Monday, October 02, 2006

"This last minute deal reeks of political gamesmanship" says PPA, but the
horseracing business is delighted with its carve out. Most posters deplored
what was seen as the "stealth" introduction of the measure by Republican
Senator Bill Frist, who pulled political strings to attach a compromise
version of a stalled anti-online gambling proposal to an essential port
security act, which went through after a late night session of Congress.
There was also concern and anger that the wishes of millions of American
online players had apparently been brushed aside. "The American people
should be outraged that Congress has hi-jacked a vital security bill with a
poker prohibition that nearly three fourths of the country opposes," said
Michael Bolcerek, president of the Poker Players Alliance, a grassroots
advocacy organisation of more than 110,000 poker enthusiasts. "Allowing this
bill to become law would run contrary to public opinion and would damage an
already fractured relationship between government and the electorate. The
millions of Americans who enjoy playing this great game will have the last
voice in this debate come Election Day." Bolcerek pointed to research which
shows that 74 percent of Americans oppose federal attempts to ban Internet
poker. "Congress has an opportunity to regulate and tax online poker leading
to potentially billions of dollars in annual revenue for the federal
government and the states," said Bolcerek. "If the goal of Congress is to
protect people from the possible dangers of gambling, a prohibition is the
worst way of achieving it. All it will do is push poker underground,
essentially creating online speakeasies, which will provide no protection
for youths, no services for the problem gambler and leave only the most
unscrupulous operators in the game"

Most players and industry observers were taking a "wait-and-see" position
before assessing the true impact of the legislation, which mainly seeks to
hamper and disrupt the financial channels through which US players fund
their online gambling entertainment at offshore venues not subject to US
law.

The bill falls short of clarifying whether the 1961 Wire Act applies to
casino and poker gambling online because it was dropped from Frist's
compromise attachment. This is being viewed as a small victory for the
online gambling community as it is thought unlikely such revisions will be
added in the future.

In fact, Frist as the main architect of the stealth ban admitted: "Although
we can't monitor every online gambler or regulate offshore gambling, we can
police the financial institutions that disregard our laws." There are
strong reservations within the US banking sector as to whether this can be
done effectively, however.

The horseracing industry was clearly pleased that its carve-outs were intact
and praised the move, particularly noting that any 'harmful elements' in
future 'rule-making' would be prevented . The Frist measure contains
language that recognises the horse racing industry's right to offer account
wagering under the Interstate Horseracing Act of 1978 - an important
historical carve-out together with state lotteries.

"This is a very significant landmark recognition by the [United States]
government of our industry's legal right to conduct wagering under the IHA
and of our industry's important position as an agribusiness that supports
500,000 jobs," said Greg Avioli, chief executive officer of the National
Thoroughbred Racing Association and Breeders' Cup Ltd. "The bill also
includes language that will prevent the addition of harmful elements in any
rulemaking required by the bill. This language was crucial for our
industry."

Other provisions are still being debated, for instance whether the law can
be used to control American ISPs, or whether affiliates and other entities
providing gambling information might be vulnerable if based on US soil or
carried out by American citizens.

The reaction to any final US regulations that might be developed in the 270
day implementation planning period could be serious. Legal advisers for one
major online payment processor have already indicated to the portal
Gambling911.com that they plan on joining in on any pending litigation that
might materialise as a result of this bill. A third party risk meeting is
slated this coming Thursday in London, the portal claims.

One of the best assessments was posted at The RX message board after a
detailed but lay study of the legislation. The conclusions were that:

Quote:

1-Neteller might go away. It will be their choice, but they may decide not
to take American customers. They are not subject to this law as they are a
foreign based banking operation - but they might abide by it.

2-There is a 270 day period [during which the AG and the Federal Bank] to
figure out how to enforce it. Right now there is no way because there is no
coding of EFT's. It is possible that they might not even find a way to do
this or it might be too expensive.

3-Nothing in this bill criminalizes your behavior as the bettor.

4-Nothing in this bill criminalizes you if you are not a bookmaking
operation and you send or receive payments.

5-The responsibility is on US banking, payment processors, and epayment
services to stop this.

6-American hosts of illegal gambling websites will have to stop. I do not
believe that ISP's have anything to do with this and there will be no
attempt to block XXXXXX from getting to your computer.

Unquote

Little is likely to change in the short term for the online gambler, but
there will undoubtedly be intense legal and financial planning activity for
operators, international financial institutions and law enforcement agencies
in the States. It is however highly unlikely that this latest American
legislative move constitutes the death knell of a thriving and successful
industry, and this issue will be playing out over a long time yet.