The Mouthpiece


By Martin Owens
Contributing Editor


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    Martin Owens

    But They're Hell On That Internet Gambling!

    The tale of how the DOJ handled two threats to America

    Philadelphia, PA (Sports Network) - You don't know Molly Norris, but she's become the measure of how badly skewed our government's priorities are these days. Norris is- or rather was- a cartoonist for the Seattle Spectator. Last April, when the TV cartoon series SOUTH PARK received threats for depicting the Prophet Mohammed in its show, Norris chimed in with her suggestion: If everybody in the world drew a Mohammed cartoon, she suggested, then even the looniest jihadi would realize you can't murder the whole planet, and the whole business would blow over.

    Not so. Even though she later disavowed the idea and apologized. No good. No less an Al Qaeda figure than Anwar al Awlaki, linked to the Fort Hood shootings and the Times Square Bomber, among others, pronounced open season on her, and the death threats haven't stopped. But then she really screwed up. She went to the government for help. On or about September 15, 2010, the FBI- that's right, the same FBI that's supposed to arrest and thwart terrorists and criminals- advised her to change her name and disappear. It's the same prescription they give for somebody who's turned state's evidence against the Mob. Only Norris hasn't broken any laws. She's not a lifelong criminal trying to swap testimony for a lighter sentence. She spoke out, as she had every right to do. But when the threatened, she was told, her only recourse was to lose her name and livelihood.

    Other laws, same targets

    This governmental shoulder shrug was in response to a genuine danger. If there's one thing we know for a fact, it's that radical Muslims follow through on their threats to kill people. But never fear! Against other threats, your Department of Justice ( the FBI's parent organization) is still on the job.

    For the DOJ is keeping up the fight against that even more sinister menace, Internet gambling! On that selfsame September 15, the Goldwater Bank of Arizona reached a "settlement" with DOJ- $13 million to atone for handling deposits made on behalf of PokerStars by an outfit called Allied Wallet. The legal theory that underpinned the action was, to say the least, interesting. The move against Goldwater bank was based on its acceptance of TARP funds from 2008 ( that is, the absolute last bank bailout before the one after that and the one after that, not to be confused with the latest, no-foolin'-absolutely-the-last bailout, now under consideration in a Congress near you).

    Why was TARP called into action? Why didn't the DOJ use the Unlawful Internet Gambling Enforcement Act? Well... because it can't, actually. UIGEA has no working definition of what - unlawful Internet Gambling" is, though it lists one or two things that aren't. And when it came time for the Treasury Department to write them, it refused. That's right, refused in writing, because American gambling law is such a tangle of competing statutes and policies that as a practical matter, it's next to impossible to tell which Internet gambling is illegal and which isn't. Certainly this is the case for banks, which are nevertheless supposed to set up "procedures" to prevent these forbidden transactions from crossing their thresholds. Again, a virtual impossibility, especially in the area of ACH check processing, which is what Allied Wallet was up to.

    So , even though Goldwater Bank probably couldn't have been convicted of doing anything wrong under the UIGEA ( which only provides penalties for the actual gambling operators anyway), the money laundering prevention section of the TARP Act was brought into play against the crooked fortune that had been amassed. All $732,000 of it ( When you consider that Internet gambling worldwide is worth about $30 billion this year, you can understand what a terrific blow has been struck here).

    But just to make sure, the farce took its now-familiar path: the threat of prosecution was used to squeeze a "settlement" of about $13 million; the exact formula for deciding this amount, 18 times the value of the alleged offense, was not disclosed. In addition, Goldwater had to admit wrongdoing and promise not to do it again, whatever it was. Oh, and set up better "procedures" As a practical matter it is quite possible that Goldwater could have gone to court and beaten the rap. But as a cold business proposition, the only sensible thing to do was pay up and move on.

    Through the Looking Glass, Darkly

    So boys and girls, what have we learned from these two events, done the same day and under the same roof?

    First, if you're the wise guys running offshore I-gaming sites: relax. So long as the only Disney parks you visit are the ones in China and France, you personally are safe. Nor is your business model in any danger: the game of whack- a- mole always favors the moles. For every payment provider that DOJ clips, two more will step up to take the business. In an industry worth $30 billion and climbing ( mobile gambling, that is via cell phones, is projected to add up to another $12 billion all by itself), somebody will be found to move the money.

    Nor should you worry about competition. The opportunity to legalize and license I-gaming at both the state and the national level has been presented annually to the Congress and the state legislatures for about four years now. Even with powerful and timely help in the form of opportunity, need and wide popular support, they continue to hang fire coast to coast, grimly determined, it would seem, not to miss the chance to miss their chance.


    If you are a banker or payment processor, best brush up on those "Procedures". They are the best protection you can have in a very uncertain arena. And since the actual Internet gambling operations are out of US government reach, the money men are the only "trophy heads" left in this scenario.

    And at all levels of the I-gaming world: remember, Obama or no Obama, the DOJ is still out there watching. It's their job to protect Americans from dreadful evils like Internet gambling, that "colossal criminal enterprise" as the FBI has called it. Whether the threat is real or not. Whether the citizens want the protection or not. And DOJ takes this responsibility seriously. If one law doesn't do the job, they won't stop- another law will be tried, and another and another. This is an important goal, and no effort will be spared.

    But if you are an honest citizen, under genuine threat of death or worse for exercising your First Amendment rights, it seems the most help you can expect from Uncle Sam is a bus ticket and a fake mustache. Maybe an invitation to visit the Ground Zero Mosque someday.

    Welcome to post-Constitutional America.

    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 I. 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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