Draft Proposal of Federal Online Gambling Ban with Poker Carveout Floated in DC

29th May 2014 // Industry, Legal News, News

A preliminary draft proposal for a federal online-gambling ban is currently being floated in the corridors of Congress in Washington, D.C., with the uncredited proposal including carveouts of several types, including one for both intrastate and interstate online poker.

The rough language of the proposal — which to date has not been sponsored by nor linked to any Congressman and is not a bill at this time, counter to many published reports — was first released by John Ralston on his RalstonReports political blog. Ralston offered little besides the rough text dump, which we’ve cleaned up and made readable (below), writing only, “Here’s what’s floating around DC — I smell a Nevada company.”

A quick cleaning and re-reading of the text shows that in addition to the poker carveout, the draft proposal also contains the seed for a federal Congressional attempt to usurp traditional “states rights” control over gambling matters and reassign them to federal control, a matter that will no doubt raise protests by numerous state governments.

According to the proposal, “Although States, under our Federal system, are due substantial deference when it comes to regulation within their borders, the Internet by its nature is an instrumentality of interstate commerce and its regulation appropriately lies within Federal purview.” This is actually a sweeping statement with applications far beyond i-gambling concerns.

As for prospects for the proposal, those are likely dim. As Chris Grove at OPR noted in a brief piece on the proposal, “Any federal action on online gambling remains highly unlikely,” due to election-year concerns.

A similar cloud hangs over who might have been responsible for the proposal, though it appears to be a compromise measure designed, and as Grove noted, is reasonably close to the Republican-centric views regarding online gambling promoted by US Sen. Dean Heller (NV) and others.

The proposal even goes as far as embracing the pre-2011 viewpoint of the DOJ that the 1961 Wire Act applied to all forms of internet gambling, stating, “it was clearly understood that … the “Wire Act”… prohibited Internet gambling.” The proposal then gently slags the late-2011 opinion of US Attorney General Eric Holder that the Wire Act actually applies only to sportbetting, writing, “Notwithstanding that understanding….”

Had this been floated five years ago, its chances would have likely been much greater; despite the affront to states, the rest of the proposal is a reasonable compromise in several ways. Yet today, it’s likely too little, too late.

The cleaned text of the proposal:

________________________________________________________

Purpose: To prohibit Internet gambling in order to protect consumers and the public interest.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SHORT TITLE.—This Act may be cited as the “Internet Gambling Prohibition and Control Act of 2014”.

SEC. 101. FINDINGS OF CONGRESS.

Congress makes the following findings:

(1) Illegal Internet gambling results in the proliferation of gambling activity, increases in gambling addiction and other socially undesirable behavior.

(2) Subchapter IV of chapter 53 of title 31, United States Code, which was added by the enactment of the Unlawful Internet Gambling Enforcement Act of 2006 (title VIII of Public Law 109–347; 120 Stat. 1952) (the “UIGEA”), makes it a Federal crime for gambling businesses to knowingly accept most forms of payment in connection with the participation of another person in unlawful Internet gambling. That statute was intended to convey Congress’s clear opposition to Internet gambling by providing help to enforcement efforts against unlawful Internet gambling operators and to limit unlawful Internet gaming involving United States persons.

(3) At the time of the UIGEA’s enactment, it was clearly understood that section 1084 of title 18, United States Code (referred to as the “Wire Act”), along with other United States laws such as sections 1952 and 1955 of title 18, United States Code (the “Travel Act” and “Illegal Gambling Business Act”, respectively), prohibited Internet gambling.

(4) Notwithstanding that understanding, on December 23, 2011, the Department of Justice released a memorandum opinion of the Office of Legal Counsel dated September 20, 2011, that reversed the Department’s longstanding position by construing the Wire Act to apply only to sports-related gambling activities in interstate and foreign commerce.

(5) That opinion has led to the further proliferation of gambling offered by offshore operators, as well as state legislation, some enacted, that will permit Internet gambling not only within the respective States but possibly foreign jurisdictions – as well.

(6) Although States, under our Federal system, are due substantial deference when it comes to regulation within their borders, the Internet by its nature is an instrumentality of interstate commerce and its regulation appropriately lies within Federal purview.

SEC. 102. DEFINITIONS.

In this title:

(1) INDIAN LANDS AND INDIAN TRIBE.—The terms “Indian lands” and “Indian tribe” have the meaning given the terms in section 4 of the Indian Gaming Regulatory Act (25 U.S.C. 37 2703).

(2) LICENSED FACILITY.—The term “licensed facility” means any facility that provides casino gaming to persons located on a riverboat, at a race track, or in another facility, regardless of the number of gaming devices in one physical location, pursuant to a duly authorized license issued by a gaming regulatory authority of a State or Indian tribe.

