Warning about U.S. Licensing and Regulation: what is happening in Italy can happen to us!

[never_bluff]

Originally Posted by Skallagrim

Making predictions at this point is totally useless.

We first have to wait to see the Menendez bill, and then we will have to see how it gets amended as time passes before a floor vote.

I can assure you the PPA has worked extremely hard to get as good a poker bill as possible. I cant assure you that we have achieved all we would like. We can only wait and see when the Senator submits what HE (well, his staff at his direction, of course) has written.

...

Lets start this discussion again once we have the Senate bill available to comment on directly.

Skall, first I want to say Thanks for all you do!

Just curious why you say we should look to the Senate bill for the direction of licensing. I have been under the assumption this would primarily be driven by the House.

[never_bluff]

Originally Posted by phils08

i dont understand the attacks on off shore sites, especially stars. While we're in complete agreement that regulation is better then the statu quo, that doesnt mean stars hasnt been absolutely exemplory in all its years of service.

Id argue they run their business far better then anyone will in the future may it be harrahs or who ever. My personal but unlikely hope is that stars is given the opportunity to serve the US as a licensed company and allow their owners to come in from the shadows. Whether that happens or not, stars is absolutely the industry standard, and the status quo has been damn good thanks to them.

imo.

+1

[TheEngineer]

Originally Posted by LeapFrog

Remind me again why the PPA supports a bill that might actually make things worse for US players? We don't even know what the full effects of the UIGEA regs will be nor the outcome of the legal challenges regarding the seizures. About the only argument for that I can see is 'strike while the iron is hot', ie, before '10 when there is the the chance that dems will lose some seats.

Worse compared to what, though? Everything we've seen shows that the there is no permanent status quo. The SDNY seizure shows a continuation of action against us.

One major issue is that Congress won't force states to accept poker within their borders. I hope we can make the bill as palatable to states as possible while making any state opting out show a law against it (rather than a letter from the governor), thus maximizing opt-in states.

I see a few paths. One is to get the best bill possible through Congress. Once done, US based sites will offer services, creating jobs and tax revenue (like any other business). Some states would opt out, but many would prefer to have the revenue and the control that the new system would provide. Also, there would be strong lobbying by industry and players to change the laws in the opt-out states. Clearly the momentum in getting states to opt-in after the initial opt-in period would be in favor of poker.

Another would be to win via litigation of UIGEA. If successful, Congress would probably pass some sort of legislation in response. However, as strong as we are now, we'd expect decent legislation for poker, IMO (as our opponents would be the ones needing a law).

A third would be the Permafrost plan -- state by state, instate only poker. A downside is that many states are too small to support this. We'd likely need federal enabling legislation for interstate compacting, much like the Interstate Horse Racing Act provides for horse racing. It also means US sites would not be able to compete internationally, while international sites would not be able to participate here. The upside is that, once the first state passes legislation, we'd probably get several more to come on board.

A final way is simply to oppose all legislation that is less than a repeal of UIGEA and the Wire Act and hope the status quo continues. Unfortunately, we've already seen ways for our foes to attack this. Congress could simply make it unlawful to play (or pass a tax like the 50% one in the McDermott tax bill). The DoJ can seize funds and continue to lean on banks, television networks, ewallets, and everyone else. UIGEA will be in full effect as well. Also, let's not be fooled by weaknesses in UIGEA. As it will be settled law if we do nothing, the DoJ could simply ask for what they'd call loopholes to be closed in either the law or the regs. And, we'd also be back on defense. We've been at our best on offense.

To figure what to support, look five years into the future (and I'd like to be able to plan my future with poker, rather than taking it day-by-day):

#1: If we pass a bill, many states will have online poker. It will be advertised, and financial transactions will be easy. Recreational players will be comfortable with the integrity of online poker. PPA, sites, and players will be energized at the state level to demand opt-ins. If we don't have a bill, we'll have a shot at maintaining the status quo by staying on offense with our continued efforts.

