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Full Tilt Poker Statement
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Anti-Gaming Bill Analyzed
Online poker and US
residents.
Business continues at
Full Tilt Poker.
Full Tilt Poker is confident in its ability to continue
to offer US customers the very best in Online Poker with
fast secure deposit and payout methods. All players
should be 100% confident in playing at Full Tilt Poker.
The Safe Ports Act passed by the US Congress on
September 30th neither prohibits nor makes it illegal
for any US customer to transact with Full Tilt Poker
and therefore Full Tilt Poker will continue to run as
usual.
The new legislation will make it a felony for American
financial institutions to process online gaming
transactions. Playing in most states is still legal. The
new law does nothing to stop international processing
entities, like NETELLER, from continuing to provide
their services. States where playing is ILLEGAL are:
Washington, Nevada and Louisiana.
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Full Tilt Poker Statement:
An Open Letter From Full Tilt Poker Regarding the State
of Your Online Poker Experience
As many people are well aware, the United States
Congress recently passed legislation that aims to make
it illegal for U.S. banks to process transactions
related to online gaming.
We, like all online poker players, are dismayed and
saddened by these potential regulations, and are doing
our best to determine what these changes will mean to
our customers. We are continuing to study this
legislation and, until our investigation is complete,
believe it would be wrong to comment on how these new
rules will impact the ability for players to transfer
funds to and from Full Tilt Poker.
In the short term, we assure you that your online
experience at Full Tilt Poker will not change. You will
still be able to deposit and withdraw money from the
site using the same methods and payment processors you
have always used, and your money will remain completely
safe and secure. We cannot predict how the online poker
experience may change in the future, but we do not
expect any immediate impact from the legislation, as the
banking industry has 270 days to implement new rules
after the bill is signed.
It is also important to note that, once signed, the new
legislation will not criminalize individuals for playing
poker online. Instead, the bill will eventually attempt
to prevent the transfer of funds to online gaming. As
poker is a game of skill rather than pure chance, we
hope that it will not be affected by this new bill.
Speculation aside, however, we will continue to work
closely with organizations like the Poker Player's
Alliance to lobby for an exemption for online poker and
for your right to play a truly American game from the
privacy of your own home and computer.
While this last-minute congressional move has
undoubtedly caused concern among our players, we want to
assure you that Full Tilt Poker is legally regulated and
licensed to offer its services to anyone around the
world and that your day-to-day experience at the site
will remain unchanged in all respects.
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Anti-Gaming Bill Analyzed:
Copyright 2006. Professor I Nelson Rose, Whittier Law
School, Costa Mesa, CA
Gambling and the Law:
The Unlawful Internet Gambling Enforcement Act of 2006
Analyzed
The Unlawful Internet Gambling Enforcement Act of 2006
was rammed through Congress by the Republican leadership
in the final minutes before the election period recess.
According to Sen. Frank R. Lautenberg (D-NJ), no one on
the Senate-House Conference Committee had even seen the
final language of the bill. The Act is title VIII of a
completely unrelated bill, the Safe Port Act, HR 4954,
dealing with port security. It can be found on pages 213
-244 of the Conference Report: View Legislation. It is
based on the Leach and Goodlatte bills, HR 4411 and HR
4777, but there are some important differences.
The following is a detailed analysis of the Act. The
section numbers that follow refer to new sections that
have been added to title 31 of the U.S. Code: §5361 The
Act begins with Congress’s findings and purpose. These
include a recommendation from the discredited National
Gambling Impact Study Commission, whose chair was the
right-wing, Republican incompetent, Kay Coles James.
Findings include the doubtful assertion that Internet
gambling is a growing problem for banks and credit card
companies. It correctly states that “new mechanisms for
enforcing gambling laws on the Internet are necessary,”
especially cross-border betting.
The Act contains a standard clause that it does not
change any other law or Indian compact. It repeats this
many times, to make sure that no one can use the Act as
a defense to another crime, or to expand existing
gambling. Most importantly, the Department of Justice is
arguing before the World Trade Organization, in the
dispute between the U.S. and Antigua, that all
interstate gambling is illegal under the Wire Act. The
DOJ insisted that any Internet prohibition passed by
Congress not expressly authorize Internet betting on
Horseracing. The DOJ believes this will allow it to
continue to argue that the Interstate HorseRacing Act
does not do exactly what it says it does, legalize
interstate horseracing.
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§5362 Definitions.
Bet or wager includes risking something of value on the
outcome of a contest, sports event “or a game subject to
chance.” The Act otherwise allows contestants to risk
money on themselves. The “game subject to chance”
restriction is designed to eliminate Internet poker.
The Act then confuses the issue of skill by stating that
betting includes purchasing an “opportunity” to win a
lottery, which must be predominantly subject to chance.
Someone will figure out a way to create an opportunity
to win, where the opportunity is subject to some chance.
But the Act expressly prohibits lotteries based on
sports events.
Betting includes instructions or information. This
eliminates the argument overseas operators used that the
money was already in a foreign country, so no bet took
place in the U.S.
