On its hype, H.R. 2046,
The Internet Gambling Regulation and Enforcement Act, sounds like the savior of the online gambling world. It's sponsor,
Barney Frank of Massachusetts, talks of how the
Unlawful Internet Gambling Prohibition Act is an intrusion upon individual freedoms in interviews as if his Bill would do away will all prohibitions on online gambling. However, the Bill is a far cry from that. Perhaps we should focus on repealing the Unlawful Internet Gambling Enforcement Act instead of substituting one problematic law for another.
H.R. 2046 provides a method for online gambling companies to become licensed to operate in the U.S. by subjecting themselves to U.S. jurisdiction, regulation and taxes. But this would not give them the right to operate openly and freely across the United States.
H.R. 2046 contains specific exclusions for States and Indian Nations who do not allow certain types of gambling. Those States and Nations could notify the Federal Government that they wish to "opt out" with respect to some or all forms of gambling. It would then be up to the Internet Gambling Companies to sort state-by-state, and disallow each type of gambling prohibited in the individual states.
So, in theory, if you lived in a state that allowed card rooms but not craps, you might be allowed only to play in certain parts of the website.
The Act is clearly an attempt to allign U.S. laws with the World Trade Organization's latest ruling--that the U.S. Internet Gambling Laws are an unfair restriction upon free trade. But how will it reconcile with states that have a state-run monopoly on certain forms of gambling such as the Texas Lottery? Texas would presumably opt out of allowing Internet Lotteries since Texas citizens cannot run a lottery. But this still runs afoul of free trade.
In addition, the sponsor's justification for the Act--to remove the government's intrusion upon individual freedoms--is wholly lost when some states will allow internet gambling and others will opt out. What happens to the individual freedoms of those in the opt out states? Texas would most likely opt out since casino gambling is not legal here. What happens to my individual freedoms, Barney?
Another problem is that the bill codifies a potential 5 year imprisonment penalty for an online company allowing a prohibited form of gambling in a state that opted out of that type of gambling. Prior to the Unlawful Internet Gambling Enforcement Act, the U.S. could only try to prosecute online gambling under the old vague, Wire Act. Then, at least the online gambling operators could claim the law was to vague to enforce and that it made no sense to apply it against them because gambling is not really illegal under Federal Law. Furthermore, they could argue that the U.S. had no right to prosecute them since they were not located in the U.S.
Mr. Frank's Bill will make it clear that the online gambling companies must screen out the players or face jail time. Moreover, because they have agreed to submit to U.S. jurisdiction, they will have no way to claim that U.S. laws do not apply to them as foreign companies. They will be, in effect, taking on a legal liability they simply should not legally have to.
In summary, it seems to me that the Bill neither achieves its stated purpose--protecting individual freedoms--nor it's substantial purpose--to comply with the WTO ruling. Furthermore, it will take away the defenses of online gambling companies that have allowed them to extend their sites to all Americans in the past.
With sanctions looming on the horizon, the U.S. must either repeal the Unlawful Internet Gambling Enforcement Act or redraft it to comply with the WTO ruling. Repealing it gets us out of hot water with the WTO and back to where we were before. Replacing it with another law that violates our WTO agreements simply does not make sense.
