6th October 2006, 1:18 PM
What's NOT Included in Anti-Gaming Legislation
A Legal Perspective
This weekend, just before Congress recessed, Senate Majority Leader Bill Frist (R-TN) finally snuck the mildest form of the antigaming legislation into an unrelated bill. The Safe Port Act provides $3.4 billion for U.S. port security and attached to that bill is a section making unlawful for banks to send money to Internet gambling sites or their intermediaries.
The bill passed both the House and Senate, meaning that it only awaits the president’s signature before becoming law.
Do not panic. First and foremost, this bill does not criminalize playing poker. In fact, the bill does not speak to the poker player at all.
After 10 years, Congress finally passed something relating to online gaming. The bill basically makes it more difficult for players to put their money into an offshore site. However, these sites are not just going to walk away from a $12 billion-a-year industry. Since the gambling businesses are beyond the hold of U.S. laws, when one funding source is blocked, they will open another.
Next, most banks and credit card companies already refuse to send money to offshore sites. Therefore, there are already offshore third-party companies in place that are more than happy to handle our financial transactions. The bill attempts to forbid financial institutions from sending money to intermediaries as well.
However, the government cannot stop its citizens from sending money out of the country for legitimate purposes. For example, if I want to buy a widget offshore, the Constitution protects my right to do so. As long as there is a third party, not involved in gaming, I am permitted to place my money in that receptacle from a US financial institution and then spend it. Once my money goes to NETeller, I can buy a watch, or pay for a trip. Because there are legally allowable things that can be done after sending the money to NETeller, the government cannot tell my bank not to send my money there. Our Constitution protects one's personal right to send money from a U.S. bank or financial institution to a business outside of the United States.
The company I mentioned is the popular NETeller. Others will soon appear on the horizon. NETeller happens to be a publicly traded company on the London AIM Exchange with a user base of more than 2.3 million customers. More than 1,700 online merchants accept payments through the NETeller system, and most of those companies are not gaming sites. With corporate headquarters in the Isle of Man, the company processes billions of dollars yearly. Companies like NETeller are not going to pack up and disappear. This legislation merely encourages more of the same.
It will be fascinating to watch this issue unfold. If our government tries to stop US financial institutions from sending money to a place like NETeller, this would surely be fodder for a lawsuit.
The issue will probably be decided from a business perspective. If NETeller makes millions from nongaming-related sources and it would hurt their business if they lost US customers, they may voluntarily stop sending money to offshore sites. On the other hand, if a large portion of their business is online gaming, a lawsuit is in the making if NETeller is blacklisted.
The Secretary and the Board of Governors of the Federal Reserve System have 270 days (after the bill is signed by the president) to come up with enforcement policies and procedures.
You can be sure that during this period, there will be lawsuits here, while abroad, there will be plans to protect the $6 billion-a-year industry by circumventing this new law that is applicable only in the US. Our government cannot make laws that apply to offshore companies who are regulated by the governments where they are located.
I wouldn’t be surprised if the offshore sites come up with programs to put large sums of money into their sites now prior to enforcement of the bill. They could offer interest or other large incentives to keep substantial sums online.
The Poker Player’s Alliance president, Michael Blocerek, told me this morning that he is “outraged at the way Frist attached the antigaming bill to unrelated legislation at the 11th hour.” The Poker Player’s Alliance is a grass roots organization of more than 110,000 members. Bolcerek said: “During the 270 day period, we will continue to fight to exempt poker.”
There are many interesting twists and turns in this new legislation which I will analyze for our readers next week after the holidays.