Poker News

IMEGA Hopeful for UIGEA to be Overturned

The Interactive Media Entertainment and Gaming Association is waiting for a decision that could overturn the Unlawful Internet Gambling Enforcement Act. iMEGA went to bat for online poker by challenging the UIGEA in front of the 3rd U.S. Circuit Court of

Gary Kaplan Pleads Guilty in BetOnSports Case

Gary Kaplan, the founder of BetOnSports, has pled guilty to violations of RICO and the Wire Act in a Missouri courtroom. He will face between 41 and 51 months behind bars and pay the United States Government $43.65 million.

According to a press release distributed by the U.S. Department of Justice, Kaplan established businesses in Costa Rica, Antigua, and Aruba. One company was BetOnSports, which advertised heavily to U.S. customers and offered the following technological prowess: “Kaplan’s toll-free telephone lines terminated in Houston or Miami and then were forwarded to Costa Rica by satellite transmitter or fiber-optic cable. Some of Kaplan’s Web servers were located in Miami and were remotely controlled from Costa Rica.”

The Department of Justice contends that in 2004, BetOnSports had 1,700 employees in Costa Rica alone and nearly one million registered customers. Its clientele issued more than 10 million bets that combined for over $1 billion. Also in 2004, BetOnSports held an initial public offering (IPO) on the London Stock Exchange that earned Kaplan $100 million. He was arrested in March of 2007 and sentencing will take place on October 27th. He has been held without bond ever since being detained by U.S. authorities.

Former BetOnSports CEO David Carruthers pled guilty to racketeering charges in April and now faces up to 33 months behind bars. Carruthers, who was detained in St. Louis, will learn his fate during a sentencing hearing on October 2nd. In June, Neil Scott Kaplan, Lori Kaplan-Multz, and Penelope Tucker all pled guilty for their roles with BetOnSports. None will receive jail time, although Tucker was issued a one year probation. Kaplan’s trial had been scheduled for September 21st before last week’s plea agreement was announced.

Interactive Media Entertainment and Gaming Association (iMEGA) Chairman Joe Brennan, who has been closely monitoring the actions in the BetOnSports case, told Poker News Daily, “It sounds like Kaplan’s plea agreement is complex. However, his risk against going to jail for a long time seems to have been minimized. There may also be some recognition that he’s already spent a significant amount of time behind bars.” Last August, William Hernan Lenis, Will Lenis, and Manny Lenis became the first BetOnSports staffers to admit guilt. The trio advertised the online sports betting outfit; one stunt involved bringing an RV to a St. Louis Rams game in 2002, enabling fans to place bets before entering the stadium.

In June, the Southern District of New York (SDNY) seized over $30 million in payments destined for more than 24,000 online poker players in the United States, marking one of the first times that the industry has been the target of federal law enforcement actions. Brennan explained, “Under the new administration, there has been no softening of the stance by the Justice Department towards internet gambling. When you look at what happened with Kaplan and what’s happening with the SDNY, it may be discouraging to those who thought that with the new administration, there would be less hostility towards internet gambling.”

On Friday, attorneys for Account Services will appear in the Southern District of California calling for the return of $14 million seized by the SDNY in June. Recently, Douglas Rennick, an individual associated with the company, was indicted on bank fraud, money laundering, and illegal gambling charges. He faces up to 55 years in jail and $1.75 million in fines. Brennan forecasted, “I’m sure that during the course of Friday’s hearing, there is going to be some discussion that the Department of Justice may prefer to see the criminal matter resolved before any civil action can move forward.” The Poker Players Alliance (PPA) has submitted an amicus brief in the case outlining that poker is a game of skill and therefore not illegal gambling.

FBI Special Agent John Gillies noted that Kaplan’s guilty plea was monumental: “Today’s guilty plea should have a lasting effect because Kaplan was not only the founder of BetOnSports, he was also one of the pioneers of illegal online gambling.”

Online Poker Warrants to be Unsealed as Judge Sides with Gambling911

In breaking news out of the Southern District of New York, Judge Laura Swain has sided with Costigan Media, the parent company of Gambling911, and ordered the warrants and affidavits associated with the seizure of over $30 million in funds destined for online poker players to be unsealed.

Swain submitted 14 pages in support of Costigan Media and the online poker community. In Tuesday’s ruling, she decreed, “The Court is required to order disclosure absent compelling reasons to deny access and even then must employ the least restrictive means of doing so.” Several sections of the warrants and affidavits are redacted, while the complete versions will remain under seal. In addition, Judge Swain mandated, “The Government is directed to make a report to the Court… as to the status of the relevant investigative and seizure activities, within 120 days… and in any event within seven calendar days of any occurrence that obviates the need for continued redaction.”

Interactive Media Entertainment and Gaming Association (iMEGA) Chairman Joe Brennan told Poker News Daily why Judge Swain’s ruling on Tuesday was groundbreaking: “Costigan Media was afforded the same right of access that the New York Times and Washington Post sometimes receive. The Department of Justice has to report back to the Court on an ongoing basis in order to determine whether the remaining information can be released.” On what information was axed from the warrants and affidavits before they were made public, Brennan speculated, “It’s more than likely names of people who are cooperating witnesses or the targets of investigation.”

Poker News Daily has obtained a copy of the affidavit sworn to by FBI Special Agent Dana Conte for the seizure of funds located in a Wells Fargo branch in California. It reads, “There is probable cause to believe that the Defendant Account Services contains property involved in actual or attempted money laundering transactions… In addition, there is probable cause to believe that the Defendant Account contains property that constitutes or is derived from proceeds traceable to the operation of an illegal gambling business.”

The affidavit reveals that the FBI has been tracking “illegal internet gambling businesses” since 2006. The target sites offer online poker, sports betting, and casino games. A six-page section outlining the issuing of payment checks and funds transfers was marked out. Conte’s document concludes with, “I also respectfully request that this Affidavit be sealed until further order of the Court, so as to not jeopardize the investigation of this case.” Conte swore to the affidavit on June 2nd. The document was signed by Judge Theodore Katz, who then ordered it sealed until further notice.

The affidavit filed by Conte relating to funds held in a Union Bank branch discusses the Wells Fargo seizure that took place three weeks prior. On the offshore internet gambling outfits, Conte comments, “Although these gambling businesses are based offshore, the vast majority of their customers are in the United States. Consequently, the internet gambling businesses necessarily rely on the United States financial system to move funds.” Once again, a six-page section was redacted from the record. The Union Bank affidavit was filed on June 24th, 12 days after the actual seizure occurred, and signed by Judge Henry Pitman.

Brennan explained that attorneys for Costigan Media will review the redacted documents and can appeal: “They could appeal to have the documents fully released. Their legal team will take a look at it and decide.” Each affidavit is 13 pages long; half is redacted.

Judge Swain had originally indicated that she would release a decision on the motion to unseal the records last week after lawyers for both sides debated the issue on July 27th. On Thursday, Costigan Media issued a letter to Judge Swain outlining the indictment of Account Services’ Douglas Rennick on bank fraud, money laundering, and illegal gambling charges.

Online Poker Payment Processor Indicted in New York

Douglas Rennick, who worked with the internet gaming payment processors KJB Financial Corporation, Account Services, My ATM Online, Alenis Limited, and Check Payment Financial, has been indicted on bank fraud, money laundering, and illegal gambling charges.

