Florida Sociologist Argues that Lawmakers Restrict the Rights of Online Gamblers
by Hillary LaClair, Senior Editor
April 17, 2009
According to the South Florida Sun-Sentinel, the state Legislature has initiated talks about expanding gambling in Broward and Miami-Dade counties. While online casino gambling advocates have consistently argued that the industry could bring U.S. states billions in tax revenue each year, the state has argued for more land-based casino gambling and less online casino gambling.
A speaker at a Florida anti-gambling rally this week said that he would prefer a law against online gambling rather than a law that would allow it while the state argues for more physical casinos to be built.
Sociologist Harold Peterson made a statement against the anti-gambling rally, claiming that many U.S. citizens have the attitude that laws in the country either permit or forbid activities, such as gambling online. Peterson notes that the rally showed assumptions about freedom and legislation that U.S. residents did not always have.
“The popularly held belief in the U.S. that laws are made to both allow and deny privileges is a very recent state of mind. The populace has accepted it because it is numb with an overwhelming flow of new law by legislators who feel that if they aren’t churning out volumes of regulations, they aren’t doing their jobs,” said Peterson. “But freedom and liberty mean unbound by the restraint of law, able to choose whatever path one desires. The idealized version of the US as ‘the land of the free’ can only exist when lawmakers put harsh limits upon themselves, only passing such measures as those that are virtually universally demanded.”
Peterson continued to explain that the United States does not, in fact, prohibit any form of online casino gambling outside of the state of Washington, but rather that the UIGEA (Unlawful Internet Gambling Enforcement Act) applies to the financial transactions of such wagers. Still, he notes that citizens are not aware of the legal statues of online casino gambling. Legislators do not have to pass a law that allows internet gambling because these activities are not in violation of any U.S. law.
“Casino smoking is another example of mistaken assumptions. Some feel the law is changing in many states, from laws permitting smoking to laws denying that right. But the actual change is from no law, which means everyone is free and at liberty to enjoy his own decision, to a law constricting behavior.”
While the state of Florida has openly opposed an American’s right to gamble online, it also has begun to push for more land-based casino gambling – harboring the same consequences that the U.S. has attempted to protect its citizens from in banning online gambling transactions. The State Senate has proposed that the Seminole Tribe’s seven casinos in the state be permitted to add craps and roulette to their gaming roster, putting them on par with Las Vegas casinos and raising $400 million annually for Florida.
Peterson continued to say that the Constitution is only a few pages long, and that the laws passed that restrict citizens’ rights consist of an eight-hundred page long list.
“Every word entered into federal and state statutes represents a tiny piece of lost freedom, of liberty surrendered. The people need to be aware of this, and demand that each act be passed only because it is essential, that the cost paid in infringement on freedom be worth whatever gains the bill grants,” Peterson concluded.
US DoJ Refuses to Provide Documentation on Unlawful Lottery Purchase Ban
by Hillary LaClair, Senior Editor
April 15, 2009
The U.S. Department of Justice has declined to provide iMEGA, the Interactive Media Entertainment & Gaming Association, with information about blocked sales of state lotteries online by credit card companies in the company’s lawsuit with the U.S. 3rd Circuit Court of Appeals. Perhaps due to the threat of the UIGEA, Visa and Mastercard have begun to deny state lottery purchases over the internet using the same text that applies to online casino gambling. However, the Unlawful Internet Gambling Enforcement Act specifically exempts online state lotteries from the law which prevents financial institutions from accepting payment for virtual gaming.
The loss of Visa and Mastercard payments has cost New Hampshire and North Dakota a great deal in state lottery funding which is put toward, educational systems, road construction and similar federal programs. In New Hampshire alone, online lottery tickets account for 24% of the industry’s revenue.
“Credit card companies are finding out when their customers sign up for the online subscription service that it is a state lottery and coding their transactions as betting,” said Donna Thronson, director of communications for the North Dakota Lottery.
