Democrat Shelley Berkley said she backs legalizing Internet gambling, but said it is too early to think about taxing it.

“Because the industry is not even established yet, I can’t imagine how we can know with any degree of certainty how the special tax would affect operators or customers,” she said.

“Let’s legalize Internet gaming, regulate it, and watch the industry develop and grow in the United States,” she said. “This is not the place to find (revenue) nor the method to get at it. I strongly believe that our economy, our consumers, and the future U.S. internet gaming industry will be better served by legalization and regulation — not by taxation.”

ONLINE GAMBLING: Promise of big money fails to lure support for online gaming – Business – ReviewJournal.com.

I think that Berkley is right on here. There are some great arguments for legalizing online gambling; filling budget gaps isn’t one of them. From a philosophical point of view, I’d say the most compelling argument for legalization is that, like gambling at casinos, this is something that Americans want to do, and that most people can do without causing harm to themselves or others. If you’re looking at it as a form of entertainment, it’s no different than spending the money on buying digital downloads of media content; if you’re looking at it as gambling, it’s no different from buying lottery tickets, which many people can do at convenience stores in their own neighborhoods. Is there really a moral distinction between buying lottery tickets and playing $0.10/$0.20 Hold’Em online? If anything, online poker’s the better choice, because at least it can help people develop their math skills.

What about the money? Would legalizing online gambling bring state budgets back into the black? I don’t see how that’s possible. A little while ago, I took on this issue in a post called The Virtue of Vice. In the next fiscal year, states are facing a combined $89 billion budget shortfall. If you accept the $72 billion-over-ten-years figure for online gaming revenues, it should be clear that even if you took ten years worth of all of the revenues for online gambling and turned it over to the states, it wouldn’t get them out of the red, even for a single budget.

If we had total state tax revenues of $3 billion from online gambling this year, it would cover a little more than 3% of the current combined budget shortfall.

Crunching McDermott’s few numbers (states and tribes will keep $30 billion out of $72 billion) shows that he’s projecting a tax rate of nearly 42%. That’s pretty high (well above Nevada’s 6.75% rate), and I’m not sure that a fledgling industry can support that kind of tax burden. Maybe it can, but as Berkley suggests, it’s impossible to say until we actually know what the industry’s going to be like.

Hoping to squeeze more money out of the state lottery, Illinois Senate President John Cullerton wants to sell tickets online and hire a private company to manage and market the games.

Cullerton thinks new technology and fresh ideas could help Illinois — facing what could be a $9 billion hole in next years budget — dramatically boost lottery revenues.

"I would venture to say you could potentially even double it," the Chicago Democrat said in a recent interview with The Associated Press.

But lottery experts are skeptical, noting Internet sales could raise legal questions and might not attract many new customers because lottery tickets already are so easy to buy.

Senate president hopes to expand Ill. lottery — chicagotribune.com.

Even if you tripled the state’s lottery sales, you’re still getting about $300 million in revenues. That’s nowhere close to $9 billion. So why even consider expanding the lottery for budgetary reasons? It’s not going to help enough to make a difference.

If the state believes that its citizens, as responsible adults, should have the right to buy lottery tickets online, so be it. But just throwing the magical gambling switch without regard to anything but a possible increase in revenues is a recipe for a public policy disaster.

As the topic becomes more and more popular we are also going to examine some questions in order to help an online gambler.

As reported by KLAS-TV: “Strip casinos be the subject of been struggling lately to observe up their gambling revenues.Fewer humbler classes are visiting Las Vegas and that property unruffled less are gambling.But could the cure in favor of the downturn subsist reaching public to would-be gamblers in their allow homes?

“Online gambling sites furnish the same variety of games that utmost Strip casinos translate — from sports betting, to poker and unruffled bingo.But progression laws take care of online gaming completely of the U.S., somebody that many casinos supported.But a considerable number are since since it of the same kind with any opportunity.

“The mistake to the internet-based casino would subsist only a clink not present, and the tables are filled through glowing players.Online casinos be obliged been giving gamblers a place to play free from the trip to Las Vegas during the term of years, on the other hand play is nor one nor the other legal nor regulated.

We have already given you several details in the beginning of this article, now we want to develop the topic.

“…When the sites before anything else began in the 1990’s, the big casinos feared they would attract away players, if it were not that after this they are vision the possibilities.If the laws are changed, existing casinos would likely have existence licensed judgment cross-border based sites, aperture the door in quest of fruitful names approve MGM and Harrah’s to influence unused gamblers.

“‘Having legal online gaming would really help the Strip casinos accompanying their marketing.It would cure them procure loudly who is stakes on the outside there,’ reported David Schwartz by the side of UNLV’s Center according to Gaming Research…”

After summing up all that we have spoken about you will realize that all this will be with you during your lifetime.

New slots machines » Blog Archive » Online gambling sites offer the same variety of games that most Strip casinos.

I think I want to rename my place of employment the “Center according to Gaming Research.” It’s much more interesting. And I look forward to seeing the casinos procure loudly who is stakes on the outside there.