The announcement came via a press release distributed by the U.S. Department of Justice on Thursday. U.S. Attorney for the Southern District of New York Lev Dassin and FBI Assistant Director Joseph Demarest headed the indictment, which charged Rennick with “bank fraud and other offenses stemming from his role in processing more than $350 million for Internet gambling companies.” Rennick is a Canadian citizen who was involved in the business of processing payments for various companies since 2007. The investigation into his activities was concluded in June, coinciding with the seizure by the Southern District of New York of over $30 million in funds destined for online poker players.

When Rennick and company opened the accounts in question, they stated that funds would be used for activities like “issuing rebate checks, refund checks, sponsorship checks, affiliate checks, and minor payroll processing,” according to the statement from the Department of Justice. In addition to processing online poker payments, Rennick’s accounts were also used to issue winnings for online blackjack, slots, and other casino games. No mention of sports betting was given. Funds were sent to U.S. residents under the names KJB Financial Corporation, Account Services, My ATM Online, Alenis Limited, and Check Payment Financial.

A bank in Cyprus funneled $350 million to U.S. bank accounts for the payment processing. Rennick was charged with one count of bank fraud, one count of money laundering, and one count of operating an illegal gambling business. He faces up to 55 years in prison combined, with bank fraud carrying up to a 30 year sentence, money laundering carrying up to a 20 year sentence, and illegal gambling carrying up to a five year sentence. He also faces up to $1.75 million in total fines for the three charges.

Interactive Media Entertainment and Gaming Association (iMEGA) Chairman Joe Brennan told Poker News Daily just moments after the news broke this morning, “We’re taking a wait and see attitude instead of taking the knee-jerk reaction to defend the processor. We’re going to take a step back to see what the processor has been doing. If they’ve been engaged in bank fraud, then they are not doing the online poker world any favors.”

The Department of Justice is also seeking the return of $565,000 from Rennick as well as the funds in Union Bank and Wells Fargo branches under the name Account Services. That payment processor recently filed a motion for return of property of $14 million in funds seized from bank branches in California. Its hearing in the United States District Court for the Southern District of California is scheduled for August 21st, two weeks from tomorrow. The Poker Players Alliance (PPA) submitted a motion to contribute an amicus brief in support of Account Services and the organization officially has until Friday to submit it. PPA Executive Director John Pappas told Poker News Daily that the PPA will still file an amicus brief in the case that will focus on proving that poker is a game of skill.

On the future of the Account Services case, Brennan speculated, “It’s going to be difficult for them to do both things at once, to bring a civil action in California while Rennick is the target of a criminal indictment. It’s going to be difficult to proceed with both of the actions.” Pappas had no comment on Rennick’s indictment. Account Services counsel Michael Pancer was out of the office on Thursday.

A call placed to the U.S. Department of Justice revealed that no timetable has been set for the indictment from here. We’ll keep you posted on Poker News Daily.

Three Kansas City Men Jailed for Contempt Regarding Internet Gaming and Poker

When it comes to laws regarding Internet gaming and poker, there has never been an attempt to prosecute any violators. Even the state of Washington, with the most draconian laws there are, has yet to arrest, try and convict someone of what the state considers a felony equal to that of child molesting – even though many have tried to get arrested. The federal courts in Kansas City, however, could be making the first steps in the prosecution of a case regarding online gaming and poker.

Last week, Tom Cascone (the owner of a popular local restaurant), Dominic Cervello and an unidentified third man, were sent to jail on contempt of court charges in the Federal Court of the Western District of Missouri in Kansas City. The trio have refused to testify before a grand jury in the court regarding a subject that, to this point, had not been disclosed. Local newspapers such as the Kansas City Star and television stations such as KMBC, after discussions with Cascone’s family, have found out that the case is about internet gaming and poker.

According to media reports, the beginning of the case goes back to March of this year. On March 31st, several homes, supposedly belonging to people tied into multiple previous investigations of organized crime from previous years in Kansas City, were raided by police allegedly investigating Internet gaming around the city. Although Cascone’s home was not one of the homes raided, he was called in to testify in the case as a witness, as he allegedly knew some of the people under question.

In July, Cascone, Cervello, and the unnamed third person were called in front of a grand jury to testify in the case and all three refused. The prosecution offered up immunity from prosecution to the trio, which was accepted, and they returned to court last week to begin what was thought to be their testimony in the case. Once on the stand, however, Cascone, Cervello, and the third party again refused to testify and were held in contempt of court by the unidentified judge overseeing the proceedings.

Unless they testify at the grand jury hearing, the trio could sit as long as 18 months in jail. There is the possibility of an earlier release if the grand jury completes its investigation into the shadowy charges or the grand jury’s term expires. The U. S. Attorney’s Office, through a spokesman, refused to answer questions from Kansas City media and the only reason that Cascone and Cervello’s names were exposed was because they requested public hearings.

Interactive Media Entertainment and Gaming Association (iMEGA) Chairman Joe Brennan told Poker News Daily that he believes the issue is a local one and not related to other internet gaming cases. In June, the Southern District of New York seized over $30 million in online poker players’ funds from banks in California.

Previous court attempts to stop online gaming and poker have gone after the providers rather than the citizens. The now infamous case in Kentucky, where Governor Steve Beshear attempted to seize online gaming domain names, is currently on its way to the state’s Supreme Court. Minnesota, who attempted to force Internet Service Providers (ISPs) to block gaming domains from access, dropped their challenges after legal action from the Poker Players Alliance and iMEGA. The case in Kansas City looks to be the first time that the U. S. Attorneys Office has brought a case to a federal court regarding online gaming and poker.

Motion in Online Poker Seizure May Be Decided Next Week

The motion by Costigan Media to unseal the warrants and affidavits associated with the seizure of over $30 million in online poker funds may be ruled on next week. Lawyers for the parent company of Gambling911 and the U.S. Government took to a New York courtroom on Monday.

The funds in question belonged to a Wells Fargo branch in San Francisco and were part of a seizure that affected over 24,000 online poker players. Costigan Media’s motion notes, “Although the warrant was issued a month ago and although the funds are now safely under the control of the government and in no danger of dissipation, the affidavit submitted in support of the warrant still remains under seal. So do any supporting documents relating to this Court’s decision to seal the warrant application.” FBI Special Agent Dana Conte swore to the affidavit, while Magistrate Judge Theodore Katz issued the warrant.

Interactive Media Entertainment and Gaming Association (iMEGA) Executive Director Joe Brennan, who spoke to Costigan Media representatives following Monday’s hearing, told Poker News Daily, “The judge had a hard time understanding why she should keep a warrant sealed after it’s been served. She said that she could understand the Government not wanting to reveal names of informants, but other than that, she didn’t understand why it should be kept sealed.” Following the hearing, attorneys for the U.S. Government met with the judge for an hour and 15 minutes behind closed doors. A decision should be handed down next week.

Many in the industry have expressed concern about the contents of the warrants and affidavits. However, according to Brennan, they are important in order to prevent future seizures by the Southern District of New York and other bodies: “The Government has seized $40 million from payment processors, but it’s actually online poker players’ money. No one knows why the Government did it. I think the players would want to know why their money has been seized. It’s better to know if the Southern District of New York will go after more money.”

