UIGEA Compliance Less Than Two Months Away, Frank Seeks Delay

We poker fans and players have a lot to occupy ourselves at the moment. There are the various tourneys happening in London and Aruba to follow. We continue to look forward to the November Nine (just over a month away now). And, of course, we continue to enjoy our own games.

Meanwhile, that Unlawful Internet Gambling Enforcement Act of 2006 -- or, as I sometimes purposefully mispronounce it, the Awful Internet Gambling Enforcement Act -- continues to creep up on us. Will something be done before that absolutely-final-no-we-cannot-delay-it-any-further deadline of December 1 arrives? Or will time run out?

You may recall that the finalized regulations for the UIGEA were put into effect on January 19, 2009, the very last full day of the George W. Bush presidency. In other words, it has been the case for a while that banks (or “designated payment systems”) can, if they choose, block clients’ transactions with online poker sites, although for the most part very few have bothered to do so.

There have been a few reports scattered here and there in the forums of people running into occasional hassles with transactions. There was also that bit of applesauce that occurred over the summer when the Assistant Attorney General of the Southern District of New York ordered a few large banks to freeze the accounts of a couple of companies (Allied Systems and Account Services) that were processing payouts for online poker sites. Not sure, actually, that it was the UIGEA that afforded the legal leverage to do that or not, but it did cause quite a bother for online poker players nonetheless.

Something like $30 million in funds were frozen, with the result being that many online poker players faced inordinate delays when trying to withdraw from the sites, most particularly from Full Tilt Poker and PokerStars. The sites eventually found new means to make the payouts happen, though, and all was (mostly) well.

However, from the perspective of the “designated payment systems,” adhering to the UIGEA’s prohibition against allowing their clients to make transactions with online sites that offer (still undefined) “unlawful internet gambling” has been essentially voluntary, since the regs state that “compliance... by designated payment systems is not required until December 1, 2009.” Also noteworthy is how in the finalized regulations the blocking of transactions will only be required when players try to move funds from their bank accounts to the online sites -- not when they withdraw.

That’s less than two months away. Meaning if nothing happens between now and December 1, the online poker experience for the American player is going to change significantly, I think. We’ll be able to withdraw, I imagine, but depositing is gonna be a headache. And you can imagine how things will go once that starts to happen.

We’ve seen a few bills proposed over this year -- a couple in the House, one in the Senate -- that if somehow rushed through and made law would successfully stop the UIGEA madness, either temporarily or permanently.

There’s the Internet Gambling Regulation, Consumer Protection, and Enforcement Act (H.R. 2267) introduced by Barney Frank (D-MA) which seeks to establish a federal licensing and regulatory system for online gambling to be run by the U.S. Treasury. That one has exactly 60 co-sponsors at present, and has been referred to the Subcommittee on Crime, Terrorism, and Homeland Security. So there are members of Congress other than those on Frank’s own Financial Services committee who have been (theoretically) invited to contemplate it.

Then there’s the Internet Poker and Games of Skill Regulation, Consumer Protection, and Enforcement Act of 2009 (S. 1597), introduced by Robert Menendez (D-NJ) over in the senate. Menendez’s bill offers to create a similar system of licensing and regulation, but focuses more specifically on “skill” games like poker. Menendez’s bill also includes a few other differences that make it less attractive than it might seem to online poker players. S. 1597 appears to be collecting dust at the moment, having no co-sponsors after having been referred to the senate’s Committee on Finance.

And there’s also Barney Frank’s H.R. 2266, the Reasonable Prudence in Regulation Act, which very simply asks that forced compliance with the UIGEA regs be delayed for a year (to 12/1/2010). That one, which has been referred to the House Committee on Financial Services (chaired by Frank), has collected 46 co-sponsors.

I suppose it’s possible -- though highly unlikely -- that one of these bills could suddenly catch fire and start moving through Congress. There’s always a chance, too, that one could get appended to some other bill and via a bit of legislative legerdemain (not unlike what helped the UIGEA become law in the first place) could get pushed through before December 1. But the likelihood of that happening seems mighty remote, too.

Let’s not give up hope yet, though. As always seems to be the case when it comes to U.S. legislative procedure, there’s still another way.

Last Thursday (October 1), a letter was sent to Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke asking for a one-year delay of the implementation of the UIGEA regs, citing how the enforcement of the law would place an “unreasonable burden on regulators and the financial services industry at a time of economic crisis.” The letter is signed by Frank and 18 other members of the House Financial Services Committee.

To be specific, the letter asks the feds to use their authority under the Administrative Procedure Act to bypass the usual hurdles and go ahead and agree to the one-year delay. Mention is made in the letter of Frank's H.R. 2266 (which would accomplish the same purpose), with the optimistic statement that “we believe this legislation is likely to move.”

So, yeah, the feds can still do whatever the hell they want when it comes to the UIGEA. Here’s hoping they do, in fact, give us another year to pursue the fight against that awful law.

But, really, it is hard to have any idea here what river card is gonna fall.

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.