Congressional Study Says $42 Billion Could Be Raised By Legalizing Internet Gambling

from the that-might-be-useful-right-about-now dept

Ragaboo writes " A congressional report was recently released estimating that the regulation of Internet gambling could amount to around $42 billion in revenue for the U.S. government. Considering both the current financial climate and the fact (given the nature of the Internet) Americans are gambling online anyway, whether the government likes it or not, it seems like an incredible waste not to simply regulate the industry. Regulation provides much-needed funds, allows standards to be imposed and oversight to ensure safety, and also allows safety nets and safeguards to be forced to be put in place against underage and problem gamblers. As it currently stands, millions are playing online poker alone from within the United States (whether or not the government approves of it, which in an of itself isn't explicitly clear) and countless others are gambling, and yet every cent being made in that industry is going overseas."

Indeed. Online gambling seems like one area where a regulated market would make a lot more sense than outright prohibition. Many other countries already do this, and it's really odd that the US continues to resist it. Many claim that it's really just an effort by the existing casinos to block out competition, but it would seem that those casinos would benefit greatly themselves by being able to offer their own online offerings. And, even with this new evidence, it looks like Congress is actually going in the opposite direction.

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Appeals Court Says Nothing Wrong With Law Banning Online Gambling

from the wanna-bet? dept

Back in 2006, as part of an effort to make our sea ports safer, Congress banned financial institutions from accepting money from online gambling sites, effectively outlawing online gambling (no, I don't understand what that had to do with port safety, but that's just how Congress rolls, apparently). Since then law has been challenged -- but hasn't had much success. The district court tossed it out saying the bill was perfectly Constitutional, and now an appeals court has said the same thing. The groups fighting the law made two claims, neither of which the court agreed with: first, that the law breached users privacy rights to gamble in their own homes, and second that the law was too vague. It seems likely that this will be appealed yet again, but who knows if the Supreme Court will care. In the meantime, every few months there are stories about Rep. Barney Frank promising to legalize online poker... but they never seem to get anywhere.

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Minnesota Sued Over Online Gambling Ban, While Frank Again Introduces Bill To Legalize It

from the know-when-to-hold-em dept

We noted several days ago that Minnesota was trying to force ISPs to block gambling web sites, going down a path trodden by several other states. That path, of course, has always ended in failure after the courts have weighed in. It looks like the courts will now get their chance to rain on Minnesotan politicians' parade, as a trade group has sued the director of the state's Department of Public Safety's Alcohol and Gambling Enforcement division to stop the ban. The group uses the suit to remind the director that he doesn't have the authority to mandate the blocking by ISPs, something the court will likely reinforce.

Meanwhile, online gambling's biggest friend in Congress, Massachusetts Rep. Barney Frank, has again introduced legislation that would legalize and regulate online gambling in the US. It sounds pretty much the same as his earlier attempts, all of which have failed, and would take the eminently reasonable step of allowing Americans to gamble in a regulated environment where they're protected by rules and law, as opposed to the current situation where they're pushed into the gray market (or worse), and have no protection. Frank also says he'll introduce separate legislation that will stop the enforcement of the UIGEA, which says that banks must stop processing any transactions that fund online gambling. At least one big casino company seems to think Frank's got a good chance of finally getting his law through: Harrah's, which recently hired the former CEO of major online gambling company PartyGaming to head its online efforts ahead of legalization.

Carlo Longino is an expert at the Insight Community. To get insight and analysis from Carlo Longino and other experts on challenges your company faces, click here.

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PartyGaming Pays Its Online Gambling Tax

from the roundabout dept

Online gambling company PartyGaming has agreed to pay the US government $105 million as part of a "non-prosecution agreement" to wrap up the government's investigation of the site. The move comes after the company's founder, Anurag Dikshit, paid $300 million in online gambling taxes a settlement to the US government last year, meaning it's now collected about $750 million or more in "settlements" with foreign gambling companies and their executives. The government has shown little interest in prosecuting anybody, underlining the belief that it's really just taxing these companies in a very roundabout way. If it's going to do that, it remains that legalizing online gambling so it can be regulated and taxed would be a better solution.