The whole thing reminded me of a Damon Wayans sketch from In Living Color, in a good way. I’ve got to start talking like that from now on.

And the article’s coda, “you will realize that all this will be with you during your lifetime,” of course brings to mind “future events like these will affect you in the future” from Ed Wood’s opus Plan 9 from Outer Space.

The economy took center stage at the largest gaming conference in the world that opened in Las Vegas. But the nation's economic struggles may actually be a win for the expansion of the gaming industry.

These days almost anything is just a click away except legal gambling. For that, you must walk into a licensed and regulated casino. Next year that may change when congress goes back into session, according to American Gaming Association President and CEO Frank Fahrenkopf.

"Looking at our industry in hard times, it is a way to provide some revenue for state government," he said.

Nevada alone faced a $1 billion deficit this year. The federal government deficit makes that look like pocket change.

As the lobbyist for the gaming companies, Fahrenkopf says the internet may be the solution. He believes a bill setting up federal regulation and taxation of legal internet gambling can pass in 2009.

"Having $8 to $15 billion, as the offshore folks say, is there in new taxes has to look very, very inviting to a new congress," he said.

Las Vegas Now | Insiders Look to Online Betting as Big Business.

As I’ve been saying for years, there’s simply too much money in online gaming for the industry–and for states–to let it go untapped for long. But I have an issue with the $8 to $15 billion in government revenues figure floated there. I’d like to try to deconstruct this estimate and come close to a better figure, using just logic and educated guesswork.

In 2007, Nevada casinos “won” $168 million from 907 poker tables, yielding state tax revenues of slightly less than $13.5 million. Poker is not a big money-maker for Nevada casinos: by contrast, the state’s slots took in $8.5 billion.

But the online poker market will be much larger. Let’s say that customers will spend $10 billion on online poker in a year. That’s more than double the entire take for Atlantic City casinos in a year and one-eighth of the current total national gambling win, but we’ll think big here. Poker players are winning and losing that money to each other. The house is only collecting a “rake” from each pot. This money is going back and forth between players, and each time, the house takes its cut.

I’m going to be generous to the industry and suggest a 10% rake–players, I know you won’t like this, but this is just a thought exercise.

Out of $10 billion wagered in pots in a year (and won by players), the house would keep 10%, or $1 billion. From that billion dollars they’ve got to pay their bills and, hopefully, leave a little something for profit. Before you say “that’s a lot of money!” remember that this is for the entire industry, and they’ve all got IT guys to pay, plus hopefully something left for the shareholders.

But before they can drive that money off to the bank, the state has to take a cut. If online gaming is taxed at the going Nevada rate, we’re talking about an effective tax rate (figuring in licenses and per-game costs) of 8% or so. So out of that $1 billion won by all casinos, the state gets $80 million.

If, however, we assume that the industry would assent to a higher tax rate, let’s say 20%, you get $200 million collected in taxes in a year when $10 billion is wagered on online poker (again, with a very high average 10% rake).

Right now, that would barely make the Clark Country School District solvent, let alone put a dent in Nevada’s budget deficit. But wait, that $200 million won’t all go to the Silver State: we’ve got to assume that if other states are letting their citizens gamble online (and not play at state-taxed casinos), they’ll want a cut. So that $200 million is spread out over the entire country.

I think my math here is sound, and my assumptions about rake and tax rates are, I think, at the high end.

So can someone explain to me how online gambling is going to generate even $8 billion in taxes a year, as was mentioned above? I’m not at all being sarcastic–I’d really like to know if there are some data points I’ve missed. According to my calculations, people would have to bet $400 billion on online poker to get $8 billion in annual tax revenue. That’s more than five times the total combined annual take for all kinds of gambling in the United States.

According to my calculations, that about $1.3 million per capita for the entire population of the United States. So unless each of us has been sitting on $1.3 million in mattress money that we’ll play online (and that money would have to magically renew itself each year), I honestly don’t see how a figure of $8 billion in revenues is defensible. I’d say that $200 to $500 million in state tax revenues is possibly in the ball park but still optimistic, given that we don’t even have solid figures on the size of the industry.

Common sense would seem to suggest that allowing people to play poker online won’t magically quintuple the annual American spend on gambling. Even if it doubled the total amount of American gambling, we’d still only get, at best, an additional $1.6 billion a year. And we’re still talking about Americans suddenly gambling twice as much as they’ve been in the past.

If I wrong on the numbers (quantatative work isn’t my strongest suit, but I think I’ve got a decent grasp on simple arithmetic), please let me know and I’ll amend this. By $10 billion poker handle might be low: the table games (non-poker) handle for the whole state of Nevada was $30 billion last year, but that includes a lot of high end play. Even if I’m off by a magnitude of ten, and there is actually $100 billion wagered each year, I don’t see how we get to tax revenues of $8-$15 billion, unless we’re talking about a dramatically different tax model.