Costigan Media, which owns the popular website Gambling911, filed a motion to open the warrants and affidavits associated with the seizure citing First Amendment rights. Brennan explained, “After a warrant is served, it’s supposed to be public record. The Government wants to keep it secret for some reason. That’s a violation of everyone’s rights.” Costigan Media’s motion cites cases involving other media outlets such as the Baltimore Sun, New York Times, Newsday, and Gannett, the latter of which publishes 84 daily newspapers in the United States.

At the helm of Costigan Media is Chris Costigan, who was upbeat following yesterday’s hearing. Brennan noted that the judge did not look down upon Gambling911 bringing a complaint under the First Amendment. Instead, she carefully tried to ascertain why the Government would want to keep documents under wraps. Brennan revealed, “The fact that the judge did not look down at Costigan Media doing business as Gambling911 was encouraging. Instead, she thought, ‘I have a media outlet that is making a First Amendment application and am taking them very seriously.’”

The United States Government cited “law enforcement concerns” as a contributing factor to keeping the seal on the warrants and affidavits. It also charged that First Amendment rights do not apply to seizure warrant applications. Now, it will be up to the judge in the case to decide if the reasons for the online poker funds seizure in early June will be brought into the public spotlight.

Stay tuned to Poker News Daily for more information.

Howard Stern Joins Poker Players Alliance

Representatives from the Poker Players Alliance (PPA), the one million member strong lobbying force for the industry, announced that controversial talk show host Howard Stern became its newest member.

The news marks the kickoff to National Poker Week, which takes place until Saturday, July 25th. PPA Chairman Alfonse D’Amato commented in a press release distributed by the organization on Monday, “I can’t think of a more fitting way to kick off National Poker Week than having my friend, Howard Stern, become a member of the PPA. I thank him for having me on his show this morning and for supporting the PPA’s efforts to protect the freedom of American citizens to play the great game of poker at the time and place of their choosing – a freedom Congress voted to take away.”

D’Amato appeared on Stern’s talk show, which airs on Sirius Satellite Radio, on Monday to discuss National Poker Week in its first media efforts. Interactive Media Entertainment and Gaming Association Executive Director Joe Brennan caught the show during his daily breakfast on Monday. Brennan told Poker News Daily, “It’s good exposure for them. Obviously, Howard has a fairly big and sometimes politically active audience. It would have been good if there was more awareness that D’Amato would be on the show this morning, but it’s a real coup for the PPA.” D’Amato’s spot lasted around 50 minutes, with about one-quarter of that time devoted to the game itself.

The PPA has revamped the website of National Poker Week to include an online letter to Congressmen with the subject, “Please Protect My Right to Play Poker on the Internet.” It can also be sent as a printed letter and editable for submissions to both the Senate and House of Representatives. A person’s first name, last name, e-mail address, mailing address, city, state, zip code, and phone number are required in order to submit a letter to Congress.

Meanwhile, the online poker petition entered National Poker Week with 355,000 signatures after eclipsing 300,000 one week ago. Freerolls for those who have signed the petition have been running on sites like Cake Poker, Full Tilt Poker, and PokerStars to significant fanfare. It calls for the following: “Please: 1) exempt poker from the Unlawful Internet Gambling Enforcement Act (UIGEA) and 2) license and regulate internet poker in the U.S. 3) Respect the rights of law-abiding Americans who love to play this great game of skill.”

Poker News Daily is onsite at the PPA Fly-In, which is taking place in Washington, DC at the Hyatt Regency Capitol Hill. “Celebrity Apprentice” runner-up Annie Duke was among those who participated in a panel discussion surrounding proper regulation of online poker. The event kicked off in Room 2237 of the Rayburn House Office Building this afternoon and featured Duke, Wired Safety Executive Director Parry Aftab, Cigital Vice President Stuart Dross, and the former executive with International Game Technology Paul Mathews.

Stay tuned to Poker News Daily for the latest updates from the PPA Fly-In.

Update on Full Tilt Poker and PokerStars Check Processing

As the battle for online poker legality comes to the forefront of the American legal system, players are still in limbo making deposits and withdrawals from their favorite sites.  Some rooms like Cake Poker have had no reported incidents, while larger ones like Full Tilt Poker and PokerStars were directly affected by the U.S. Attorney’s Office seizing funds in bank accounts tied to processors.  As poker rooms have adjusted, popular deposit methods have now been restored on all sites.

The main issue for many players was that checks received in the mail from payment processors bounced as a result of the bank accounts being frozen.  This caused widespread concern that the online poker industry wouldn’t be able to stay afloat if players in the United States were not able to deposit or withdraw.  However, the poker rooms stepped up and refunded players, usually with a bonus for their hassle.  In the meantime, the sites and processors have scrambled to restore confidence in the industry that players can and will receive payments for cashouts when requested.

On Full Tilt Poker, many players turned to wire transfers and are sticking with this payment method despite the extra fees that are tacked onto the transaction.  Many players on online poker forums are reporting their success with traditional wire transfers.  Requests have been typically approved the same day and initiated two weeks later.  Some people are reporting a lag time of only four days, while others who initiated a bank wire around the middle of June received their transfers during the first week of July.  The general rule of thumb is that players should expect anywhere from four to 20 calendar days for a bank transfer to work from approval to receipt.  Fees range from $15 to $35 for this type of transaction.

For players on Full Tilt Poker who are not trying the bank wire method, it seems that order has been restored to paper checks and echecks.  Players who have requested their checks near the end of June have already been receiving them in July with a seven to 10 day turnaround period from request to receipt.  Some of the checks appear to be coming from Canadian banks, well outside the jurisdiction of the U.S. Attorney’s Office.

Now restored, echecks at PokerStars have been requested regularly in the last couple of weeks from players at the world’s largest poker room.  Players who have requested checks have reported receiving them in about a week.  Once deposited, they are clearing in major banks in 24 hours’ time.

It seems that the U.S. Attorney’s Office merely set the online poker industry back by a few weeks in terms of normal business practice.  Players appear to be sending and receiving funds like they were before the seizure.  Checks from major rooms are clearing without incident and high-volume players are using bank wires to safely receive funds directly into their account, accepting the fact that additional fees might apply.

In the meantime, poker industry advocate organizations such as the Poker Player’s Alliance (PPA) and Interactive Media Entertainment and Gaming Association (iMEGA) are gearing up to determine if online poker is indeed legal or illegal and if the Unlawful Internet Gambling Enforcement Act (UIGEA) is unconstitutional.  As the legal battles officially start, Poker News Daily will monitor activities as they occur and report on any changes in the payment processing sector.

Account Services Files Motion in Online Poker Funds Seizure

Payment processor Account Services has filed a motion for the return of property after funds were seized by the U.S. Attorney’s Office for the Southern District of New York. The company requests the “release and return of funds” totaling $13 million.

The funds in question were held in account 7986104185 at a Wells Fargo branch in Escondido, California. Account Services also seeks the return of $1 million held in accounts 353000248 and 353000256 at a Union Bank branch in San Diego. The suit notes, “The Wells Fargo funds were seized pursuant to a warrant, whereas the Union Bank funds were seized without a warrant in the Southern District of California.” The Southern District of New York seized the money back in early June as part of a larger effort that affected over 24,000 online poker players.

