1.
2009 Efforts to Legalize Online or Sports Gambling
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Rep. Barney
Frank’s Bills to Create Federal System for Legal
Online Gambling
- Delaware State
Legislation to Legalize Sports Betting
- New Jersey
Federal Lawsuit to Legalize Sports Betting
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Rep. Jim
McDermott’s Bill to Tax Internet Gambling Winnings
2. 2009 Efforts
to Ban Online Gambling
- The UIGEA – New
Federal Regulations Threaten to Clamp Down on
Gambling-Related Transactions
- Kentucky
Efforts to Seize Online Gambling Domain Names
- Minnesota
Efforts to Block Online Gambling IP Addresses
- DOJ Criminal
Cases Against Online Operators
3. Past Anti-Online Gambling Initiatives
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The
Leach Bill (H.R. 4411) – The Unlawful Internet
Gambling Enforcement Act of 2005
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The Goodlatte Bill (H.R. 4777) –
To Amend the Wire Act To Expand and Modernize the
Prohibition Against Interstate Gambling
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Barney Frank’s Bill (H.R. 2267) -
Internet Gambling Regulation, Consumer Protection, and
Enforcement Act |
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Bill Summary: |
This bill was created to
establish a federal framework to legalize, regulate, and
tax online gambling, with the exception of sports
betting. The bill is supported by some commercial casino
interests (such as Harrah’s and MGM), the American
horserace wagering industry (such as Youbet.com), and
the online poker lobby (such as the Poker Player’s
Alliance).
In introducing the
Internet Gambling Regulation Bill, Frank commented that
“The government should not interfere with people's
liberty unless there is a good reason. “This [the
oppressive UIGEA] is, I believe, the single biggest
example of an intrusion into the principle that people
should be free to do things on the Internet. It's
clearly the case that gambling is an activity that can
be done offline but not online.”
Frank said the bill would
give the US Department of the Treasury the authority to
establish regulations and license Internet gambling
operators for terms of five years, renewable conditional
on good conduct and efficiency. The Treasury would also
have the authority to revoke the license of any operator
that violates the law, or does not comply with its
requirements. The Secretary for the Treasury may call on
the US Attorney General for enforcement and compliance
issues, including the issuing of fines and jail terms.
Terms of imprisonment of up to five years are provided
for under the Act.
Other components of the
bill include: (1) ensuring high standards and a thorough
review process for any potential license holders, (2)
requiring technologies to deter compulsive and underage
gambling, (3) ensuring customer protections are in
place; and (4) measures to prevent money laundering and
tax avoidance. |
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Bill Text:
See the text of H.R. 2267
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Barney
Frank's Bill (H.R. 2266) - Reasonable Prudence in
Regulation Act |
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Bill Summary: |
In addition to the
Internet Gambling Regulation Bill, Rep. Barney Frank
also introduced a separate piece of legislation, called
the Reasonable Prudence in Regulation Act, delaying the
effective date for compliance with the burdensome and
vague UIGEA regulations by one year. If this bill
passes, the December 1, 2009 date currently scheduled as
the effective date for the UIGEA regulations (which were
implemented on January 19, 2009, one day prior to
President Obama taking office) will be pushed back by
one year.
As stated on the House Financial Services Committee
website: "The legislation will stop Federal regulators
from enforcing the UIGEA until Congress has had a chance
to decide national policy." This provides time for the
Internet Gambling Regulation bill to make its journey
through Congress, and give operators additional time to
comply. |
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Bill Text:
See the text of H.R. 2266
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Delaware State Legislation to Legalize
Sports Betting |
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Bill Summary: |
The Delaware state
legislature recently approved a bill to legalize sports
gambling in the State of Delaware. The initial efforts
to pass this bill failed. However, in May 2009, the
Delaware legislature approved a bill that would legalize
sports betting at the state’s racinos. |
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Bill Text:
See a copy of the Delaware sports gambling bill
Latest Major Action:
The bill to legalize sports betting is under
consideration. The new bill has the support of
Delaware’s governor.
The state is
currently working on the system to implement
sports betting in Delaware.