Carlo Longino is an expert at the Insight Community. To get insight and analysis from Carlo Longino and other experts on challenges your company faces, click here.

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Frank To Push For Repeal Of Internet Gambling Ban

from the busted-out dept

Congressman Barney Frank will apparently soon introduce legislation to repeal the US ban on online gambling, as the EU looks like it's preparing to push the WTO to take action against the ban. Along with being ineffective and useless, the ban falls foul of WTO regulations, and could lead to the US being subject to punishments from the organization. It sounds as though the WTO would like to give the US government the chance to sort out the illegal ban on its own before taking action on a complaint about it. Though, even with the changed political climate in the US, it remains to be seen if the repeal could stick. It's also really hard to see how a ban on online gambling, and forcing financial institutions to police it, remains preferable to a well-regulated environment that protects consensual bettors. Hopefully US politicians will agree.

Carlo Longino is an expert at the Insight Community. To get insight and analysis from Carlo Longino and other experts on challenges your company faces, click here.

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Court Says It's Not Online Gambling If You Can Renege On A Bet

from the hello-loophole dept

The US has always had this odd hatred for online gambling -- but no state has been more aggressive about the issue than Washington state -- even to the point of threatening people with arrests for even talking about online gambling. So, you can imagine that the state didn't look too favorably on the launch of a person-to-person "wager" site called Betcha.com which claimed it had found a nice loophole that made it legal: you could renege on your bet. Yes, if you lost a wager, you could click a button saying "I refuse to pay." The catch, of course, was that the site had a rating system, and if you reneged, it was likely to harm your rating, and others might refuse to bet against you. Betcha claimed that the presence of the renege button meant that it wasn't actually gambling, because you never actually had to bet any money.

The state of Washington not only disagreed, it took a month or so until state authorities raided the company, arrested its founders and seized its computers. That seems pretty extreme for what does seem to be a rather open question in the law. And, in fact, a state appeals court found that the Betcha founder is right: the presence of the renege button means that the site is not a gambling site:

"Accordingly, there is nothing risked, which is the essence of both the common law and statutory definition of 'gambling.'"

Of course, that doesn't mean Betcha is coming back into existence. Since its founder (who has a law degree and had carefully researched gambling laws to make sure the loophole was legit) was arrested, thrown in jail, extradited to Louisiana, charged (in Louisiana) with gambling-related felonies finally forcing him to negotiate a plea bargain, dropping the charges if he agreed to certain conditions. With that experience in mind, restarting the site and risking it happening again just doesn't seem that appealing.

So, way to go Washington State -- you tossed a guy in jail for a completely legal web business.

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Court Of Appeals Overturns Kentucky Gambling Domain Seizure

from the good-ruling dept

Back in September, the state of Kentucky tried to seize over 100 domain names, claiming they violated a local state law against "gambling devices." None of the domains were run or hosted in the state of Kentucky, which made this quite a stretch in legal terms. While many of the domain names were for gambling websites, some were merely parked domains. The politicians who ordered the seizure were quite open that this was an attempt to "protect" local gambling interests -- but it seems like an incredible legal reach to claim that because of local protectionist laws, the state somehow has the right to seize domain names from around the world. The domain owners complained, but a local Kentucky state court ruled in favor of the government. However, an appeals court quickly told the state to hold off seizing the domains until it could review the case.

That court has now overturned the lower court ruling saying that a domain name is clearly not a gambling device, and is not covered by the law. However, this does potentially leave the door open for Kentucky politicians to change the law to include domain names... at which point we'll need to go through this whole silly legal battle all over again.

