internet gambling

Online Casino Gambling Moves Forward in New Jersey

by Michelle Minton on November 16, 2010 · 2 comments

in Deregulate to Stimulate, Economy, Nanny State, Personal Liberty

As I reported last week, though federal attempts to legalize online gambling have seen little progress in the last year, states’ efforts have shown much more promise. In particular, New Jersey State Senator Raymond J. Lesniak’s attempt to legalize online gambling in the state has made significant progress. Yesterday his bill, S490 and its companion S11, were approved by the Senate Budget and Appropriations Committee and they await a full Senate vote.

S-490 would authorize the state’s Atlantic City casinos to offer online versions of their games to New Jersey and also to international customers. The bill is meant to bridge the state’s budget gap and support the state’s flailing horse racing industry. The Interactive Media Entertainment and Gaming Association (iMEGA) estimate that New Jersey’s intrastate gambling system could raise up to $250 million in gross revenue and $55 million in taxes per year.

According to the text of the bill, the games that casinos would be allowed to offer online include:

[Roulette] Poker, roulette, baccarat, blackjack, craps, big six wheel, slot machines, minibaccarat, red dog, pai gow, and sic bo; any variations or composites of such games, provided that such variations or composites, and any above listed game or variation or composite of such game to be offered through Internet wagering,

The bill also leaves room for the commission to approve other games in the future so long as the game is found to be “compatible with the public interest and to be suitable for casino use after such appropriate test or experimental period as the commission may deem appropriate.”

While it shouldn’t have taken a budget crisis to move this forward and the state should not be subsidizing the horse racing industry, it is a step toward freedom for individuals who wish to gamble. If other states follow New Jersey’s lead and legalized Internet gambling within their borders, states could enter into agreements that allow residents to gamble online at each other’s online casinos. It isn’t perfect, but it is better than a blanket ban.

Image credit: FamilyofFun’s flickr photostream.

Legalized Internet Gambling in New Jersey?

by Michelle Minton on November 9, 2010

in Deregulate to Stimulate, Economy, Nanny State, Personal Liberty

What does it take to get governments to deregulate? You might think the answer is “a miracle” or maybe “drugs in the water,” both of which might be right. However, it seems that another way to move free-market legislation forward is economic crisis. Perhaps then it’s unsurprising that New Jersey has been really pushing the economic liberty agenda, considering they were ranked as having one of the worst fiscal situations in the nation.

Since the beginning of the Great Recession of 2008, we have seen several surprising moves to deregulate online gambling and some surprising people backing legislation because of their belief in defending individual rights, as well as their belief that legalized online gambling could be a monster revenue-raiser.

Since New Jersey has a major stake in the business of gambling, it makes sense that they have led the charge on several initiatives that would increase the ease with which bettors can lay down their dough. For example:

Former New Jersey Governor Jon Corzine supported a lawsuit initiated by New Jersey State Senator Raymond Lesniak declaring unconstitutional the federal ban on sports gambling. Current New Jersey Governor Chris Christie was a little more reluctant to throw his support in that direction.

Yesterday the New Jersey Senate’s Government, Wagering, Tourism, and Historic Preservation Committee met and considered a proposal that would legalize Internet gambling for the state. The bill was sponsored by Sen. Lesniak once again.

Under the provisions of the proposed legislation, New Jersey would receive 20% of gross gaming revenues from the online gambling sites.

According to supporters, allowing online gambling would help alleviate several issues facing the state and its struggling gaming industry. Revenue from online gambling could be used to subsidize horse racing, boost the state Treasury, and help support Atlantic City casinos. Supporters have also said that several thousand support jobs could be created through the legalization of online gambling.

As it seems to always be, the rationale behind legalization is deplorable — it will generate tons of tax revenue for the state — but the result would be an incremental step toward liberty in New Jersey.

Poker and Private Property in South Carolina

by Michelle Minton on October 20, 2010 · 1 comment

in Nanny State, Personal Liberty, Property Rights

In South Carolina, the fate of five men has hung in the balance for the last four years. They crime they have been accused of is running an illegal house of gambling from the home of one of the defendants. In actuality, the five men were playing a twice weekly, kitchen table game of poker, in which they paid an agreed upon fee (a “rake) in order to pay for drinks and snacks.