The Act exempts activities that we all know are
gambling, but are, by statute, declared not to be
gambling. These include securities and commodities,
including futures, that are traded on U.S. exchanges.
Boilerrooms and bucketshops, selling foreign securities
are gambling. Insurance is not.
Free games are not gambling. But there is a special
provision that allows sites to offer points or credits
to players only if these are redeemable only for more
games. Operators of free games, where players can win
valuable prizes, will have to stop giving points for
wins that can be redeemed for cash. Free bingo, on the
other hand, can still give small cash prizes paid out of
the advertising budget.
Fantasy leagues are legal, but subject to detailed
restrictions. A fantasy team cannot be “based on the
current membership of an actual team.” What they
actually mean is a fantasy team cannot be composed
merely of the players of a real team. There is no limit
on the cost of entering, but prizes must be announced in
advance, and not based on the fees paid by participants.
Statistics must be derived from more than one play, more
than one player, and more than one real-world event.
Being in the “business of betting or wagering” still
does not include mere players. It also expressly does
not include financial institutions involved in money
transfers.
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“Designated payment system” is a new term. It could have
been labeled simply “target,” as in “you are the target
of a criminal investigation.” It covers any system used
by anyone involved in money transfers, that the federal
government determines could be used by illegal gambling.
The procedure will be that the Secretary of the
Treasury, Board of Governors of the Federal Reserve
System and Attorney General will meet and create
regulations and orders targeting certain money transfer
systems.
“Financial transaction provider” is a very broad
definition covering everyone who participates in
transferring money for illegal Internet gambling. This
expressly includes an “operator of a terminal at which
an electronic fund transfer may be initiated,” and
international payment networks. This covers third party
providers, like Neteller.
“Interactive computer service” includes Internet service
providers. “Restricted transaction” means any
transmittal of money involved with unlawful Internet
gambling. “Unlawful Internet gambling” is defined as
betting, receiving or transmitting a bet that is illegal
under federal, state or tribal law. The Act says to
ignore the intermediary computers and look to the place
where the bet is made or received.
This does not completely solve the problem of Internet
poker, or even Internet casinos. The Act does not expand
the reach of the Wire Act, the main federal statute the
DOJ uses against Internet gambling. Although the DOJ has
taken the position that the Wire Act covers all forms of
gambling, courts have ruled that it is limited to bets
on sports events and races. State anti-gambling statutes
have similar weaknesses, including the presumption that
they do not apply if part of the activity takes place
overseas. This new statute requires that the Internet
gambling be “unlawful.” But it would often be difficult
to find a federal, state or tribal law that clearly made
a specific Internet bet illegal. Nevada and other states
are expressly permitted to authorize 100% intrastate
gambling systems. Congress required that state law and
regulations include blocking access to minors and
persons outside the state.
Tribes were given the same rights, with the same
restrictions. Two tribes can set up an Internet gaming
system, if it is authorized by the Indian Gaming
Regulatory Act. This means that tribes can operate bingo
games linking bingo halls on reservations. They can also
link progressive slot machines, if their tribal-state
compacts allow. But they cannot operate Internet
lotteries and other games open to the general public. It
is interesting that Congress decreed that states can
decide for themselves if they want to have at-home
betting on horseracing, but not on dogracing. Congress
also decreed that tribes can operate games that link
reservations, even across state lines, but not the
states themselves: state lotteries are not exempt.
Congress had a little problem with the term “financial
institution.” To force casinos to report large cash
transaction, federal law was changed to define
“financial institution” as including large gambling
businesses. Congress had to undo that definition, so
that in this Act casinos go back to being casinos. Since
no other federal laws were changed, casinos will still
have to file Financial Transaction Reports and the other
forms. The other definitions are standard or are
described above.
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§5363 “No person engaged in the business of betting or
wagering may knowingly accept” any money transfers in
any way from a person participating in unlawful Internet
gambling. This includes credit cards, electronic fund
transfers, and even paper checks. But it is limited to
Internet gambling businesses, not mere players. It also
would not cover payment processors, except under a
theory of aiding and abetting.
§5364 Federal regulators have 270 days from the date
this bill is signed into law to come up with regulations
to identify and block money transactions to gambling
sites. At this writing, President Bush had not yet
signed this bill, but he will. So the regs will go into
effect by the beginning of July 2007.
The regs will require everyone connected with a
“designated payment system” to i.d. and block all
restricted transactions. So all payment processors are
suppose to have systems in place to prevent money from
going to operators of illegal Internet gambling. The
first step will undoubtedly be to take the credit card
merchant code 7995 and expand it to all money transfers.
Visa created the 7995 classification in 2001 to avoid
having its credit cards used for online gambling. The
federal government will order banks and all others
involved with electronic money transfers to cease
sending funds to any Internet operator who has a 7995
credit card merchant code. Any financial institution
that follows the regs cannot be sued, even if it
wrongfully blocks a legitimate transaction.