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Isn't There An Easier Way To Tax Online Gambling?

from the roundabout dept

One of the founders of British online gambling site PartyGaming yesterday pleaded guilty to a charge of transmitting bets across state lines -- and agreed to pay the US government $300 million. The exec, Anurag Dikshit, wasn't one of those nabbed by US authorities as they changed planes in the US, but rather he came forward on his own in an attempt to clear the legal air surrounding him and his company. It appears that the US government has rewarded him with leniency: he's free on $15 million bond with some loose travel restrictions ahead of his sentencing -- scheduled for December 2010. This latest news follows the guilty plea of an executive of NETeller, which processed payments for gambling sites, who forfeited $100 million to the government, while the company itself coughed up $136 million. So from these three instances alone, the government has taxed, er, fined, gaming sites and execs over half a billion dollars. If revenue generation is the goal, why not simply legalize online gambling, then regulate and tax it? That way, the government gets its slice, while US citizens can enjoy some protection while betting, instead of being forced into the grey market where they're largely at the whim of site owners.

Carlo Longino is an expert at the Insight Community. To get insight and analysis from Carlo Longino and other experts on challenges your company faces, click here.

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Gaming Giants Still Can't Make Up Their Mind On Internet Gambling

from the wanna-bet? dept

The American Gaming Association, the casino industry's biggest trade group, is struggling to reach a consensus on internet betting, as its members take up divergent viewpoints. Some casino companies support federal regulation for it, while others want states to be able to regulate it (though maybe not Kentucky); others, of course, want to see the blanket ban continue, fearful of anything that might let new competitors in to the market. The AGA's latest approach appears to be to support legislation to study whether to legalize online betting -- which, we're pretty sure, sounds about as wishy-washy as could be.

The facts surrounding online gambling in the US are already pretty clear: previous legislative efforts may have reduced online gambling, but they've also driven American bettors to largely unregulated services and forced them to use some other often-shady services to fund their activities -- since US banks are given the responsibility to stop gambling sites' funding. The result is that gamblers keep up the same activity they were doing before, but are now exposed to more danger and risk, while US authorities are missing out on the chance to collect some taxes. This still seems pretty irresponsible, since gaming regulators in mature markets would argue that driving consumers into unregulated territory where they're not protected by laws and rules governing casinos isn't a great idea.

Meanwhile, the AGA's waffling isn't a surprise, since many of its members hate to see new competition in any form. But existing casino operators are, arguably, better placed than anyone to compete in new, highly regulated markets that don't require huge capital outlays on the scale of expensive new properties. Also, it's hard to understand how more competition for gambling dollars could hurt consumers, when competition might actually deliver them a number of significant benefits, particularly over gray-market services of questionable legality.

Carlo Longino is an expert at the Insight Community. To get insight and analysis from Carlo Longino and other experts on challenges your company faces, click here.

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Kentucky Appeals Court Tells Kentucky To Hold Off Seizing Domains

from the wait-just-a-second... dept

While a lower court in Kentucky had agreed to allow the state to seize 141 domain names as being "illegal gambling devices" despite having nothing to do with the state of Kentucky, other than being available on internet connections there (and everywhere else), an appeals court has now issued an injunction to stop the state from seizing the domains until the appeal can be heard. While we still have to wait for the full appeal, at least damage won't be done in the interim.

There's one other interesting note in the article, which is that Kentucky's Attorney General appears to be trying to distance himself from the case. Even though most state actions are normally taken by the AGs office, in this case, the lawsuit was filed by the state's Secretary of Justice and Public Safety (there's some question if it's legal for this person to bring the suit). Either way, the AG's name was on the case, but he's now specifically asked to have his name removed from the case. That seems like quite a statement. When even the Attorney General of the state wants nothing to do with the lawsuit, perhaps it's time for the state to admit it overstepped some legal bounds.