#2: If we defeat UIGEA, we'll be back at #1 but with the benefit of our opponents requiring a law -- not us. Nothing from #1 slows down #2, so these two can be worked in concert.

#3: If states were eager to authorize instate sites, it seems some would have done so already. We'll need to get this through at least one state before even thinking this is the way forward, IMO. There's also a problem where many states will pass laws against playing on sites not licensed by that state.

#4: The sure loser of the bunch. If we were this active prior to UIGEA passing, poker would have absolutely gotten a carve-out. I'm pretty sure our opponents now wish they had given us this, as we poker players are the ones making the most noise now.

for what its worth, here is the stars response from the IT thread in the zoo

That isn't reassuring. If UIGEA impacts PS after Dec. 1, I'm not sure they'll stay.

[LeapFrog]

Originally Posted by TheEngineer

Worse compared to what, though? Everything we've seen shows that the there is no permanent status quo. The SDNY seizure shows a continuation of action against us.

If the status quo is eroding, it has been doing so at an incremental pace. Since UIGEA there have been zero interruptions of play (for the big sites) and only a few incidents where there have been interruptions in the flow of cash, most resolved rather quickly. Cashing out of PS or FTP right now seems to be very fast.

So again, what is the rush here? Why not wait to see the full effects of the regulations and what our legal efforts bring? Why risk everything by blind support of what could be poison pill legislation?

Originally Posted by TheEngineer

#1: If we pass a bill, many states will have online poker. It will be advertised, and financial transactions will be easy.

Really? How do you figure? How do you answer LetsGambool's question?

Originally Posted by LetsGambool

So my question is, not just for Skall but any PPA rep....what is the PPA's plan for evaluating how many states will opt out of whatever the final legislation looks like?

Originally Posted by TheEngineer

That isn't reassuring. If UIGEA impacts PS after Dec. 1, I'm not sure they'll stay.

What in the Stars response made you come to this conclusion?

If in say 2 months we find that the Frank bill is moving ahead with no changes, will the PPA support a bill that is identical to the current version?

[PokerXanadu]

Thanks Skall & TE for the input. You guys are on the frontlines so are the best for bringing us up to date. I'm sure there is more to the inside scoop that you can't say, but it's good to know that you are in there fighting for what will be best for us.

Below is an article that shows what in-state regulation is really all about. The current push in California, and the one coming next year in Florida, for in-state regulation is being pushed by Jim Tabilio of Poker Voters of America, who is a professional lobbyist. Reportedly, the money behind this efforts comes from the Indian tribes. According to Jim, the idea is to give us more choices, i.e. you will be able to choose between playing on a state licensed site that is fully compliant with the UIGEA or a foreign unlicensed site. But this doesn't seem to match the reality of the legislation, which seems to be going in the direction of only licensed sites will be legal and only in-state sites will get licenses. This option (#3 on TE's list) is likely the worst one of all for us. It needs to be watched very carefully as if it gets passed in one state it will likely spread to other states quickly. California will be first. If the final bill opens the door for more choices as Jim publicly claims, than we can support it. But if it makes all Internet venues illegal except for in-state operations, we need to get very active, very quickly to oppose the legislation. Don't let this get passed "in the middle of the night" like the UIGEA - it will be the death knell of US player access to large international player-base poker sites.

Article from www.gamblingcompliance.com , an industry news provider.
("GamblingCompliance launched in February 2007 and has very quickly established itself as the leading provider of legal, regulatory, political and business information for the global gambling industry.")

Online Gambling Mulls US B2B Future

26 Jul, 2009 / Gambling Compliance / Chris Krafcik


American legal experts have echoed the recent predictions of Europe’s online gambling bosses that domestic land-based operators are likely to dominate the US internet gaming market once it opens up.

At the recent Gaming Executive Summit in Madrid, the chief executives of PartyGaming, 888 and Playtech all agreed on one thing: whether internet gambling is regulated at the state or federal level in the United States, domestically-established operators – not overseas aspirants – are in pole position to reap the benefits.

