My thoughts on the new US internet gambling bill - warning very long.

Ok, here are my thoughts on HR 1174 - The Internet Gambling Regulation, Consumer Protection, and Enforcement Act.

Before I start let me preface with these:

1.I am not a practicing attorney. The statements contained in here are only my opinion and in no way should be considered legal advice.
2.This is going to be LONG.

Before I begin detailed analysis, my general thoughts are that this is a half-assed concoction by the US congress.
It does nothing to settle the debate on the legality of poker under the UIGEA definition of ‘bet’. In fact it uses that same definition.
Make no mistake about it, this is about money. There are licensing fees, fines, assessments and personal and business taxes all included in this bill. It does provide some decent measures such as protection for underage or vulnerable persons but these small concessions, imo, so not justify this monstrosity.

It prohibits internet sports betting (section 5388) and the use of credit cards for payment or settlement of a bet or wager for other than horse racing or intrastate activities, but does not address debit or check cards (section 5389).
It allows the states to violate the UIGEA definition of “bet” by setting up state or Tribal lotteries on the internet. It also makes definitive TOS violations a felony, but I’ll address that specifically.

Edit:Becuase this thing does NOT clarify the poker issue, I urge everyone to contact their representatives to voice their oppinions. I also urge every member of the PPA to contact the alliance and tell them to quit blowing smoke up our asses and get POKER defined and legalized, not just gambling.

Well, here goes:

Section 5381 is Congressional findings, in which is stated the reasons for enacting this bill. The basics are covered, including “to ensure the games are fair, protect underage and otherwise vulnerable individuals…”

Subsection 5(A) is troubling because it states:

‘(5) An effective Federal, State, and tribal licensing system would ensure that licenses are issued only to Internet gambling operators which meet strict criteria to protect consumers, and which--‘
(A) are in good financial and legal standing, and of good character, honesty, and integrity;”

The bill does not make any recommendation as to determining standards of “good character, honesty, and integrity”. In fact, this bill is similar to many modern house resolutions in that it is purposefully vague and allows great leeway to the parties tasked with these functions. In HR 1174 these powers are granted to the Treasury Department.

Section 5382 covers definitions of the terms included in the bill and is very basic stuff.
One thing of note is that the definition of “bet” used in the UIGEA is used here. This leaves open the doubtful possibility that “poker only” sites might not be covered. At least, it leaves one possible solution to a problem presented in 5383(d)(3)(E) which I'll cover later.

Section 5383 covers the establishment and administration of licensing program and contains the meet of the matter.

Subsection 5383(a) establishes the authority for the licensing program and regulations pertaining to it solely with the Treasury Department, yet allows State and Tribal powers to be designates of that authority.

Subsection 5383(a)(3) implies that a training period for enforcement of the regulations will be in place. I’m assuming the length of this training period will be determined by the Treasury Secretary.

Sub-section 5383(b) states officially the reason for the bill, that no person may operate an Internet gambling facility which accepts bets from persons located in the US and territories without a license issued by the Secretary of Treasury. This does not state United States citizens. It makes clear that the defining boundary is the borders in which the person is located, not the nationality of the individual.

Subsection 5383(c) sets forth the application procedures and required information for the application, including:
criminal and credit history of SEO’s or anyone in control of the applicant company;
financial statements;
articles of incorporation;
business plan providing details on the applicant ability to protect underage and problem gamblers, fairness of games, and complicity with law enforcement;
certification that the applicant will submit to US jurisdiction and all applicable US laws related to internet gambling;
certification that the applicant has a US corporate entity and that a majority of the officers or board members are US citizens.