I’m not saying that we shouldn’t legalize online poker. I’m just saying that we should do it for the right reasons (personal liberty, player protection, minimizing hypocrisy), not because we’ve been promised a magic $8 billion treasure chest with no logical proof.

After months of hard work, negotiations and amendments, Antigua and Barbuda has successfully attained white list certification from the UK Department of Culture, Media and Sport.

By attaining this white list status, remote gaming operators based in Antigua and Barbuda will, as of 21 Nov., be allowed to advertise their services to consumers in the UK and promote the expansion of Antigua and Barbuda’s online gaming industry.

The white listing also means that operators will have the opportunity to work within a world-class regulatory environment that offers “superb e-services infrastructure.”

According to Mark Mendel, Antigua and Barbuda’s attorney at the World Trade Organisation WTO, this achievement makes Antigua and Barbuda the only non-EU European Union country, other than Tasmania, to receive white list certification.

Antigua Sun.

This sounds pretty good for Antigua. It’s better, I suppose, than being blacklisted. I wonder how the new administration will alter the U.S. policy towards online gaming. I’m not sure that it will, but you never know.

Gamblers in the UNLV study weren’t asked about gambling addiction, but rather what gambling meant to them and what motivated them to gamble online versus in bricks-and-mortar casinos. Researchers asked gamblers, 20 of whom primarily visited casinos and 10 of whom mostly gambled online, to create visual collages representing their feelings about gambling.

Alice, to illustrate how she felt about gambling online, showed a cartoon character fighting off a pack of bulldogs.

The study comes as the debate heats up around Internet gambling, which is the focus of at least five bills circulating through Congress.

The study doesn’t conveniently serve arguments for or against legalization of online gambling and therefore is unlikely to register in the debate. But it does offer a glimpse into an activity that is growing in popularity and is little understood by many involved in the debate.
Players in the political debate interpreted the study in contradictory ways.
Dressing down: Web gambling’s hallmark – Las Vegas Sun

I’m not so sure about this “visual collage” thing. It’s not the sort of thing I’d expect an adult to do. In fact, I’m pretty sure that if I was talking to someone and asked them to describe how they felt by selecting a cartoon, they would whack me in the head pretty hard. Maybe I should broaden my range of acquaintances.

The thing about gambling online is that it’s still just gambling. Sure, there are differences. But there are probably differences in how consumers relate to restricted slot locations (the bars, gas stations, and markets w/ 15 or fewer games) and major casinos. As I said yesterday (when I was talking about owner/investors) some people will win, some will lose. I would say that some are born to sing the blues, but I’d rather select a cartoon to tell you my mood than quote a Journey song here. The only problem is, they play it so often on the radio that I’ll never be able to forget it. Can we do a study on that?

A U.S. House of Representatives panel said on Monday it will hold a hearing on Friday to look at Internet gambling, which is effectively banned in the United States.

The hearing will examine whether Internet gambling can be regulated to protect consumers and the payments system, said the House Financial Services Committee.

Committee Chairman Barney Frank introduced a bill in April that would repeal an effective ban on online gambling imposed last year by Congress.

The Massachusetts Democrat said the ban was “imprudently adopted” and the pastime is “a matter of individual freedom.”

Frank’s bill would make it legal again for banks and credit card companies to make payments to online gambling sites.

The bill includes provisions for licensing and regulating online gambling companies to protect against underage gambling, compulsive gambling, money-laundering and fraud.

ABC News: House panel sets hearing on Internet gambling

As I’ve said many, many times previously, studying Internet gaming is a great idea. With states already using gambling for revenue and development purposes, it makes sense to take a serious look at the pros and cons of an Internet gaming regulatory regime.

In another effort to roll back an Internet gambling ban, Rep. Shelley Berkley on Thursday introduced a bill calling for a one-year study of online wagering by the National Academy of Sciences.

“One of the advantages of this legislation is that it doesn’t take a side,” she said. “It doesn’t say Internet gambling is good or bad. It says ‘Let’s study the issue.’ ”

But Berkley, D-Nev., acknowledged she wants to repeal the Internet gambling ban approved last year by Congress.

“It’s very difficult to unring a bell once it has rung in Washington,” Berkley said. “But the ban was sneaked onto a port security bill, and the people who voted for it, including myself, were not contemplating a ban on Internet gambling.”

The measure was passed and signed into law in October.

Berkley’s bill comes one week after Rep. Barney Frank, D-Mass., proposed legislation to repeal the Internet gambling ban and require the Department of Treasury to regulate the $13 billion online wagering industry.

Berkley is a co-sponsor of Frank’s bill and Frank has said Berkley’s bill is “perfectly complementary” to his.

While Frank’s bill has 11 co-sponsors so far, Berkley claims to have 60 co-sponsors, including Frank and Nevada’s two other House members — Reps. Dean Heller and Jon Porter, both R-Nev.

Other Berkley co-sponsors include Rep. John Conyers, D-Mich., the chairman of the House Judiciary Committee which is likely to review Berkley’s bill, and Rep. Frank LoBiondo, a New Jersey Republican who represents casinos in Atlantic City.

