unlawful internet gambling funding prohibition act

Despite D.C. Legalization of Online Poker, Players Leave USA

by Michelle Minton on August 30, 2011

in Agenda for Congress, Deregulate to Stimulate, Nanny State, Personal Liberty

Post image for Despite D.C. Legalization of Online Poker, Players Leave USA

It is perhaps a little ironic that the most vocal opponents of online poker will soon be the only people in the USA who can legally play online poker. The District of Columbia is moving forward with its plans to run the pilot program, which will allow 20 to 30 places around D.C. to offer online poker within the next week or so, despite the claims of corruption during the initial phases when the plans were pushed through the legislative process. If all goes well, the virtual poker rooms will open their doors to anyone (of age) in the District by the end of the year.

The planned system in D.C. has a lot of problems from a free market standpoint. For one, a monopoly system of government run poker room eliminates competition and the benefits that come from that. In the pre-UIGEA, pre-Black Friday era of online poker, players would quickly realize if a poker website had unfair odds, shady practices, or something as simple as bad customer service and they could and did move on to other poker rooms on the Internet. There would not be such an option for D.C. online gamblers.

Even with its problems, the D.C. online poker system would set the District on a path toward legalized online gambling. Unfortunately for poker players in the rest of the United States, they are left with a choice of either driving to the brick-and-mortar casino or moving to another country.

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New Bill Would Tax Online Gambling

by Michelle Minton on June 21, 2011

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

Yet another online gambling bill to add to the pile, Rep. Jim McDermott introduced the igaming taxation and regulation bill that he unsuccessfully introduced in 2009. While McDermott’s bill wouldn’t legalize online gambling, it is companion legislation to the bill HR 1174 introduced earlier this year by Reps. John Campbell and Barney Frank, which would legalize and regulate online wagering.

This time around, The Internet Gambling Regulation and Tax Enforcement Act, (HR 2230), which was introduced today by Reps. Jim McDermott, John Campbell, and Barney Frank, would require gambling platforms to report to the federal government on players’ financial activities and withhold a 2 percent federal tax on deposits received each month. The bill gives states the option to tax the sites an additional 6 percent on deposits. Both of these taxes would be paid by the websites and would not be paid by players.

A report from H2 Gambling Capital, released after McDermott introduced his first online gambling tax bill, looked at online wagering over a five-year period. According to the report, legalized online gambling could create 32,000 jobs, $94 billion in economic activity, and an additional $57.5 billion in tax revenue.

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More States, Politicians Jump on the Internet Gambling Bandwagon

by Michelle Minton on June 13, 2011 · 5 comments

in Nanny State, Personal Liberty

The oncoming legalization of online poker charges ahead this week with more lawmakers “seeing the light” or at least the potential revenue dollars that online gambling could add to state coffers. News broke Friday that Nevada’s Governor Brian Sandoval signed a bill that would pave the way for licensing and regulation of online gambling in the state. The bill gives the Nevada Gaming Commission (the agency that regulates all gambling in the state) until this January to develop rules that would govern online gambling activities. However, those rules would not be implemented until the federal government passes some kind of legislation that officially legalizes online gambling. A graph of the odds of that happening would probably look something like a rollercoaster track. Yet, the events of the last three months make it appear as though legalization in some form or another is more likely than ever.

This past March long-time Internet gaming advocate Democrat Rep. Barney Frank teamed up with the newly minted Republican Rep. John Campbell of California and Republican Rep. Peter King of New York to introduce a new bill to legalize, regulate, and tax online gambling. Then on April 15, the Department of Justice shut down the most popular online poker sites serving Americans. Black Friday, as that day became known, was quickly followed by “Blue Monday” with federal prosecutors in Baltimore shutting down still more sites. The DOJ smack-down was preceded by several states taking independent action to legalize intrastate online gambling within their borders (including the District of Columbia, which did pass a budget measure legalizing the activity in the District).

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Online Poker Showdown: States Step Over Feds to Legalize iGaming

by Michelle Minton on May 20, 2011

in Nanny State, Personal Liberty

In the wake of a federal clamp-down on Internet poker, states are forging ahead with their efforts to explicitly legalize, regulate, and tax online poker. On Thursday, the Nevada state assembly unanimously approved legislation that would license and regulate online poker if and when the federal government explicitly legalizes online poker.

This stripped-down, caveat-laden version of the bill comes in the wake of the DOJ April 15 shutdown of prominent online poker rooms. Prior to “Black Friday,” several bills had been under consideration in the Nevada state assembly to legalize online poker, regardless of federal action.

The original bill, from which the current proposal was derived, would have given the Nevada Gaming Commission (NGC) the authority to develop and implement licensing procedures for interstate and intrastate gambling. Notably, the original proposal stated that the NGC could not deny operators simply because they had been operating in the states prior to explicit legalization — this is different from recent federal proposals which would have blocked foreign operators for at least two years or permanently if it is determined that they broke federal law by offering unlawful online gambling to Americans after the implementation of UIGEA.

Not surprisingly, PokerStars, one of the off-shore poker sites that was shutdown by the DOJ on Black Friday and would likely be barred from the U.S. under last year’s federal proposal to legalize online gambling. Reportedly, PokerStars contributed around $272,000 to political campaigns in Nevada, but most of the funds have been returned.

The approved bill calls for the NGC to develop rules for licensing and taxing by January 2012 which will be implemented only if the federal government passes legislation approving online poker.  This bill also requires that the online poker websites operate in a partnership with an existing gambling license holder or an affiliate that has been in business for at least five years.