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EFF, ACLU Ask Court To Strike Down Kentucky's Domain Name Seizure

from the good-for-them dept

You may recall that a judge recently allowed Kentucky's governor to seize a bunch of domain names that were related to gambling -- even if neither the owners nor the servers were based in Kentucky -- setting a terrible precedent. That's why it's good to see the EFF, the ACLU and the Center for Democracy and Technology (CDT) team up yet again to ask an appeals court to overturn this decision. Hopefully the appeals court recognizes how truly awful the original decision was, and notes how it seems to violate multiple clauses of the Constitution.

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White House Gives Banks One Year To Stop Online Gambling Transactions, Despite Protests

from the pushing-through-bad-rules dept

Despite significant questions from other elected officials about the plan, the White House has, in fact, approved new regulations requiring banks to stop any financial transactions dealing with online gambling. They've given banks one year to figure out a way to deal with it -- which hopefully gives Congress enough time to change the law.

The regulations make little sense for a variety of reasons:

1. It's still not clear why online gambling should be made totally illegal, rather than simply regulated, like in many countries.
2. It makes no sense to put the burden and liability on financial institutions to figure out what transactions involve online gambling.
3. It makes even less sense to dump this on banks right now, especially as many are struggling merely to survive in this financial climate. Adding an extra burden of making them figure out if every transaction involves online gambling seems unnecessary (and perhaps unusual).
4. Congress had asked the White House for more time to explore the impact of these regulations, but the White House used a lobbyist to aggressively push for these regulations to be put in place as quickly as possible.

Congress and the new administration will hopefully take up this issue next year, and remove this unnecessary burden from banks before it was set to go into effect.

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Whitehouse Accused Of Trying To Push Through Anti-Gambling Regulation No One Wants

from the hurry-up-and-regulate dept

Even as some of our elected representatives are trying to re-legalize poker, the White House appears to be trying to shove through the regulations put in place a couple years ago to stop online gambling. The Unlawful Internet Gambling Enforcement Act of 2006 put the responsibility on financial institutions to stop any financial transactions used in online gambling. As we see all too often, it's a situation where the government is putting the liability on a third party to stop an undesirable activity, rather than on those actually involved in the activity. Not surprisingly, financial institutions have been protesting any regulations enforcing this law -- and with the current financial collapse going on, they're pushing back hard on any effort to enforce the law. So, what happens? Apparently, the White House has assigned a former NFL lobbyist working for the White House to try to force the regulations through, apparently putting tremendous pressure to get things moving. Congress is now asking the White House to explain why they're trying to rush this through, just as financial institutions are having so much trouble. It certainly does raise questions. Considering the push to reverse the law in the first place, combined with the protests from financial institutions that it shouldn't be their problem to stop online gambling, why is the White House putting excess pressure to try to make it happen?

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Judge Allows Kentucky To Seize Domain Names

from the bad,-bad-news dept

Last month, we wrote about a judge allowing Kentucky's governor to seize 141 domain names that were somehow associated with gambling sites under a bizarre interpretation of Kentucky law. Pretty much everyone involved admits that this is just Kentucky's governor protecting local gambling establishments who supported him in the election. No one is even hiding the fact that this is purely about protecting the governor's political supporters from any sort of competition.

However, what's scary is in how the seizure is incredibly broad and far-reaching. None of the sites are based in Kentucky. Many of the sites are nothing more than holding pages, rather than actual online casinos. And, the law itself interprets these sites as "illegal gambling devices" which seems like a big stretch. There was some pushback, as people explained to the judge what an incredibly bad precedent this ruling would set -- as it would effectively allow any local law to be used to take possession of any website.

Apparently, the judge doesn't care. Late last week, the judge upheld the original ruling, giving one small out to the various sites. If they implement filters that block access to any IP address in Kentucky, they can keep their domain names. That's backwards. It shouldn't be the responsibility of a website that is just online to use geocoding techniques to comply with every single local law. If that were the case, the internet would ground to a halt, as any website would face so many different liabilities from so many different jurisdictions to make it impossible to comply -- and in each lack of compliance, face a potential seizure of the domain name. This is a bad ruling by any stretch of the imagination, made even more bizarre by the judge's unilateral ruling before a hearing was even held. The whole thing sounds quite questionable, and hopefully will be dumped on appeal.