ReviewJournal.com – Business – Berkley offers bill on study of Web wagers

As I said last year when Representative Porter introduced a similar bill, I think this is long overdue. Honestly, they should have done this study in 1998. Better late than never, I guess. I really hope they take a serious look at the history of gambling prohibition in the U.S. before making any recommendations.

Attempting to roll back a ban on online gambling, House Financial Services Committee Chairman Barney Frank introduced on Thursday a bill that would permit Americans to place bets over the Internet.
Frank’s bill would enable companies to be licensed to accept bets and wagers online from individuals in the U.S.
The bill would exempt the operators from current restrictions on online gambling and would require licensed companies to have protections in place against underage and compulsive gambling, money laundering and fraud. Read text of the bill.
Frank, a Massachusetts Democrat, called existing Internet-gambling law “an inappropriate interference on the personal freedom of Americans” that should be undone.
Current law prevents U.S. banks and credit-card companies from processing payments to online-gambling businesses outside the country.
…
Speaking to reporters at a Capitol Hill news conference, Frank said he doesn’t gamble himself but said the bill is meant to address personal choice.
“This [current bill] is an intrusion on individual liberties,” Frank said. On Wednesday, Frank called Internet gambling a “victimless crime.”
The estimated 12 million to 20 million online gamblers in the U.S. contribute more than half the industry’s estimated worldwide annual revenue of $12 billion, according to the University of Pennsylvania’s Annenberg Public Policy Center.

Internet gambling would be legal under Rep. Frank’s bill – MarketWatch

Online poker players will no doubt cheer the bill. I’ve got to confess that I don’t know enough about the political climate in Congress right now to handicap the bill’s chances. I just think we should keep in mind that we’re heading into what promises to be an extremely divisive poltical season en route to the 2008 presidential campaign, so you’ve got to think about how a yea or nay vote would help or hurt members of Congress and their respective parties.

I’m not sure that wrapping online gambling in the flag of personal liberty is the best tack for Frank to take, because there’s a fairly solid body of law that says gambling is not an inalienable right. Here’s why:

In 1960, the Nevada Gaming Control Board published it’s “Black Book,” or list of excluded persons. It had on it 11 men suspected of links to organzied crime–many hadn’t been convicted of anything–who were to be barred from all Nevada casinos. One of the men, John Marshall, was ejected from the Desert Inn after deliberately flouting the ban. Marshall sued just about everyone–governor Grant Sawyer, the Control Board, and the DI–and argued his case up to the federal 9th Circuit Court of Appeals, which ruled that Marshall’s exlcusion was justifiable and not a violation of his 14th amendment rights, though the court made it clear that the Control Board should follow regular procedures in putting people in the Black Book.

The upshot of this is that gambling isn’t a natural right: if a state or federal government can give a reasonable explanation of why you shouldn’t be allowed to gamble, you can’t gamble. And this is precisely the argument the Justice Department has used, arguing that “unregulated” online gambling is a conduit for money laundering and organized crime. You can disagree over whether they’ve proven that, but I’m not sure that you’d win in court.

The better rationale for legalization, looking at history, is dollars and cents: Legalizing online gaming will allow states to channel some of the money spent on it to the public good. A secondary argument should be that, by allowing already-regulated U.S. and European companies into the field, fly-by-night and criminally-linked competitors will be driven out. Regulation, rather than prohibition, may be a more effective regime for player protection and crime control, and it would definitely benefit states–at least those that chose to legalize it.

Two Nevada lawmakers, hoping to repeal a crackdown on Internet gambling, are working on legislation that would require the National Academy of Sciences to conduct an 18-month study of online wagering.

Reps. Shelley Berkley, D-Nev., and Jon Porter, R-Nev., will co-sponsor the legislation, which is expected to be unveiled within weeks.

The Nevadans also hope to gain a powerful ally in Rep. Barney Frank, D-Mass.

Frank, chairman of the House Financial Services Committee and a longtime critic of gambling restrictions, has called last year’s Internet gambling ban “preposterous” and one of the “stupidest” bills ever passed.

Former Senate Majority Leader Bill Frist, R-Tenn., attached the ban to a port security bill that passed in the waning days of last year’s congressional session.

Frank has said he is considering proposing a repeal of the ban, which aims to shut down 2,300 Internet gambling sites producing about $12 billion per year.

Berkley said she talked to Frank on Wednesday on the House floor about Internet gambling and they plan to meet again “in the very near future.”

reviewjournal.com — Business – Nevada lawmakers to push for Net betting study

Needless to say, I think this is a great idea, as we need to know more about Internet gambling.

I’d like to modestly add that the National Academy of Sciences needs to enlist the help of a historian who’s written a book on gambling prohibition and the Internet in the 18-month study.

Has the time actually come for Congress to read its own legislation?

In the wee hours before Congressmen could head off for their election year recess, they managed to churn out a mound of unread anti-gambling legislation. In their haste to vacate, the lawmakers added fuel to a smoldering trade dispute between the tiny island paradise of Antigua and the superpower to the north. While the conflict centers around online gambling, it could well end up disrupting the businesses of companies such as Microsoft and Google, if the US is unable to fend off the bully Antigua.

