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Old 02-28-2007, 05:06 AM   #1
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Nelson Rose columns

Just received copies of Attorney Nelson Rose's latest columns.

He allows these to be posted as long as Copyright notice is given.


2006 - #13 (c) Copyright 2006, all rights reserved worldwide. GAMBLING AND THE LAW(r) is a registered trademark of Professor I Nelson Rose, Whittier Law School, Costa Mesa, CA

Gambling and the Law(r)
Internet Poker Folds A Winning Hand

The fallout from the new Unlawful Internet Gambling Enforcement Act of 2006 has been nothing short of amazing.
Every publicly traded gaming company is running for cover, and many of the private ones as well. Operators as big as PartyPoker and the payment processor FirePay stopped taking bets from the U.S. when President Bush signed the bill into law on Friday, October 13th. Other companies have said they will cut off U.S. players once regulations are in place.
The main question is: Why?
The new Act should add little to an online operator's worries. Legally, it creates a new crime, accepting money for unlawful Internet gambling transactions, that only applies if the gambling is unlawful under some other federal or state law. Practically, this was not a drive by the federal Department of Justice or any state prosecutors. It was merely an underhanded ploy by a hypocritical politician, Bill Frist (R.-TN), to score some points for his presidential ambitions with the religious far right.
Some legal commentators have said that the new Act is something new, because it makes an operator guilty of this new crime in every state, since every state makes non-licensed gambling illegal.
But, half the states do not have laws on the books against bettors. In those states, betting even with an illegal bookie is not a crime.
The other states do make betting under some circumstances a crime. Of course, in the history of the United States, only one person, a sports bettor in North Dakota, was ever charged under these archaic statutes.
I have heard it argued that up until now, the only potential criminal liability was on the bettors in those states, not the foreign operators.
Imagine what such a law would say: It a crime in this state to make a bet, but it is not a crime to be in a gambling business that accepts the bet.
There never has been a law that penalizes only the players and not the operators.
More importantly, these laws were on the books long before this new Act was passed; so were the many state statutes outlawing unlicenced gambling businesses. If an Internet poker operator was violating any of these state laws it was already in trouble.
Years ago, Congress made it a federal felony to be involved in any way in a "gambling business," defined as five or more people violating state gambling laws for 30 days or with gross revenues of $2,000 in any single day. Worse, if those were state felonies, the operators were already guilty of the federal crime of racketeering, which has far worse penalties than this new Act.
Internet poker operators had looked at the state and federal anti-gambling statutes and concluded that they probably did not apply. The federal Wire Act, for example, was held to be limited to sports bets, while the state statutes are flawed because they do not expressly apply to out-of-state operators.
This new Act does not extend the reach of the Wire Act or any other federal or state anti-gambling law.
There may be good reasons for folding a business that is making millions of dollars a day, including the risk of prosecution. But this new Act did not change those odds.
END
(c) Copyright 2006. Professor I Nelson Rose is recognized as one of the world's leading experts on gambling law. His latest books, GAMING LAW: CASES AND MATERIALS and INTERNET GAMING LAW, are available through his website, www.GAMBLINGANDTHELAW.com.
GAMBLING AND THE LAW(r) Rose/ 2006-13


GAMBLING AND THE LAW(r) Rose/ 2006-13
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Last edited by swetyejohn; 02-28-2007 at 05:11 AM.
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Old 02-28-2007, 05:07 AM   #2
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Column 2

2006 - #14 (c) Copyright 2006, all rights reserved worldwide. GAMBLING AND THE LAW(r) is a registered trademark of Professor I Nelson Rose, Whittier Law School, Costa Mesa, CA