In California and Florida, where online poker is showing signs of life, early signals suggest that in-state interests will be battling fiercely to protect their turf.

April saw a failed attempt by Florida’s lucrative card-room industry to bring internet poker under the control of the state’s Division of Pari-Mutuel Wagering, while a preemptive California draft bill, publicised in May, gave state-licensed card rooms and Indian tribes with compacts the exclusive right to offer poker online.

According to Patrick O’Brien, a gaming attorney with Greenberg Traurig in Fort Lauderdale, offshore operators eyeing intrastate direct-to-consumer offerings face an uphill battle with local regulators, whose wish lists include neither higher vetting costs nor bigger bureaucracies.

“Limiting internet licences to current licensees greatly reduces the cost of regulation – due diligence has already been performed, the regulators already have relationships with the operators and the operators already know most of the rules,” he told GamblingCompliance. “It is far easier to limit new licences to existing operators than to start an entirely new bureaucracy or start dealing with a flood of entirely new operators.”

O’Brien said that at the state level, ensuring local interests are given the exclusive right to offer gambling – online or not – is nothing new.

In 2001, Nevada, one of the first states to consider intrastate e-gaming regulation, passed a bill allowing only state-licensed operators to launch services online. Licences were never issued, though, as the law later attracted opposition in the form of the US Department of Justice.

O’Brien also pointed to a recently enacted sports wagering law in Delaware – which limits sports betting to three existing racinos there – as being further proof of a locals-only mentality in state legislatures across the country.

“If the Frank Bill is not enacted, the United States industry will be built on state licensing, and the parties to be licensed for internet gambling will be the same parties already operating bricks-and-mortar facilities,” he said. “This has been the trend in all recent gambling expansion efforts.”

With intrastate business-to-consumer prospects looking gloomy, some of Europe’s publicly traded firms are hoping instead to leverage their business-to-business assets by partnering with local operators that lack compelling online products and critical Internet industry know-how.

“Poker players aren’t going to put up with second-rate products,” John Shepherd, spokesman for the world’s fourth largest poker operator, PartyGaming, told GamblingCompliance. “So, if you make an entrance into the United States market with a substandard product, you're going to last about a week.”

But even well-equipped overseas B2B groups like Party, of course, will have to contend with established North American vendors that have been busy amassing valuable political capital with regulators, lawmakers and trade groups.

Rhode Island’s Gtech Corporation, which supplies services and technology to 24 of the United States’ 43 lotteries, is thought to have assembled enough B2B firepower under its new subsidiary, G2, to make a compelling case in states with online ambitions.

Moreover, Gtech’s competitor, Intralot, is supplier to nine United States lotteries and recently announced plans to form its own internet unit called Intralot Interactive. Intriguingly, PartyGaming signed its own partnership deal with Intralot in April 2009.

There is also CyberArts Licensing of California, which has expressed interest in running a poker network there if one were to be established, and International Game Technology of Nevada, whose online arm, WagerWorks, specialises in the development of casino games.

In the relatively untested waters of intrastate online gambling regulation, Linda J. Shorey, a gaming attorney with K&L Gates in Harrisburg, Pennsylvania, told GamblingCompliance that it remains unclear whether B2B providers – specifically those, such as PartyGaming, that at one time took money from American residents – will be able to meet state requirements for suppliers.

Prospects at the federal level look brighter – if only somewhat – but O’Brien and Shorey agree that an operator or provider’s history here will undoubtedly play a salient role in any decision about licensure.

Under Barney Frank’s Internet Gambling Regulation, Consumer Protection, and Enforcement Act, the section covering suitability for license issuance is friendlier toward existing land-based operators, Shorey said.

“[Frank’s bill] requires those seeking licensure to establish ‘suitability,’ which is a concept common to the law governing land-based wagering,” she said. “Certainly, already licensed operators of land-based wagering would have an advantage proving their suitability because they know the drill.”

That “suitability” appears in the legislation should come as little surprise, she added, given land-based casinos are thought to have had a hand in crafting it.