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New Jersey Federal Lawsuit to Legalize
Sports Betting |
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Bill Summary: |
A New
Jersey State Senator and several gaming trade groups
filed this lawsuit seeking to overturn a 1992 federal
law that prohibits sports gambling in all but four
states. Under the 1992 law, the Protection Amateur and
Professional Sports Act (PASPA), states that did not
previously allow sports gambling or enact legislation
permitting sports gambling within one year of the
enactment of PASPA were forever banned from allowing
sports gambling in the future. The plaintiffs in this
case have filed suit stating that PASPA is
unconstitutional for a number of novel reasons. |
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Bill Text:
see a copy of the lawsuit
Latest Major Action:
The case is pending.
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(H.R. 2268) Rep. Jim McDermott’s Bill
to Tax Online Gambling Winnings |
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Bill Summary: |
HR 2268 is designed to
provide a federal system to ensure that net winnings of
online gamblers are taxed. Any online casino or race
book that is licensed pursuant to the law would be
required to report the net winnings of all customers to
the IRS. |
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Bill Text:
See the text of H.R. 2268
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The UIGEA – New Federal Regulations
Threaten to Clamp Down on Gambling-Related Transactions |
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Bill Summary: |
The
Unlawful Internet Gambling Enforcement Act of 2006 (the
“UIGEA”) was adopted by Congress on 30 September 2006
and signed into law by the president on 13 October 2006.
The law placed restrictions on banks to ensure that
electronic payment methods could not be used for online
gambling. The passage of the UIGEA unleashed a mass
exodus of banks, payment processors, and advertisers
from the remote gaming industry. Licensed and regulated
online operators were
left without banks, payment processing systems and
advertising outlets. The impact of the UIGEA continues
to
reverberate among operators around the world, many of
whom have ceased to provide gambling services to US customers.
For a detailed discussion on the UIGEA Regulations by
Law Professor I. Nelson Rose, click here
http://www.compatiblepoker.com/final-uigea.cms.htm |
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Kentucky Efforts to Seize Online Gambling
Domain Names |
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Bill Summary: |
In late
2008, the State of Kentucky filed a lawsuit seeking to
seize the internet domain names of 141 online casinos
and sportsbooks that Kentucky claimed were offering
illegal gambling services under Kentucky state law. The
lawsuit was brought by a private law firm that was
promised a share of the proceeds that were coerced from
online operators who were forced to pay hefty cash fines
to get their domain names back and promise not to accept
bets from Kentucky residents. A few operators actually
paid this “legal extortion.”
In
October 2008, the trial court judge, who was politically
connected to the officials who brought the case, ruled
that Kentucky could seize the domain names of the 141
web sites, even though the web sites were located
outside of the state, and in most cases, outside of the
US. The trial court judge agreed with the lawyers for
the state and found the domain names to be “gambling
devices” that were subject to seizure by the state.
A group
of online operators, led by the trade group iMega, file
briefs in opposition to Kentucky’s brazen attempt to
seize domain names located outside of the state. These
operators filed an appeal seeking to derail getting the
“home-town, shakedown” by the Kentucky state officials,
private lawyers, and trial court judge. On appeal, the
Kentucky Court of Appeals overruled the trial court
judge and said that the state lacks jurisdiction to
seize the 141 internet domain names. |
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Lawsuit Text:
For a copy of the trial court’s ruling, click here
For a copy of the appellate court’s ruling, click here
Latest Major Action:
This case is on appeal to the Kentucky Supreme Court
For more information
about this case, see the collection of documents and
articles created by Poker Player’s Alliance at
http://pokerplayersalliance.org/special/kentucky-poker/ |
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Minnesota Efforts to Block Online Gambling
IP Addresses |
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Bill Summary: |
On April 29, 2009, the
Minnesota Department of Public Safety (DPS) served
notice to 11 internet service companies (ISPs)
instructing them to prohibit Minnesotans from accessing
a list of 200 online gambling web sites. The lawsuit
mirrors an attempt by a Republican state legislature to
accomplish the same goal through a pending bill that, if
enacted, will require ISPs to block access to online
gambling by Minnesota residents.
The Minnesota DPS action
has raised an outcry among online poker players, some
state legislators, and others.