The Act allows the federal regulators to exempt
transactions where it would be impractical to require
identifying and blocking. This obviously applies to
paper checks. Banks have no way now of reading who the
payee is on paper checks and cannot be expected to go
into that business. Banks tried to defeat this bill, not
because they cared about patrons’ privacy, but because
they knew that it would cost them billions of dollars to
set up systems to read paper checks.
The great unknown is how far into the Internet commerce
stream federal regulators are willing to go. The Act
requires institutions like the Bank of America and
Neteller to i.d. and block transactions to unlawful
gambling sites, whatever they are. But, while the Bank
of America will comply, Neteller might not, because it
is not subject to U.S. regulations. Will federal
regulators then prohibit U.S. banks from sending funds
to Neteller? And would they then prohibit U.S. banks
from sending funds to an overseas bank, which forwards
the money to Neteller?
For financial institutions within the U.S, the Act
provides that exclusive regulatory enforcement rests
with their federal regulators, like the Federal Reserve
Board. The Federal Trade Commission is supposed to
enforce regulations on everyone else. It is extremely
doubtful whether the F.T.C. will ever try to do anything
about the Netellers of the world, who are beyond regular
U.S. regulatory control.
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§5365 Since there is no way to regulate overseas payment
processors, the Act allows the U.S. and state attorneys
general to bring civil actions in federal court. The
courts have the power to issue temporary restraining
orders, preliminary and permanent injunctions, to
prevent restricted transactions. The only problem with
this enormous power is that it is, again, practically
useless against payment processors who are entirely
overseas.
It is difficult to serve a company with the papers
necessary to start a lawsuit, a summons and complaint or
petition, if the company has no offices, or officers, in
the U.S. Even if the papers for such a lawsuit can be
served, there is normally no requirement that foreign
countries enforce these types of orders. Other countries
are particularly reluctant to enforce a T.R.O., which
does not even require that the defendant be present.
Preliminary injunctions are also often ignored, because
they are issued without a full trial and can be modified
at anytime by the trial judge. Neteller operates out of
the Isle of Man. I do not know of any treaty or other
law which would require the Isle of Man to enforce even
a permanent injunction against one of its licensed
operators.
The Act provides for limited civil remedies against
“interactive computer services.” An Internet service
provider can be ordered to remove sites and block
hyperlinks to sites that are transmitting money to
unlawful gambling sites. ISPs are under no obligation to
monitor whether its patrons are sending funds to payment
processors or even directly to gambling sites. But once
it receives notice from an U.S. Attorney or state
Attorney General, the ISP can be forced to appear at a
hearing to be ordered to sever its links.
The Act provides for limited civil remedies against
“interactive computer services.” An Internet service
provider can be ordered to remove sites and block
hyperlinks to sites that are transmitting money to
unlawful gambling sites. ISPs are under no obligation to
monitor whether its patrons are sending funds to payment
processors or even directly to gambling sites. But once
it receives notice from an U.S. Attorney or state
Attorney General, the ISP can be forced to appear at a
hearing to be ordered to sever its links.
The greatest danger here would seem to be with
affiliates. Any American operator can be easily grabbed.
This includes sites that don’t directly take bets, but
do refer visitors to gaming sites. If the affiliate is
paid for those referrals by receiving a share of the
money wagered or lost, it would not be difficult to
charge the affiliate with violating this law, under the
theory of aiding and abetting. Being a knowing
accomplice and sharing in the proceeds of a crime make
the aider and abettor guilty of the crime itself. The
federal government could also charge the affiliate with
conspiracy to violate this new Act.
The other danger lies with search engines. Although
California-based Google does not take paid ads, punching
in “sports bet” brings ups many links to real-money
sites. This new Act expressly allows a federal court to
order the removal of “a hypertext link to an online
site” that is violating the prohibition on money
transfers. But what prosecutor would want to be
ridiculed internationally for trying to prevent Google
from showing links?
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The Act gives ISPs a
little more security by declaring that they cannot be
convicted of violating the Wire Act, unless, of course,
the ISP is operating its own illegal gambling site. This
section of the Act ends with a limitation, that,
frankly, makes no sense. It says that, after all the
talk of getting court orders to prevent restricted
transactions, “no provision of this subchapter shall be
construed as authorizing” anyone “to institute
proceedings to prevent or restrain a restricted
transaction against any financial transaction provider,
to the extent that the person is acting as a financial
transaction provider.” This could be a typo, since the
bill was rushed through without an opportunity to even
be read. Or perhaps it means that banks can be ordered
to not transfer money to gambling sites, but only if
they know about it. It is indecipherable.
§5366 Criminal penalties: Up to five years in prison,
and a fine. And barred from being involved in gambling.
§5367 The Act naturally makes ISPs and financial
institutions liable if they actually operate illegal
gambling sites themselves.
Lastly, the Act requests, but does not require, the
executive branch to try and get other countries to help
enforce this new law and “encourage cooperation by
foreign governments” in identifying whether Internet
gambling is being used for crime. The Secretary of the
Treasury is told to issue a report to Congress each year
“on any deliberations between the United States and
other countries on issues relating to Internet
gambling.” That report will go unread.
END
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