Gaming Law "In the News" ...

A Catania Consulting Group Client Newsletter August 19, 2009

Integrity, Leadership, Experience ...

Frank Catania, Esq. President, former Assistant Attorney General, Director NJ Division of Gaming Enforcement,   VP Compliance Players International.  frank@cataniaconsulting.com

Gary Ehrlich, Esq. VP, former Assistant Attorney General, Deputy Director NJ Division of Gaming Enforcement.  gary@cataniaconsulting.com

Keith Furlong, VP, former Public Information Officer & Legislative Liaison NJ Division of Gaming Enforcement. keith@cataniaconsulting.com

Joseph Kelly, Esq., Associate, Professor of Business Law, SUNY College Buffalo. jkelly@cataniaconsulting.com

Your’e Hired!! Donald Trump Set to Regain Three Casinos that Bear his Name

Donald Trump confirmed that he plans to make Atlantic City “hot” again. Trump and Beal Bank of Nevada presented a reorganization plan that would take the struggling gaming company, Trump Entertainment Resorts, out of bankruptcy and put Trump back in control of the three casinos that bear his name: Trump Taj Mahal, Trump Marina and Trump Plaza.

Trump departed as chairman of Trump Entertainment Resorts, the company that operates the three Atlantic City casinos, last February. At the time, he said that bondholders weren’t interested in his plan to take the company private.

Trump’s new reorganization plan, and his acquisition of the three Atlantic City casinos that bear his name, requires approval from a bankruptcy court judge.

New NCAA Policy Bans States With Single Game Sports Betting From Hosting Championship Events: Selective Policy Targets Nevada and Delaware

The new NCAA policy was presented after a request from the NCAA and other professional sports leagues to stop Delaware’s plans for sports betting was denied by a federal Judge. Delaware plans to reintroduce sports betting after not having participated in the activity since 1976. There are currently four states in the U.S. that are allowed to have sports betting—Nevada, Delaware, Montana and Oregon. Each of these states were grandfathered into a 1992 law that banned sports betting.

Only Nevada and Delaware would potentially be impacted by the new policy, as Oregon no longer offers any sports betting and Montana does not allow bets on single games.

The policy bans hosting NCAA championship games as well as regional championship games in all sports. The policy does NOT extend to conference championship or non-Bowl Championship bowl games.

The Unlawful Internet Gambling Enforcement Act

To paraphrase Winston Churchill, U.S. internet gambling laws are a riddle, wrapped in a mystery, inside an enigma. It is generally accepted that offshore online sports betting operators who accept U.S. players are in violation of the Wire Act (1961). It is legally unclear whether federal law prohibits non-sports interactive gambling such as poker. The U.S. Justice Department insists that all interactive wagering including interstate, state- licensed interactive horse racing in about 29 states, is illegal. The General Agreement on Trade in Services (GATS), which involved an internet gambling complaint by Antigua against the U.S., concluded that the U.S. violated the GATS in allowing domestic interactive horse race wagering while excluding foreign operators.

In October 2006, Congress passed the Unlawful Internet Gambling Enforcement Act (UIGEA), which did little to resolve the legal uncertainty as to what was prohibited Internet gambling. The primary purpose of UIGEA was to block monies going from the player to the offshore gaming operator. Federal regulators, pursuant to UIGEA, required non-exempt participants in designated payment systems to develop procedures by December 1, 2009 to block prohibited payments to online gambling operators.

