copyright © 2011 by k&l gates llp. all rights reserved. black friday impacts linda j. shorey
TRANSCRIPT
Copyright © 2011 by K&L Gates LLP. All rights reserved.
BLACK FRIDAY IMPACTS
Linda J. Shorey
2
What Motivated DOJ To Act?
3
Opinions
Increasingly bold activity by Pokerstars in U.S. Payment processors lying to banks about their
activities. Poker Companies’ use of less-than-savory
payment processors. Possible evidence of connection between the
Poker Companies and activities of the less-than-savory payment processors.
All of the above and more.
4
Was DOJ’s Action An Attempt To Influence The Legislative Debate On Internet Gambling?
Maybe or maybe not; DOJ’s not talking. Some say this is not a gambling case but a bank fraud
case (they point to permitting return of accounts and seized domain name usage for non-U.S. players).
Some say this is a gambling case to stop online poker (they point to choice of poker operators only and none of the sports wagering operators still accepting wagers from U.S. players).
Ultimately, however, Congress and State Legislatures are more influenced by their constituents (and lobbyists) than by DOJ activity, and poker has support.
5
Some Winners & Losers
6
Who Loses?
Stars & Tilt, U.S. online poker players, Online players in other countries, Absolute/Ultimate, and Other U.S.-facing poker sites who had plans to
continue to operate in some fashion in the U.S.
7
Who Might Benefit?
Big Casinos, Certain non-U.S. Poker Operators --
Those never taking wagers from U.S.-based players, and
Those who stopped taking wagers from U.S.-based players in October 2006,
U.S.-based online subscription and play-for-free poker operators.
8
Impact Uncertain Or As Yet Unknown
PPA, Those receiving “gifts” or campaign
contributions, Land-based poker tournaments, Networks televising poker tournaments, Banks, and other financial institutions, in the
Internet gambling payment processing system and lawful Internet gambling businesses needing their services, and
Likely others.
9
Legislative Efforts - Congress
10
In Play - HB 1174
On March 17, 2011, Rep. John Campbell (R-CA) introduced H.R. 1174 – "Internet Gambling Regulation, Consumer Protection, and Enforcement Act."
Identical to H.R. 2267 (introduced by Rep. Barney Frank (D-MA) in prior congressional session), as amended and reported by the House Financial Services Committee on July 28, 2010.
Provides framework for issuance of licenses to “operate an Internet gambling facility” (defined as “the direction, management, supervision, or control of an Internet site through which bets or wagers are initiated, received or otherwise made, whether by telephone, Internet, satellite, or other wire or wireless communication”) and for the regulation of licensees.
11
On Deck
Action in the Senate (bill, addition to conference committee bill, etc) undertaken by Senator Harry Reid and limited to poker.
12
Hurdles For Congressional Action Multiple Interested Parties Not on Same Page
Large Casinos Regional Casinos Horseracing Industry Tribes States Non-U.S. Operators
Congressional Leaders Who Oppose I-gambling Rep. Bachus (R-AL) – Chair of House Financial
Services Committee Senator Kyl (R-AZ)– Republican Whip
13
Did Black Friday Impact Congressional Efforts?
Possible positive Unifies members of American Gaming Association Illustrates need for consumer protection through
regulation Mobilizes players to become engaged in –
Grassroots activity Supporting PPA
Possible negative Members opposed to online gambling argue UIGEA is
working Support for claims that the online gambling industry
associates with disreputable/criminal actors
14
Legislative Efforts - States
15
States With Legislative Activity in 2011
15
16
Status of Legislative EffortsDone for 2011
Hawaii – Legislative session ended May 5 Florida – Legislative session ended May 7
Passed and now law Washington D.C. – Congressional period to object
ended April 7, law effective April 8Passed Legislature and before Governor
Iowa – Passed legislature May 3Passed Legislature but vetoed by Governor
New Jersey – Governor Christie vetoed March 3Introduced and in Committee
California Nevada
17
Washington D.C. Law #L18-370
The Lottery Modernization Act of 2010 (Subtitle G of the District’s 2011 budget legislation) changes D.C. law to provide that a “lottery or lottery game means both games of skill and games of chance that are operated by and for the benefit of” the District, IF
When offered over the Internet, it can be confirmed that those playing are located in the District; and
“No method, media or device for play of the games of skill and games of chance” violates federal law.
18
New Jersey S490/A2570
The legislation that would have permitted licensed New Jersey casinos to offer their authorized games over the Internet to persons located in NJ was vetoed by Governor Christie because, among other things, he believed it violated the NJ Constitution.
Senator Lesniak, sponsor of the vetoed legislation, has indicated he intends to introduce a joint resolution that would provide for a constitutional amendment referendum to appear on the November 2011 ballot.
19
Iowa -- SF 526
Requires the administrator of the state racing and gaming commission to prepare and provide the legislature, by December 2, 2011, a report “regarding the creation of a framework for the state regulation of intrastate internet poker.”
20
Nevada -- AB 258
As introduced on March 1, would have permitted Nevada to be a hub for interstate online poker and provided that applicants for a NV license would not be denied licensure solely because they accepted wagers from U.S., if licensed in another jurisdiction.
As amended on Apr. 25, the bill provides that no license for interactive gaming will be effective until
A federal law is enacted that authorizes it, or The U.S. DOJ informs Nevada gaming authorities, in writing, that
it is permissible.
Applicants must meet federal law qualifications for interactive gaming
21
California – SB 40 and SB 45 SB 40
Authorizes and provides for regulation of intrastate Internet poker.
Permits licensure of up to 5 operators, but the operators must be a federally recognized tribe or tribal authority, a licensed card room, or an entity owned by a combination of tribes/tribal authorities and/or card rooms.
SB 45 Authorizes and provides for regulation of intrastate Internet
gambling. Permits licensure of up to 3 qualified bidders as hub
operators. Federally recognized tribes may bid but would do so “subject
to the jurisdiction of the state.”
22
Did Black Friday Impact State Efforts?
Nevada - Yes Others – No immediate direct effect
23
What May Impact State Operation After Legislation Enacted?
Action by U.S. DOJ Liquidity Blocking by banks Tax rates
24
Prediction
25
Two Year Forecast
Federal 50-50 chance of federal authorizing legislation in 2011 25-75 chance of federal authorizing legislation in 2012
State 0 chance of state authorizing legislation in 2011
(including the ability of D.C. to implement its law) 50-50 chance of state authorizing legislation in 2012