Interactive Media Entertainment and Gaming Association (iMEGA) Chairman Joe Brennan told Poker News Daily what the result of the motion may be: “It’s going to force the Government to come forward and justify why they seized funds destined for players. There’s no underlying crime here on the part of the players. The Unlawful Internet Gambling Enforcement Act (UIGEA) didn’t make it illegal to bet online. I would want to know why the Justice Department would target the funds since the players don’t seem to be at fault.” The financial services industry in the United States has until December 1st to fall in line with the regulations of the UIGEA, which were approved as midnight rules in November by the outgoing Bush Administration.

The warrant for seizure of the Union Bank funds was filed on June 24th. It called for the “seizure of the contents… and to refuse the withdrawal of any amount from said accounts by anyone other that duly authorized law enforcement agents.” According to Account Services, the warrant was issued a full 12 days after the seizure actually took place and its affidavit remains sealed. Industry news site Gambling911 recently filed suit to open the warrant and affidavit. The money seized from Account Services by the Southern District belonged to 13,800 online poker players with the same number of checks outstanding. Brennan noted that the payment processor likely only handled online poker transactions.

Account Services asserts that violations of the Illegal Gambling Business Act are to blame. In an update issued by the Poker Players Alliance (PPA) last month, the organization noted that the Wire Act was also potentially cited as justification for the seizure. Account Services’ motion explains, “The government acted with callous disregard for the movant’s constitutional rights when it unreasonably and unlawfully seized the funds from ASC’s Wells Fargo and Union Bank accounts.” It cites violations of the Fourth Amendment of the United States Constitution and notes that it is not in breach of the Illegal Gambling Business Act because it is not conducting a gambling operation. Even if it is, “online poker is not an illegal gambling business.”

The PPA has successfully proven that poker is a game predominated by skill in courtrooms around the country. Judges from Colorado to South Carolina have come to the same conclusion, in part due to a study by Cigital and PokerStars which concluded that three-quarters of 100 million cash game hands on the world’s largest online poker site did not go to showdown. In essence, a player’s skill of betting and bluffing earned them a pot prior to showdown. Similarly, Account Services’ motion concludes, “Poker is not gambling under the [Illegal Gambling Business Act’s] definition of the term because poker is a game of skill.” The motion quotes the Cigital study, which was authored by Paco Hope.

Account Services also claims that it will suffer “irreparable injury” if the funds are not returned. It adds that the company has “an interest in and a need for return of the money,” has “adequate remedy at law,” and the “retention of funds” by the U.S. Government is unreasonable. Attorneys Michael Pancer and L. Barrett Boss sign the document. Stay tuned to Poker News Daily for the latest from the online poker funds seizure.

Third Circuit Court of Appeals Hears iMEGA UIGEA Case

On Tuesday, lawyers from the Interactive Media Entertainment and Gaming Association (iMEGA) argued in front of the Third Circuit Court of Appeals in Philadelphia. The objective: prove that the Unlawful Internet Gambling Enforcement Act (UIGEA) is unconstitutional.

iMEGA’s case was the second on the docket on Tuesday in the Third Circuit behind a legal battle over whether a Yeshiva school could be constructed on the grounds of a synagogue based on zoning rights. One of the central issues discussed by the trade organization and counsel  for the United States Attorney General’s Office was where a bet placed online actually occurs. iMEGA Executive Director Joe Brennan explained, “We argued that the bet took place in another country like Costa Rica. When a person enters into a bet, it comes from an account already placed on the site.” However, it could be argued that bets originate on a person’s computer, on a server, or somewhere along the way in cyberspace.

Also at the forefront of the debate on Tuesday was whether iMEGA had standing to sue, something Brennan noted was preserved at the District Court level. iMEGA has online poker sites and individual players as members. Brennan recalled, “There was a ruling from the Third Circuit that concluded whether or not third parties could come forward if members were harmed, but [U.S. Attorney General counsel] Nicholas Bagley wasn’t familiar with it.” On his overall impressions, Brennan admitted, “It’s tough to tell. The three judge panel spent a lot of time with us. They didn’t spend as much time with the Government’s attorneys.”

Also questioned was whether it would have been advantageous for iMEGA to find an internet gambler who was harmed to appear in court. It’s a similar quandary that the Poker Players Alliance (PPA) has found itself in with regards to the online poker funds seizure in New York. In essence, anyone who stepped forward would be required to testify under oath that they played online poker. Brennan noted, “We said that, per the language of the statute, a person would essentially incriminate themselves in order to challenge the UIGEA. While there are no criminal sanctions, there are civil penalties for players.”

Judges Dolores Sloviter, Thomas Ambro, and Kent Jordan listened to attorneys for iMEGA and the Federal Government on Tuesday. The panel will now deliberate and return one of a wide variety of verdicts. One of the questions posed concerned the status of bills to license the industry in the United States and delay the implementation of the UIGEA’s regulations. Both were introduced on May 6th and referred to the House Financial Services Committee. HR 2266, the Internet Gambling Regulation, Consumer Protection, and Enforcement Act, is up to 40 co-sponsors. HR 2267, the Reasonable Prudence in Regulation Act, has attracted 23 co-sponsors. Neither has been scheduled for mark-up or discussion on the floor of the House of Representatives. One possible outcome is the Third Circuit deferring a resolution until Frank’s bills are acted on.

Many in the industry are now scrambling to ascertain when the Third Circuit will hand down a decision. Brennan revealed that the court’s average turnaround time is three months and iMEGA does not expect to hear back in the next 30 days. At the District Court level, the organization was left in the dark for nearly six months.

In the meantime, iMEGA will turn its attention to the Commonwealth of Kentucky, where briefs were filed to the state’s Supreme Court in May. To open the year, the Kentucky Court of Appeals in Louisville overturned a lower court ruling by a two to one margin and asserted that the Commonwealth did not have jurisdiction to seize 141 internet gambling domain names. The State quickly appealed. There has been no word on whether the Kentucky Supreme Court will take the case.

Visit the official website of iMEGA.

Costigan Media Files Suit to Open Warrant in Online Poker Funds Seizure

Amid the fanfare of the 2009 World Series of Poker (WSOP) Main Event in Las Vegas, Costigan Media, the parent company of Gambling911, has filed suit to open warrants in the case involving the seizure of $30 million in online poker player funds by the U.S. Attorney’s Office for the Southern District. It is the first legal action brought after the Southern District acted in June.

The reason for the Federal Government’s seizure remains a mystery. In the past, media outlets have been authorized to file legal action in matters of public record. Costigan Media’s filing notes, “Resolution of this issue will require the Court to define the scope of the public’s and the media’s First Amendment and common law rights of access to judicial documents.” The Southern District seized well over $30 million last month, adversely affecting more than 24,000 online poker players. Many rooms reimbursed players for difficulties cashing out and, in some cases, awarded an extra 10% cash bonus for any inconvenience.