The legislation in question primarily sought to restrict access to online gaming sites for American players by criminalizing financial transactions between American financial institutions and the sites in question. It has, however, had the unintended consequence of strengthening Antigua’s hand in its dispute with America before the World Trade Organization (WTO) over the supply of cross border gambling services. As Mark Mendel, Antigua’s lead attorney in the case explained to El Reg:

The new legislation strengthens our arguments that the US permits domestic remote gambling but not foreign remote gambling, as it has a number of ‘carve outs’ for domestic operations that cannot apply to foreign ones. It is just further evidence of the discriminatory effect of US laws and the [American] government’s enforcement of them.

In its hurried attempt to penalize the foreign-based online gaming outfits without offending the American-based horse racing and Indian casino industries, Congress managed to bring into bold relief the crux of Antigua’s claim against the United States – namely that American law treats foreign suppliers of gambling services differently than its own. Such equitable treatment between trading partners forms the backbone of the WTO, and, if Antigua has its way, American intellectual property owners will ultimately pay the price for the American government’s refusal to open its market to at least certain types of internet gambling.

Tiny Antigua grabs the US by its illegal, online dice

Fans of Mortal Kombat will have to imagine that game’s narrator reading this post’s headline to get the full dramatic effect.

I’ve already written extensively on the WTO case and the latest gambling “ban” (for that matter, I was a consultant on the WTO case), so the only new thing I’ve got to say is that Congress will learn that in today’s world, borders just aren’t as inviolable as they once were.

It was getting late on Oct. 12, the night before a sweeping anti-Internet gambling bill would be signed into law. Paul McGuire was at his computer, enjoying one last hurrah on PartyPoker, a site that had pledged to kick off all U.S. users as soon as the law left
President Bush’s desk. “It was kind of like that last party before summer ends when you’ve got to go back to school,” says McGuire, a 34-year-old New Yorker and author of the popular “Tao of Poker” blog. “They were playing loose because it was the last night.” Maybe for some.

Not McGuire, whose online handle is “Dr. Pauly.” At 11 p.m., he simply closed down his PartyPoker account, withdrawing thousands of dollars in winnings accumulated in recent weeks. He later wired the funds to an offshore account with NETeller, an Internet bank registered in the Isle of Man, and opened new accounts with two other poker sites — both of them privately owned.

So much for the U.S. crackdown on Internet gambling. The Unlawful Internet Gambling Enforcement Act is designed to halt the flow of the roughly $6 billion that flows each year from U.S. gamblers to foreign Internet casinos by officially barring credit card companies and other U.S. financial institutions from processing illegal wagers. The Justice Dept. has long maintained that online poker gambling, like sports betting, violates terms of the 1961 Wire Act.

But within hours of the new bill’s signing, McGuire was back online, betting on hands of Texas Hold ‘Em — and he was not alone. He’s now wagering through PokerStars.com and FullTiltPoker.com, both licensed by the Canadian Mohawk territory of Kahnawake and happily taking U.S. customers. (PokerStars also has a license with the government of the Isle of Man, where it is headquartered.) Both sites saw record numbers of players the weekend following the law’s adoption, according to Louisiana’s Casino City, which monitors traffic on online poker sites in its trade journals.

Indeed, the new law will do little to stop online gambling, say gamblers, betting companies, and industry analysts alike. Instead, the law will drive out regulated, publicly traded companies like PartyGaming, the Gibraltar-based parent of PartyPoker, and make way for private gambling companies and banks based in nations where such industries are loosely policed at best. As a result, the new law could ultimately make billions of dollars in U.S. online gambling transactions more difficult to trace, and increase the likelihood that funds end up in criminal hands. “It leaves an opening for some of the more unscrupulous companies coming in from unregulated places,” says Frank Catania, past director of New Jersey’s Division of Gaming Enforcement and president of Catania Consulting Group (see BusinessWeek.com, 7/12/06, “Betting Against Online Gambling”).

Online Gambling Goes Underground – Yahoo! News

This is exactly what everyone predicted would happen: the law won’t stop online gambling, but it has crippled the publicly-traded companies with U.S. exposure.

After a few months of this, you’ve got to think that Congress will appoint a committee to seriously devise a national policy on Internet gambling that will actually address the concerns of all involved.

And yes, that was a really lame Celine Dion joke in the intro. I just had a mental image of these habitual online poker players transferring funds into new ewallets while over-emoting.

