President Signs Bill Aimed at Limiting Online Gambling

The
Republican-backed measure, attached to the “SAFE Port
Act” in a last minute Congressional push to pass the bill before adjourning
for the November elections, seeks to prohibit Internet gambling by outlawing financial
transfers to overseas casinos.

A version
of an anti-online gambling bill had been passed in the House in early July, but
it seemed to have stalled in the Senate after fierce lobbying caused several
Republican senators to pull back on passing the bill. The unexpected passage of
the bill by the House and Senate later in October outraged and surprised many
groups representing the online gaming industry.

“With
the stroke of a pen, the president has tried to take away a source of
entertainment for 23 million Americans, and didn’t even bother to explain why,”
said Michael Bolcerek, president of the Poker Players Alliance, a grassroots
organization whose membership has ballooned to 110,000 since July.

The
Justice Department had always considered Internet gambling to be illegal, but
has been unable to stop the explosion of domestic gambling. U.S. residents account for some half of the
world’s $15.5 billion in wagers, according to the Nottingham Business
School.

“Namely
to date there has been great frustration that internet gambling has grown, and
that the only practical way to stop it, will be to stop the conduit of money
coming from the United States to overseas institutions,” said Ira Rothken,
managing partner of the Rothken Lawfirm LLP, which has sued the gaming
industry.

The
ambiguity stems from the 1961 Wire Act, which bans sports wagering across telephone
lines. Supporters of the legislation said the bill simply clarified the 1961
act to encompass Internet wagering as well.

Now that
the bill has been signed, federal regulators have 270 days to create
regulations on how to block internet gambling-related financial transactions.

“I
think that we’re probably going to see a multi-phase result. the first phase,
which is now, is chaos because there is a lack of predictability of what is
going to happen,” said Rothken, adding, “a large part of this law will
be determined in the next 270-days.”

In light
of the unexpected addition and passage of the internet gambling legislation in
the House and Senate, the domestic and overseas gaming industry is scrambling
to stay alive.

After the
first approval of the House bill in July, PartyGaming PLC – the world’s largest
online gambling company – announced in a statement that it would “suspend
all real money gaming business with U.S. residents.” Despite the
pre-emptive move, shares of the UK-based PartyGaming have plummeted from
approximately $2 before the announcement to 64 cents Friday.

Bolcerek,
an amateur player himself, argues poker should not be included in the ban
because it is a game of skill, and not chance. Instead, he suggests that the
bill be reviewed and a study bill be added to look at the regulation and
taxation of online poker.

According
to a study commissioned by the Poker Alliance, the U.S. government would reap $3.3
billion dollars in tax revenues, and another $1 billion for state coffers annually,
by taxing online poker.

“If
the decision was made about tax dollars, they should have at least looked at
poker,” said Bolcerek.

But
organizations such as the National Coalition Against Legalized Gambling argue
on its Web site that online gambling can be more harmful than traditional
brick-and-mortar casinos, addicting victims more quickly and leading them into
financial ruin. There would also be little benefit to the United States since most of the
wagering money is funneled overseas.

Proponents
on both sides of the debate agree that passage of the bill will not immediately
deter online gamblers from continuing to place wagers.

Rothken
notes that gamblers and casinos will find new and sometimes risky techniques to
transfer money.

“In the
next few months we will see a lot of activity of and how the fertile human imagination
can try to bypass this bill.”

But Bolcerek
thinks that the new websites that pop-up will have less protections for keeping
minors off the gambling sites, services for problem gamblers, and services for
tracing financial transactions.

“If
your public approach for public policy is to address those areas, prohibition
is sorely lacking.”

“In
the long term, this will be detrimental to the game,” he added.