In 2006, when the UIGEA was passed, the U.S. federal government placed banks and other financial institutions with the responsibility of enforcing the ban against internet casino gambling. Since its reintroduction late last year, the government has threatened the banks with more severe consequences if they do not comply.
iMEGA has asked the DoJ to submit the information it has on the blockage of internet lottery purchase as a crucial evidence in its case against the UIGEA (iMEGA v. Keisler, et al), where it claims that the legislation has led to “overblocking” of online gambling transactions. The DoJ has since declined to provide the information, alleging that it was “inappropriate absent unusual circumstances.”
The decision to withhold this information from iMEGA, evidence that gives the pressure group a great deal of clout in its case, has frustrated those involved in the case – including iMEGA chairman, Joe Brennan Jr., an active supporter of online casino gambling.
“The Justice Department doesn’t think that there is anything ‘unusual’ about credit card companies blocking purchases that are clearly allowed by the very law they’re trying to defend?,” asked Brennan Jr. “The New Hampshire lottery is losing a quarter of its sales even though they’re supposed to be protected by this law. I’m not a lawyer, but that seems like ‘unusual circumstances’ to me.
“It’s our right and it is consistent with the rules on supplementing the record to have this information added. Since the last brief was submitted to the court, the final regulations for UIGEA were published and have gone into effect, and as a result, the state lotteries – which are exempt from this law – have been affected. The Court should, and would, want to consider this.”
Brennan Jr. believes that the DoJ has withheld this information because it proves the inefficacy of the ban on online casino gambling. iMEGA is not prepared to let this matter drop. Instead its legal team has prepared a formal motion to subpoena the information which is expected to be filed within two days.
“I’m not surprised the DoJ does not want this Court to have this information. It’s proof of what iMEGA has said from the beginning: this law is so vague the banks and credit card companies would wind up blocking every gaming transaction – even the exempted ones – rather than risk violating the law,” Brennan Jr. concluded. “It’s no longer just a theory. It’s a fact.”
The EU May Not Have Pressured the US Into Compliance with WTO Laws
by Hillary LaClair, Senior Editor
April 14, 2009
After the European Commission’s formal investigation against the United States found that the U.S. was guilty of discriminating against offshore online casinos, the Commission filed a report claiming that it could take legal action. The findings in the report show that the treatment of offshore online casinos by the U.S. blocks the market access for casino operators and is in violation of the World Trade Organization agreements. Recent trends imply, however, that the U.S. may take threats of WTO arbitration with a grain of salt.
Before taking legal action, members of the European Union have decided to ask the U.S. to open its doors to online casino operators as a settlement agreement. But a trade expert believes that lax prosecution of recent cases by the EU will not cause the U.S. to feel pressured to comply.
Dr. Stephen Woolcock of the London School of Economics told Gambling Compliance that the EU investigates several complaints each year but that it rarely decides to pursue any such cases with the World Trade Organization.
“The Trade Barriers Regulation is not a very sharp instrument to get the US’ attention,” said Woolcock. “The EU has never really used it very aggressively.”
Because trade representatives have already said that they would rather negotiate with the U.S. than pursue legal action, Woolcock believes that the U.S. may view this as an empty threat.
"The European Commission investigation further highlights the need for the Obama Administration and Congress to regulate Internet gambling not only to protect consumers, but in order to restore integrity to the international trade system," said Jeffrey Sandman, spokesperson for the Safe and Secure Internet Gambling Initiative, upon the report’s filing. "The Obama Administration should seek to forge a new direction on Internet gambling, rather than keeping in place a protectionist trade policy that hypocritically discriminates against foreign online gambling operators."
A source stated that bilateral talks were most likely to ensue because “a case would take a very long time tied up at the WTO.”
The EU is not likely to accept a situation in which the U.S. continues to pursue European online casinos for activities in the U.S. when the U.S. is bound by international trade agreements to allow unrestricted competition in services.
Representative David Blunkett MP of the UK Parliament commented, “"I fully support the call by the EU Trade Commissioner, Cathy Ashton, for urgent U.S. action to regularise the trade relationship, respect WTO rules and to regulate online gambling. This would provide not only fair competition, but protection for individuals and families, and a legal basis on which substantial revenue could be raised at a time of considerable pressure on public finances.”
Finally, newly appointed U.S. Trade Representative Ron Kirk openly supports free trade agreements and it is believed that he will devote himself to upholding WTO regulations. If nothing else, offshore casinos that have undergone litigation with the U.S. Department of Justice can expect to maintain a market without further harassment from the U.S. court system.