At first blush, the case seems like an inconsequential example of a backward law in a conservative state, but as it has wound through the judicial system in South Carolina it has sparked debate about landmark issues and the decisions could have reverberating implications for the rest of the country.

In 2006, the five men were arrested and convicted for illegal gambling. In 2009, however, Judge R. Markley Dennis reversed the gambling convictions and declared that the particular game the men were playing, Texas Hold ‘Em, is a game of skill and not one of chance. The men were still convicted of operating a gambling house, but the ruling was seen as a victory by poker players. In particular, online gamblers saw it as a step towards defending their favored game on the Internet (as case could be cited as precedent in future hearings on the legality of online gambling).

In South Carolina it is illegal to play a game of chance. Games of skill, however, are legal.

The state’s laws regarding gambling are out of date and incredibly vague.

The 1802 law in South Carolina regarding gambling states that any game with cards and dice is illegal. That does not just mean poker, it involves games such as Chutes and Ladders, Yahtzee, and even Go Fish.

But interpretation of the the law has been left largely in the hands of law enforcement. This most recent case has lawmakers and legal scholars to question the wisdom of leaving the topic so ill defined. Earlier this week Senior Assistant Attorney General Sonny Jones said that low-stakes, friendly games of cards are not illegal under South Carolina law:

“It is our position that this statute does not encompass the Friday night poker game or the penny ante” get-together…Occasional games of bridge are also safe.”

Assistant Attorney General Havird Jones said it is up to law enforcement to decide if a poker game has drifted into an illegal house of gaming.

He said common sense, purpose and legal language should help police determine what is at hand.

While the statement seems promising for the right to play poker, leaving the definition vague and for cops to determine on the seem leaves the legality of individual behavior within his or her own home that much more opaque. It does, however, get to the heart of the issue under debate with this case. When does one’s private residence become “public” because of the activities they choose to engage in within the privacy of their own home?

Henry McMaster, an attorney general in the state, is challenging the Charleston judge’s ruling that Texas Hold ‘Em is a game skill. If he is successful, they may not need to address the limitation of private property rights in the state of South Carolina. While a decision is not likely to be issued for several months, South Carolinians — as well as poker players — ought to watch the proceedings carefully, as they will have broad implications for both gaming and property rights on residents in the state and the rest of the country.

A Republican Sweep Might Not Stop Online Gambling

by Michelle Minton on October 18, 2010

in Nanny State, Personal Liberty, Tech & Telecom

Many analysts and pollsters are predicting a Republican sweep of the coming midterm elections in the House. While Rep. Barney Frank (D-Mass.) seems untouchable, there are no guarantees and in fact, some claim that his challenger, 35-year-old Marine Corps veteran Sean Bielat, is just a few points behind Frank in polling data.

The end of Congressman Barney Frank would very likely be the end of his bill, HR 2267, the Internet Gambling Regulation, Consumer Protection, and Enforcement Act, which he has championed (through several incarnations and sessions).

While some advocates of decriminalized Internet gambling fear that the loss of its main champion will kill any possibility of legalization in the next session, their fears may not be warranted.

Last week Chris Krueger,  political strategy analyst with Concept Capital, appeared on CNBC and had this to say about the odds of decriminalizing Net gambling in the wake of a Republican sweep (video available here):

Keep in mind with Internet gaming there’s this pretty decent shot I think that in a lame duck session assuming the democrats lose both the house and senate Barney Frank this could really be his last chance he’s the primary sponsor of this bill. The trump card for Internet gaming for lack of a better word is that it raises 42 billion dollars over 10 years. That’s a big offset that you can tack onto an expensive tax extenders bill or even some sort of a transportation bill…

So in the lame duck with a Republican sweep the odds would go up that an Internet gaming ban lift could get through. Next year though without Barney Frank in his position of leadership I think it faces some long odds. But again it raises 42 billion dollars over 10 years and you can’t discount that in a congress that’s really going to be starved for revenue raisers.

