When the United States Senate passed the Unlawful Internet Gambling Enforcement Act at the 11th hour last fall by unanimous consent, the Congressional body had little knowledge of the issue itself. Attached as a rider to the Safe Port Act, the UIGEA ushered in a climate of turmoil and uncertainty in the online gambling world. With the proposed regulations released in October, the Poker Players Alliance is seeking your input as part of a federally-mandated comment period. PPA Executive Director John Pappas explains the existence of a comment period: “This is part of the democratic process in which we operate. The Federal Government can impose rules and regulations, but they must do so in a way that allows the American public to comment on them. When they introduced the proposed UIGEA regulations in early October, there were a number of problems. What we’ve been doing is encouraging PPA members and poker players everywhere to write to the Federal Government and point out the issues with their regulation.”
So what are the shortcomings with the UIGEA regulations? Here are five flaws taken from the PPA’s website:
1. The proposed regulations should be modified to clarify that they don’t cover games predominantly determined by skill, such as poker, bridge, mahjong and backgammon. Section 5362(1)(a) of UIGEA defines a bet or wager as “the staking or risking by any person of something of value upon the outcome of a contest of others, a sporting event, or a game subject to chance,…” “Subject to chance” can be interpreted in a variety of ways, but in a gambling context it should reasonably be taken to mean games like roulette or slots where players bet against “the house” and success is determined by chance. Poker players compete, not against the house, but against each other, and the success of a player over any significant time interval is determined by that players’ skill.
2. The regulators must define what is and isn’t “unlawful Internet gambling.” The federal and state laws governing Internet gambling are very ambiguous -- nearly all of them were written before the advent of the Internet, and it is not clear how they apply to Internet gaming. In the proposed rule, the regulators emphasize that it is not their intention to clarify this question, because to do so would require them to examine the laws of every state with respect to every gaming modality. Yet that is exactly what they are requiring every bank and payment system to do individually.
3. The regulators should refrain from implementing the regulations until the U.S. resolves its international trade disputes. The World Trade Organization has found the U.S. to be out of compliance with its obligations under the General Agreement on Trade in Services because of its attempts at prohibiting Internet gambling. This is likely to cost the U.S. economy billions of dollars in lost market share and export opportunities. The U.S. government is in negotiations with its trading partners over this matter. Inasmuch as these regulations arguably make that situation worse, the regulators should hold off on finalizing the regulations until the U.S. can resolve its international trade obligations.
4. The proposed regulations should not infringe on personal privacy. UIGEA deputizes banks and payment systems and turns them into the Internet morality police. These regulations should not compel banks to scrutinize the private transactions of individual poker players and others. To do so is hostile to the personal and financial privacy of every American with a credit card or checking account.
5. The UIGEA and the enforcing regulations should not apply to Internet poker nationwide. Federal case law has consistently held that the Wire Act applies only to sports betting and very few states have any laws against Internet poker. These regulations should be clear to only block those transactions which are in fact against the law. Games of skill which are not outlawed under current federal law – such as poker, chess, bridge and majong -- should be exempt from the UIGEA and the regulations.
The main issue the PPA takes with the regulatory efforts is that the guidelines set forth by the U.S. Treasury and Federal Reserve are vague at best (point #2 above). To quote Pappas, “In effect, these regulations will force credit card companies to block transactions to online poker accounts. There’s no definition given of what is or is not unlawful. If you are the Chief Legal Officer of a bank, you’re gong to err on the side of being conservative and block anything that could be perceived as a gaming transaction whether it’s legal or not.”
The Federal Government is required to review any and all comments given as part of this process. This essentially acts as a “stall tactic” that would delay the regulations from going into effect until all comments are reviewed and analyzed: “Really what this can help do is give the government pause before they rush to push out regulations. They’re required to review and take into account all of the filings that are sent. We think that, if we can get a lot in there, it gives the Government more to chew on and effectively will help delay the implantation of any regulations for a while. That is a short term goal. Ultimately, we want good regulations.” In total, the process can take anywhere from a few weeks to a few months.
With the regulations set forth not specifically outlining what is or is not illegal, you can see that the law passed last year was a poor one, at best. Pappas agrees: “I think that Congress didn’t realize what it had passed. They certainly didn’t realize it was unenforceable and put the burden on the U.S. banks and financial institutions to figure out what isn’t and is legal.”
Comments are due by December 12th. The PPA has asked for an extension to this deadline, but doesn’t expect that to occur. Click here to learn how to submit a comment as well as read some helpful tips. Here is a sample of some of the comments submitted so far by individuals and organizations. Note that the themes are similar to the five points outlined above:
“I would like you to reconsider adopting these changes in any timely manner, and instead allow for a bill which regulates and controls online wagering. Individuals should be allowed to do what they please with their own money. Thanks for your time.”
“I urge a revision to the proposed regulations to ensure a proactive bias towards processing of all financial transactions. To accomplish this, I propose revising the regulations to remove from the regulations all penalties for all but willful and egregious noncompliance. Also, I propose that the Monitoring section of the regulations be revised to require banks to process all lawful transactions.”
“The proposed rules on stopping the funding of unlawful internet gambling activities need a major overhaul. The rules require banks to do the impossible and provide no clear guidance. The costs and regulatory burden that banks will incur will not accomplish the desired result.”
“The corruption associated with this act is also readily apparent to the American people. There is no ethical or moral foundation for allowing certain forms of gambling (horse racing, state lotteries) and prohibiting others (poker). Especially considering that lotteries are far more likely to attract people with gambling problems. The vast majority of poker players are people that can easily afford to lose the money they are gambling in contrast to the majority of state lottery participants who cannot.”
“These regulations don't define what is or isn't unlawful gaming, and the regulations differ from state to state. I'm worried that banks (who have had the enforcement of this dumped in their laps) are going to block all gaming transactions, legal or illegal.”
Check out the full list of comments by going to http://www.regulations.gov. Then, select "Department of the Treasury-All” from the agency drop-down menu, then click “Submit.” In the “Docket ID” column, select “Treas-DO-2007-0015” to view public comments for this notice of proposed rulemaking.
To learn how to submit a comment, visit the PPA’s regulatory comment landing page by clicking here. You don't even have to be a PPA member to file a comment; any interested person or organization can do so. The Federal Government has spoken. Now it’s your turn to talk back.
News Resources
To read a summary of the UIGEA regulations written by CardPlayer, click here. Read Professor I. Nelson Rose's take on the UIGEA regulations.
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