Advocates of online poker breathed a sigh of relief recently, as a key provision of the Unlawful Internet Gambling Enforcement Act of 2006 has been delayed until June 1, 2010. For those of you less keen on the trials and tribulations of online poker players, I will start with a brief introduction to the UIGEA and internet gambling litigation that occurred this decade. Before the UIGEA, the only regulation of online gambling that existed was the Wire Act of 1961. That Act (18 U.S.C. § 1084) prohibited being “engaged in the business of betting or wagering knowingly us[ing] a wire communication facility for the transmission in interstate commerce…of bets or wagers on any sporting event or contest, or for the transmission of a wire communication which entitles the recipient to receive money or credit as a result of bets and wagers…” Internet gamblers attempted to bring a lawsuit against MasterCard under the Wire Act for allowing them to gamble at an online casino in 2001. This was unsuccessful, and the Fifth Circuit held that the Wire Act only prohibited sports betting online, and not “internet gambling on a game of chance.”
In 2006, the Security and Accountability For Every Port Act (SAFE Port Act, Pub. L. 109-347) was passed, with the UIGEA added as a rider very late into the process. The UIGEA, contrary to some popular belief, did not ban online gambling. It prohibits transactions from “banks or similar institutions” to illegal online gambling sites. It does not define “illegal online gambling”, but does define a bet as the “risking…of something of value upon the outcome of a contest of others, a sporting event, or a game subject to chance.” This caused a sharp divide in online casino operations – some, like then market leader PartyPoker, pulled out of the U.S. market due to the passage of the UIGEA. Some, like Full Tilt Poker and PokerStars, continued to serve U.S. customers. These companies are generally owned offshore, and process payments in various countries around the world. With regard to the U.S. and legality, Full Tilt and PokerStars take the position held by many poker players, stating that betting on poker is not “subject to chance.” They contend that poker is not a game of chance, but a game of skill.
The online poker movement has attracted a somewhat surprising number of defenders. As poker came into the mainstream, with names like Phil Hellmuth, Phil Ivey, and now Michigan’s own Joe Cada becoming celebrities featured on ESPN, as well as average people being able to play at home on sites like PartyPoker and PokerStars, it was no longer considered a negative activity like gambling had been in the past. Casual online players and professional poker players alike have rallied under the banner of the PPA – the Poker Players Alliance. The site tracks current federal bills pending to protect online poker, keeps players up to date on the latest online poker related legal news, and even features talking points and a guide to meeting members of Congress.
Chief among its defenders is Rep. Barney Frank (D-MA). He has introduced H.R. 2046 (in 2007), the Internet Gambling Regulation and Enforcement Act. It seeks to modify the UIGEA by legalizing and opening up to federal regulation Internet gambling facilities. It addresses the concerns of Congress in the UIGEA (minors, problem gambling, and money laundering) while allowing poker players to enjoy their game online. Rep. Frank’s proposed Act is now up to 63 co-sponsors in the House. Frank is the chief legislator that the PPA has rallied behind, but there are other key players as well. Rep. Robert Wexler (D-FL) has proposed H.R. 2610 (2007), the Skill Game Protection Act, which would legalize gambling on games of skill online, including chess and poker. Rep. Jim McDermott (D-WA) introduced H.R. 2607 (2007) to legislate tax collection on revenues from Internet gambling. Finally, last year, Sen. Robert Menendez (D-NJ) introduced S.3616, the Internet Skill Game Licensing and Control Act, which would legalize and regulate games of skill. This is the first bill relating to poker to hit the Senate floor.
Two important things have happened in 2009 relating to online poker. In June, the Department of Justice ordered the accounts of cash handlers for online poker sites frozen in the Southern District of New York, freezing close to $34 million in online poker players’ money. The PPA predictably opposed the action in a press release. However, the action may never be contested in court. Full Tilt and PokerStars have reimbursed their players, with Stars even giving an extra 10% credit to those who were affected. As far as the UIGEA goes, its enforcement provision has been delayed until June 1, 2010 by the Department of the Treasury and the Federal Reserve Board. This allowed Rep. Frank to go ahead with his bill’s hearings, which occurred on December 3, two days after the UIGEA would have gone into effect. Joe Brennan, chairman of the Interactive Media Entertainment and Gaming Association, believes that this is a testament to the power of Rep. Frank, as it is very unusual for any department of the government to essentially forestall an act of Congress. This sets the stage for Rep. Frank to attempt to get his original bill, as well as the Reasonable Prudence in Regulation Act, which would delay the UIGEA until next December, passed in 2010.
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