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SAFE Port Act - George Will Thoughts

Found an interesting commentary in Newsweek on the recently passed SAFE Port Act, by the noted commentator, George F. Will, who begins with the following: “Perhaps Prohibition II is being launched because Prohibition I worked so well at getting rid of gin. Or maybe the point is to reassure social conservatives that Republicans remain resolved to purify Americans’ behavior. Incorrigible cynics will say Prohibition II is being undertaken because someone stands to make money from interfering with other people making money.” The full text of the article can be found here.

Add comment October 23rd, 2006

SAFE Port Act - Good News, Part 2

The second good thing to come out of the SAFE Port Act, if you think people should have the ability to freely participate in such licensed online gaming activities as they desire, is the carve out that businesses operating horse betting sites received.

For purposes of the SAFE Port Act, “unlawful Internet gambling” does NOT include any activity allowed under the Interstate Horseracing Act. While this is not free from debate, the U.S. based racing industry would say that means that horse betting on the internet is a permitted exception under the SAFE Port Act and financial transactions can freely go to horse betting sites. The Interstate Horseracing Act had previously been amended to clarify that inter-state wagering on horse racing was contemplated under the Act.

However, some have argued, including the U.S. Department of Justice, that the 1961 Wire Act makes the offering of such wagering a crime since horse racing is a “sporting event or contest” and thus covered by the Wire Act. But no prosecutions have ever been commenced.

The SAFE Port Act was written to explicitly leave standing the current debate on the Wire Act vs. the Interstate Horseracing Act. The SAFE Port Act goes on at length to emphasize that it is not intended to and does not change the current state of the law, so that it leaves to another day whether the Interstate Horseracing Act, civil in nature, can trump the Wire Act, criminal in nature, so as to permit horse betting to be legally offered and to now, under the SAFE Port Act, be able to accept financial transactions from U.S. based banks. Horse racing sites do so and will continue to do so and we expect the Department of Justice, notwithstanding their pronouncements to date, will continue to do nothing to stop it.

Add comment October 21st, 2006

SAFE Port Bill - Good News, Part 1

While we know many are forecasting the “end” of online gaming resulting from the passage of the SAFE Port Bill, expected to be signed into law by October 14, 2006, those in the know, know better. So, we begin our multi-part series on the ways in which the SAFE Port will still preserve online gambling for those who want to partake, will in some ways make online gambling easier and will even create new opportunities for betting.

Remember that the SAFE Port Bill does NOTHING to change existing law. All definitions in the Bill are merely utilized for determining which financial transactions will be deemed to be “restricted transactions”, and therefore subject to being blocked. They do not attempt to define words and phrases used in the 1961 Wire Act, which is the most often source of support for arguing for the criminalization of the operation of online gambling. In fact, Section 5362(10)(A) states that the term “unlawful Internet gambling” only means a “bet or wager” which utilizes the internet “where such bet is wager is unlawful under any applicable Federal or State law….” Nothing new. And it also goes on at length to define a “bet or wager”. So activity, to be objectionable under the SAFE Port Bill, must first satisfy the definition of a “bet or wager” set forth in the Bill, and THEN be deemed to be unlawful under a previously existing Federal or State law.

Good news Number 1 is that “bet or wager” under the SAFE Port Bill can not include a deposit to an insured depository institution. So a transfer to a bank account cannot be deemed to be connected with a bet or wager. So, as a result, there is a clear path to permitting transfers to deposit accounts outside the U.S., where such deposit accounts could be used to make transfers to gambling businesses.

And we expect some or maybe many enterprising folks will be able to set up foreign accounts for players on the fly, as they explain in their terms and conditions, where funds are actually transmitted to a foreign account, which will then be used for the direct transfer to the gambling company. And you might even be able to accomplish the double transfer in the terms and conditions and have it be seamless for the player.

We imagine these protections were established to protect banks from any restriction on transferring funds from one bank to another bank. And they certainly do. In fact, Section 5362(2) also creates protection for the financial institution by providing that a financial transaction provider’s activities do not constitute being in the “business of betting or wagering”.

Add comment October 8th, 2006

SAFE Port Bill Presented to President

The SAFE Port Bill (H.R. 4954) was presented to the President for his signature on Tuesday, October 3, 2006. Under the U.S. Constitution, the President has 10 days, excluding Sundays, in which to consider the Bill.

If he objects to the Bill, he returns it to Congress and it does not become law unless two-thirds of both the House of Representatives and the Senate vote to over-ride the veto. If he does not return the Bill to the House within the ten day period, by October 14, 2006, the Bill will become law. He can, of course, sign the Bill at any time within the ten day period, at which point it becomes law. All commentators seem to be of the view that the SAFE Port Bill will be signed by the President, and we are of no different view.

Add comment October 6th, 2006

What the U.S. Safe Port Bill is Not

Assuming President Bush signs the U.S. Safe Port Bill (which he will), there certainly will be much discussion and writing in the coming days and months about what the Unlawful Internet Gambling Enforcement provisions of the Bill really mean. We’ll be reviewing it here, section by section, but first wanted to describe what it is not.

1. It does not outlaw internet gambling in the United States. The 1961 Wire Act, the interpretation of which just about everybody has a different view when people try to apply it to internet gambling, are unchanged. The debate on if, how and to what extent the Wire Act can be applied to domestic and foreign businesses that offer internet sports betting, casino games, horse racing and poker will continue.

2. It has absolutley no provisions telling U.S. citizens what they can or can’t do on the internet. In fact, it is important to remember, neither does the often quoted Wire Act, which only has prohibitions on what a business “engaged in the business of betting or wagering” can’t do.

3. It is not criminal in nature against players. Rather, it tells U.S. banks, through regulations to be issued not earlier than mid-2007, and probabaly later, what they must do in order to try to prevent the use of their financial instruments (credit cards, checks, etc.) to pay for internet gambling.

Add comment September 30th, 2006

U.S. Safe Port Act (aka Unlawful Internet Gambling Enforcement Act) Passes House and Senate

Well, after over 9 years of debate and votes, legislation attempting to prohibit the use of bank financial instruments for many types of internet gambling has passed both the U.S.House of Representatives and the U.S. Senate. It got there through a back door route, by attachment in closed Committee deliberations to the Conference Report. Language was added to a bill which had previously only dealt with protecting the ports of the U.S. from terrorist attack. The conference report can be found here on the House of Representatives website , which contains the inserted internet gambling language beginning on page 213.

Add comment September 29th, 2006

U.S. Internet Gambling Legislation Coming?

Be watchful, U.S. Senate leaders are trying to attach internet funding prohibition legislation to anything they can as the 109th Congress comes to a close. While they failed in their attempt at adding it to the Department of Defense funding bill, there are still a few opportunites left. More to come . . . . .

Add comment September 27th, 2006