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Kentucky's Gambling Domain Name Grab Sets A Terrible Precedent

from the governors-who-want-more-power dept

Last month, we wrote about a bizarre lawsuit in Kentucky, where a judge gave the government the ability to seize the domain names of numerous online gambling sites, even though none of them were based in Kentucky, or even registered via Kentucky-based registrars. The whole thing smelled of corruption, given that the governor is closely tied to offline casino interests, and his campaign apparently included a big promise to bring more offline casinos to Kentucky. This effort seems mostly focused on not just blocking out online competitors, but seizing their domain names. Lots of people are pushing back and explaining how ridiculous the scenario is to the judge, noting, for example, that following similar logic would allow any country to seize any domain name. For example, China could decide that the BBC website violates its laws and demand that the BBC domain name be turned over to the Chinese government. Most folks would recognize that this is ridiculous -- but it's effectively what the Kentucky governor has done.

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Kentucky Governor Seizes Online Gambling Domain Names

from the can't-have-competition-for-horse-racing dept

It's always fascinating to watch US politicians act as complete hypocrites when it comes to gambling. They talk about moral issues on why they need to stop online gambling, but allow their own personal favorite types of gambling, such as horse races and lottery. Kentucky, of course, is a big horse racing state, so perhaps it should come as no surprise that the state has strict anti-online-gambling laws. These laws are so strict that the state's governor is using them to seize 141 domain names of sites that the state claims are used for illegal gambling. Of course, it appears that many of the domains aren't online gambling sites at all, but parked domains. The state doesn't seem shy about the fact that it's doing this to "protect" the horse racing business, but of course, throws in the moral argument as well:

"Illegal Internet gambling poses a unique threat to our Commonwealth. For individuals - particularly our youth - it is tantamount to a virtual home invasion. For some of our vital and most venerable legitimate enterprises, it undermines their exemplary regulatory compliance and siphons away their constituents."

Home invasion? Really? A parked domain is the equivalent of a home invasion?

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Create An Ad For An Online Gambling Company? Face Jail Time!

from the is-that-even-illegal? dept

The US gov't has long had an odd fascination with stopping online gambling (except for horse racing -- which politicians engage in -- and state lotteries, for obvious reasons). Sometimes, this obsession reaches bizarre levels, such as the claim a few years back that it wasn't just illegal to run an online gambling operation, but that it was illegal to help advertise one. Most have pointed out that this has little actual legal basis, and is likely a violation of free speech rights -- but that hasn't stopped the government from using such threats.

Two years ago, the feds charged some ad execs with a whole bunch of crimes simply because they had the company BetOnSports as a client. BetOnSports, of course, was completely legal outside the US, but that didn't stop the US from claiming otherwise (even arresting BetOnSports' CEO as he was traveling through the US in a completely separate action from the lawsuit in this post). Even if it turns out that BetOnSports is somehow illegal, it makes no sense to drag in execs from a totally different company that only created promotional campaigns for BetOnSports. That hardly seems to deserve getting charged criminally.

But, when the gov't wants to put you down, it finds a way. The three ad execs have now all plead guilty in the case. Even though they had nothing to do with running the gambling site, they agreed to a plea bargain to avoid a lengthy and costly trial that could have resulted in a lot of jail time. It's not clear yet what the sentences will be in this case, as that will be announced in October, but at least some of the execs may get off without jail time. That's good, but it still remains ridiculous that they had to go through this two year ordeal just because they created promotions for the company.