Instrastate Online Gambling May Pass Before the UIGEA is Repealed
by Hillary LaClair, Senior Editor
April 13, 2009
It is beginning to look as though the decision to allow intrastate online gambling will be made before a decision to allow or repeal the UIGEA is made. While the Unlawful Internet Gambling Enforcement Act specifically prohibits intrastate online casino gambling transactions, individual U.S. states have every right to regulate and license online gambling websites within their borders. California, for example, has prepared a bill that would license online casino gambling and Texas, New York, Florida and New Jersey have are in various stages of similar legislation.
Washington is the only U.S. state that specifically prohibits online casino gambling, but the UIGEA has put several states into the thinking that they do not have the right to regulate the industry within their own borders. Vermont, North Dakota and New Hampshire have placed blocks on internet lottery purchases, despite that form of online gambling having been exempt from the UIGEA.
In California, New Jersey and a handful of other states, talks have ensued over the possible regulation over online casino gambling. Should these states institute systems for regulating online casinos, the UIGEA will become more of a hindrance to U.S. law than ever before, and perhaps give internet gaming advocates the case they need to have the law overturned.
Meanwhile, April is upon us, and it has been one month since Congressman Barney Frank vowed to reintroduce legislation that would overturn the ban on internet gambling in a “couple weeks.” Many online casino gambling advocates have grown increasingly frustrated with Frank who has been an opponent of the UIGEA since its inception.
“Representative Frank has been battling for us and has tried several times to have the new law overturned,” said online player Max E. “But I know I had hoped that he would have already succeeded this way I can play at whatever casino I want.”
As the UIGEA is still in motion, more casinos have exited the U.S. market, leaving many American gamers disenfranchised with the Congressman in his attempts to repeal the ban. The U.S. Department has been consistent in its fight against online casino gambling, bringing legal action against online casino operators – even those that exited the market with the inception of the UIGEA in 2006.
“I only play at online casinos on a casual basis,” said Fran H. “Some of the casinos I play at I can’t send my friends to, because they don’t accept US players anymore. I wish it wasn’t like this.”
The last major action of Representative Frank’s proposed legislation, HR 6870 or the Payments System Protection Act, was in October of last year. The bill was introduced “to ensure that implementation of proposed regulations under subchapter IV of chapter 53 of title 31, Unites States Code, does not cause harm to the payments system,” and to ensure that upon the effective date of its passing the UIGEA “shall cease to apply.”
Frank, the chairman of the Financial Service Committee, is expected to introduce the legislation again later this month for further review. Frank can be reached via e-mail for any casino gambler wishing to contact the Congressman for more information by accessing www.house.gov/frank/contact.html.
Barney Frank to Reintroduce H.R. 2046
by Hillary LaClair, Senior Editor
April 8, 2009
While online casino gamblers have expressed a great deal of frustration with Congressman Barney Frank for having delayed the reintroduction of his bill that would repeal the UIGEA (Unlwaful Internet Gambling Enforcement Act), the Chairman of the US House Financial Services Committee told Gaming Intelligence that he will again propose the legislation.
“Continuing his efforts to dismantle the anti-online gaming legislation passed by the Bush Administration, Congressman Barney Frank will introduce a bill which would establish a licensing and regulatory framework for online gambling operators before the end of April as a standalone bill,” the newspaper read.
While the UIGEA was tacked onto the Safe Port Act of 2006, Frank told the newspaper that the Gaming Regulation and Enforcement Act (H.R. 2046), would be a standalone bill. Experts feel that this may make the bill’s passing more difficult, but Frank told the press that it would be ‘inappropriate’ to practice the same methods of the Republicans that passed the UIGEA.
“That is not my intention. It would be a mistake. I want to do this with hearings, discussions and votes,” said Frank.
“We welcome the standalone bill, which would allow for a thorough discussion of all the issues relating to regulations and consumer protections,” said Jeffrey Sandman, spokesman for the Safe and Secure Internet Gambling Initiative which supports Frank’s efforts. “The excitement over Congressman Frank’s bill that it would create an environment that would protect American consumers and include safeguards against underage gambling and compulsive gambling, which don’t exist right now.”