Although the bill will likely be amended before it receives a vote in Frank’s House Financial Services Committee later this year, O’Brien said the current version gives the secretary of the Treasury Department power to prohibit licensure if a candidate: (i) fails to provide a proper application and documentation; (ii) supplies inaccurate or misleading information in connection with their application; (iii) has been convicted of a felony; or (iv) has been delinquent in filing tax returns or paying taxes, penalties or interest to the United States or a state of the United States.

Frank’s bill also affords the treasury secretary a level of subjective power in any licensing decision, whereby they can determine whether a candidate’s past reputation, habits and associations pose a threat to public interest and effective regulation – a power sure to concern any company with former ties to the American market.

However, O’Brien, who spent 26 years in the Treasury Department, acknowledged that operators and providers with arguably discreditable history should still have room to negotiate with the secretary.

“Casino and card room operators which accepted US customers but withdrew from the industry prior to October 13, 2006 – the effective date of the Unlawful Internet Gambling Enforcement Act – should also be able to enter the legitimate industry, arguing that the state of the law relative to non-sports books was confused prior to the enactment of the UIGEA,” he said.

For offshore online operators with no previous activity in America, demonstrating suitability for federal licensure may be easier, Shorey said, though a lack of brand recognition could make it both difficult and costly to attract customers and generate revenue profitably.

Best positioned among foreign online gambling firms in any regulatory scenario, she posited, are those with B2B capabilities and a clean sheet with the feds.

“There is reason to believe, at this point in time, that for most online operators, business-to-business provision of service and joint ventures are more likely than direct-to-consumer wagering opportunities,” Shorey said.

[PokerXanadu]

Note also in the article I quoted in my last post the details about how foreign sites that have previously offered online gambling in the US will have trouble getting a license under the Barney Frank bill. This is why I am strongly advocating an amnesty clause added to the bill.

This also reveals what I believe is the true motivation behind the SDNY DOJ seizure of funds: the DOJ wants to establish a precedent of wrong-doing by the major poker sites who thumbed their noses at the DOJ by continuing to offer internet poker to US players after passage of the UIGEA. This precedent will later be used to deny licensure to these sites under the Barney Frank bill.

Someone ought to investigate the money trail - who appointed or controls these SDNY staffers, and does it somehow lead back to campaign contributions by Harrahs, et al.

[phils08]

I could be wrong, but i view the dec, 1 situation like this:

We have stars + ft + all the other randoms. Assuming things get tougher wouldnt the sites think about each other? Meaning that if stars left that market, and full tilt was ballsy enough to stick with us, full tilt would become the industry giant, and stars would look as foolish as party did. Same thing the other way around. Full tilt leaving and stars staying would mean 250k on stars during peak hours which is just printing money.

This scenario doesnt account for the fact that they both can leave, but i dont see that happening. This is why competition in business is so important.

If the sites play their cards right they can monopolize the industry.

If all else fail i guess we can all go to bodog As they said they dont care about US law.

[PokerXanadu]

Originally Posted by phils08

and stars would look as foolish as party did.

If the Frank bill goes through as originally worded, Party will suddenly look like genius - they'll get licensed while PS & FT won't.

If we get to Dec. 1 with no delay in UIGEA and no licensing bill passed, I don't think either PS or FT will change anything. The UIGEA is law right now - and both sites continue to operate now under the "it doesn't apply to us" mantra; rightly so.

I'm not saying that the foreign poker sites are in violation of US law or the UIGEA. I don't think they are. And I don't think they should pull out of the US market now or Dec 1.

I am saying that the DOJ is trying to set a precedent that they can point to later to deny licensing to the current sites that accept US players. We need to ensure this doesn't happen by getting an amnesty clause into the bill. The clause should make it so that no one gets denied a license on the basis of having offered online betting or wagering to U.S. citizens either prior to or subsequent to the passage of the bill. The amnesty doesn't have to hinge on any issue of legality of online gambling or online poker - it just has to state that eligibility for licensing cannot be denied to a site because it operated prior to licensing.

