Online Casino Gambling

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.

The regulation of online gambling has been one of the most controversial topics of recent times.  Since the inception of the industry in the late 1990s, jurisdictions, lawmakers, organizations and individuals all over the world have debated whether it should be completely legal and regulated or banned entirely.  The United States is arguably the biggest center of controversy due to the UIGEA (Unlawful Internet Gambling Enforcement Act) enacted by President Bush and a republican-led U.S. Congress.  Although the UIGEA does not specifically forbid American players from gambling online, it does speak highly of the disdain many U.S. politicians have for the industry.  Ironically, even with this legislation in place, research shows that well over 50% of online gamblers worldwide reside in the United States.

UIGEA Reception

The initial reaction to the UIGEA can be compared to that of Prohibition back in the in the early 1920s.  It was similar in a sense that several publicly regulated offshore online casino operators abandoned the American market in fear of punishment from lawmakers.  However, the drastic market shift that left players with fewer gaming options simply directed them to privately owned firms who were not afraid to accept wagers from U.S. citizens.  For this reason, critics of the bill have frequently remarked that the UIGEA really does nothing to stop internet gambling for the simple fact that players can seemingly always find a loophole that allows them to play somewhere.  Jurisdictions such as Antigua and Barbuda have labeled the UIGEA and other legal actions taken by the United States as discrimination against online casino operators and a breach of international free trade.  Battles have already been won against the U.S. and several more countries are planning to file complaints because it continuously fails to make efforts to comply with WTO’s (World Trade Organization’s) filing back in 2005.

The United Kingdom, Belgium, Italy  and many other nations have decided to regulate and tax the online gambling industry instead of outlaw it completely.  In fact, several countries, including Germany, Sweden, Finland, Denmark and The Netherlands were warned back in 2006 by the European Commission for allowing local lotteries to offer sports betting, but preventing other operators from doing so.  Charlie McCreevy, EU Financial Services Commissioner, recently hinted that more nations could be added to the growing list of juristidtions currently pending legal ramifications for refusing to open their markets to online gambling.

The Battle Continues

Recent studies conducted by the British government reveal that there are nearly one million avid online gamblers residing in the country.  These players account for an estimated one-third of Europe’s approximate number of 3.5 million people who gamble online.  When combined with nearly 20 million online gamblers in the U.S., you have a rather large group of global supporters that help to power the billion dollar per year industry that has become the internet gambling market.  Players everywhere want a piece of the action so until viable agreements are reached, online gambling regulation will likely be a controversial matter for some time to come.