The U.S. Justice Department, which had earlier taken action against payment processors such as Neteller, Citidel, and Paypal, seized in June 2009 over 30 million dollars in poker payments going from the offshore operator to the U.S. players. This seizure is being contested by both payment processors and pro-poker groups. In April 2009, a Canadian payment processor was indicted in New York Federal Court for bank fraud conspiracy and the catchall Illegal Gambling Business Act and the Anti-Money Laundering Act. Interestingly there was no UIGEA allegation, perhaps because the recent federal statute specifically did not include payments going from the gaming operator to the player. Federal seizure of funds may be contested successfully. For example, Bill Scott, who operated an offshore sports betting operation and had been indicted along with 20 other individuals in 1998, had funds seized pursuant to the Fugitive Disentitlement Statute. This law allowed seizure of funds from someone who was avoiding prosecution by remaining outside the United States and was engaged in a money laundering scheme through an unlawful Internet gambling enterprise. In a civil proceeding, the federal district court granted summary judgment to the U.S., which was reversed on appeal (2009) because the U.S. could not show that Scott remained outside the United States in order to avoid the criminal charge.

There are several bills now before Congress that would legalize and regulate online gambling operators. Unfortunately, they specifically exclude Internet sports wagering from regulation. There is a remote chance that UIGEA will be declared unconstitutional or that New Jersey plaintiffs will be successful in overturning the 1992 Bradley bill that had the effect of restricting sports wagering to four states. In the meantime, offshore sports operators will continue to accept billions of dollars from U.S. players.

Courtesy of www.sportsnetwork .com – article by Professor Joe Kelly

The Menedez Bill and the Prosecutors Posted on Aug.07, 2009 in PokerLaw.com
Written By Professor Joseph M. Kelly

On August 6, 2009, New Jersey Senator Robert Menendez introduced a bill (S1597). Also this week, a Canadian was indicted in New York federal court for processing $350 million in poker and other payments to player. What’s the connection? These two events neatly juxtapose the current posture of law enforcement against the likely future of online poker.

In the last session of Congress, Rep. Robert Wexler and Sen. Robert Menendez introduced internet skill/poker legalization bills that went nowhere. The current bill would impose a 10% tax on all player deposits and the proceeds would be split evenly between the federal government and the state where the player was situated. The bill requires that all license applicants demonstrate suitability, solvency and social responsibility, three criteria that I discussed in my interviews at CardRunners. The Menendez bill is different from Rep. Barney Frank’s bill, which would legalize all qualified online gambling operators except for sports wagering and should be in the spotlight again in September.

A number of commentators on these recent bills have remarked that prospective tax revenue flowing from online poker is too juicy for the state and federal governments to pass up, particularly in these times of high deficits. When forced between cutting spending and raising taxes, it is nearly axiomatic that most of our elected officials demonstrate bipartisan support for the latter over the former. Generating new tax revenue should be attractive to Washington and cash-strapped states, but beware the government agency that is at least one step removed from real-world fiscal problems and the political implications that follow them: the U.S. Department of Justice, and its state counterparts.

Consider the state of Washington, for example, where online poker playing is criminalized as a class C felony, equivalent to rape. In Rousso v. Washington (2009) a poker player/lawyer challenged unsuccessfully the constitutionality of this bizarre law, largely because it interfered with interstate commerce.

In North Dakota, an attempt was made to legalize interstate state licensed poker. The bill died when the U.S. Justice Department declared in 2005 it would be unlawful. In California an intrastate poker bill died in the past legislature partly due to U.S. Justice Department opposition. In the near future, an intrastate online poker regulation bill should be introduced and stands a better chance of becoming law because of California’s desperate financial situation and the Obama Administration’s policy of not interfering in intrastate matters.

The U.S. Justice Department in June seized over thirty-million from payment processors in poker player monies going from the operator to the player. The U.S. Justice Department has long insisted that all interactive gambling, including poker and interstate horse racing (which currently exists in about 29 states) was illegal. In seizing the monies the Justice Department did not rely on UIGEA for various reasons and instead utilized the Anti-Gambling Business Act and the Anti-Money Laundering Act, which are “catchall” statutes. The seizure is being contested by the effected payment processors and by various pro-poker groups.

I mention recent prosecutorial actions and the legislative developments to illustrate the fact that two trains are on a collision course. One is winding through Congress, and the other is driven by The Prosecutor. Somebody is bound to get hurt.