[never_bluff]

Originally Posted by PokerXanadu

Below is an article that shows what in-state regulation is really all about. The current push in California, and the one coming next year in Florida, for in-state regulation is being pushed by Jim Tabilio of Poker Voters of America, who is a professional lobbyist. Reportedly, the money behind this efforts comes from the Indian tribes. According to Jim, the idea is to give us more choices, i.e. you will be able to choose between playing on a state licensed site that is fully compliant with the UIGEA or a foreign unlicensed site. But this doesn't seem to match the reality of the legislation, which seems to be going in the direction of only licensed sites will be legal and only in-state sites will get licenses. This option (#3 on TE's list) is likely the worst one of all for us. It needs to be watched very carefully as if it gets passed in one state it will likely spread to other states quickly. California will be first. If the final bill opens the door for more choices as Jim publicly claims, than we can support it. But if it makes all Internet venues illegal except for in-state operations, we need to get very active, very quickly to oppose the legislation. Don't let this get passed "in the middle of the night" like the UIGEA - it will be the death knell of US player access to large international player-base poker sites.

Exactly. Which is why it makes no sense to me that the PPA supports the California initiative. This type of initiative scares me more than anything out there, given the likelihood that such state initiatives could become popular. Pretty much pokerstars.it x 50.

[LetsGambool]

Originally Posted by LeapFrog

What in the Stars response made you come to this conclusion?

Yeah, I don't see TE's conclusion at all from what Stars said. The UIGEA doesn't change licensing laws. Stars will leave if licensing is passed and they don't get a license as they are interested in following laws.

I just can't figure out how we decide whether to support a bill with state opt-outs without trying to figure out which states will opt-in or opt-out. If we pass something and 45 states opt-out, its a disaster.

[phils08]

why would 45 states opt out? Arent there economic reasons for opting in? Unless of course its a state with casinos in which case those states likely would.

Im with you on the part about not knowing what to support. It's a tough decision to make, and personally i have no clue which is the correct one.

[LetsGambool]

Originally Posted by phils08

why would 45 states opt out? Arent there economic reasons for opting in? Unless of course its a state with casinos in which case those states likely would.

Im with you on the part about not knowing what to support. It's a tough decision to make, and personally i have no clue which is the correct one.

I have no idea if 45 states would opt out. Maybe 0 states opt out. Maybe 25 do.

The current bill doesn't give any money to the states, so the economic reasons to opt-in becomes tenuous as these states are already crunched on funding their budget and now have something that's a potential competitor to in-state gambling without the sweetheart deals.

Wouldn't states with no casinos, but with lottery interests potentially have incentive to opt out? What about states with no gambling and strong anti-gambling forces? Then, as you mentioned, what about states with casinos?

But that's my point, I have absolutely no idea how many states will opt-out and can't support legislation until we have some sense as to what that number will be.

[phils08]

yea i agree with all that lg. I wish we had a way to estimate how many states would opt out. I guess its doable with research. Look up how many states have strong gambling laws, casino plans, etc.

playing the waiting game is just so annoying. I use this game to pay for a freaking expensive school (barg) and not having the game and playing live would slash my monies in half. I guess the wait goes on.

[LetsGambool]

Originally Posted by phils08

yea i agree with all that lg. I wish we had a way to estimate how many states would opt out. I guess its doable with research. Look up how many states have strong gambling laws, casino plans, etc.

Well then we're at 30+ states opting out.

[JPFisher55]

One point to consider about intrastate online poker laws is that any state that licenses its own sites and bans other sites is likely violating the Commerce Clause of the US Constitution. So the offshore poker sites can justify, and probably will, ignore such laws.

OTOH, Rep. Franks bill would give states express permission to opt out of the federal licensing law, adopt their own licensing law and ban sites that the state does not license. This is the bad part of his bill. IMO, the bill needs a provision that any state opting out must prohibit all online gaming or all online gaming of the type that the state opted out from the federal licensing. Without such provision in its final version, IMO the PPA should oppose the bill unless, and until, the DOJ wins the SDNY seizure case.