Frank first introduced the bill to Congress in April of 2007, where it was co-sponsored by 48 other U.S. representatives, but was not able to move out of committee and earn a floor vote in the House.
“After the break, definitely in April,” said Frank when he was asked when he will introduce the bill again.
EU Asks U.S. to Regulate Online Casino Gambling
by Hillary LaClair, Senior Editor
March 26, 2009
In concluding its formal investigation against the United States, the European Commission issued a preliminary report that finds the U.S. laws on internet casino gambling are discriminatory and not “legally justified.” The findings in the report state that the treatment of foreign internet gambling operations by the United States blocks the market access for offshore companies and is a violation of the World Trade Organization rules.
Late last year, the European Union sent a high level delegation to investigate claims that the U.S. Department of Justice has been and continues to discriminate against offshore online casinos and other gambling websites, violating international free trade agreements. Congress and members of the executive branch were visited by a team of E.U. investigators in September, headed by senior E.U. trade official M. Jean-Francois Brakeland, head of the European Commission’s dispute settlement office.
"The European Commission investigation further highlights the need for the Obama Administration and Congress to regulate Internet gambling not only to protect consumers, but in order to restore integrity to the international trade system," said Jeffrey Sandman, spokesperson for the Safe and Secure Internet Gambling Initiative. "The Obama Administration should seek to forge a new direction on Internet gambling, rather than keeping in place a protectionist trade policy that hypocritically discriminates against foreign online gambling operators."
When the formal investigation ended last month, EU representatives said that they would first attempt to negotiate with the United States rather than to take legal action. “The report next month will back the EU’s position, but the Commission intends to deliver its findings to Washington which it hopes will persuade the U.S. to start bilateral talks to find a solution without going to the WTO,” said the source. “A case would take a very long time tied up at the WTO…”
EU Trade Commissioner Catherine Ashton has since asked that the U.S. begin to regulate and legalize internet casino gambling as a means of addressing the issue and comply with a global spirit of avoiding protectionist moves. "It is for the US to decide how best to regulate Internet gambling in its market, but this must be done in a way that fully respects WTO obligations. I am hopeful that we can find a swift, negotiated solution to this issue," said Ashton.
In addition the protecting youth in the U.S. with regulatory laws, which currently are not in place and result in several U.S. citizens illegally gambling on the internet, a regulated industry could generate as much as $51.9 billion in federal revenue over the next decade. The figures were the result of a study conducted under Congressmen Barney Frank and Jim McDermott.
Representative David Blunkett MP of the UK Parliament commented, “"I fully support the call by the EU Trade Commissioner, Cathy Ashton, for urgent U.S. action to regularise the trade relationship, respect WTO rules and to regulate online gambling. This would provide not only fair competition, but protection for individuals and families, and a legal basis on which substantial revenue could be raised at a time of considerable pressure on public finances."
Nebraska Shows Opposition to Slots Machine Gambling
by Hillary LaClair, Senior Editor
February 28, 2009
If Congress decides to allow individual States to make the decision to allow or disallow online casino gambling, Nebraska certainly would not be first to jump on the bandwagon. A recent proposal in Nebraska that enabled citizens to vote on whether or not to allow slot machine gambling in the Nebraska Thoroughbred racetracks failed to pass the first round of voting and is likely to die before 2010.
“They don’t want gambling, I guess,” said State Senator, Russ Karpisek of Wilber in reference to the state’s General Affairs Committee. According to the Omaha World-Herald, the proposal was introduced before the Committee, which failed at a 3-4 vote to advance to further consideration. Out of the eight members on the Committee, a mere five votes are required to move a proposal to the full legislative body.
Karpisek is chairmen of the General Affairs Committee. He told press that Nebraska has lost a good portion of its gambling revenue to bordering states that offer slot machine gambling. A vote to allow casino gambling at the racetrack would have revived the struggling industry, according to Karpisek. He added that some of the revenue would have been allotted to the state’s declining road-building programs. Without the much needed funding to increase the purses, the state’s racetracks are doomed to fail in just two year’s time. President of the racehorse owners and trainers group, Jerry Fudge, placed a greater vote of confidence in the industry, however.