The bolded parts are extremely troubling. The complicity with law enforcement, submission to US jurisdiction and ALL applicable US laws is concerning in that, besides the blatantly obvious, it forces foreign maintained and controlled companies to submit to US jurisdiction and laws.
Yeah, Yeah, I know…before you tell me “But shotglass, the very next sentence states that the companies must be US owned and operated.” This part of the bill may be overturned by the World Trade Organization because according to section 5383(k)(1)(B) if the section requiring a majority of US control is determined to violate the trade commitments of the US by the WTO final arbitration then these clauses are null and void.
However, in order for that to happen the US must be sued in the WTO by a foreign country, not company. Antigua, maybe?

Suitability for licensing is set forth in Sec 5383(d)(2) and states that the applicant must provide to the Secretary clear and convincing evidence that the applicant:
is a person of good character, honesty and integrity;
does not pose a threat to the public or regulation or licensed activities;
does not create or enhance the dangers of illegal activities
and a bunch of other legal mumbo-jumbo that is not clearly defined within the bill, but is left up to the discretion of the Secretary.

Without defining these characteristics within this bill, and especially what constitutes “clear and convincing evidence”, congress is leaving open the possibility of partiality and bribery for licensing approvals and the possibility of disqualification without justification.
A simple statement by the secretary that so-and-so is not of good character is enough for initial disqualification. However, the bill does set forth a process for appeal of denial that is lengthy and time consuming, which does include terminating the employment of anyone person determined to be a disqualifying factor.

Sec 5383(d)(3) allows an applicant or person to be determined not suitable for licensing if:
the required information and documentation is not provided;
false or misleading statements in the supplied applicant information;
the applicant or a controlling person has been convicted of a crime punishable by imprisonment of more than 1 year (not actually imprisoned, just plead guilty or convicted without serving time is enough);
the applicant or a controlling person is delinquent on payments of taxes owed to the US government or state governments;

and

Section E through I of this subsection [5383( d)(3)] is horrible.
In a nutshell, these sections make any person or business that has operated an internet gambling activity since the enactment of the UIGEA in 2006 NOT ELIGIBLE for licensing.
This means that any poker room, payment processor etc currently in operation that did not immediately remove itself from the US market upon enactment of the UIGEA will not be eligible for licensing.

This is the problem which I mentioned near the beginning of this article. The bill has a minor loophole in that it is using the UIGEA definition of “bet”. Because of this, if poker can be proven to not be in violation of the UIGEA by being a game of skill and not chance, then poker only sites should not be covered by this bill or the UIGEA.
There’s a VERY small window of opportunity for these rooms such as Stars, Full tilt, Merge, Cake, etc to get this to happen because if this bill is signed as is then I doubt very much that any change to their status will occur during my lifetime.
Again, a lengthy appeals process is established for any denials

Sec 5383(g) is a double edged sword. Subsection (1) requires that appropriate safeguards are in place to ensure that the individual placing the bet is of legal age to place the bet at the location the bet is placed;

I think we’d all agree that’s a good thing, but:

Subsection (2) requires that the gambler be physically located in a jurisdiction that permits internet gambling at the time the bet is placed. This is bad because section 5387 of the bill is an ‘opt out’ clause that allows any State, Tribal Area or US territory to opt out of this bill and continue under the UIGEA. Can anyone say “F-U Washington State.”?

Subsection (3) & (4) are taxes, specifically customer taxes.
These sections require that taxes on winnings be paid to the government at the time of any payment to the customer of any proceeds of Internet Gambling and that taxes on the internet gambling site are collected as well.
I think bikes said it best in his blog:

Originally Posted by bikes

also fuck taxes. fuck taxes right up their god dam ass.