Costigan Media is seeking the unsealing of the warrant, the affidavit for the warrant, and any other relevant documents that remain under wraps. The warrant in question was used to seize funds from a Wells Fargo branch in San Francisco, California on June 2nd. Magistrate Judge Theodore Katz signed the document, with an affidavit sworn to by Dana Conte, a Federal Bureau of Investigation (FBI) agent. Costigan Media’s filing reveals that Katz stated, “I am satisfied that there is probable cause to believe that the property so described is subject to seizure and civil forfeiture.” The parent company of Gambling911 added that the order sealing the warrant is also sealed, further complicating the situation. Funds were held in account 7986104185 under the name Account Services. The case is numbered 09-MAG-1320.

Gambling911 boasts affiliate links for UltimateBet, Players Only, Doyle’s Room, Absolute Poker, and a host of online sports betting sites. Noticeably absent are Full Tilt Poker and PokerStars, two of the heaviest hit sites by the funds seizure. Interactive Media Entertainment and Gaming Association (iMEGA) Executive Director Joe Brennan told Poker News Daily, “The government can’t even make a substantive claim that Gambling911 is acting on its own financial interest because of its own affiliate marketing. Instead, they want the news and opportunity.”

The court filing also questions, “The narrow but important issue presented in this case is whether the well-established First Amendment and common law rights to public proceedings and access to documents that ordinarily apply to judicial documents extend to a civil seizure warrant that has already been executed, but where no criminal charges have been brought.” On the media conglomerate’s chances of successfully opening the seizure warrants, Brennan told Poker News Daily, “It depends on who does the asking and where they do the asking. This is a little different in that there’s not a lot of precedent for new media outlets. It is a little groundbreaking for them to be doing this, but the precedent varies from district to district.”

Costigan Media also questions the reason for document being sealed. It speculates that “secrecy in ongoing investigations to protect confidential sources,” and “concerns of all of the un-indicted parties implicated by the Conte Affidavit” may be to blame. The company explains, “The public’s interest in criminal prosecutions should not be held hostage by a government’s blanket unsupported assertion of confidentiality or privacy concerns.” Brennan noted that the legal matter will take at least 10 days, which may be elongated by the upcoming Fourth of July holiday weekend in the United States.

Costigan Media is represented by Baruch Weiss and Matthew Trokenheim of Arent Fox in New York City. The action is dated July 2nd, just one day before the start of the 2009 WSOP Main Event from the Rio All-Suite Hotel and Casino in Las Vegas. The $10,000 buy-in tournament kicks off today with the first of four starting days.

Stay tuned to Poker News Daily for the latest news surrounding the online poker funds seizure.

Poker News Briefs, June 25th, 2009

Oral arguments have been scheduled for July 7th, 2009, in the Interactive Media Entertainment and Gaming Association’s ongoing challenge...

Judges for iMEGA UIGEA Challenge Announced

The three judge panel from the Third Circuit Court of Appeals that will hear the Interactive Media Entertainment and Gaming Association (iMEGA) argue why the Unlawful Internet Gambling Enforcement Act (UIGEA) is unconstitutional has been named. The Third Circuit will hear the case on July 7th at 10:00am ET.

At the District Court level, Judge Mary L. Cooper disagreed with many of iMEGA’s reasons why the UIGEA should be declared unconstitutional. However, she granted the trade organization standing to sue, prompting an appeal to the Third Circuit. Now, over a year later, lawyers for iMEGA will receive their day in court. Democratic Presidents appointed two of the three judges named to the Court of Appeals panel, leaving many in the industry optimistic that the UIGEA challenge may be successful.

President Jimmy Carter appointed Judge Dolores Sloviter to the Third Circuit in 1979. She is the veteran of the panel and served as the Third Circuit’s Chief Judge from 1991 to 1998. iMEGA Executive Director Joe Brennan told Poker News Daily, “I think this is an interesting panel. Judge Sloviter was part of the panel that blocked the Communications Decency Act, which is a landmark case in internet law.” The panel in question ruled that the Act, which dealt with internet pornography, was unconstitutional under the First Amendment.

President Bill Clinton appointed Judge Thomas Ambro to the Third Circuit in 1999 and Congress approved him one year later. Brennan noted, “Judge Ambro’s best known decisions have consistently upheld First Amendment rights and civil liberties.” Besides First Amendment rights, iMEGA notes that the UIGEA should be “void for vagueness.” Online poker players know all too well that the UIGEA failed to identify what activities are permissible. In response, credit card companies such as Visa and MasterCard have blocked legal online lottery purchases in New Hampshire and North Dakota. To iMEGA, this “over-blocking” is an example of the shortcomings of the 2006 law.

The third and final judge to make up the panel that will hear lawyers for iMEGA and the U.S. Department of Justice debate the constitutionality of the UIGEA is Kent Jordan, appointed by George W. Bush. On whether any residual influence from the Bush Administration will affect Jordan’s views, Brennan commented, “Even Judge Jordan, with his extensive corporate law background, may potentially recognize the undue burden that UIGEA places on banks and credit card companies. Despite assumptions the industry may make on his being nominated by President Bush, who signed the UIGEA, or his religious background, I think this is a good panel.”

Taking the case on behalf of iMEGA is Eric Bernstein, who argued the case in front of Judge Cooper, and Stephen Saltzburg, former Deputy Attorney General of the United States. Nicholas Bagley and Jacqueline Coleman will represent the U.S. Department of Justice, Federal Trade Commission, and Federal Reserve, who collectively serve as the defendants in the case. In a press release distributed by iMEGA, Brennan noted that he is looking forward to an objective panel: “This law will finally have to stand on its own two feet in court, free from politics and all other outside influences. We feel very confident that when the judges take a look at the law, they will see just how defective it is and they will overturn it.”

The organization is fresh off a victory in Minnesota, where the state’s Department of Public Safety rescinded orders to 11 of the world’s largest internet service providers that called for the blockage of 200 internet gambling domain names. iMEGA filed suit to stop the action, effectively ending the Department of Public Safety’s attempts at censorship. If successful, USA-friendly sites like Bodog, Full Tilt Poker, and Players Only would have been inaccessible by Minnesota residents. In addition, a host of online poker rooms that do not accept U.S. customers would also have been blocked.

Stay tuned to Poker News Daily for the latest from the iMEGA legal challenge.

Utah Transit Authority Cracks Down on Internet Gambling

According to a story that appeared on Fox 13 in Salt Lake City, the Utah Transit Authority (UTA) is cracking down on its riders’ internet usage. Now, viewing pornography or gambling online will result in a $300 fine.

Fox 13’s Arikka Von broke the story, which appeared last week. When asked why UTA management implemented the new rules, Von explained, “UTA says it’s not because they had a bunch of complaints. The old ordinances are just that: old, at least 10 years old, so they have some new policies that include some of the new services like free WiFi.” On a national scale, online poker players have faced the same difficulties interpreting age-old laws like the Wire Act, which was enacted in 1961, nearly 50 years ago. The Wire Act, although passed before the advent of the internet, has been largely extended by the U.S. Department of Justice to include many forms of internet gambling.

Von noted, “A train ticket gets you free internet once you agree to the Terms of Service. That means no online gambling or viewing pornography. The UTA now has a new ordinance that fines passengers for illegal or offensive internet use on the train. The first violation is $300. Do it again and it could cost you $500.” The UTA is one of a growing number of transit systems to include internet onboard. American Airlines recently debuted Gogo Inflight Internet on cross-country trips. The service is available for a fee.

