internet gambling banned by Congress
Pub Date: 11/1/2006
In a classic "midnight surprise," Congress passed The Unlawful internet Gambling Enforcement Act of 2006 just minutes before it adjourned for its fall recesss. The measure was buried in the Safe Port Act, HR 4954, dealing with port security. President George Bush subsequently signed the act.
The law says no person engaged in the business of betting or wagering may knowingly accept any money transfers in any way from a person participating in unlawful internet gambling. This includes credit cards, electronic fund transfers, and even paper checks.
Montana gambling enforcement authorities have long held that internet gambling is illegal, largely because it requires use of credit instruments such as credit cards, and credit gambling is specifically outlawed in the state. Further, it is considered illegal because it is conducted over telecommunications wires, whereas Montana law requires gamblers to personally be at the site where the gambling occurs.
Rich Miller, executive director of the Gaming industry Association of Montana, said, "As usual, the devil will be in the details, which in this case we won't know until 270 days after the President signs the measure or sometime in July 2007.
"The measure will, apparently, have no impact on intra-state activity,
Indian Gaming or horse racing, all specifically excluded," Miller said.
"Aimed primarily at the banking and money transferring industry, the bill, draconian at first blush, still leaves plenty of loopholes for those
wanting to gamble on-line," Miller continued.
"Long term, it will be the poker community that will be most visibly
affected. When Washington state made internet gambling a felony, initially it did move some players from the internet to local card rooms.
"But today's new players were being introduced to poker on the internet. It allowed novices to learn how to play the odds, instead of deal with the head games that occur at a live poker table," he said.
"Live card games can be an intimidating and expensive way to learn poker. The number of new players who sit down at a live card game could ultimately decrease" as internet gambling is closed down.
Gene Huntington, Gambling Control Division administrator, said, "Contrary to much that has been said about the new law, I think it has some teeth. How effective the law will be will depend on how aggressively the federal agencies will pursue implementation.
"What has gotten the least attention and in the end may be the most important provision of the bill," Huntington said, "is to allow internet gambling within a state boundary, if allowed by the state.
"We know Nevada and potentially other states are ready to move on implementing legal intrastate gambling. This in the end may be more damaging to offshore gambling sites than federal enforcement."
Professor I. Nelson Rose, recognized as one of the world's leading experts on gambling law, said in a recent copyrighted article, "This act does not completely solve the problem of internet poker, or even internet casinos. The Act does not expand the reach of the Wire Act, the main federal statute the Department of Justice (DOJ) uses against internet gambling.
"Although the DOJ has taken the position that the Wire Act covers all forms of gambling, courts have ruled that it is limited to bets on sports events and races," Rose wrote. "State anti-gambling statutes have similar weaknesses, including the presumption that they do not apply if part of the activity takes place overseas. This new statute requires that the internet gambling be 'unlawful.' But it would often be difficult to find a federal, state or tribal law that clearly made a specific internet bet illegal."
The Rose paper also said, "The regs will require everyone connected with a 'designated payment system' to i.d. and block all restricted transactions. So all payment processors are suppose to have systems in place to prevent money from going to operators of illegal internet gambling.
"The first step will undoubtedly be to take the credit card merchant code 7995 and expand it to all money transfers. Visa created the 7995 classification in 2001 to avoid having its credit cards used for on-line gambling. The federal government will order banks and all others involved with electronic money transfers to cease sending funds to any internet operator who has a 7995 credit card merchant code.
"Any financial institution that follows the regs cannot be sued, even if it wrongfully blocks a legitimate transaction," Rose wrote.
"The Act allows the federal regulators to exempt transactions where it would be impractical to require identifying and blocking. This obviously applies to paper checks. Banks have no way now of reading who the payee is on paper checks and cannot be expected to go into that business. Banks tried to defeat this bill, not because they cared about patrons privacy, but because they knew that it would cost them billions of dollars to set up systems to read paper checks."
Editor's note: To read Rose's complete analysis of the new law, go to: http://www.gamblingandthelaw.com/columns/2006_act.htm. © Copyright 2006, all rights reserved worldwide. Gambling and the Law ® is a registered trademark of Professor I Nelson Rose, www.GamblingAndTheLaw.com.
Source: The Montana Tavern Times, Nov., 2006, published monthly by Continental Communications, 125 W. Granite St., Suite 102, Butte, MT 59701.