Online Gambling

The Federal Reserve Board has been named in an action to challenge implementation of the Unlawful Internet Gambling Enforcement Act of 2006. The action was filed by the Interactive Media Entertainment and Gaming Association, Inc. in June of 2007, and is tentatively scheduled to be heard in September.

While not much may come of the hearing — surely, the law will not overturned — at least we may get some clarification on the law and how it will be enforced.

Interesting… the The Interactive Media Entertainment & Gaming Association (iMEGA) is trying a different tactic to stop the enforcement of the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA). They have filed a lawsuit saying that enforcement of the UIGEA would set a dangerous precedent because “sets a dangerous precedent for I-commerce by criminalizing the transmission of money if the end result is illegal in some unspecified place”.

Other grounds pointed out in the lawsuit is the recent rulings by the World Trade Organization against the United States regarding their stance toward online gambling.

On Thursday, April 26, Rep. Barney Frank introduced HR 2046, the Internet Gambling Regulation and Enforcement Act of 2007. HR 2046 will lift the prohibition on playing poker online.

Representative Frank is the Chairman of the important House Financial Services Committee. And he understands the injustice that we have suffered. When he introduced the bill, he told reporters that “The existing legislation is an inappropriate interference on the personal freedom of Americans and this interference should be undone”.

Voice your support using this quick and easy form to email your representative… it took me about 2 minutes to complete!

Then, stick it to the man and play online poker at any one of the many sites that continue to accept US players! [Note: After clicking the link, you'll get the most accurate list if you select your state using the control on the left center of the screen.]

Rep. Barney Frank is my new hero. He’s at least started the conversation to repeal the Unlawful Internet Gambling Enforcement Act of 2006.

Let’s do our part by writing to our elected officials expressing our desire to have this law repealed.

1) Find your representative — enter your zip in the top left corner.

2) Send him or her an email — see below.

3) Find your senators — select your state in the top right corner.

4) Send them the email as well.

Here is the email that you can send (credit to Hal Coblentz for the text of this email):

I am writing to express my opinion that the Unlawful Internet Gambling Enforcement Act of 2006 should be repealed. I strongly believe our government should not prohibit adults from enjoying an American pastime in the comfort of our homes. I am in favor of legalization, regulation and taxation of the internet gaming industry by the U.S. Government.

You can also sign this petition to have the law repealed.

Information Week’s March 29 article on online gambling is a must-read. It provides an excellent summary of the major events in the industry over the last few years, and contains some interesting insights into where the industry may be headed in the near future.

Tidbits from the article:

• Online gaming appears to nearing its pre-UIGEA levels.
• A U.S. court has ruled that the Wire Act of 1961 — the law on which the U.S. government bases much of its online gambling policy — only applies to online sports betting.
• The UIGEA makes it explicitly legal for states to regulate online gambling that may occur within their borders.

I was skeptical when I saw the formation of the Poker Player’s Alliance about 18 months ago. Their goal is “.. to promote the game, ensure its integrity, and, most importantly, to protect poker players’ rights.”.

Yeah, right. Good luck.

But I now think that they may be on to something. They have named former senator Alfonse D’Amato as Chairman of the Board of the organization. Getting someome like him to lead the charge — someone who knows the ins-and-outs of Congress, and who still may be able to call in a few outstanding favors — is a real score.

Do your part and help fud the efforts of the PPA — and get some bonus cash at the same time. Here’s how.

• Open a new Full Tilt Poker account, or log into your existing account
• Follow these instructions to join the PPA through the Full Tilt Poker cashier. If you join PPA at the $20 level, Full Tilt Poker will give you a $50 bonus + a freeroll entry; joining the PPA at higher levels gets you better goodies from Full Tilt Poker.

US players can also play in special PPA Membership Drive $500 freerolls at PokerStars in exchange for allowing them to share your contact information with the PPA. The PPA will send you more information, and you can decide to join at a later time.