“I wouldn’t say we’re out of business, but we’ll have to try something else. What that’ll be, I don’t know,” said Fudge.
The state had intended to replace the racetrack in Lincoln, with a proposed $50 million in funding, and that the existing State Fair Park track would be used as a research facility for the University of Nebraska.
Senator Cap Dierks voted against the proposal to allow the citizens of Nebraska to vote on slot machine gambling. “The bottom line is that this is taking money from the people who can least afford it,” he said. “It’s an immoral way to treat our citizens.”
The proposal would have allowed 3,500 slots machines to be built at seven racetracks in Nebraska and a counterpart of the bill would have given a detailed outline of the machines’ regulation. The estimated revenue that would have been generated from the slots machine equals out to $221 million per year. 40 percent of that money would have been put toward building roads and 14 percent would have gone to the struggling racetracks.
The news comes shortly after officials from Utah called for Congress to uphold the rights of individual states to form their own online casino gambling laws. The immediate refusal of Nebraska to allow slots machines to be built in existing land gambling facilities does not bode well for the future of internet gambling in the state, should Congress allow individual states to decide gambling law. Of all fifty states, Washington is the only existing that outlines any legislation pertaining to internet casino gambling. Hawaii and Utah are the only two states that have completely outlawed any form of gambling, including national lottery tickets.
Committee advancement was the first obstacle that the proposal had to overcome, which would have been followed by a constitutional amendment, were it not stricken down. State voters have in the past rejected the expansion of gambling in Nebraska in recent years.
A Competitive Enterprise Institute Study May Aid the Online Casino Industry
by Hillary LaClair, Senior Editor
February 27, 2009
The possibility of a legalized online casino industry increased considerably this week, as a Washington research facility released a position paper that supported the industry. The Competitive Enterprise Institute has presented the argument that gambling is legal in the United States, contrary to popular belief. The Institute has opined that the online casino industry has received bad publicity from politicians who use scare tactics to protect domestic gambling facilities.
“Contrary to such fear mongering, recent examples of online gambling ‘scandals’ have been isolated incidents, and are not symptomatic of a corrupt system. In fact, gambling on the Internet is safer in many respects than gambling in the real world,” the paper reads. “Even so, such fears have resulted in repeated attempts to either limit of prohibit American’ ability to gamble online, as some members of Congress portray Internet gambling as a lawless activity involving only cheats and victims. Most attempts by Congress over the past 10 years to limit or ban online gambling have been unsuccessful, but some recent high-profile scandals at gaming sites have revived such efforts.”
The CEI paper notes that a great deal of individuals whose finances were put in jeopardy was the direct result of legislative action taken by the U.S. Department of Justice and the IRS. The specific incident, which occurred in 2007, withheld NETeller payments from casino-goers who were owed winnings. Several key personnel at NETeller were arrested and the affected persons were blocked from millions of dollars. NETeller has since refused to service U.S. online casino players. A similar case arose with Bodog online casino, in a civil forfeiture hearing that the casino shrugged off, where millions were seized that were intended for the payment of U.S. citizens.
The study continued, reporting that regulation for online casinos does exist under the jurisdiction of industry groups, foreign governments and the casino owners who have established a strict set of rules for the online casinos to adhere to. Organizations such as eCOGRA allow rating systems and mediation to casino players for disputes with any internet gambling facility. Additionally, the gamblers are able to detect collusion in gambling websites, with the Absolute Poker and Ultimate Bet scandals serving as the perfect example. Gambling facilities that are traded on the London Stock exchange adhere to these guidelines to maintain a solid reputation and a position on the market.
“As a result of gambling’s unique development in America,” the study continues, “there is no set federal regulator or official body tasked with overseeing online gambling. However, that does not mean that Internet gambling faces no government regulation. Many independently operated rating agencies offer certificates for sites that meet standards of security, legality (meaning they guarantee that age-limits are strictly upheld), and fairness. Many of these rating organizations also require Internet casinos to participate in their dispute mediation services in the event that a player feels cheated. These ratings are a viable and effective way for consumers to ensure that their rights are respected in the realm of online gambling.”