Here are some of the relevant parts of Section 802 of the bill, which deals with “unlawful internet gambling”:

Sec. 5362. Definitions

`In this subchapter:

`(1) BET OR WAGER- The term `bet or wager’–

`(A) means 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, upon an agreement or understanding that the person or another person will receive something of value in the event of a certain outcome;

`(B) includes the purchase of a chance or opportunity to win a lottery or other prize (which opportunity to win is predominantly subject to chance);

`(C) includes any scheme of a type described in section 3702 of title 28;

`(D) includes any instructions or information pertaining to the establishment or movement of funds by the bettor or customer in, to, or from an account with the business of betting or wagering; and

`(E) does not include–

`(i) any activity governed by the securities laws (as that term is defined in section 3(a)(47) of the Securities Exchange Act of 1934 for the purchase or sale of securities (as that term is defined in section 3(a)(10) of that Act);

`(ii) any transaction conducted on or subject to the rules of a registered entity or exempt board of trade under the Commodity Exchange Act;

`(iii) any over-the-counter derivative instrument;

`(iv) any other transaction that–

`(I) is excluded or exempt from regulation under the Commodity Exchange Act; or

`(II) is exempt from State gaming or bucket shop laws under section 12(e) of the Commodity Exchange Act or section 28(a) of the Securities Exchange Act of 1934;

`(v) any contract of indemnity or guarantee;

`(vi) any contract for insurance;

`(vii) any deposit or other transaction with an insured depository institution;

`(viii) participation in any game or contest in which participants do not stake or risk anything of value other than–

`(I) personal efforts of the participants in playing the game or contest or obtaining access to the Internet; or

`(II) points or credits that the sponsor of the game or contest provides to participants free of charge and that can be used or redeemed only for participation in games or contests offered by the sponsor; or

`(ix) participation in any fantasy or simulation sports game or educational game or contest in which (if the game or contest involves a team or teams) no fantasy or simulation sports team is based on the current membership of an actual team that is a member of an amateur or professional sports organization (as those terms are defined in section 3701 of title 28) and that meets the following conditions:

`(I) All prizes and awards offered to winning participants are established and made known to the participants in advance of the game or contest and their value is not determined by the number of participants or the amount of any fees paid by those participants.

`(II) All winning outcomes reflect the relative knowledge and skill of the participants and are determined predominantly by accumulated statistical results of the performance of individuals (athletes in the case of sports events) in multiple real-world sporting or other events.

`(III) No winning outcome is based–

`(aa) on the score, point-spread, or any performance or performances of any single real-world team or any combination of such teams; or

`(bb) solely on any single performance of an individual athlete in any single real-world sporting or other event.

SAFE Port Act – THOMAS (Library of Congress)

The key sections here definitively outlaw sports betting, but poker is a grey area, and freeroll tournaments are definitely permitted. So, strictly speaking, it will still be legal to play poker on the Internet, but not to wager money on it–something that might be a moot point, but maybe not. Could you charge a $100 monthly membership for a site, then offer freeroll tournaments whose prize isn’t based on the number of partcipants? I think the law allows that.

Could Harrah’s Entertainment allow casino players to redeem Total Rewards points for entry into a satellite tournament for the World Series of Poker? I think that, under section viii/II, this would be allowed.

Let’s go on, to find out just what “unlawful Internet gambling” is:

`(10) UNLAWFUL INTERNET GAMBLING-

`(A) IN GENERAL- The term `unlawful Internet gambling’ means to place, receive, or otherwise knowingly transmit a bet or wager by any means which involves the use, at least in part, of the Internet where such bet or wager is unlawful under any applicable Federal or State law in the State or Tribal lands in which the bet or wager is initiated, received, or otherwise made.

`(B) INTRASTATE TRANSACTIONS- The term `unlawful Internet gambling’ does not include placing, receiving, or otherwise transmitting a bet or wager where–

`(i) the bet or wager is initiated and received or otherwise made exclusively within a single State;

`(ii) the bet or wager and the method by which the bet or wager is initiated and received or otherwise made is expressly authorized by and placed in accordance with the laws of such State, and the State law or regulations include–

`(I) age and location verification requirements reasonably designed to block access to minors and persons located out of such State; and

`(II) appropriate data security standards to prevent unauthorized access by any person whose age and current location has not been verified in accordance with such State’s law or regulations; and

`(iii) the bet or wager does not violate any provision of–

`(I) the Interstate Horseracing Act of 1978 (15 U.S.C. 3001 et seq.);

`(II) chapter 178 of title 28 (commonly known as the `Professional and Amateur Sports Protection Act’);

`(III) the Gambling Devices Transportation Act (15 U.S.C. 1171 et seq.); or

`(IV) the Indian Gaming Regulatory Act (25 U.S.C. 2701 et seq.).