(3) LICENSED FACILITY ACTIVITIES.—The term “licensed facility activities” means bets or wagers offered by a casino gaming facility that –

(i) occur between or among players who are located on the premises of one or more casino gaming facilities; and

(ii) are lawful in the State or on the Indian lands in or on which each casino gaming facility is located.

(4) POKER.-

(A) IN GENERAL.—The term “poker” means any of several card games—

(i) in which success over the long run is influenced by the skill of the player;

(ii) that are commonly referred to as “poker”;

(iii) that are played by 2 or more people who wager against each other and not against the “house” or operator; and

(iv) in which the person operating the game may assess a commission fee (commonly referred to as a “rake”) or any other type of fee.

(B) POKER TOURNAMENTS.—The term “poker” includes poker tournaments in which players pay a fee to play against each other, including tournaments where the licensee guarantees a minimum tournament pot.

(5) PRIZE.- Any gift, award, gratuity, good, service, credit or anything else of value which may be awarded to a person based on the outcome of a game, whether or not possession of the prize is actually awarded or placed on an account or other record as evidence of the intent to award the prize. “Prize” shall not include free or additional play or intangible or virtual prizes that cannot be converted into money or merchandise.

(6) QUALIFYING INTRASTATE LOTTERY TRANSACTION.—The term “qualifying intrastate lottery transaction” means the purchase of a chance or opportunity to win a lottery or other prize—

(A) which opportunity to win is predominantly subject to chance;

(B) which winning is determined not more frequently than daily;

(C) which is authorized by a State or Indian tribe wholly within its borders;

(D) with respect to which the Internet is solely the medium for purchase but is not the medium in which the drawing or the playing of the game or contest is conducted;

(E) which requires the delivery (electronically or non-electronically) of a tangible ticket or card for purposes of redemption of any prize; and

(F) which is not an online lottery game that is intended to mimic or does substantially mimic a gaming device, slot machine, poker, or any other casino game.

(7) STATE.—The term “State” means each of the several States of the United States, the 1 District of Columbia, and any commonwealth, territory, or possession of the United States.

SEC. 103. WIRE ACT CLARIFICATION.

18 USC § 1084 is amended by adding at the end, the following:

(f) For the purposes of this Act:

(1) the term “wire communication” includes the Internet, and any activity which involves the use, at least in part, of the Internet.

(2) the term “any sporting event or contest” includes games in material part or predominantly subject to chance which are played for a prize, including games in which players compete against each other, and not against any person, entity, or fellow player hosting the game, the outcome of which, over any significant interval, is predominantly determined by the skill of the players.

(3) use of a “wire communication facility for the transmission in interstate or foreign commerce of bets or wagers” includes any transmission over the Internet carried interstate, incidentally or otherwise.

(4) the term “bets or wagers” does not include –

(i) any activities set forth in 31 USC §5362 (1)(E)(i)-(viii);

(ii) any activities permitted under 15 U.S.C. §3001 et seq.;

(iii) bets or wagers on poker, but only in, between or among States and Indian tribes that have expressly authorized that activity, or among States and Indian tribes that have expressly authorized that activity, including pursuant to Tribal-State or State-State compacts or agreements;

(iv) qualifying intrastate lottery transactions; or

(v) licensed facility activities.

SEC. 104. UIGEA CONFORMING AMENDMENTS.

The Unlawful Internet Gambling Enforcement Act (31 U.S.C. §5361 et seq.) is amended—

(1) in section 5362(1)(E) by adding at the end,

“(x) bets or wagers on poker that are transmitted using a wire communication as that term is defined in 18 U.S.C. § 1084, but only if such bets or wagers occur—

(I) in, between, or among States or Indian tribes that have expressly authorized such bets or wagers; or

(II) pursuant to compacts or agreements between or among States and Indian tribes that have expressly authorized such bets or wagers.”

(2) in section 5362 (10)(B) by striking “(B)” and everything after and inserting,

“(B) Intrastate Transactions.—The term “unlawful internet gambling” does not include placing, receiving, or otherwise transmitting a bet or wager where—

(i) the bet or wager is not otherwise prohibited by Federal law and—

(I) is initiated and received or otherwise made exclusively within a single State;

(II) the method by which the bet or wager is initiated and received or otherwise made is expressly authorized by and placed in accordance with the laws of such State, and the State law or regulations include—

(aa) age and location verification requirements reasonably designed to block access to minors and persons located out of such State; and

(bb) appropriate date security standards to prevent unauthorized access by any person whose age and current location has not been verified in accordance with such State’s law or regulations; and

(ii) the bet or wager does not violate any provision of—

(I) the Interstate Horseracing Act of 1978 (15 U.S.C. §3001 et 14 seq.);

(II) chapter 178 of title 28 (commonly known as the “Professional 16 and Amateur Sports Protection Act”);

(III) the Gambling Devices Transportation Act (15 U.S.C. §1171 et 18 seq.); or

(IV) the Indian Gaming Regulatory Act (25 U.S.C. §2701 et seq.).”