While there is no draft of a repeal, nor is there a timeline for creating said draft, Congressman Barney Frank (D) has stated publicly that he thinks the Unlawful Internet Gambling Enforcement Act of 2006 is one of the “stupidest laws” ever passed. (Source: Financial Times, Companies UK: The Week, Mar 17 2007. Subscription required to read article.)

Maybe this is the beginning of the end to all the hassles with online gaming in the United States. I sure would like to see things get back to normal again!

Effective immediately, NETeller can no longer be used by US account holders at online gaming sites. This announcement follows a similar announcement by Firepay in October 2006.

This announcement should come as no surprise, given that:

1. the NETeller Group is a publicly-traded company that needs to protect its shareholders and executives from prosecution under the UIGEA
2. the US detained two former NETeller executives earlier this week 

In fact, if you read my blog, you’ll see that I outlined why the clock was ticking for NETeller back in November 2006.

In any event, NETeller exiting the gaming market for US account holders will be a temporary roadblock for US players. If recent history is any guide — and it should be — US players will quickly find a way to play the games the want, at the stakes they want, at any site that will accept them.

I have done a fair amount of research and thinking about this issue, and wanted to share my findings and thoughts on the topic.

1) Prior to the passing of the Unlawful Internet Gambling Enforcement Act of 2006, eleven states had laws on the books that specifically ban all forms of online gambling. These states are: IL, IN, LA, MI, NJ, NV, NY, OR, SD, WA, WI. Online gambling continues to be considered illegal in these states. As for the other 39 states, the question of whether online gambling is illegal continues to be unanswered.

It bears noting that I have seen no reports of any player in the United States being prosecuted under any anti-online gambling state laws.

2) The Act did nothing to alter, curtail, or extend state laws regarding online gambling. Thus, it did not make online gambling illegal in all states.

3) The Act does place restrictions on the financial transactions that occur in connection with online gambling; it restricts electronic fund transfers and the use of credit cards in connection with such wagering. This means that players will no longer be able to make wagers, or collect winnings using electronic fund transfers, credit or debit cards, or some other online payment systems — once the US Treasury Department publishes its regulations for enforcing the Act in the summer of 2007. As a law passed by Congress, this law will apply to all states.

In response to the Act, online gambling sites have done one of three things with respect to US-based real-money players:
1) Continue to accept US-based real-money players from all states
2) Accept US-based real-money players from states other than the states in which online gambling is specifically outlawed (meaning no players from the states listed above)
3) Closed their site to all US-based real-money players

Also in response to the Act, Firepay (an online payment system) stopped handling gambling-related transactions. NETeller (another online payment system) continues to handle gambling-related transactions, and has stated that they are monitoring the situation. Blog update: NETeller has also exited the US market.

So what has the Act really done? In and of itself, it certainly did not make online gambling illegal; the state laws on this issue continue to apply as they did before the Act was passed. It has reduced the number of sites where US players can gamble, and it forced US players to find creative ways of funding their online gambling accounts. It certainly raised awareness in the United States (and the world for that matter) about online gambling, but my sense is that it still has not yet had a major impact on behavior. Depending on the enforcement parameters that the US Treasury Department comes up with next year, the Act may have little long-term impact on online gambling in the United States.

NETeller recently confirmed that they are staying in the US market, at least until the US implements the provisions of the UIGEA in July 2007. Realistically, there will need to be a major shift in the United States Congress to allow NETeller to continue operating under its current business model in the United States. By major shift, I mean something on the order of a repeal of the UIGEA, which is unlikely.

One possible scenario that I can see is that the regulations that are implemented will contain a loophole through which NETeller will attempt to squeeze through. History suggests that most regulations of this nature do contain loopholes that are exploited by interested parties, and there is little reason to think that the UIGEA regulations will be an exception. Once NETeller attempts to squeeze through the loophole, litigation may follow (although I can’t imagine what jurisdiction would hear the case).

We’ll all have to wait and see. In the meantime, game on!

By the way, if you are a US player and recently go kicked out of your casino or poker room (like I did!!!), I got your back. Here is a list of online casino and online poker sites that continue to accept US-based real-money players. Fight the power.