Gambling and the Law(r)
Prohibition 2.0
The Unlawful Internet Gambling Enforcement Act, "Prohibition 2.0," has already caused as much panic, joy and confusion as the first Prohibition.
Prohibition 1.0, the ill-fated 18th Amendment to the U.S. Constitution, went into effect in 1919 and was repealed in 1933. The "noble experiment," as it was called, was the 19th Century Puritans' efforts to end sin in the U.S. by prohibiting the "manufacture, sale, or transportation of intoxicating liquors... for beverage purposes."
Now, Republican Majority Leader Bill Frist, who aspires to be the next Puritan President of the 21st Century, is going to save our souls by prohibiting the transfer of funds to online gaming sites.
Who would have thought that gambling, one of America's fastest growing businesses, when legal, would become the ultimate sin?
Prohibition 2.0 requires federal regulators to make rules for banks, e-wallets and other payment processor to identify and block all transfers of funds for unlawful gambling transactions. Only gambling. Congress has mandated that financial institutions must prevent people from using their own money to buy this one product. There are no similar rules covering heroin or child pornography.
Whenever there is demand for something, there will be entrepreneurs willing to act as suppliers, even if the product is illegal. The most long-lasting, significant result of the first Prohibition was the creation of modern organized crime.
There are loopholes in the hastily written new Act. Like other Puritans, Sen. Frist feels he has a direct hotline to God. He didn't need to have hearings or expert testimony or even have anyone proofread his bill. He attached it to the unrelated SAFE Ports Act, and under the rules of Congress, the only way any representative or senator could read the bill would be to vote against port security.
Entrepreneurs are already overloading my email mailbox with ideas to get around Prohibition 2.0. The most obvious loopholes are contests of skill and games in which no purchase is necessary to participate.
Like all prohibitions, the Frist bill contains silly exemptions. Prohibition 1.0 allowed alcoholic beverages used for medicines and sacramental wine. A movement started to have beer declared a medicine, and it is amazing how many men decided to become, or at least dress like, priests and rabbis.
Besides not changing the law on interstate horseracing, Prohibition 2.0 authorizes fantasy sports or "educational" games, whatever those are. And purely intra-state gambling has now been expressly made legal.
Of course, the individuals most happy with Prohibition 2.0 are the online gaming companies that are still taking bets from the U.S. The principals of privately owned online poker companies won't be able to become instant billionaires by going public. But they are consoling themselves with the hundreds of millions of dollars that would have otherwise gone to PartyPoker.
END
(c) Copyright 2006. Professor I Nelson Rose is recognized as one of the world's leading experts on gambling law. His latest books, GAMING LAW: CASES AND MATERIALS and INTERNET GAMING LAW, are available through his website, www.GAMBLINGANDTHELAW.com.
GAMBLING AND THE LAW(r) Rose/ 2006-14


GAMBLING AND THE LAW(r) Rose/ 2006-14
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"Doubt is not a pleasant condition, but certainty is an absurd one. -- Voltaire
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Old 02-28-2007, 05:09 AM   #3
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Column 3

2006 - #15 (c) Copyright 2006, all rights reserved worldwide. GAMBLING AND THE LAW(r) is a registered trademark of Professor I Nelson Rose, Whittier Law School, Costa Mesa, CA

Gambling and the Law(r)
The Green Felt Revolution

In November 1989, the people of Czechoslovakia overthrew the Communist government in a bloodless coup, the "Velvet Revolution." In November 2006, the voters of the United States overthrew the Republican control of Congress. In part this was due to a "Green Felt Revolution:" Poker players helped win the election for the Democrats.
More accurately, the Republicans lost, through their heavy-handed prohibition of Internet gambling.
This is not mere hyperbole on my part. Prior to entering law school, I ran political campaigns for a living. I was a published author on psephology, the study of elections.
Of course, we all know the main issues of the 2006 mid-terms were the disastrous civil war in Iraq, President Bush's incompetence, and the widespread corruption and hypocrisy of the conservative Republican majority in Congress.
But even with all that, many races were very close. When there is less than one percent difference between winning and losing, anything that influences even a few hundred votes counts.
Take the defeat of Rep. Jim Leach (R.-Iowa). According to Dow Jones: "Leach narrowly lost his reelection bid Nov. 7 to David Loebsack, a 51%-49% upset considered by many to be election day's biggest shock."
Leach had served in Congress for 30 years. His re-election a 16th time from a safe Republican seat was considered more than a sure thing - he was a power to be reckoned with, for example, as the Chair of the House International Relations Committee.
But Leach had a thing about Internet gambling. The rumors in Washington, DC, are that Leach told then-Majority-Leader Sen. Bill Frist (R.-TN) that he would not support Frist's bid for president unless Frist got an online gaming prohibition bill through Congress.
The first presidential caucuses in 2008 will be in Leach's home state of Iowa. Leach invited Frist to "testify" at a "hearing" on Internet gambling in July 2006 in Iowa, a "hearing" that consisted solely of anti-gambling activists.
Frist rammed a prohibition through Congress, by attaching the Unlawful Internet Gambling Enforcement Act to the port security bill.
But for many people, this was one interference too many in their private lives. The ones most upset were not necessarily liberals, but rather libertarians.
The conservative movement in the U.S. is splintering. Although issues like gay marriage may stir up some of the elderly and religious far right, there are millions of people who really don't care what people do in the privacy of their own homes. In fact, they simply want government to cut taxes, provide essential services and otherwise to stay out of everyone's lives.
Voters were also turned-off by the Republican's arrogance of power. Frist would not even allow Democrats to read the final wording of his pet anti-gambling bill.
Through publications like PokerPlayer, Leach became well-known as one of the chief opponents of Internet gaming. Players are becoming organized. Poker Players Alliance (PPA) has more than 75,000 members, all of whom received multiple emails aimed at defeating the "anti's" in Congress.
After the election, the PPA polled 1,033 voters in Leach's District. Among those who knew about the new law, 10% said it made them more likely to vote for Leach; but 15% said it influenced them to support his opponent.
There were 107,097 votes cast. Leach lost by 5,711 votes, 2%. Which means that if only 2,856 voters had switched, Leach would have been reelected.
It would take a detailed study to know the exact impact. Elections are also decided by how many people are motivated enough to register, to get to the polling booth and to mark either candidate's name.
The issue of Internet gambling was a minor factor. But to say it had no impact would mean that it doesn't matter how members of Congress vote.
I am willing to bet that Leach would still be in Congress, if he had not helped foist Prohibition 2.0 on the American people.
END
(c) Copyright 2006. Professor I Nelson Rose is recognized as one of the world's leading experts on gambling law. His latest books, GAMING LAW: CASES AND MATERIALS and INTERNET GAMING LAW, are available through his website, www.GAMBLINGANDTHELAW.com.
GAMBLING AND THE LAW(r) Rose/ 2006-15