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Fighting for its Life: Absolute Poker Makes a Deal with Feds

by Michelle Minton on May 17, 2011 · 1 comment

in International, Nanny State, Personal Liberty, Precaution & Risk, Trade

In 2002, four fraternity brothers from the University of Montana founded an online gambling platform that became one of the most popular online casinos for Americans. However, after years of scandal, the Black Friday DOJ shutdown, and a PR nightmare lasting for nearly four years, it appears as though the company is officially down for the count, taking millions of dollars in player money and hundreds of jobs with it. The one glimmer of hope for spectators was that, unlike the other poker companies facing pressure from U.S. authorities, Ultimate Bet/Absolute Poker was fighting back against the DOJ.

Absolute Poker, which merged with Ultimate Bet (UB), was still in the process of rebuilding its reputation after 2007 when the company was involved in what has been described as the largest cheating scandal in online poker history. One of the original investors for the company that developed the sites software, Russ Hamilton who had the developers create a “super user” account that could see the cards of all players. Ostensibly, Hamilton told the developers the account would be used to catch cheaters. Ultimately, it was used to cheat players out of more than $22 million.

Then came Black Friday. As I and many others, including my colleague Brian McGraw, have written about, on April 15, 2011, the DOJ and the District Attorney’s office in NY unsealed an indictment against the major online poker companies serving U.S.-based customers. Two founders of Absolute Poker were among those cited in the indictment which alleges:

[T]he sites committed bank fraud, money laundering and illegal gambling offenses by “tricking” U.S. banks into processing online gambling transactions, a violation of the Unlawful Internet Gambling Enforcement Act of 2006. The indictment seeks at least $3 billion in penalties and forfeiture.

Prior to the indictment, shareholders were reportedly planning on selling the company — now that seems all but impossible.

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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.

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.

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.

Online gambling opponents play the Abramoff card

by Michelle Minton on April 16, 2010

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

Gambling as an activity for fun has been around since the dawn of human civilzation. When man first discovered fire, there were probably cavemen huddled at a distance, wagering on how long it would stay aflame. Yet, it seems that some in congress think combining this innate human desire for risk and reward with Internet technology could hearken the end of  life as we know it and they’ll use any possible weapon to ban Internet gambling.cave-roulette1

As more states increase regulated and taxed gambling activities, an online gambling draws closer to an explicit federal allowance,  the anti-tax set on capitol hill are scrambling for any kind of evidence to connect online gambling with illegal activities–anything to prove that it is a threat to the public good. The latest stretch-of-the-imagination by opponents of Internet gaming (led by Representative Spencer  Bauchus; R-Ala.) is a memo connecting the legalization efforts with the Abramoff scandal. If you don’t remember, back in 2006 Jack Abramoff, a prominent lobbyist in D.C. admitted to misusing funds and attempting to bribe members of congress. Sure, old Jackie boy’s firm took money from pro-gambling organizations and yes, he definitely had dubious financial dealings, but before seeing the actual memo I am still sitting here asking myself what has that got to do with the legality of online wagering? If anything, the memo simply serves as evidence that something is horribly wrong with the way our representational government has been operating if a lobbyist can buy legislators that easily.

Citing lobbying disclosure records, the GOP memo asserts that Internet gambling interests paid “Team Abramoff” nearly $5 million from 2001 to 2004, including clients such as the Interactive Gaming Council of Vancouver, which is helping to lead efforts to legalize online gambling in the United States. “While Jack himself is now imprisoned, many of his former associates continue to carry out Abramoff’s plan to legalize Internet gambling in the United States,” the GOP memo reads.

Setting aside the charges for fraud and laundering, Abramoff was just doing his job. Furthermore, lobbyists wouldn’t exist if they didn’t work–that is if representatives made principled decisions based on the defense of individual rights rather than on whim and whatever will net them them the most tax dollars. The first time a Congressman wrote up legislation to “help” one business or improve the “public good” by harming another business, leveling the playing field, or taxing one, but not the other, the lobbying industry was born. If regulators are going to pick “winners” and “losers” with their policy decisions then corporate entities have just as much right as voters to have their say in the most convincing manner possible.

The Unlawful Internet Gambling Enforcement Act (UIGEA) which was set to go into effect in December has effectively killed the Online gaming industry in the US, costing many millions in lost revenue, legal costs, and years in prison for people who simply offered an activity to willing consumers. Even though implementation of the regulation has been delayed until June, and legalization appears nigh, there are those in congress with who willfully disregard the fact that gambling online is a voluntary act, it does not infringe upon any individual’s rights and is a contract between the business (the online gaming platform) and the consumer (the gambler) therefore there is no need for the government to come in and deem it illegal or legal.

The arguments expressed in memos like the one connecting Internet gambling to the Abramoff scandal simply demonstrate why legislators should be restricted to protecting individual rights and nothing else. Does it protect anyone if we ban an activity that 86% of Americans have chosen to engage in? We could protect a lot of people from harming themselves if we banned chocolate–but we don’t do that because Americans have the right to make choices about their own lives (to a certain extent…for now). We have a right to our own lives, liberty, and the pursuit of happiness as we see it, so long as it doesn’t infringe on the rights of other individuals–when our actions do impede other individuals’ ability to pursue life, liberty, and happiness that is when Spencer Bachus should start thinking about “protecting” people.

The best option now is to put Internet gambling back into the regulatory gray area by reversing UIGEA and regulating the industry just as any other business–no new legislation required.

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