So, while legalization of Internet gambling may still have a shot in a Republican-controlled House and Senate, I doubt that the version we would see would be any more free market than Barney Frank’s current bill. Most likely, it will look something like decriminalized alcohol sales after prohibition with the government retaining a death-grip on the neck of the industry for as long as it can.

Not Wright for Internet Gambling

by Michelle Minton on September 28, 2010 · 1 comment

in Legal, Nanny State, Personal Liberty

Some Net gamblers are lamenting the indictment of California State Senator Roderick Wright (D-Inglewood) who was indicted by a grand jury for alleged voter fraud. Wright is seen as a proponent of online gambling in California because of the bill he introduced earlier this year which would legalize online gambling in a limited form in California. If convicted of voter fraud, the chances of his bill passing are slim to none. Perhaps online gamblers in California shouldn’t be too upset.

As I wrote in June, Wright’s plans for bringing Internet gambling to California aren’t exactly ideal…to put it mildly. Actually, what I said was that Wright’s SB 1485, while apparently legalizing some online gambling, would actually have the effect of criminalizing all forms of Internet gambling except for the three state-authorized online casinos.

Sen. Rod Wright introduced SB 1485, a bill that supposedly legalizes Internet gambling for residents. What it would actually do is legalize gambling only at the three online platforms and criminalize Internet poker played anywhere else online. Currently, there are no federal laws that make online poker games a crime and the DOJ has never prosecuted individual players associated with the activity. California makes 11 names games illegal to play online, but poker is not one of them. Thus, in CA, poker is not consider an unlawful Internet gambling activity at the moment. But if a law is passed that sanctions only three online providers, chosen by the state, as SB 1485 does, then playing poker online anywhere else will be a crime. The state’s DOJ will be allowed to arrest any individual caught playing poker online at a non-sanctioned site.

Currently, California law makes 11 named games illegal to play online or any game where the operator takes a rake (a cut of the money won in each hand). Thus, online poker in the state is legal at the moment.

While some might argue that legalizing online gambling in this less than desirable form is still a step in the right direction, but is it? If Net gambling was banned throughout the United States, including California, then perhaps it would be a step forward. But as U.S. law and California law currently exist, Internet gambling is not illegal. There are currently 11 named games illegal online in California; poker is not one of those named games, thus it is technically legal in the state.

The supposed purpose of Wright’s bill is bring online gambling out of the black market, earn tax revenue for the state, and to protect consumers. While amendments will be considered, as it is now — restricted to the max — the bill won’t accomplish any of its goals.

1. It won’t add protections for consumers:

The text of the bill itself notes that millions of Californians gamble online for money. Criminalizing all but three sites will not stop players from visiting the platforms they know and like. Those online gamblers will have no protections because they will be breaking California law.

2. It pushes online gambling into the shadows:

As mentioned above, players will continue to frequent unsanctioned gambling sites, only they’ll now be criminals. If Senator Wright and any other politician talking about Internet gambling really wants to protect players, they should let all sites be legal — allowing players recourse if they’re ripped off. If, however, the state wishes to put its seal of approval on any of the platforms, that might make some new gamblers feel more comfortable about playing at those designated sites.

Whether Wright is found guilty or not, his proposal ought to be mucked.

Such limited legalization is an all around bad bet.

California poker players: 1 – Free market opponents: 0

by Michelle Minton on July 1, 2010 · 2 comments

in Culture, Legal, Nanny State, Personal Liberty, Privacy, Tech & Telecom, Trade

As I wrote yesterday, California was on the verge of passing a bill that would have allowed residents to play poker online at one of three state-authorized sites, but that would have also have made criminals out of residents who chose to play at any other site online.
The bill was withdrawn by Sen. Wright, supposedly due to pressure from pressure on all sides:

…with the Morongo Band of Mission Indians, the California card rooms that initially endorsed online poker, and three of California’s political lobbying associations for tribes pitted against the legislation — as well as anti-gambling groups and the visible absence of key players — the legislation as written was a long shot.

