On the Menendez Bill (S. 1597); or, Be Careful What You Ask For

Last week Senator Robert Menendez (D-NJ) introduced yet another online gambling-related bill, something called the Internet Poker and Games of Skill Regulation, Consumer Protection, and Enforcement Act of 2009 (S. 1597) (full text here).

Once again, the news of another “anti-UIGEA” bill has evoked a kind of vague enthusiasm in the poker community. And once again, I find myself wondering “Do We Really Want Online Poker Regulated?”

You might recall that Menendez introduced a somewhat similar bill on the Senate floor last September (S. 3616). That one also focused on “games of skill” as it brought together various ideas for regulation of online gambling that had been proposed in the several other bills introduced over on the House side during the previous (110th) Congress.

Mendendez’ previous bill went nowhere -- in more ways than one. Once S. 3616 was introduced, it was referred to the Committee on Banking, Housing, and Urban Affairs, and that’s the last action taken. But like all bills introduced in the Senate, it remained “in play” (as it were) even as a new president took office and a new Congress took up residence over in the House. That’s because unlike House bills, which fade into history if not made laws during the Congress in which they are proposed, Senate bills that have not been acted upon perpetually remain in consideration since the Senate is technically a “continuing body.” (EDIT [added 8/12/09]: Might not be accurate here with regard to the fate of Senate bills, I am afraid -- see comments.)

In other words, when Menendez decided to introduce a second online gambling-related bill last week, his decision meant he’d had a rethink and wanted to propose something different from before, since his earlier bill was still on the table. That’s a little different from Barney Frank (D-MA) reintroducing his legislation last May -- he had to, if he still wanted the legislation considered, since all of those bills he’d proposed during the previous Congress (including the Internet Gambling Regulation and Enforcement Act, or IGREA) had died away.

So there’s a procedural difference to note here. And, indeed, the new bill from Menendez does represent a kind of rethink, insofar as it presents a much more detailed outline of how licensing and regulation of online poker (and other “games of skill”) would go.

There’s also a fairly huge difference between the bill Frank proposed back in the spring -- his Internet Gambling Regulation, Consumer Protection and Enforcement Act (H.R. 2267) (full text here) which now has 54 co-sponsors -- and the Menendez bill. I’ve already heard some commentators strangely describe Menendez’ bill as just “a Senate version” of Frank’s House bill, but that’s not even close to being the case. While it does recite several of the same mechanisms for licensing and regulating online sites that Frank’s bill recommends, it also makes that distinction between “games of skill” (e.g., poker, chess, bridge, mah-jong, backgammon) and other forms of online gambling, and thus only proposes to regulate sites that offer such skill games.

Like Frank’s H.R. 2267, Menendez’ bill sets up a federal licensing and regulatory system, to be run by the U.S. Treasury, but also allows for individual states (and tribes) to ask to be allowed to take over the business of issuing licenses and do the regulating. This continues to be the part of such proposed legislation that frets me the most, as I happen to live in a state where it seems quite possible my government would decide against letting the feds license and regulate online gambling here.

In his analysis of Menendez’ bill, I. Nelson Rose, a gambling law professor at Whittier Law School in California, explains that this state “opt out” provision is quite sketchily explained and even self-contradictory, and so is hard to respond to as it is presently worded. If you are interested, you can read Rose’s analysis here, which once again gives us a lot of reason not to be so excited about this or any other bill proposing the licensing and regulating of online poker.

The Poker Players Alliance has come out in favor of the new bill, noting how it speaks to the need “to protect consumers by exercising appropriate control and oversight over Internet poker and other games of skill.” PPA Chairman Alfonse D’Amato calls S. 1597 “another powerful step towards protecting Internet freedom, protecting consumers and protecting online poker.”

What do I think? I have a couple of responses.

For one, I have to think the prospects for Menendez’ bill are quite dim, especially compared to Frank’s. I say that mainly because of the present makeup of the two legislative bodies, as well as the relative power Frank and Menendez currently enjoy in each. And like that previous House bill introduced by Rep. Robert Wexler (D-FL) regarding “skill games,” I think S. 1597 is likely going to remain in the background of any discussions about licensing and regulating online gambling for the near (and possibly far) future.

Secondly, I’m becoming less and less enthused by these bills as time goes by as it becomes increasingly clear that each doesn’t really represent “another powerful step toward protecting Internet freedom” (as D’Amato says), but instead introduces ways to restrict such freedoms.

I fully recognize that we need to be able to play online poker without worrying about sites cheating us -- and we need to have some legal recourse whenever they do. But what’s the point of fighting for that protection if by doing so we help create a situation in which some of us -- maybe a lot of us -- cannot play at all?

The sole reason to be at all energized by any of these bills is the way they invite criticism of the hopelessly-flawed and unfair Unlawful Internet Gambling Enforcement Act of 2006 -- the bill that has become law.

And, really, the only bill I’m supporting at present is the one Frank introduced back in May just before his latest attempt at licensing and regulating online gambling, namely, his Reasonable Prudence in Regulation Act (H.R. 2266) (full text here), a simple two-pager that does nothing more than ask for a one-year delay before financial institutions’ compliance with the UIGEA becomes mandatory. That happens on December 1, 2009, and I do think we online poker players are going to face some frustrations here and there -- particularly with regard to depositing -- if that date arrives without any legislative action happening in the interim.

H.R. 2266 currently has 35 co-sponsors -- more than I thought it would have at this juncture. It has been referred to the House Financial Services Committee (which Frank chairs), and so shouldn’t completely fall off the radar, although I’m not too hopeful about it moving through the House, Senate, and onto the president’s desk before December 1.

Even so, I think that’s probably where our energy should be directed -- toward the rapid passage of H.R. 2266 -- and not so much expended as vague, misinformed praise for bills we may not actually want to see become law.