GAMBLING AND THE LAW(r) Rose/ 2006-15
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"Doubt is not a pleasant condition, but certainty is an absurd one. -- Voltaire
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Old 02-28-2007, 05:10 AM   #4
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Column 4

2006 - #16 (c) Copyright 2006, all rights reserved worldwide. GAMBLING AND THE LAW(r) is a registered trademark of Professor I Nelson Rose, Whittier Law School, Costa Mesa, CA

Gambling and the Law(r)
Legal Poker Under Prohibition 2.0

Bill Frist, then Majority Leader of the U.S. Senate and now ex-would-be presidential candidate, designed the Unlawful Internet Gambling Enforcement Act ("Prohibition 2.0") to cover Internet poker. He defined "bet or wager" as including risking something of value on the outcome of a contest, sports event "or a game subject to chance."
Is there any game, even chess, that is not "subject to chance?"
But Frist, whose arrogance was matched only by his incompetence, actually created the greatest explosion of creativity in the poker industry that I have ever seen. Everyone wants to be the next PartyPoker.com, to figure out a way to spread legal poker games online.
The cleanest way to run a traditional Internet poker site that does not violate any federal or state law is to be licensed by a state and limit players to people who are physically present in that state.
Even in this situation, it is possible the federal Department of Justice might say there is a violation of the Wire Act, since a phone line might pass temporarily into another state. But the DOJ would lose this argument for many reasons. The sole purpose the Wire Act was enacted in 1961 was to help the states enforce their public policy, which, at the time, was prohibition. What could possibly be the justification for preventing a state, like Nevada, from allowing its residents to bet with its own state-licensed poker sites?
The main obstacle to every state licensing, regulating, and of course, taxing, their own Internet poker sites is politics. Utah is not the only place where legislators would hesitate to authorize even the most limited form of online gaming. In Nevada, the problem is the opposite: there are already so many (landbased) licensed poker rooms that it is difficult to work out the details for sharing the new online revenue, and there is fear of diverting players away from the existing gaming floors.
In general, the answer is "skins." Players will log on to Caesars Palace's future online poker room and choose which game they want to play, say $5 - $10 Hold'em. They then are placed at a table that has a Caesars Palace logo on it. They probably will not know, or care, that other players may see different logos because they signed up through different casino websites. Computers ensure that each casino gets its correct share of the table's revenue.
But there are at least three other ways to have legal online poker. All gambling requires prize, consideration and chance. Eliminate any one, and it is not gambling.
A site could charge money, even for games of chance, so long as it does not give valuable prizes. Bragging rights don't count. So, someone could start a contest for the world's greatest poker player, if all they win is a trophy, no cash.
Some poker sites allow players to play for free. For example, at BetZip.com (one of my clients), anyone from more than 20 states can enter by merely mailing in a hand-written card. This is not gambling, even though players can win up to $10,000 cash. Since there is no consideration, it does not violate federal law or the laws of most states.
Others are looking at showing that poker is a game of skill. I am writing a Legal Opinion for one of the biggest operators that at least tournament poker is predominantly skill, and therefore legal under federal law and the laws of most states.
There may or may not ever be lawsuits on the issue. After all, is there any government lawyer who wants to be made a public laughingstock by claiming that poker is a game of chance?
END
(c) Copyright 2006. Professor I Nelson Rose is recognized as one of the world's leading experts on gambling law. His latest books, GAMING LAW: CASES AND MATERIALS and INTERNET GAMING LAW, are available through his website, www.GAMBLINGANDTHELAW.com.
GAMBLING AND THE LAW(r) Rose/ 2006-16


GAMBLING AND THE LAW(r) Rose/ 2006-16
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