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Antigua Doesn't See Settlement With US Over WTO Plan To Let It Ignore US Copyrights

from the stand-your-ground dept

The back and forth battle between the US and Antigua is long and involved. You can read the background if you want, but the short version is that the US suddenly claimed that Antigua-based online gambling sites were in violation of US anti-gambling laws. Antigua took offense at this, and noted that it appeared to violate free trade agreements between the two countries, most specifically because the US still allowed certainly types of domestic online gambling. The issue went to the WTO multiple times, and every time Antigua won -- and every time the US ignored the decision. At one point, the US pretended it won the ruling, and another time it announced that it was simply, unilaterally, changing its trade agreement with Antigua.

Since Antigua has little leverage against the US, it started to look at other options -- and took serious an idea that some folks first suggested in jest: if the US keeps ignoring the WTO rulings, let Antigua ignore US intellectual property rights. Antigua took this plan to the WTO, and the WTO approved it -- though, limited it to only $21 million worth of intellectual property, which given industry accounting probably represents half an album or so. Either way, the US threatened Antigua not to follow through on this plan, even though the WTO approved it -- and the two sides agreed to negotiate a settlement, with a deadline of today, June 6th.

Well, here we are, and Antigua is saying that (can you believe it?) the US appears to be taking a hardline position on this whole thing and no settlement is expected. It will be interesting to see if Antigua really follows through on ignoring US intellectual property, and how it goes about doing so. Also, it will be worth watching to see how they "count" just how much intellectual property they're ignoring. I'm assuming they won't use RIAA math.

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Feds Admit They Have No Clue How To Enforce Anti-Online Gambling Legislation

from the please-clarify dept

In the fall of 2006, Congress (for reasons that have never been explained) put a clause banning online gambling into a bill supposedly about protecting our ports (so no one would vote against it). Since then there's been an ongoing legal effort to get that part of the law overturned. It's particularly upset financial institutions who are told they need to stop gambling operations from accepting money -- though, they're not quite sure how to do that. To top it all off, even the federal officials who are charged with enforcing this law are now admitting that they have absolutely no clue how to enforce it, noting that the legislation itself is incredibly broad and unclear. In other words, we have a law that almost no one wants and which those in charge of enforcing have no idea how to enforce (or even why they should enforce it). So why did it get passed in the first place? Well, at least our ports are safe.

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Antigua Says It's Going To Start Ignoring US Copyrights (For Real This Time)

from the no,-really,-really,-really dept

Officials in Antigua are now trying to draw a line in the sand, claiming that if the US doesn't finally agree to allow some forms of online gambling by the end of this month, it will go ahead with its threats to ignore US copyrights with the approval of the WTO. As you may recall, back in December, the WTO granted Antigua that right, after a loooooooong series of battles with the US over whether or not the US was violating free trade agreements by banning online gambling. Of course, every time the WTO sided with Antigua, the US would stall, claim the WTO sided with the US (when it clearly did not) and (my personal favorite) claim that even if it had broken trade agreements, it didn't matter any more because the US was unilaterally changing its trade agreements so that it was no longer violating them.

Of course, when Antigua won the final decision in December, allowing the country to ignore US intellectual property rights, the US government and the entertainment industry quickly warned Antigua not to follow through on those plans -- but the US government still won't shift in its position on the matter. Thus, Antigua is agitating to get this show on the road. While it first needs to get one last permission slip from the WTO, once that's in place, it can start ignoring the copyright on American movies and music. Of course, while some are suggesting that it may make sense for The Pirate Bay to move to Antigua, that's not accurate. After all, the WTO has said that Antigua can only violate $21 million worth of intellectual property, and with the way the entertainment industry counts damages, that's like half an album or so.

In fact, that seems to be exactly the angle that the entertainment industry is taking in this fight. An MPAA letter warning: "The proposed retaliation would be impossible to manage. The real and resulting economic harm would vastly exceed any amount the (WTO) might approve, even the grossly exaggerated amount ($3.4 billion) for which Antigua seeks approval, plus the economic harm would extend to other WTO members."

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