`(C) INTRATRIBAL TRANSACTIONS- The term `unlawful Internet gambling’ does not include placing, receiving, or otherwise transmitting a bet or wager where–

`(i) the bet or wager is initiated and received or otherwise made exclusively–

`(I) within the Indian lands of a single Indian tribe (as such terms are defined under the Indian Gaming Regulatory Act); or

`(II) between the Indian lands of 2 or more Indian tribes to the extent that intertribal gaming is authorized by the Indian Gaming Regulatory Act;

`(ii) the bet or wager and the method by which the bet or wager is initiated and received or otherwise made is expressly authorized by and complies with the requirements of–

`(I) the applicable tribal ordinance or resolution approved by the Chairman of the National Indian Gaming Commission; and

`(II) with respect to class III gaming, the applicable Tribal-State Compact;

`(iii) the applicable tribal ordinance or resolution or Tribal-State Compact includes–

`(I) age and location verification requirements reasonably designed to block access to minors and persons located out of the applicable Tribal lands; and

`(II) appropriate data security standards to prevent unauthorized access by any person whose age and current location has not been verified in accordance with the applicable tribal ordinance or resolution or Tribal-State Compact; and

`(iv) the bet or wager does not violate any provision of–

`(I) the Interstate Horseracing Act of 1978 (15 U.S.C. 3001 et seq.);

`(II) chapter 178 of title 28 (commonly known as the `Professional and Amateur Sports Protection Act’);

`(III) the Gambling Devices Transportation Act (15 U.S.C. 1171 et seq.); or

`(IV) the Indian Gaming Regulatory Act (25 U.S.C. 2701 et seq.).

So it is legal to use the Internet to place bets within a single state in which bets are legal: Nevadans, then, should be able to place bets with casino sportsbooks online. It looks to me like THIS LEGALIZES INTERNET GAMBLING WITHIN NEVADA! And it is legal to use the net to send bets from one Indian reservation to another, as long as it doesn’t violate the `Professional and Amateur Sports Protection Act’ (which outlaws sports betting except in Nevada, Delaware, and Oregon)–so poker would be fine, but sports bets aren’t.

I’m puzzled as to why bets can’t be sent from one state where they are legal (i.e., Mississippi) to another (i.e., New Jersey). Is the “intrastate” exception actually a carve-out to guarantee the legality of wireless gambling, which in already on the way in Nevada.

That’s what I think the most important parts of the bill are, at least for Nevada. Nelson Rose also has a commentary up in which he dissects the entire bill: Nelson Rose’s analysis of H.R. 4954.

Some in the media have expressed wonder at the “secret” website launched to support indicted former BOS CEO David Carruthers. As I said in an earlier post, nothing posted on the Internet is secret, but some things can be mysterious, enigmatic, or inexplicable.

The site’s webmaster has sent me an extensive Q & A that explains who he is (though it doesn’t reveal his “secret identity,” for reasons that seem plausible enough). Here it is:

Q: Who are you?

A: I’m an independent security consultant in the online gaming industry.

Q: Nationality?

A: British.

Q: Do you have any affiliation with BETonSPORTS Plc, David Carruthers, or
his legal team?

A: No. Unlike for example the now archived FreeJayCohen.com,
FreeDavidCarruthers.com is a completely independent effort.

I don’t own any stock in BETonSPORTS Plc either.

Q: Are you an ex-colleague of David’s? Did you work at Ladbrokes or
BETonSPORTS before or after its listing?

A: No. I have never met David but I, like many, wish him and his family well.

Q: Are you being supported by anyone financially or otherwise to do this?

A: No, I’m doing it completely under my own steam, and completely at my
cost both in time and money.

Q: Why are you doing this?

A: The David Carrruthers and Nigel Potter cases are indicative of the
complete failure of the Blair administration to stand up for the rights of
British citizens. The actions of certain ambitious District Attorneys in
the US are no less foul in their callous disregard for those people who’s
lives they destroy as a result of prosecutions like these, but it is the
passivity and inaction of the Blair administration that is the most
contemptible.

You have to draw a line in the sand about remaining silent in the face of
injustice. With the arrest of Carruthers and clear intention of Blair to
sell more British people down the river via the Extradition Act 2003
(evidenced by the NatWest Three’s recent plane ride to Texas) that line
was crossed.

You might say that I believe that one man can (and should) make a
difference. I hope to do so.

Q: Why won’t you tell the world more than your first name? What do you
have to hide?

A: The current US administration does not tolerate dissent, and I do not
wish my name to be on a watchlist when I travel, so that as happened with
David, when the passenger’s details are shipped off under the US-EU
Passenger Name Record agreement within 15 minutes of the plane taking off,
I do not receive what the US Administration deems appropriate ‘treatment’
when I land.

Q: Are you anti-American?

Not at all. I am a big proponent of the special relationship between the
UK and US, and the Anglosphere.

Q: What are your politics?

A: I am skeptical of all politicians, of left or right, in the UK or
elsewhere. People from the US in particular have let their politicians run
amok since 9/11/01 and to grab all kinds of power they should not have, in
the name of the so called ‘War on Terror’.

I wish more people from the US would watch Adam Curtis’ ‘The Power of
Nightmares’ and understand that unless restrained by sensible people,
“those with the darkest fears became the most powerful”, and cast that
shadow into the every day lives of everyone.

Q: Do you dislike journalists?

A: I dislike sloppy, lazy journalism, like Sharon Churcher’s article in
the Mail on Sunday about the BETonSPORTS case. Articles like that are the
reason why blogs are becoming far more trusted and frequently read than
the newspapers. Each time poor articles like that are published, the
reputation and influence of the fourth estate is further diminished. This
is not 1986.

