Opponents of pending Internet gambling legislation speak out

Earlier this week on the Senate floor, Senator Jon Kyl (R-Ariz.), apparently wary of legalized online gambling, gave the following statement on HR 2046:

Mr. President, I would like my colleagues to be aware of an important letter signed by 45 State attorneys general expressing “grave concerns” about Representative Barney Frank’s Internet Gambling Regulation and Enforcement Act, H.R. 2046.
The State attorneys general note that the recently enacted Unlawful Internet Gambling Enforcement Act of 2006 has “effectively driven many illicit gambling operators from the American marketplace.” The Frank bill “proposes to do the opposite, by replacing state regulations with a federal licensing program that would permit Internet gambling companies to do business with U.S. customers.” The letter continues:
A federal license would supersede any state enforcement action, because s 5387 in H.R. 2046 would grant an affirmative defense against any prosecution or enforcement action under any Federal or State law to any person who possesses a valid license and complies with the requirements of H.R. 2046. This divestment of state gambling enforcement power is sweeping and unprecedented.
One final but very important point from the letter is the impact of the so-called “opt-out” provisions. Specifically, the letter reads:
[T]he opt-outs may prove illusory. They will likely be challenged before the World Trade Organization. The World Trade Organization has already shown itself to be hostile to U.S. restrictions on Internet gambling. If it strikes down state opt-outs as unduly restrictive of trade, the way will be open to the greatest expansion of legalized gambling in American history and near total preemption of State laws restricting Internet gambling.
The Frank bill is unacceptable to the State attorneys general and it ought to be unacceptable to Members of Congress as well. I urge my colleagues to oppose the Frank bill or any similar proposals that would create a permissive Federal licensing scheme for Internet gambling.

The blogosphere is boiling over with posts on last year’s UIGEA legislation, which clamped down on online wagering, and where things may be headed in Congress.  For a sampling, check out “Online Poker,” “Live Action Poker,” and “USAPokerLife.com.”

CRS Report on Proposed Internet Gambling Regulations

The good folks at opencrs (“Congressional Research Reports for the People”) have posted a recent Congressional Research Service report describing the Unlawful Internet Gambling Enforcement Act passed last year, and implementation regulations issued last month by the Fed and the Treasury Department.

Here’s the Summary contained in the Report:

The Unlawful Internet Gambling Enforcement Act (UIGEA) seeks to cut off the flow of revenue to unlawful Internet gambling businesses. It outlaws receipt of checks, credit card charges, electronic funds transfers, and the like by such businesses. It also enlists the assistance of banks, credit card issuers and other payment system participants to help stem the flow. To that end, it authorizes the Treasury Department and the Federal Reserve System (the Agencies), in consultation with the Justice Department, to promulgate implementing regulations. Proposed regulations have been announced with a comment period that ends on December 12, 2007, 72 Fed. Reg. 56680 (October 4, 2007).

The proposal addresses the feasibility of identifying and interdicting the flow of illicit Internet gambling proceeds in five pay systems: cards systems, money transmission systems, wire transfer systems, check collection systems, and the Automated Clearing House (ACH) system. It suggests that, except for financial institutions that deal directly with illegal Internet gambling operators, tracking the flow of revenue within the wire transfer, check collection, and ACH systems is not feasible at this point. It proposes exempting them from the regulations’ requirements, but invites comments that offer alternative approaches. It charges those with whom illegal Internet gambling operators may deal directly within those three systems, and participants in the card and money transmission systems, to adopt policies and procedures to enable them to identify the nature of their customers’ business, to employ customer agreements barring tainted transactions, and to establish and maintain remedial steps to deal with tainted transactions when they are identified. Introductory remarks explain why the Agencies rejected a [“check list of unlawful Internet gambling operators”] approach. Several bills have been introduced to augment these efforts, including H.R. 2046 (Internet Gambling Regulation and Enforcement Act), H.R. 2607 (Internet Gambling Regulation and Tax Enforcement Act) and H.R. 2610 (Skill Game Protection Act).

The Report is a great read for folks with an interest in the regulation of online gambling.

Below are links to the govtrac.us website for pending legislation referred to in the Report:

  • HR 2046 (Internet Gambling Regulation and Enforcement Act)
  • HR 2607 (Internet Gambling Regulation and Tax Enforcement Act)
  • HR 2610 (Skill Game Protection Act)

Internet-Ordained Clergy, Online Gambling, and the Regulation of Online Video

A few items that caught my eye last week-

  • According to the National Law Journal, “Internet-ordained ministers are legal in all 50 states, except for certain counties in Virginia, Pennsylvania and North Carolina, where the practice has faced legal challenges in the past decade.” I wonder how those counties feel about weddings officiated by Rolling Stone-ordained clergy. Anyway, check out this NLJ article highlighting some of the risks presented by Internet ministers.
  • CNET’s News Blog featured a detailed post on the ins and outs of online gambling, including the 2006 Unlawful Internet Gambling Enforcement Act, lobbying efforts to scale back the law, and the purported benefits of playing poker.
  • The Progress & Freedom Foundation’s Adam Thierer shares his concerns relating to some current attitudes toward the regulation of online video, as evidenced by a recent 463 Communications/Zogby International survey. Adam’s post links to the survey, which includes a number of other ‘interesting’ findings.

Regulation of Online Intrastate Gambling

Earlier this week Congressman Tom Feeney (R-Fla), in written materials supplementing previous floor remarks, addressed the 2006 Unlawful Internet Gambling Enforcement Act and what he views as a threat to that law:

[L]ast year, I cosponsored legislation with Congressman Bob Goodlatte to help stop the widespread growth of gambling over the internet. Though Federal law already prohibits gambling over telephone wires, the passage of this legislation was necessary to maintain the original intent of the law while also bringing it up to speed with the explosion of current and future technology. However, this update of the law made clear that it would only affect interstate commerce, respecting the rights of states by leaving to them the decision whether and how to regulate gambling within their own borders. New legislation before the Financial Services Committee attempts to undo all of this previous work, instead granting the federal government the expansive and exclusive right to regulate all online gambling. This new legislation would represent the first time in history that the Federal Government would be given power to issue gambling licenses, and it marks a significant shift away from allowing states to determine for themselves what type of policy is best. Proponents of this legislation state that the bill offers states the right to “opt out” of this regulation, but the truth is that the states already have the right to determine their own policy towards gambling without any broader federal regulation that threatens to undermine their control over licensing standards and enforcement actions.

I haven’t seen the bill the Congressman is referring to, and I’m not expressing any opinion here about gambling, or whether it should be legal. But I am scratching my head about the concept of online intrastate gambling.

Is it technologically feasible for a wagering site based in Illinois to only allow persons physically located in Illinois to place bets? I suppose it could be tried, but something tells me that lots of determined people would find ways around such a restriction, which would presumably invite federal attention.

Perhaps the bill’s opponents are instead worried about states losing out on tax revenues that could one day be extracted from online gambling sites purportedly operating exclusively within a single state?

If anyone is familiar with the proposed legislation, I’d be interested in your opinion.

Promoting online child safety – Regulate or Educate?

If you are interested in alternative angles of attack on this issue, check out this post, which links to a non-regulatory approach to protecting minors online. Both were authored by Adam Thierer of The Progress & Freedom Foundation, and showcase two bills presently pending before Congress – S. 1965 and H.R. 3461.

[October 5, 2007 UPDATE from the P&FF blog].