The only form of betting prohibited by U.S. federal legislation is sports betting and Washington is the only state in the U.S. that has a specific law prohibiting internet gambling. The UIGEA does not actually criminalize the act of internet gambling, but rather the funding of any online casino activity. The U.S. government has placed financial institutions at the head of the enforcement of the Unlawful Internet Gambling Enforcement Act of 2006, without a clear definition of what actually constitutes illegal internet gambling.
“Gambling online for money is legal in the United States, with some restrictions on sports betting… People who fall victim to fraud in online gambling operations are not lawbreakers. Internet gambling does not break any federal law and only one state in the union, Washington, expressly bans it for state residents,” the paper continues. Internet casinos can, by comparison, coordinate and track a user’s IP address and further monitor him and his gambling activity across several gambling platforms and multiple casinos, alerting sister site management and other casino operators.
Finally, the paper points out how difficult it has become to cheat in online casinos, as any gambling website worth its weight institutes bot and collusion detectors among other fraud prevention software. The author states that cheating in the real world is much easier to pull off than on the internet. The paper also notes that land casinos are more at risk for cheating because they do not support an effective means of observation. The only dealer observation available is a video camera that is only effective when watching a player that is already suspected of cheating – and that even then it is difficult to use the video to prove any misdeeds.
Conversely, it is easier to detect cheating in online casinos by tracking hands in the history recorded by almost every casino and the IP addresses to which they are attached and that casino operators are able to write effective software to “sound the alarm” if there are suspicious betting patterns – even if the other players are not privy to it.
“It is far easier to cheat in real-world casinos than it is online. Online cheating requires more technical skill, is easier to track and is harder to get away with than cheating in the real world. In the real world. Cheating can take a variety of forms. For example, players can use marked cards, tamper with gambling devices, pay off dealers, move bets so they ‘pay off’ in certain table games, stack a game with confederates and employ other methods to otherwise goose the odds in their own favor. Most of these tactics are literally impossible to carry out in the virtual world.”
The CEI concludes in the end that online gambling faces challenges common to any growing industry, as it may be tied to threats or risks that do not exist in the real world, but that it is not illegal, does not take place in a lawless “Wild West” setting and that there are no real grounds for cheating that do not exist in land casinos.
It is uncertain what effect this study might have on the Obama administration and its decision, if any, that is made on overturning the UIGEA. One thing is for sure, the text provides online casino advocates with political clout that may be used in future legislative battles and a reason to celebrate.
Spain Loses $25 Million in Untaxed Online Casino Gambling
by Hillary LaClair, Senior Editor
February 13, 2009
One of the arguments usually presented in the ongoing attempts to have online casino gambling legalized in the U.S. is the tax revenue it could generate. It is the hope of internet gambling advocates that a taxed and regulated industry would not only help the economy thrive, but that it would also benefit the gambler who would no longer have to seek out shady establishments to wager online. It would seem that the regulated internet casino industry in Spain has not been a shining example of this concept, however, having lost $25 million in uncharged taxes on online casinos.
According to reports from the Spanish Association of Internet Bettors, $250 million is gambling revenue from Spain continues to go toward offshore, unregulated and unlicensed online casinos. Since Devember of 2007, when the Spanish Congress of Deputies voted for a bill to tax and regulate online gambling websites, the industry has taken one step forward and two backward.
While the bill outlined the nation’s intent to regulate and tax online casinos, the Spanish Association of Internet Bettors is curious as to why an estimated $250 million in gambling revenue continues to go to offshore establishments. The Spanish National Lottery charges a 10 percent tax rate, which if applied to internet gambling, would result in $25 million in annual tax revenue.
The Spanish government has since decided that it would advance its plans to place online gaming terminals in convenience stores and gas stations, increasing the public online casinos from 4,000 to an estimated 11,000. The betting association has opined that despite the legislation, it will be another full year before the nation sees a taxed and regulated online casino industry.
The last attempt made to regulate the industry was in June of 2008, when the Gambling Sectoral Commission held a conference with members of the Minister of the Interior, the Secretary of the State of the Information Society, the Tax Agency, the National Entity of Lotteries and Betting as well as a number of autonomous communities. The laid-out game plan has since been delayed significantly, according to the Swiss-Presse.