I'm going to get as much mileage off of this picture as I can

The Poker Players Alliance (PPA) also opposed the bill due to the criminalization of playing online anywhere but the three hubs chosen by the California department of Justice, in addition to the effect it would have on competition:

“[This bill] will not attract the best qualified and most experienced hub operators… the measure imposes a variety of operational financial barriers and preferences that will discourage or bar non-traditional telecommunications, software, and out-of-state gaming companies from applying as hub operators or subcontractors…Rather than leveraging proven Internet gaming models with recognizable brands and sizable player bases, this bill sets out to ‘reinvent the wheel’ and assumes that California players will readily migrate to unfamiliar new sites.”

The PPA supports federal legislation that overturn the UIGEA and legislation that would create a new framework to license, regulate, and tax Internet gambling.

In any case, the most beneficial action to take (apart from abolishing all laws regulating gambling and involuntary taxes) would be to overturn UIGEA and have online casinos and players fall under existing tax law.

CA to criminalize Internet poker?

by Michelle Minton on June 29, 2010 · 9 comments

in Nanny State, Odds & Ends, Personal Liberty

That is, unless you play at one of the three state-sanctioned “hubs”.

Much like other proposals to “legalize” online poker and other Internet gambling activities, proposals to legalize on a limited basis such as the proposed SB 1485 in California, seem like a step forward to online poker players who, for many years, have wagered money on the Internet in a legal gray area.  But sometimes it is better to be uncertain of your legal standing than to know that an activity you enjoy has become a criminal offense.

After the UIGEA was passed in 2006, as I have written about in the past, it was thought that online gambling would soon be officially criminalized. But when the final rule came down and the implementation date arrived (the day when all banks and credit processing companies needed to abide by the new rules), poker players realized that not much had changed in their experience of online play.

However, during the interim between UIGEA’s passage and the implementation of it’s watered-down version, a few legislators initiated bills to legalize certain online gambling activities, both federally and locally in their home states.

sen-rod-wright

Making news these days is California’s latest attempt, initiated by Sen. Rod Wright introduced SB 1485, a bill that supposedly legalizes Internet gambling for residents. What it would actually do is legalize gambling only at the three online platforms and criminalize Internet poker played anywhere else online. Currently, there are no federal laws that make online poker games a crime and the DOJ has never prosecuted individual players associated with the activity. California makes 11 names games illegal to play online, but poker is not one of them. Thus, in CA, poker is not consider an unlawful Internet gambling activity at the moment. But if a law is passed that sanctions only three online providers, chosen by the state, as SB 1485 does, then playing poker online anywhere else will be a crime. The state’s DOJ will be allowed to arrest any individual caught playing poker online at a non-sanctioned site.

Currently, California law makes 11 named games illegal to play online or any game where the operator takes a rake (a cut of the money won in each hand). Thus, online poker in the state is legal at the moment.

This type of restricted legalization is, not only offensive to defenders of individual rights, open markets, or personal privacy, but also it just will not work or do what Wright and proponents hope it will.

1. First, it will not add protections for consumers because gamblers will continue to operate at non-sanctioned sites:

The text of the proposed regulations recognize that “millions of Californians” gamble at online casinos for money. Once there are a handful of state-sanctioned casinos, Californians will continue to play at the online sites that they are familiar with or that court their business.

2. It pushes gambling further into the shadows

If the Senator is concerned about these millions of gambling Californians, he should be aware that criminalizing their chosen activity will not accomplish this goal. Rather, it simply pushes them further into the shadows. Any player who is defrauded or robbed in an online game might be too afraid to speak with authorities, lest he be charged with the misdemeanor offense of playing a game online.

3. There is no way to prevent people from continuing to gamble at the online sites they want to.

Much like UIGEA before it, this type of limited access is impossible without some other major intrusion on personal privacy (such as monitoring a person’s computer activity). Online casinos in other states or other countries will continue to serve Californians.