Enforcement of the UTA’s ban on internet gambling and pornography is done by the organization’s police force. Fox 13 noted, “These are real police officers,” and explained, “An officer will always try to educate first and foremost. Riders say they’ve never seen anyone watching porn on the train.” UTA has enacted a full appeals process if riders feel they were targeted unfairly. A representative of the transit system admitted that identifying what is acceptable and what is not can be a complicated process: “The definition can be very difficult to pin down for everyone.”

Interactive Media Entertainment and Gaming Association (iMEGA) Executive Director Joe Brennan told Poker News Daily, “I’m surprised that they’re going to waste anyone’s time enforcing internet gambling. I’m also disturbed with the constant association with pornography. Our opponents try to make that linkage constantly between gambling and pornography. All you have to do is look at the acceptance of all things gambling. There is no comparison between the two activities.” The term “internet gambling” is mentioned in the Fox 13 story just once, while references to pornography pervade the rest of the two and a half minute piece.

With regards to enforcement of the UTA’s guidelines through law enforcement personnel roving the trains, Brennan commented, “They’ll have police officers looking over the shoulders of riders. This announcement is someone grandstanding politically. The claim on internet gambling is dubious. The claim on pornography is also misguided.” Brennan added that viewing pornography is typically done in private, not in the middle of a commuter train in a major metropolitan area.

According to text found on the UTA’s website, the internet service provided by the transit system filters content automatically: “UTA’s service providers use content-filtering software that attempts to restrict access to offensive sites; however, no content-filtering software is totally effective. Please use the same precautions you would use accessing any public wireless network.” The service is available for riders age 18 and over.

iMEGA is fresh off filing a lawsuit against the Minnesota Department of Public Safety (DPS), which attempted to force the censorship of 200 internet gambling domains by its residents. The DPS served notice to 11 of the world’s largest internet service providers (ISPs) calling for the blockage. However, after iMEGA’s suit, it rescinded its notice.

PPA to Announce National Poker Week on June 22nd at 2009 WSOP

The Poker Players Alliance (PPA), the industry’s main lobbying force, will announce its plans for National Poker Week on Monday at the 2009 World Series of Poker (WSOP). An press conference to be held at 11:00am Pacific Time will feature Full Tilt Poker pro Howard Lederer, Congresswoman Shelley Berkley (D-NV), former three-term Senator from New York and current PPA Chairman Alfonse D’Amato, and PPA Executive Director John Pappas.

The announcement of Poker Week comes on the heels of the seizure of $30 million belonging to online poker payment processors by the U.S. Attorney’s Office for the Southern District of New York at the beginning of June. The news rocked the online poker industry and, although echecks recently reappeared as a deposit option on PokerStars, over 24,000 players were affected; many are now gun-shy about cashing out. Bank accounts in Arizona and California were targeted at the PPA is currently engaged in dialogue with the Southern District over the contents of the funds that were frozen. No formal lawsuit has been filed by attorneys for the PPA, payment processors, or the Interactive Media Entertainment and Gaming Association (iMEGA), which has been keeping a close eye on the situation.

So what is National Poker Week? The PPA’s website explains that the event is “a coordinated grassroots advocacy effort focused on educating lawmakers in Washington, D.C. on the benefits of protecting the game of poker.” Lederer, Berkley, D’Amato, and Pappas will kick off the festivities on Monday, June 22nd in Pavilion 11 of the Rio All-Suite Hotel and Casino, just down the hallway from the massive Amazon Room, which is playing host to the 2009 WSOP. New advocacy tools will be rolled out, which Poker News Daily has learned includes new forms to contact Congressmen on Capitol Hill. Pappas will walk media members in attendance through the PPA’s new features at the conclusion of the event, which will also consist of a question and answer session.

Media were sent two e-mails about the event, the second of which announced the attendance of Lederer, a longtime supporter of the PPA. While many media outlets are expected to be in attendance, it is not clear whether the event is open to the general public.

Berkley is a co-sponsor of Barney Frank’s HR 2267, the Internet Gambling Regulation, Consumer Protection, and Enforcement Act, which was introduced on May 6th. A total of 33 other members of Congress have also stepped up to co-sponsor the bill, which establishes a complete licensing and regulatory framework for the internet gambling industry in the United States. Frank’s HR 2266, the Reasonable Prudence in Regulation Act, is up to 19 sponsors. HR 2266 delays the compliance date of the Unlawful Internet Gambling Enforcement Act’s (UIGEA) regulations by one year to December 1st, 2010.

Representatives from Poker News Daily will be in attendance at the Rio on Monday for the 11:00am press conference, which comes nearly 10 days removed from the beginning of the 2009 WSOP Main Event. The feature tournament kicks off on July 3rd with the first of four starting days and plays down to its final table on July 15th. The action will then break for 100 days, resuming on November 7th. The spectacle will play down to a winner on November 10th inside the Penn and Teller Theater at the Rio and air on cable station ESPN that evening.

Poker News Daily has learned that Frank is slated to issue the “Shuffle Up and Deal” command for one of the starting days of the 2009 WSOP Main Event. Last year, Congressman Robert Wexler (D-FL), whose Skill Game Protection Act would have exempted poker, bridge, mah jong, and other player versus player games from the Wire Act and UIGEA, issued the call in the Amazon Room.

The PPA is a one million member strong organization based in Washington, D.C. that fights for the rights of poker players, both in the live and online arenas. In 2006, the then-nascent organization stood at just 50,000 members. It took just two years for the PPA to cross the seven-figure mark.

Kentucky Attorneys File Response Brief to Supreme Court in Internet Gambling Case

On Thursday, attorneys for the Commonwealth of Kentucky filed a 20 page response brief to the state’s Supreme Court. The case pits Kentucky Justice and Public Safety Cabinet Secretary J. Michael Brown against the Interactive Media Entertainment and Gaming Association (iMEGA).

The response brief was actually due on Wednesday, June 17th. Upon submitting the document on Thursday, Commonwealth attorneys were also asked to file a Motion for Enlargement. In it, the state’s legal team expounded on the reason for the one day delay: “In this action, ten separate parties have sought to participate in this litigation as amicus curaie parties, with many such motions still pending, and numerous parties currently litigating this case as Appellees.” The Commonwealth added that, based on iMEGA’s brief being submitted on June 3rd, it “calculated a due date for the filing of a Reply Brief in this action on Thursday, June 18th.”

Despite the confusion, Commonwealth attorneys officially submitted the brief on Thursday to the Kentucky Supreme Court. The highest court in the Bluegrass State is not obliged to take the case and no indication has been given as to when a possible hearing could occur. The brief begins with an argument that Brown has standing to bring a civil suit against the owners of 141 internet gambling domain names that were seized by the Justice and Public Safety Cabinet last September at the urging of Governor Steve Beshear. If successful, the seizure and forfeiture would result in the domain names of industry behemoths like PokerStars and Full Tilt Poker being inaccessible not only in Kentucky, but also around the world.

Besides standing, another dispute in the case is whether the State is spearheading a civil trial to prosecute a criminal illegal gambling charge. The brief asserts, “The text of the statute contains no such language. It does not reference a conviction, criminal action, or even person against whom a criminal action might be brought… This case was brought as a civil proceeding, not out of a desire to be creative.” The 141 internet gambling domain names in question were seized on the grounds that they constituted illegal gambling devices, a term that has traditionally referred to tangible objects like slot machines and roulette wheels that would be employed in an underground casino.

