The Mouthpiece


By Martin Owens
Contributing Editor


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    Martin Owens

    Internet Gambling :Handicapping the Law for 2010

    "More law, less justice."
    Cicero


    Philadelphia, PA (Sports Network) - It caught me by surprise. Shame on me, I'm one of the people who should have seen it coming.

    When you grow up around a racetrack, as I did, one of the first things you learn is that people will bet on damn near anything. So as a lawyer focused on Internet gambling law, I should have been able to predict that, along with existing fantasy leagues for football, basketball, baseball, and just about any other game or sport you could name, there would sooner or later be a fantasy league covering the decisions of the US Supreme Court. And it happened at the end of the year just gone.

    That's right, participants may now compete in predicting the outcome of cases currently before the Honorable Justices. Contestants win points by correctly predicting the verdicts, what the voting margin will be, and which Justices, by name, will vote with the majority or dissent. Now of course the appeal for this pastime is, let us say, limited. Only a tiny minority, even of lawyers, fool with Constitutional law when they don't have to- and the average guy who watches the game on weekends would rather get a root canal than analyze legal arguments.

    (Just in case someone is interested, the website is http://www.fantasyscotus.net/.)

    But if I didn't come up with the idea, I can certainly steal- oops, I mean research, the application. As the bookmakers keep telling us, point spreads and odds are only expressions of probability . It's just a lucky coincidence that they can also be used to make tons of money, because after all, they don't have to be used that way. It's beyond doubt, however, that the use of numbers tends to make predictions both quick and memorable. For which reason my predictions for Internet gambling law in the coming year are expressed as odds. Here goes:

    U.S. National Legislation to Legalize Internet Gambling

    Congressman Barney Frank and his associates certainly deserve our support and sympathy for trying to repeal the Unlawful Internet Gambling Enforcement Act ( UIGEA),or at least modify it so that a reasonable human being can understand what the hell it says. But their efforts have come to nothing the past three years, and 2010 looks no different. Even the change of regimes from Bush to Obama doesn't make that big a difference. The bottom line is, supporting an expansion of gambling gains no significant advantage for most officeholders, and may be risky. Opponents, on the other hand, can count on a small but dedicated voter core. Add to this the fact that UIGEA allows legalization of I-gaming by states, which are not eager to share either power or revenue with Uncle Sam, and we can see that gambling reform at the Congressional level is still an uphill fight.

    ODDS:
  • 5-1 - against any I-gaming reform passing either chamber of Congress this year.

    UIGEA Regulations

    The regulations for actually applying this nearly incomprehensible law are supposed to finally emerge this year. There will be no actual penalty for US financial institutions in the event that an Internet gambling transaction should actually slip through their preventive procedures. But inventing and applying those procedures amounts to an administrative burden that they'd rather not have. Some financial service providers have taken to sending form letters to their customers, warning against online gambling, when the amount in question seems like it might be a bet- clearly, a waste of a stamp and a piece of paper.

    ODDS:
    A wash. Nobody cares. It's just another administrative drill for the banks, who can tolerate it. Meantime, the odds are a hundred to one against anyone actually being prosecuted under this useless, unenforceable statute.

    The WTO proceedings with Antigua:

    As one or two of us remember, in 2003 the government of Antigua, which licenses online gaming businesses to operate worldwide, sued the USA before the World Trade Organization. The charge: that US anti-gambling laws amounted to an illegal restriction of trade, restricting the US gambling market to "locals only", in violation of WTO treaty obligations. To cut a very long story short, the Americans won a victory and then proceeded to throw it away by defying the WTO altogether. Most of the Antiguan case failed. All the Bush administration had to do was open up online bets on horse races, which would have expanded the market and actually benefited American horse racing. They refused to do this on supposedly moral grounds, whereupon the WTO authorized Antigua to take punitive measures - in this case, to trespass on U.S. intellectual-property protections to the tune of a couple billion dollars or so. In response, the Bush administration attempted to rewrite its treaty obligations in this regard. Under the WTO rules, all the treaty members can claim compensation against a country that does that. So now, in addition to Antigua, Uncle Sam finds himself fending off claims from Australia, Canada, Costa Rica, Macau, and the whole European Union. This could get expensive, but so far the American trade representatives have managed to stretch out negotiations, and wearing the other side down seems to be the only coherent part of US strategy here. Today, seven years later, America seems well on the way to simply talking this whole matter to death. The point is, it never had to happen in the first place. One more self-inflicted wound from the Bush legacy.

    ODDS:
  • 10-1 - that Uncle Sam will B.S. everybody else until they go blind, or agree to accept a small settlement, or perhaps none at all.
  • 30-1 - that this has no lasting effect on trade.
  • 50-1 - that nobody remembers anything about this in five years, except possibly the negotiators themselves.

    State Legalization of Internet Gaming

    If the UIGEA allows state governments to legalize and license Internet gambling within their respective borders, and the UIGEA has been in effect since 2006, then why haven't the assorted state governments jumped on the opportunity?

    Interestingly enough, this is not due to gambling's reputation as a social evil. The expansion of legalized gambling has always been a sure bet in bad economic times. What is holding up state licensing of I gaming in the USA is simply inertia.. All the potential stakeholders, public and private, have discovered that setting up and running an in-state Internet gambling network will not be an automatic slam dunk. It will require planning, coordination, and especially cooperation between the players in the existing US gambling market- rivals up to now. It's time for the folks who want a piece of this future to step forward and roll up their sleeves. But so far it's been a standoff- operators and software providers, on the one hand, are waiting for formal state-government permission before they make any substantial commitment; the state lawmakers and regulators want to see commitment before they give permission. What will break the deadlock? Why, hunger of course.

    The best candidates for legalizing Internet gaming, particularly poker, are those with large land areas, large populations, a tolerant attitude toward adult pastimes, and a chronic need for revenue. Of these, California and Florida are foremost. Florida has already authorized a study of in-state Internet gambling. California has not formally acted, but its existing system of licensed municipal card rooms and Indian gaming, together with lots of talent and experience regarding web-based networks and systems, make it the best prepared state for entering this market. Its enormous chronic deficit makes it the state that is readiest to reach out for another source of revenue. But this is by no means guaranteed - this is an election year, and elections have a habit of monopolizing lawmakers' time.

    ODDS:
  • 2-1 - In favor of California's legislature approving an Internet poker system this year.
  • Even money or 8-5 - that Florida might.
  • Other states - 5-1 - against, overall, unless and until one state shows the way. Then there'll likely be a stampede to follow the leader.

    That's it for now.

    Let me wish everyone a Happy New Year, and a Lucky one!

    Mr. Owens is a California attorney specializing in the law of Internet and interactive gaming since 1998. Co-author of INTERNET GAMING LAW with Professor Nelson Rose,( Mary Ann Liebert Publishers , 2nd ed 2009) ; Associate Editor , Gaming Law Review & Economics; Contributing Editor, TSN. Com Comments and inquiries welcome at to mowens@trade-attorney.com.

    Copyright 2010


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