4. The flow of money into the state’s coffers will not increase.

Sure, criminalizing an activity adults engage in freely and that violates no other person’s rights is massive breach of regulatory authority, but it won’t even increase tax revenue for California. The gamblers who play online now will continue to play unlawfully, and have greater incentive not to report income earned online. Add in the cost of enforcement and licensing the three sanctioned hubs and the final tally may end up costing Californians more money than it brings in.

With the state’s massive deficit, the promise of millions in new revenue might convince others that this is a good idea. My advice, as it often is when it comes to the Golden State, is that gamblers or anyone else who likes to make decisions about their own life, might consider moving to Nevada.

A hearing of the proposal is scheduled today at 3:30pm PST

Choosing individual liberty is no gamble.

by Michelle Minton on June 16, 2010

in Legal, Nanny State, Odds & Ends, Personal Liberty, Tech & Telecom

On June 1st the Oregonian published an opinion piece by the editorial staff, titled “Legalization would be a gamble, too”

The basis for the editorial board’s logic as well as some of the facts cited in the article are questionable, if not downright incorrect.  The main argument the editors make is that legality of an activity should be based, not on the constitution, free will of man, or other such concepts, but rather “public” perception of the activity; if the general public finds distasteful an activity that a minority enjoys it is perfectly fine to prohibit the activity.

We still aren’t convinced that what this country needs is more legalized gambling…There are still too many unanswered questions and unknown social impacts with legalizing online betting.

Basing the law on such a tenuous foundation is only a good bet if you plan to always be in the majority, otherwise the editors at the Oregonian might one day find their favorite activities have been prohibited, say for example, off-the cuff opinion articles that haven’t been fact-checked?

According to the article:

Like alcohol during Prohibition, Internet gambling is rampant even though it is banned in the United States. Thousands of online gambling sites are available to anyone anywhere with Internet access. All of them are based in other countries outside the reach of U.S. laws and law enforcement.

Internet gambling has never been banned in the US. Though no law makes it legal, no federal law criminalizes the activity. The state of Oregon does have laws governing Internet gambling that say, “Anyone engaged in Internet gambling may not knowingly accept a credit payment from another engaged in “unlawful gambling using the Internet,” but that makes the law dependent on a definition for what constitutes unlawful gambling. Since Oregon has no other laws regulating online gambling the law is not yet in effect.

Another error committed by the article is the description of “unregulated Internet gambling”

…legalizing online gambling could provide billions of federal tax dollars every year and serve to clean up some of the dark, unregulated alleyways of Internet gambling, where identity theft, sleazy financial practices and underage players are common.

While it’s true that the US hasn’t regulated the activity, most Internet casinos are regulated by the country they’re based in and the rare instances of crime occurred in regulated casinos. Laws won’t stop criminals, but criminalizing players creates victims without recourse.

A new federal law aimed at quashing Internet gambling by requiring banks to block suspected online gaming transactions took effect Tuesday. The restrictions may have some short-term impact on the Internet gambling industry, but players will get credit cards from overseas and find other ways around the law.

But if it isn’t possible to stamp out or even slow Internet gambling, does that mean the federal government should license it, tax it and profit from it?

oregonian-editorial-board1The issues isn’t about money. It is about whether or not it’s government’s role to criminalize an activity adults willingly choose to participate in and the answer is a resounding: No.

Yes, millions of Americans already are gambling on the Internet. But does anyone know whether legalization of the most accessible, convenient gambling opportunity ever invented — available with a few clicks of a mouse wherever there’s Internet access — would greatly increase gambling activity and problems associated with gambling?

So, if this is clearly an activity that “millions of Americans” want to engage in, what gives the state government, the feds, or the editors at the Oregonian the right to prevent consenting adults from playing games online with their own money?

While we don’t know the exact repercussions of explicitly legalizing online gambling in the US, we do know that sacrificing our liberty is a much riskier bet.

Note: After writing a letter to the Oregonian expressing my displeasure with the message of the article and misrepresentation of online gambling, I received an email from the public access editor, explaining that “…except in unusual instances, we reserve our letters page for local correspondence, and your letter would not qualify”

States fold/double down on gambling in light of new regs

by Michelle Minton on June 3, 2010

in Odds & Ends

Many in the Internet gambling industry are skeptical about the impact that the new gambling laws, which went into full effect this Tuesday, will have on the industry. However, the compliance deadline seems to have prompted many states into taking major leaps on the issue of Internet gambling; some good, some bad, most mixed.

