UIGEA to existing state legislation, in affirmation that the court’s interpretation of the act only holds prevalence in jurisdictions where online gambling has been deemed illegal by other laws.  This essentially means that other than wagering on sports events over the internet, which is prohibited on a federal level, online gambling is legal and financial transactions should be allowed to those players in states without legislation against it.

Following announcement of the ruling, Joe Brennan Jr., iMEGA chairman, voiced that the court made it clear that online gambling is unlawful in states with existing laws in place.  He also noted that there is currently only six states that have laws against online gambling, which leaves a total 44 states where it is potentially legally.  Brennan declared that this isn’t a win of any sort, but a good start.