The next section is Extremely Troubling but all I’m going to do is copy and paste it so that you can make up your own minds:

‘5383(k)(5) COMPILATION OF DATASETS ON PLAYER BEHAVIOR-
‘(A) IN GENERAL- The Secretary shall compile and make available to the public, on the Web site of the Secretary, datasets on player behavior.
‘(B) REGULATIONS REQUIRING SUBMISSION OF INFORMATION- The Secretary shall prescribe regulations to require licensees under this subchapter to provide information on player behavior that the Secretary determines is appropriate for the datasets under subparagraph (A).
‘(C) INFORMATION REQUIRED TO BE INCLUDED- Datasets prepared under this paragraph shall include information on any individual player, if requested by the Secretary, including but not limited to information concerning gambling frequency, gaming duration, the amount wagered, the number of bets placed, and net losses, provided that such request complies with the provisions of subparagraph (D).
‘(D) PROTECTION OF PRIVACY- All information provided pursuant to this paragraph shall be aggregated and anonymized, and shall not contain information that either alone or in combination with other data elements would permit identification of any individual player.

Yeah, right I believe that my identity during playing will be kept out of these data bases as much as I believe that the sky is green.

The rest of section 5383 goes on to set standards for monitoring of licensee compliance and delegation of licensing authority to certain entities (State and Tribal Authorities) if these entities apply for authority.

Section 5384 sets standards for inclusion of a problem gambling, responsible gambling, consumer safeguards (fair gaming), and self exclusion program that shall be implemented by each licensee.
This section goes on to state that any person on the prohibited list (self exclusion, underage, arrears in child support payments {yes, that is in the bill}) will forfeit all winnings to the general fund of the Treasury.

WTF!

This section also contains a denial of liability clause which protects the Government and internet gambling provider should any person decide to seek re-compensation of any losses or damages of any kind arising from that person’s gambling activities based on a claim that the person was a compulsive, problem, or pathological gambler. VERY NICE!

Section 5385 protects financial transaction providers from liability for engaging in financial activities or transactions with licensee’s unlawful activities, unless that provider had prior knowledge of the illegal activities. Again, very nice.

Section 5386 requires that the Director of the Financial Crimes Enforcement Division begin developing a list of unlicensed internet gambling providers within ten days of this bills enactment and provide that list to the Treasury Secretary no later than 120 days after enactment. This list will be provided to all financial transaction providers and be deemed “actual knowledge” of violations of section 5385.

Section 5393 is potentially AWESOME in that it makes all of the data mining slugs a felon. If I understand this correctly, and I’d like to think that I do, then any violation of the TOS – even an honest mistake - can land you in jail for 5 years.
Read for yourself:

Sec. 5393. Cheating and other fraud
‘(a) Electronic Cheating Devices Prohibited- No person initiating, receiving, or otherwise making a bet or wager with a licensee, or sending, receiving, or inviting information assisting with a bet or wager with a licensee, knowingly shall use, or assist another in the use of, an electronic, electrical, or mechanical device which is designed, constructed, or programmed specifically for use in obtaining an advantage in any game authorized under this subchapter, where such advantage is prohibited or otherwise violates the rules of play established by the licensee.
‘(b) Additional Offense- No person initiating, receiving, or otherwise making a bet or wager with a licensee, or sending, receiving, or inviting information assisting with a bet or wager with a licensee, knowingly shall use or possess any cheating device with intent to cheat or defraud any licensee or other persons placing bets or wagers with such licensee.
‘(c) Permanent Injunction- Upon conviction of a person for violation of this section, the court may enter a permanent injunction enjoining such person from initiating, receiving, or otherwise making bets or wagers or sending, receiving, or inviting information assisting in the placing of bets or wagers.
‘(d) Criminal Penalty- Whoever violates subsection (a) or (b) of this section shall be fined under title 18 or imprisoned for not more than 5 years, or both.’

And the last thing this bill requires is that the Treasury Secretary develops a feasibility study for the prevention of, get this “impaired gambling”.
Wow, that just pissed me off. I’m gonna miss the days that some drunk donks off his whole stack to me.
This has been extremely long, and for those of you who took the time to read it…we have too much time on our hands.

If anyone has differing opinions then I’d love to hear them,
Shotglass

Damn Shotglass, you're a real bloodhound. Republicans and religious groups argue about the morality factor but it's always been about money. If the government doesn't get their share of whatever they think they're owed, it's going to be trouble. The UIGEA and now this shutdown of major rooms is just another example of the government not getting theirs.

