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.”

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Guest Post: Lawsuit challenges online gambling ban in Washington state

In addition to being a skilled chess player, my partner John Leonard is also no stranger to the inside of a casino. While I don’t think he’s ever made a virtual wager, I thought he’d enjoy summarizing the following case, which challenges Washington’s Internet gambling prohibition. Thank you to Mr. Rousso for sharing the discovery request linked to below. -MHE

On the first day of the 2007 World Series of Poker Main Event, Lee Rousso, a resident of King County, State of Washington, filed a lawsuit in the King County Circuit Court asking that that State’s law barring internet gambling be declared unconstitutional. The law was passed in 2006, and became effective in June of that year.

According to the complaint filed in the suit, Rousso, from June, 2003 to June, 2007, regularly logged on to pokerstars.com, described as the “world’s leading internet poker site,” and played poker against other Pokerstar customers. Although most of Rousso’s internet poker playing involved “play money,” some of the games were allegedly played for virtual chips that represented real money.

Noting, among other things, that internet poker is not illegal under federal law, and that gambling, including poker, are legal in the State of Washington, Rousso charged in his suit that the Washington law outlawing internet poker was unconstitutional in that it violated the Commerce Clause of the United States Constitution because it: (1) discriminates against internet poker in favor of legal “brick-and-mortar” casinos in the State of Washington; (2) places an undue burden on interstate commerce; (3) places an undue burden on international commerce; and (4) infringes upon the federal regulation of internet gambling, and violates the General Agreement on Trade & Tariffs (the “GATT Treaty”). Rousso also charged that the law violates the U.S. Constitution’s prohibitions against cruel and unusual punishment, and because of its vagueness, violates the 14th Amendment’s guarantee of due process of law to citizens of the several states.

Unfortunately for Rousso, despite his impressive complaint, the suit has thus far not gone well. In response to his complaint, the State of Washington served upon him a demand for production of information that, according to Rousso, is confidential and protected from disclosure by the Fifth Amendment’s protection against self-incrimination. The lower court then denied Rousso’s request for a protective order with respect to the production of the requested information, a decision that Rousso has appealed to the Division One Court of Appeals.

However, conceding that the State had won the first round of the case, Rousso has stated that he has waiting in the wings a substitute plaintiff who could come in to the case, or perhaps file a new case, pursuing the same constitutional challenges to the Washington law that are at issue in the present lawsuit.

I’ll be watching this one closely, and will update as further information becomes available. Knowing, however, how difficult it is to get a state statute declared violative of the U.S. Constitution, I believe that Mr. Rousso is in for an uphill fight.

One question that comes to mind is why Mr. Rousso did not seek to have the statute declared invalid under the Washington State Constitution. While I readily admit that I am not a Washington lawyer, and know nothing about the Washington Constitution, I am aware of the growing trend of citizens of the states seeking relief from allegedly oppressive statutes under their respective state constitutions, which in many cases offer expanded constitutional protections not available under the Constitution of the United States. Just a thought.

I pressed John for an example, and here’s what he came up with:

It appears to me that the following articles from Article I, Declaration of Rights, of the Washington Constitution apply directly to Mr. Rousso’s case. This is especially true of Article 12. Article 8 may not be directly applicable because it deals with the irrevocable grant of privileges and immunities, which I don’t think is what is involved in the statute that Mr. Rousso is challenging. I don’t understand why he didn’t raise these State Constitutional provisions in his Complaint.

SECTION 12 SPECIAL PRIVILEGES AND IMMUNITIES PROHIBITED.
No law shall be passed granting to any citizen, class of citizens, or corporation other than municipal, privileges or immunities which upon the same terms shall not equally belong to all citizens, or corporations.

SECTION 8 IRREVOCABLE PRIVILEGE, FRANCHISE OR IMMUNITY PROHIBITED.
No law granting irrevocably any privilege, franchise or immunity, shall be passed by the legislature.

Thanks again, John, for the guest post. For anyone interested, here’s the press release Mr. Rousso issued when the suit was first filed.

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 Tax Freedom Act expiration extended to November 2014

Yesterday President Bush signed into law HR 3678, the Internet Tax Freedom Act Amendments Act of 2007. Thus the law now provides that “[n]o State or political subdivision thereof may impose any of the following taxes during the period beginning November 1, 2003, and ending November 1, 2014: (1) Taxes on Internet access and (2) Multiple or discriminatory taxes on electronic commerce.” Certain grandfathering provisions applicable to states that tax Internet access were similarly extended until November 1, 2014.

Read more about the amendment at webpronews.com and TechCrunch.

First Amendment Challenge to Child Online Protection Act

Earlier this year Judge Reed of the Eastern District of Pennsylvania ruled that the Child Online Protection Act (“COPA”) is facially violative of the First and Fifth Amendments, and permanently enjoined the Attorney General from “enforcing or prosecuting matters premised upon COPA at any time for any conduct.” The government appealed.

Yesterday amici curiae filed a brief with the Third Circuit, expressing their concern “about Congress’ attempt to censor what this Court has recognized to be a ‘dynamic, multifaceted category of communication’ – the Internet – by transforming it into a ‘child-proof’ medium whose ‘level of discourse’ would be reduced to that ‘suitable for a sandbox.’ The First Amendment does not allow such sanitizing of public discourse, however well intentioned.” The Center for Democracy and Technology, one of the eighteen amici, includes a link to the brief on its website.

Plaintiffs/Appellees include American Civil Liberties Union; Androgyny Books, Inc., d/b/a A Different Light Bookstores; American Booksellers Foundation for Free Expression; Addazi, Inc., d/b/a Condomania; Electronic Frontier Foundation; Electronic Privacy Information Center; Free Speech Media; Philadelphia Gay News; Powell’s Bookstores; Salon Media Group, Inc.; Planetout, Inc.; Heather Corinna; Nerve.Com, Inc.; Aaron Peckham, d/b/a Urban Dictionary; Public Communicators, Inc.; Dan Savage; and Sexual Health Network.

Amici curiae that filed yesterday’s brief include American Society of Newspaper Editors; Association of American Publishers, Inc.; Center for Democracy & Technology; Comic Book Legal Defense Fund; Computer & Communications Industry Association; Freedom To Read Foundation; Information Technology Association of America; Internet Alliance; Media Access Project; National Association of Recording Merchandisers; National Cable Television Association; Net Coalition; Newspaper Association of America; Online Publishers Association; People for the American Way Foundation; PMA, The Independent Book Publishers Association; Society of Professional Journalists; and United States Internet Service Provider Association.

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.