On whether the State had jurisdiction to seize the domains, Commonwealth attorneys explain, “The true intention or will of the legislature is the law, not the literal language of the statute… Courts must consider the intended purpose of the statute, the reason and spirit of the statute, and the mischief intended to be remedied.” On the national level in the United States, online poker players have run into a similar dilemma with the Wire Act, which has traditionally applied to local telephone carriers and online sports betting outfits. Based on recent funds seizures by the Southern District of New York, the 50 year-old law has been interpreted by the U.S. Government as potentially covering online poker.

The brief spends considerable real estate on the question of whether Kentucky can seize property like a domain name, which is not located within its borders. One of its main arguments focuses on the Civil Asset Forfeiture Reform Act, which was introduced in the 1990s by current Poker Players Alliance (PPA) Chairman Alfonse D’Amato in the U.S. Senate. The Commonwealth notes that a subsection of the bill “addresses a problem that arises whenever property subject to forfeiture under the laws of the United States is located in a foreign country… It is probably no longer necessary to base in rem jurisdiction on the location of the property if there have been sufficient contacts within the district in which the suit is filed.” Senator D’Amato’s first name is incorrectly given as “Alphonse.”

The brief also alludes to a suit brought by the PPA’s Washington State Director, Lee Rousso, who filed legal action arguing that the State’s harsh stance on internet gambling constituted a violation of the Commerce Clause of the United States Constitution. The Kentucky brief explains, “The Rousso court ultimately concluded that the State’s interests in protecting its citizens from the ills associated with gambling outweighed the relatively small cost imposed on out-of-state businesses.” In Washington, playing online poker is a Class C felony.

iMEGA and the Kentucky Justice and Public Safety Cabinet now await word on whether the state’s Supreme Court will take up the case.

PokerStars Traffic Slips 9% After Cashout Issues

Traffic on PokerStars, the largest online poker site in the world, has slipped 9% in the last two weeks, likely due to potential cashout issues for its players, according to PokerScout.com. PokerStars has recommended bank wires for players seeking cashouts.

On the first Thursday of June (the 4th), PokerStars saw a peak of 37,523 real money ring game players. By June 11th, one week later, that number had dropped to 34,692, a fall of 8%. Yesterday (June 18th), the site hosted a peak of 34,207 cash game players, representing a 1% decline week over week and 9% drop since June 4th. As further evidence of a slowdown, on June 13th, PokerStars recorded a peak player count of 28,455, the first time it had slumped below 30,000 since December 31st, 2008.

However, traffic on the site is up during the first 18 days of June in comparison to the same period in May despite the ongoing World Series of Poker (WSOP). During the first 18 days of May, PokerStars boasted an average peak player count of 34,626 at its virtual cash game felts. In the same period this month, it has seen an average of 34,872, a gain of nearly 1%. Throughout the month of May, PokerStars had an average peak volume of 34,886 players. An article released by PokerScout on June 14th noted that traffic on Stars had fallen 5% in the last week alone to the “lowest level so far this year.” Year over year, however, the world’s most popular online poker site has experienced a 54% growth in activity.

On Full Tilt Poker, the average peak player volume over the first 18 days of May stood at 16,801. In June, that figure has ballooned to 17,736, a growth of nearly 6%. During the same period when traffic on PokerStars fell by 9%, player counts on Full Tilt rose by 2%. The site will bring back its Sit & Go Madness promotion this weekend, offering nearly $200,000 for players competing in the popular single-table tournaments. Between April 19th and May 10th, the peak number of cash game players on Full Tilt Poker exceeded 18,000 just once. During the first 18 days of June, the 18,000 plateau has been breached eight times, including four straight days between June 15th and June 18th. Year over year traffic at Full Tilt Poker is up by 59%.

At the CEREUS Network, which includes Absolute Poker and Ultimate Bet, cash game traffic has remained steady. During the first 18 days of May, an average peak of 3,144 real money ring game players could be found on the CEREUS Network. Over the same period in June, that number grew slightly to 3,148. Over the last 30 days, the Network has hosted fewer than 3,000 real money ring game players just five times and has not attracted a peak of fewer than 2,000 since April 30th. According to PokerScout, CEREUS is the fifth largest Network worldwide with a seven day running average of 2,300 real money ring game players.

Finally, traffic on PartyPoker, which does not accept players from the United States, is up significantly. PokerScout.com claims the spike in player volume by the longtime industry staple may be due to the Million Dollar Hand promotion. During the first 18 days of May, the average peak cash game traffic was 7,351 players. During the same period in June, the figure skyrocketed to 9,410, a jump of 28%.

Interactive Media Entertainment and Gaming Association (iMEGA) Executive Director Joe Brennan gave Poker News Daily his reaction to the drop in traffic on PokerStars: “Operators know the burden is on them to make sure the players have the money due them. Any operator that would have problems will likely lose share to companies that don’t. But, it’s too early to say any one company is having major problems and no reason to think that all of the operators who have been affected aren’t working overtime to resolve slow pay problems. There is no need to panic.” iMEGA has not yet become involved in the situation legally. So far, it has allowed the Poker Players Alliance (PPA), the main lobbying force for the poker industry, to take the lead.

Update on Internet Gambling Legal Battles in Kentucky and Minnesota

With the 2009 World Series of Poker (WSOP) now just one week away, Poker News Daily sat down with Interactive Media Entertainment and Gaming Association (iMEGA) Chairman Joe Brennan to discuss the future of online poker in Kentucky and Minnesota.

iMEGA must file its brief in the Kentucky case by June 1st. The squabble surrounds the seizure and potential forfeiture of 141 internet gambling domain names, including those belonging to industry giants PokerStars and Full Tilt Poker. Brennan told Poker News Daily that iMEGA’s brief will likely be filed before the June 1st deadline and hit the Kentucky Supreme Court’s desk sometime next week. A bevy of amicus briefs have also been submitted from organizations like eBay, the Electronic Frontier Foundation, the Center for Democracy and Technology, the American Civil Liberties Union, Network Solutions, and the Poker Players Alliance. iMEGA’s brief has been completed for two months. Brennan explained the logic in waiting to submit it: “We sat on it because we didn’t feel the need to give Commonwealth attorneys more time than necessary. They’ll get a chance to submit a rebuttal brief.”

In January, the Kentucky Court of Appeals overturned a lower court’s ruling and found that the Commonwealth did not have jurisdiction to seize the 141 domain names in question. The case has the potential to set considerable precedence regardless of how the Kentucky Supreme Court rules. On the State’s brief to its highest court, Brennan told Poker News Daily, “In our mind, they’ve broken no new ground. They haven’t strengthened their case at all. They are falling back on same arguments that were unsuccessful at the appellate level: We are bad people, we don’t deserve to be here, and sites don’t deserve to be represented by groups like iMEGA, which is simply an illegal internet gambling association.” If the State’s seizure and forfeiture are successful, the domain names in jeopardy would be inaccessible not only in Kentucky, but also around the world.