Q: What do you think the main effects of the David Carruthers arrest have
been?

A: Apart from hitting share prices, causing British CEOs to rethink their
travel plans and their ‘directors and officers’ insurance cover, the
arrest has caused two short-term effects;

The first was to ensure that other sports betting operations just got a
boost from all of the publicity regarding the case, and not just from the
‘ex’ customers of BETonSPORTS who currently haven’t a place to bet but
completely new customers too;

The second is that many US-facing sportsbook operations (such as
Sportingbet USA) have abruptly stopped taking telephone wagers, and are
moving their operations completely to Internet-only wagering platforms
such as Finsoft or SportsPulse. While there is no expectation that the US
‘Unlawful Internet Gambling Enforcement Act’ will pass the Senate, there
is a rightful concern that continuing to take telephone wagers now opens
operators to further prosecutions based on the 1961 US ‘Wire Act’.

Q: What about the future effects?

A: This is less clear, and depends on the Blair government getting its
collective thumb out of its posterior and standing up for its citizens for
once.

Three good things the Blair administration has done in the last nine years
in office are making the Bank of England independent, liberalising the
alcohol licensing laws to permit 24hr drinking, and the Gambling Act 2005.

That they are now not standing up for British businesses who are prepared
to bring the government revenues under that Act by operating foreign
facing remote gaming sites is unbelievable.

Q: What is your vision for the FreeDavidCarruthers website?

A: I intend it to become a central rallying point for discussion of the
David Carruthers case and its injustice, the plight of UK businessmen
under the Extradition Act 2003, and the issue of online gambling and its
regulation in general.

Previously, I’d considered the Carruthers case chiefly in light of American online prohibition efforts, but it’s interesting to see how others in the world see it.

Antiguan government officials reacted angrily today to news that the United States Department of Justice has released indictments of two Antiguan residents on money laundering charges related to their operation of an Antigua based and licensed gaming service provider. The charges, contained in an indictment dated 7 April 2005, accuse William Scott and Jessica Davis of violating United States anti-money laundering laws through their operation of World Wide Telesports, or WWTS. Ironically, the allegations hinge on purported violations by the two of United States legislation known as the “Wire Act” and the “Travel Act,” the application of both of which to gaming operators from Antigua was found last year by the World Trade Organisation to be contrary to the American obligations under WTO law.

Antigua’s Ambassador to the WTO, Dr John W. Ashe, doesn’t see the indictments and Antigua’s WTO victory to be unrelated. “These indictments, coming down at a time when the United States is supposed to be undertaking efforts to comply with the rulings of the WTO, are surely no coincidence. It is more than just a little ironic that the United States Department of Justice has chosen to single out for prosecution a well-known gaming service provider from Antigua, a jurisdiction that has been leading global efforts to license, regulate, supervise and oversee a robust yet clean and safe gaming industry over the Internet–and the only jurisdiction to take on the United States at the World Trade Organisation–and win–on this exact issue.”

Under WTO procedures, the United States had until 3 April 2006 to comply with the rulings of the WTO in the gambling case. Having initially stated that coming into compliance would involve significant legislative efforts, the United States made a surprise announcement at the WTO meeting last month that it was already in compliance with the adverse ruling, despite having taken no apparent corrective action at all. The parties are in the early stages of a process at the WTO whereby a panel will review the current situation and assess the status of United States compliance. “We are looking forward to this review process,” said Dr Ashe, “and we feel very confident that once again the WTO will agree with us that the United States’ position on Internet gaming from our country is simply trade discrimination–disguised restrictions on trade in services in violation of the WTO agreements. In the year since we won our case, facts have only gotten better for Antigua and worse for the United States.”

The indictments do not allege that Mr Scott and Ms Davis engaged in any money laundering conduct other than by virtue of conducting the ordinary business of a licensed Antiguan gaming company, conduct that not only is lawful in Antigua, but much of which is clearly lawful in the United States as well. The Antiguan Solicitor General and Chairman of Antigua’s Financial Services Regulatory Commission, Mr Lebrecht Hesse, announced that the Antiguan government would be contacting the United States directly to lodge a protest over the latest action of the Department of Justice. “Coming at a time when Antigua and the United States are expected to be working together on a reasonable solution to our dispute, these indictments announced by the Americans yesterday–which I note have been laying unsealed, in secret, since they were returned over a year ago–are pretty incredible. We trust that these indictments do not represent the official position of the United States government and rather represent the work of some over-zealous prosecutor. We look forward to the US administration’s prompt clarification of this most unfortunate incident.”

Turning to the subjects of the indictments, Mr Hesse observed as Chairman of the FSRC “both of these individuals have been through the extensive due diligence process we subject all major participants in our gaming industry to, and both have been found fit and proper to conduct this kind of regulated business in Antigua. To our knowledge, Mr Scott and Ms Davis-Dyett have been law-abiding citizens since coming to this country some years ago.”

As I’ve said a million times already, this is the major issue of the Internet: the collision between national borders and international commerce.