On May 7, 2009, iMega,
an online gambling association, filed a lawsuit in
federal court in Minnesota seeking to prevent the
Minnesota DPS’s action. |
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Lawsuit Text:
For a copy of iMega’s lawsuit seeking to prevent
Minnesota DPS from blocking online gambling, click here
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DOJ Criminal Actions Against Online
Operators |
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Bill Summary: |
The United States
Department of Justice has brought criminal cases against
several high-profile foreign remote gambling operators
and issued threats to advertisers and others to stay out
of the online gambling business. A summary of the DOJ’s
activities from 1997 to 2009 follows: |
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Summary Text:
DOJ’s activities from 1997 to 2009
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Leach Bill (H.R. 4411) – The Unlawful Internet Gambling
Enforcement Act of 2005 |
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Bill Summary: |
This bill is designed to
prevent the use of payment instruments (credit cards,
fund transfers, etc.) for certain forms of online
gambling that are defined as “unlawful Internet
gambling.” The bill requires financial
institutions to identify and block payments related to
so-called unlawful Internet gambling transactions. If
there is a violation, the government may file a lawsuit
(known as an injunction) to prevent or restrain the
violation. The bill provides a special exemption
for three types of Internet gambling: (1) horse
racing under the Interstate Horseracing Act (IHA),
so OTBs and account wagering systems can remain in
business, (2) Indian gambling that takes place on a
reservation or between two reservations; and (3)
Internet gambling that occurs solely within a state’s
own borders, referred to as Intra-state gambling.
While the bill purports to
be a piece of anti-gambling legislation, it actually
endorses and sanctions three types of online gambling:
(1) wagering on horse races via Internet, telephone or
television, (2) online and remote gambling on Indian
reservations and (3) online and other remote gambling
taking place within a state, such as the online sports
betting and wireless casino gambling permitted in
Nevada. The bill creates a special favored status for
these forms of domestic online and remote gambling, and
serves to block any other forms of remote gambling.
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Bill Text: See the
Text of H.R. 4411
Sponsor:
Rep Leach, James A. [IA-2] (introduced
11/18/2005) Cosponsors
(29)Latest Major Action: 1/5/2006 Referred to
House subcommittee. Status: Referred to the
Subcommittee on Financial Institutions and
Consumer Credit.
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Goodlatte Bill (H.R. 4777) – To Amend
the Wire Act To Expand and Modernize the Prohibition
Against Interstate Gambling |
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Bill
Summary: |
This bill amends the Wire
Act, 18 U.S.C. § 1084 by:
1. Expanding the Wire Act
to apply to all games of chance, such as poker,
blackjack, backgammon, bingo and any other casino game,
as well to cover lotteries. This is a
“legislative reversal” of existing court rulings that
the Wire Act only applies solely to sports gambling, and
does not cover any other forms of gambling.
As currently written, the Wire Act cannot be used
against online lottery, poker or blackjack sites.
2. Expanding the
jurisdictional application of the Wire Act to cover any
situation where a bet is placed or received from (1)
anywhere in the United States or a territory of the
United States, (2) from the maritime jurisdiction of the
United States, or (3) to or from any place outside the
jurisdiction of any nation (i.e., the high seas,
Antarctica, or outer space).
3. Raising the penalty for
violations of the Wire Act from two years, to five
years.
4. Expanding the scope of
criminal conduct under the Act to include any business
that uses electronic payment systems of any type (credit
cards, wires, checks) in furtherance of a bet made
illegal under the new Wire Act.
While claiming to be an
anti-gambling bill, it is actually a pro-gambling bill
for favored types of domestic online and remote
gambling. The bill provides special exemptions for
five forms of United States based online and remote
gambling. First, the bill clarifies that online
and other forms of remote gambling on horseracing is
legal under the Interstate Horseracing Act (IHA).
Second, the bill provides an exemption for online and
other remote gambling on an Indian reservation, or
between Indian reservations. Third, the
bills allows states to legalize and regulate online and
other forms of remote gambling taking place within a
state, such as the online sports betting and wireless
casino gambling permitted in Nevada. Fourth, the
bills exempts “fantasy sports” leagues and gambling
amongst friends related to such leagues. Fifth,
the bill exempts the types of games offered by sponsors
where entry into the games is free to the customers and
the only prize is to participate in a contest by the
sponsor.
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Bill Text:
See the Text of H.R. 4777
Sponsor:
Rep Goodlatte, Bob [VA-6] (introduced
2/16/2006) Cosponsors
(115)
Latest Major Action: 2/16/2006 Referred
to House committee. Status: Referred to the
House Committee on the Judiciary.
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