Internet gambling is still not illegal. It is perhaps the most ubiquitous myth about online play, that it was ever illegal or that the new UIGEA regulations make online gambling a crime. As I explained in my research paper The Truth About Online Gambling, Online gambling is not a criminal offense. That is, unless states explicitly make it a criminal offense. So far, only one state has gone to that extreme: Washington.

Washington State:

Last week, the Poker Players Alliance staged a rally outside of the Washington State Supreme Court which was hearing arguments to strike down a state law that makes Internet poker a class c felony. That could get a player up to five years behind bars and a $10,000 fine. Lee Rousso, the Poker Players Alliance Washington director filed a suit declaring the law unconstitutional under the commerce clause.

“This law is not about the legislature protecting the state’s citizens, but rather about protecting special interests and tribal casinos from competition.” The state has legal card rooms and casinos.” said PPA Chairman Alfonse D’Amato.

In a random poll of 400 Washington state voters, they found 79% oppose the law making criminals of online poker players. It could take 6-9 months for the court to issue a ruling.

Massachusetts:

Lawmakers in Massachusetts made an attempt in April to criminalize online poker in a bill that, not surprisingly, simultaneously licensed 2 new casinos in the state. Luckily the language in the bill criminalizing online poker was taken out.

California:

Meanwhile, California lawmakers voted this week for a bill that legalizes online gambling in a very limited parameters, by allowing the state DOJ to award three licenses to California operators for 5 years each.

The effects of UIGEA have yet to be seen, but it is certainly forcing discussion of the issue. As always, players should be very careful not to jump at the first prospect of legalization on such a limited basis. Like the ugly girl at the prom who’ll dance with the first guy who asks, overly-eager online gamblers might end up getting their toes stepped on.

Internet Gambling Regs in effect…now.

by Michelle Minton on June 1, 2010

in Odds & Ends

Today is the day that US credit processing companies must begin complying with the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA). After regulatory wrangling, protests, and delays, the bill that was sneaked onto the books in the last hours (literally) of the Bush administration mandates that financial institutions have written rules in place to guarantee that they are not processing funds from “unlawful” Internet gambling activities. According to the language of the final rule for implementing the regulations, institutions must implement “policies and procedures that the Agencies deem to be reasonably designed to identify and block unlawful Internet gambling transactions.”

According to Professor I. Nelson Rose, noted legal scholar, the final rules practically nullified the original Act’s effect as a de facto ban on Internet wagering.

“The federal agencies still put the burden on the financial institutions to do “due diligence.” But what this means is banks have to do the same amount of “know your client” work with new commercial customers that they now do to prevent money laundering: basically ask the company owners what their business is and do a little checking to confirm they are telling the truth. If the new commercial customer proves it is not in the gambling business, there’s nothing more to do. If it is in the gambling business, the bank then has to ask it for its state license. The new rule says that getting a license is enough, because it is up to the states to regulate the Internet gambling operation of their licensees.”

Despite the apparent ease with which credit processing companies can circumvent the laws, some have already taken steps to comply with UIGEA by blocking all Internet gambling funds, presumably the intended desire of UIGEA’s creators. As a result, the gambling message boards are a’buzz, discussing alternative methods for depositing funds with online casino operators.

The ways for Internet gamblers to continue playing for real money remain numerous. The new laws do not apply to paper checks, wire transfers, foreign bank credit cards, or overseas payment processors. There are also new methods cropping up, perhaps in response to the new challenges online gamblers face. As I have discussed in the past, some of those methods carry risks. It is likely that, if UIGEA is not overturned, as more companies find ways around the new regulations those who have blocked transactions will change their minds.

Even if gamblers and banks can easily bypass the rules, the point remains that they shouldn’t have to feel like criminals while engaging in voluntary activities in the privacy of their own homes.

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