The US govt has been double-dipping (and plenty times more) since the beginning of time. It makes no sense to tax a used car that's been sold 3 times over. The taxes were paid on it when it was first purchased. Why on earth are we paying taxes on the EXACT SAME FUCKING ITEM? Next thing you know the IRS is going to be showing up at garage sales looking for their cut of $500 where Joe Neighbor sold a snow blower and an old wardrobe.

The UIGEA was a fucking band-aid with loopholes galore, and look what happened. Instead of taking online poker and kinda shoving it off in to the corner, they should have looked at what was really going on and came up with a actual solution. People will still find ways to get money online and gamble just like there are illegal card rooms all over town on my speed dial. It's like a convict finding a way to smuggle drugs in to a prison. We're resourceful beings, we'll always find a way.

Regulating the business, or simply taking their cut from the rooms is the only logical solution however I honestly think the government is too stupid to figure out how to do it.

Yeah, man. I agre with everything you wrote.
This new bill that got introduced in March and into of committee in April is no better than the UIGEA. All it does is address the gub'ment's buthurt about all the tax $$$ that they're missing.

cliffs for the lazy?

Originally Posted by philly and the phanatics

cliffs for the lazy?

OK, cliffs:

It does not clarify the issue of whether poker is a game of chance or skill and continues to use the definition of bet from the UIGEA of 2006, which leaves the same loophole that is currently in the UIGEA but attempts to close that loophole in a different way.

It prevents the use of credit cards for payments but does not address debit or check cards.

It states that any gambling site that did not immediately pull out of the US market when the UIGEA was passed is NOT eligable for licensing.

It has some vague qualification requirements for licensing, such as "must be in good financial and legal standing, and of good character, honesty, and integrity" but does not clarify what is good character.

It requires that all US facing gambling sites are majority controlled by US persons, that their buisinesses are in easily accessible locations for audits, but nullifies the first part if overruled by the World Trade Organization arbitration.

Enacts taxes on both players (must be collected at time of payout) and gambling sites.

Requires the development of datasets on player behavior.

Makes violations of the sites' TOS that can be considered cheating a felony with up to 5 years in prison.

Establishes programs to protect underage and vulnerable persons as well as an excluded persons list. There's a self exclusion list which you may remove yourself from and then there is an "not authorized" list which keeps you from playing EVER, if you wind up on this list.

And requires a study on preventing impaired gambling.


Becuase this thing does NOT clarify the poker issue, I urge everyone to contact their representatives to voice their oppinions. I also urge every member of the PPA to contact the alliance and tell them to quit blowing smoke up our asses and get POKER defined and legalized, not just gambling.

ya missed one significant cliff methinks...

"This section goes on to state that any person on the prohibited list (self exclusion, underage, arrears in child support payments {yes, that is in the bill}) will forfeit all winnings to the general fund of the Treasury."

yep, a pretty ugly piece of legislation here. particularly that a person's (ok let's be honest and call that person a "man") winnings would not be applied to these child support arrears (bad enough) but that they would be forfeited to the "general fund of the Treasury." what we have here is a clear violation of the due process clause of the 14th amendment. But of course the Bradley Amendment has already been violating that clause for over 30 years, and nobody seems to care....

Welcome to my Orwellian nightmare world. 2nd class citizens (unmarried non-custodial biological fathers) have no rights, and increasingly no survival options. this bill makes me want to go ahead and die already.

I am also agree with your informative post.



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Update: Rep. Joe Barton, from the great state of Texas, is drafting an Internet poker bill that will finally define, legalize and regulate poker in America. Supposedly it will stand separately from HR1174, refered to above. This bill should be introduced this summer and the PPA has been involved with much of the drafting of it. As soon as I can get my hands on it after it's introduced then I'll take a read through it.

Online poker bill pitched to Bono Mack | The Desert Sun | MyDesert.com