American Friendly Poker sites, and what the new congress law means in plain English

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 Legal Landscape of Online Gaming Has Not Changed

The new bill attempts to make it more difficult to get money into a site by forbidding US financial Institutions from funding the type of online gambling that the law has previously made illegal. The new bill does not make online gaming illegal where it was not illegal before. Let me say that again. The new bill does not make online gaming illegal. The bill merely speaks to the mechanism by which an online account is funded. I am going to spend some time in this article explaining the accuracy of my reasoning.

The Bill Constitutes Enforcement Legislation

The bill begins in section 5361 by discussing congressional findings. In that section the bill states that Internet gambling is funded by credit cards, etc. Section 5361(a)(4) states in relevant part:

“New mechanisms for enforcing gambling laws on the Internet are necessary because traditional … mechanisms are often inadequate…” 

The Bill Does Not Change Existing Gaming Law
 

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Of extreme importance in a statute is the definitional section that sets forth the parameters of a bill. The term “Unlawful Internet gambling” is given a definition. Section 5362(6) defines unlawful Internet gambling to mean placing or receiving a bet “where such bet or wager is unlawful under any applicable Federal or State law.” This raises the question regarding what type of online gambling is already illegal. That will be discussed below.

This brings us directly to the issue of what has been deemed illegal in the last 10 years since the first online casino opened its virtual doors. In a nutshell, sports betting is made illegal by the 1961 Wire Act, but poker is not.

How the Law Works

In order to explain this discrepancy, I must digress with some rudimentary background about just how the law works. You probably remember from your high school civics class that the legislature makes laws that the judiciary construes. That means that our representatives in Congress draft the laws that judges then interpret. 

If a law is unclear, a depuy attorney general (the prosecutor) will take one position and often a defense attorney will take an opposing position. They go to court and a judge makes a determination. So when the Attorney General makes a public statement about what a law means, he might or might not be correct. It is ultimately the decision of a court. 
 

Play Online Poker

However, in order for Internet poker to be illegal, there must be a specific statute that forbids such activity. For years I have posed the question: What statute prohibits online poker? And if it is illegal, why has there not been one lawsuit filed by the government against an owner of an online poker site?

Online Poker Is Not Illegal

Even though the Attorney General’s office has publicly taken the position that the 1961 Wire Act forbids online poker, in 10 years they have not put their money where their mouth is. Why? The judiciary (that is, the interpreting body) has already held that the 1961 Wire Act doesn’t speak to poker. It only applies to sports betting.

The case in point to which I refer is “In Re Mastercard International,” decided by District Court Judge Stanwood R. Duvall, Jr. in 2001. Among other issues, Judge Duval was faced with the question of whether the Wire Act applied to online gambling. The posture of the case was interesting because many deadbeat gamblers attempted to avoid online gambling debts they had incurred by alleging that the money they owed their credit card companies amounted to illegal gambling debts in violation of the Wire Act. As a matter of fact, there were so many similar suits filed by so many gamblers who did not want to pay their losses that the lower court consolidated 33 such similar charges.

Judge Duvall ruled that the Wire Act only prohibited wagering on sports events and he dismissed all 33 cases, noting that “Comparing the face of the Wire Act and the history surrounding its enactment with the recently proposed legislation, it becomes more certain that the Wire Act's prohibition of gambling activities is restricted to the types of events enumerated in the statute, sporting events or contests.” In other words, online poker was not within the reach of the Wire Act’s prohibition. The District Court of Appeal agreed with Duvall’s ruling that the 1961 Wire Act does not apply to online poker.

Hysteria Is Completely Unfounded

Since this new law does not change what is legal or illegal, the current hysteria is completely unfounded. This legislation attempts to make it more difficult to get money into a site. Besides a few wrinkles that will be the topic of another article, that’s about it. 
 

I am not saying there won’t be lawsuits construing the meaning of the statute, but ultimately, the statute will only be deemed to affect the method by which online sites are funded. 

Correct Analysis

There are a few very insightful people out there correctly analyzing this new legislation. For example, the president of the American Gaming Association, Frank Fahrenkopf is one such person. “This bill did not make anything legal or illegal,” says Fahrenkopf. “What it did was affect the mechanism by which Internet gambling takes place…and there is some question as to whether or not that will be effective.”

Bloomberg correctly reports that “Congress passed legislation that curbs financial payments from banks to offshore Internet casinos that are illegal under US law.”
 

I urge our readers to use care in accepting the opinions that one site gets from another site where no legal opinion is being presented. Please, read the statute yourselves. Read the words carefully and think about my analysis. The statute can be found by clicking here. The Unlawful Internet Gambling Enforcement section starts on page 213.

Jurisdiction 

Another area I have written about extensively is the area of jurisdiction. Libraries of books have been written on the varied and complex meaning of jurisdiction. One of the simplest meanings of “jurisdiction” is legal power. 
 

Our government doesn’t have jurisdiction to make rules for a company that resides offshore. Our rules do not apply in other countries, as they have their own sets of rules. 

This bill prohibits a gaming company from accepting payment that violates US gaming law. Besides the fact that no law makes online poker illegal, all the gaming sites are offshore and not subject to US laws. 

A law that tries to control an offshore company is considered a law with no teeth, because it cannot be enforced. In the US, when a law is broken, a person is arrested. The government subpoenas records and a case moves forward. What it means not to have jurisdiction is that US laws do not apply offshore, nor can the US arrest a person in another country nor does our government have subpoena power to command an offshore company to turn over records. NETeller, an online money transfer service, is also an offshore company, not subject to US laws. 
 

First of all, nothing is going to happen for 270 days. The Secretary and the Board of Governors of the Federal Reserve System have 270 days (after the bill is signed by the president) to come up with enforcement policies and procedures. Those procedures are directed to the behavior of banks and credit card companies. The procedures will be a nightmare. 

Representatives of the financial services industry worry about a heavy regulatory burden being placed on banks. “The bill sets up banks to police a social issue,” said Laura Fisher, spokeswoman for the American Bankers Association. “It's not something we want to encourage.”

The bill passed by Congress could allow regulators to exempt checks and money transfers because they are more difficult to track. “Analyzing 40 billion checks a year would be a largely manual process,” Fisher said.

If checks are not exempt, this would break our banks as it would be too costly to enforce. If checks are exempt, players could simply send a check to an online site. If checks are not within the purview of the law, what about e-checks?

The rules won’t even be figured out for nine months during which time, all the clever sites will have legally circumvented this new law by other legal procedures to fund the sites. 
 

I am surprised to see some online sites overreacting and posturing as if they will pull out of the market. Any company that just pulls out of the market deserves to lose a lot of money because it is receiving bad legal advice. 

Offshore companies are not bound by US antigaming laws. But the most persuasive reason why offshore companies shouldn’t pull out is because the laws of online gaming have not changed. A few years ago when the government was beginning to subpoena news networks, offshore sites didn’t pull out because the movement by the government couldn’t affect them. Similarly, a law that directs itself to the mechanism used to enforce current laws, does not change the legal landscape.

This article was first published at CardPlayer.com.
The Author is: Allyn Jaffrey Shulman

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