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EFFECTS AND FUTURE OF HR 4411



The Effects and Future of HR 4411
July 19, 2006  
© 2006 Randy Saylor  

The future of online poker is at stake. While poker can and will survive a legal prohibition in the United States, a loss of more than half of the worldwide players would certainly throw the operators for a loop.

The good news is this is an unlikely event. Let us get one thing clear: passage and ratification of this bill WILL NOT make playing online poker from the United States illegal. It may hinder our funding options, or our internet access, but no provision of the bill suggests it is illegal to log into a poker site and play for real money.

The bad news is, passage and ratification of this bill will create the perception of illegality among the common folks…our potential opponents…our potential fish.


What is the Bill About?

Some quotes from the official congressional summary, posted at www.house.gov

 

Amends the federal criminal code to prohibit persons engaged in the business of betting or wagering…

A definition: poker players are not in the business of betting; we are players. This aspect was debated in the House, and determined not to apply to players. The sites are in the business of betting, and the United States government has no jurisdiction over a business in another country, especially when said business is licensed and regulated by its home country. If we (as a country) have an issue with another country’s business licensing standards, it is a matter for our State Department, not our legislature.

 

…from knowingly accepting credit, electronic fund transfers, checks, drafts, or similar instruments…

 

Again, our Congress has no jurisdiction over what a foreign company can or can’t “accept.” The reality is that American credit card issuers already decline transactions with gambling businesses…not for lawful reasons, but for protection from gambling debts. It should be noted, however, that pressure was placed on the creditors by the Federal Reserve to restrict those transactions, and no bank wants to run afoul of the Federal Reserve Bank.

 

Directs the Secretary of the Treasury and the Board of Governors of the Federal Reserve System to prescribe regulations to identify and block restricted transactions and transmissions of wagering information. Grants financial organizations immunity from civil liability for blocking transactions which they reasonably believe are restricted transactions.

 

This paragraph is significant for Americans. It means that all financial transactions, not just credit cards, can be blocked. It also means that I can’t hold my bank liable if they decline my wire transfer to my “aunt” who happens to live in Costa Rica or Kahnawake.

 

Grants U.S. district courts original and exclusive jurisdiction to prevent and restrain restricted transactions. Authorizes the Attorney General or any state attorney general to institute proceedings to prevent or restrain a restricted transaction.

 

This is boilerplate. U.S. district courts have neither the constitutional authority nor the inclination to investigate such activities. The Treasury and Justice Departments would be responsible for investigating and pursuing legal action. State Attorneys General don’t have a dog in this fight. Mentioning them is superfluous.

 

Imposes fines and/or a five-year term of imprisonment for violations of this Act. Authorizes a court to enter a permanent injunction prohibiting an individual convicted of a violation of this Act from engaging in betting or wagering activities.

 

Imposes fines and/or imprisonment on whom, may I ask? Mike Sexton? Lee Jones?

Authorizes the prosecution of otherwise exempt financial transaction providers, interactive computer services, or telecommunications services that have actual knowledge and control of bets and wagers and that operate, or are controlled by an entity that operates, an unlawful Internet gambling site.

 

Again, these “entities” are outside the United States’ jurisdiction. There is no way for the United States government to restrict its citizens’ transactions with overseas companies. Legitimate e-wallet services outside the U.S. cannot be directed to restrict the choices their American customers make.

 

The money laundering provisions are simply fear mongering. Drug dealers, arms dealers, the mafia, and terrorists are not using Party Poker to launder millions of dollars. This provision is ludicrous. The worst criminals in online poker are donkeys who call your three-bet preflop with J4 and crack your aces when they hit two pair on the river.

 

The biggest concern, by far, in this passage, is the possible regulation of the ISPs. If telecommunications providers are cracked down upon, it is possible that access to the data required to play online may be restricted to Americans. I am not a telecommunications expert, but my research suggests that the use of internet telephony to foreign ISPs, and the establishment of VPNs (virtual private networks) can overcome this problem. In other words, I use my (American) ISP to get online. I use an internet phone call to connect to a foreign ISP, from whom I establish a VPN link to my chosen site. Once the VPN is up, concerns about advanced packet readers to detect gambling data are alleviated. Direct dial-in to the sites may also be a solution, as may some new technology.

 

Calls for the U.S. government, in deliberations with foreign governments, to: (1) encourage cooperation by foreign governments in identifying whether Internet gambling operations are being used for money laundering, corruption, or other crimes; (2) advance policies that promote international cooperation in enforcing this Act; and (3) encourage the Financial Action Task Force on Money Laundering to study the extent to which Internet gambling operations are being used for money laundering purposes.

 

Directs the Secretary to report to Congress annually on deliberations between the United States and other countries on Internet gambling.

 

Okay. So the State Department will “ask” third-world governments, who get a significant portion of their budget from their licensees, to “crack down” on these renegades. We will be satisfied with their assurances of “taking it seriously” and “investigating it”, only to continue their foreign aid anyway, lest we appear racist and xenophobic.

 

The Future of the Bill

 

Despite the bill’s overwhelming majority passage in the House, pundits doubt the bill will gain passage in the current Senate term. Summer vacation will soon begin, and the Senate is facing a significant amount of legitimate legislation in the coming months, along with the uncertainty of the coming midterm elections. In addition, the makeup of the Senate tends to be more socially moderate than that of the House of Representatives. History tells us that if the Senate does act on this bill in 2006, it will be mired in debate and filibuster, and the version voted on in the Senate is likely to be much different HR 4411.

 

The Political View

 

One interesting aspect of the bill’s landslide passage, without amendment, in the House is the fact that Democrats and Republicans voted yes or no in roughly equal percentages. This is likely because the issue really does split the parties. A liberal Democrat may favor big government, with its attendant regulation, and vote yes, while a Democrat that prefers fewer social controls would vote no. A fiscally conservative Republican might want smaller government, but a socially conservative Republican, influenced by the “religious right”, may want to contain a societal problem, namely gambling. Someone opposed to this bill may be upset by its “big government” flavor, or by the suggestion of moral control through regulation.

 

Hope

 

Let us hope, then, that the machinations of Congress delay this issue past November, when 1/3 of Senators and all Representatives have bigger concerns with elections. Should this happen, the non-passage of the bill will only be a minor victory. If the popular media play the non-passage as a defeat, it can become a major victory. This could create a surge of positive sentiment in our direction. Perhaps the next Congress will look at the possibility of regulating and benefiting from online gambling options, rather than the knee-jerk ban.

 

The lottery and horse racing lobbies are powerful, and may yet force this bill to pass. We can only hope that they are unsuccessful, and we get to give the free market a chance to decide the issue. I hope for the best here. I need some new fish at my tables.
 


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