In Minnesota, the deadline is looming for 11 internet service providers (ISPs) to respond to the Minnesota Department of Public Safety. The government entity mandated that ISPs block access to 200 internet gambling domains, although not all of the sites in question accept customers from the United States. Brennan updated Poker News Daily readers on whether any ISP has responded: “Every one we’ve spoken to agrees that Minnesota lacks jurisdiction and authority under the Wire Act. At this time, they’re not going to reply.” iMEGA’s legal team has had extensive conversations with the Minnesota Attorney General’s office, which has agreed not to force responses from ISPs in the near future.

Brennan noted that discussions with the Attorney General’s office and Department of Public Safety in Minnesota have been anything but hostile: “They’ve acknowledged that there is some contention and they seem to be interested in getting things right. While we’re still on the other side of a contentious issue, they’ve behaved reasonably and professionally.” Brennan noted that John Willems, Director of the Department of Public Safety’s Alcohol and Gambling Enforcement Division, has likely never handled a high-profile internet case before. However, upon hearing that 200 sites may be censored, “the opposition moved at internet speed.”

No strict timeline has been given as to when we may see further developments in Minnesota. Two weeks ago, iMEGA filed a lawsuit against Willems in his capacity as head of the Alcohol and Gambling Enforcement Division. However, the organization is not rushing to seek a court order preventing a potential blockage from going into effect. Brennan explained, “We’re not all running to get in front of a Federal judge. Both sides will take a look at this and act in a reasonable timeline.”

Stay tuned to Poker News Daily for the latest from Kentucky and Minnesota.

Gambling Research Facilities Launched at Yale and University of Minnesota

The National Center for Responsible Gaming (NCRG) has announced the formation of two Centers of Excellence in Gambling Research at Yale University in New Haven, Connecticut and the University of Minnesota in the Twin Cities.

According to a press release distributed by the NCRG, the two new facilities “will employ a long-term, institutional approach to conducting innovative and multidisciplinary research and education programs about gambling disorders.” Research grants for the Centers were doled out by the Institute for Research on Gambling Disorders. The Institute’s Executive Director, Christine Reilly, told Poker News Daily why the organization selected Yale and the University of Minnesota: “We sent the proposals to an independent committee that looked at scientific merits of each location’s study. The leaders at Yale and the University of Minnesota are two of the most successful researchers in the field, so it wasn’t a surprise.”

Each center will receive a three year grant for research worth just over $400,000. At the conclusion of that time period, researchers can reapply for additional support. Reilly discussed the challenges of gambling-related studies: “Both of these Centers are working with human subjects. It takes a while to find participants, collect data, and publish data. In general, it’s a slow process and we need to be supportive of them.” A principle investigator will head up the research at each facility and studies will address multiple fields.

At the Ivy League institution, Dr. Marc Potenza “will examine the various factors that influence treatment of gambling disorders,” according to the organization’s press statement. Clinical trials involving the drug naltrexone, which is typically used to treat alcohol dependence, will take center stage. At the University of Minnesota, Dr. Jon Grant will “develop a model of impulsivity that will enable the identification of young adults at risk for developing pathological gambling.” The results of both studies are expected to be released in major publications, although no time frame was given for completion. The NCRG has given out over $7 million in grant money since it was established in 1996 and makes its home in Washington, D.C.

A separate study focusing on the effects of taking naltrexone appeared in “Biological Psychiatry and International Clinical Psychopharmacology” in 2001. In the NCRG-funded trial led by Dr. Suck Won Kim at the University of Minnesota, 30 participants engaged in 13 weeks’ worth of treatment. In the end, results showed that “naltrexone was effective in stopping cravings and, therefore, stopping gambling urges.” Other studies have centered on gambling among youth, gambling’s effects on the brain, and gambling among college students. Reilly noted that the Institute for Research on Gambling Disorders has funded numerous short-term studies. However, the establishment of two Centers represents the increased importance of long-term investigations. The NCRG’s very first study, which was conducted by the Harvard Medical School, found that between 1.14% and 1.60% of the “adult population could be classified as having pathological problems incident to gambling.”

Glenn Christenson, Chairman of the NCRG, explained in the same press release how the Centers of Excellence in Gambling Research fit in with his organization’s long-term mission: “In 1996, the NCRG launched the first competitive grants program in the U.S. to fund research into gambling disorders, so the creation of the new Centers of Excellence is consistent with the organization’s pioneering legacy of supporting the highest-quality research in this field.” Gambling research has taken center stage in Congressional committee hearings on bills to clarify the Unlawful Internet Gambling Enforcement Act (UIGEA). Last July, Congressman Spencer Bachus (R-AL) erroneously quoted a McGill University study stating that one-third of college students who gambled online ultimately attempted suicide. In reality, no such study had ever taken place.

In Minnesota, internet gambling has come under fire by the state’s Department of Public Safety, which issued notices to 11 internet service providers (ISPs) calling for the blockage of 200 gaming sites. The targets included USA-friendly rooms like Bodog and Full Tilt Poker as well as numerous sites that do not accept action from the United States. The Interactive Media Entertainment and Gaming Association (iMEGA) has filed a lawsuit challenging the Department of Public Safety’s actions.

iMEGA Files Lawsuit Against Minnesota Department of Public Safety

In the wake of the order by the Minnesota Department of Public Safety calling for the blockage of 200 internet gambling websites, the Interactive Media Entertainment and Gaming Association (iMEGA) has filed a lawsuit.

The legal action was filed in the United States District Court in Minneapolis and lists John Willems, the Director of the Alcohol and Gambling Enforcement Division, as its defendant. Letters were sent by the Department of Public Safety to 11 of the country’s largest internet service providers (ISPs), including Charter, Comcast, and Qwest. Several of the ISPs in question offer multiple products, such as residential home telephone service, cell service, high-speed internet, and cable television; notably absent from those served was Time Warner. iMEGA’s lawsuit was officially entered on Wednesday and weighs in at 20 pages.

iMEGA Chairman Joe Brennan told Poker News Daily what the organization’s reasoning was for seeking legal action in the wake of the notices sent out by the Minnesota Department of Public Safety: “We’ve told the ISPs that the Department of Public Safety doesn’t have the authority to do this. The choke point is the Department of Public Safety. They have, in our opinion, exceeded their authority and jurisdiction. It makes sense to go to the source rather than betting on the goodwill of the ISPs.” In an interview with PocketFives.com, Poker Players Alliance Executive Director John Pappas noted that if an ISP complied with Minnesota’s censorship, they would be promptly sued by his organization. Brennan explained, “At this point, we’re not inclined to take any legal action against ISPs because they have not yet responded.”

The lawsuit filed on Wednesday notes that the internet permeates more than 150 countries worldwide. It also reminds readers that the Department of Public Safety generated the list of 200 sites randomly. Along with the domain name, the Department of Public Safety included each site’s IP address and telephone number in its letter to ISPs. Bodog, Full Tilt Poker, and Players Only headlined the list, which also included a bevy of rooms that do not accept U.S. players, including Titan Poker, Everest Poker, and Action Poker. Meanwhile, PokerStars, the largest online poker site in the world, was noticeably absent from prosecution.

iMEGA’s lawsuit notes that the State of Minnesota did not have jurisdiction to act because “none of the sites identified in the Defendant’s list are owned by entities within the jurisdiction of, or subject to prosecution by, the State of Minnesota.” The organization also claims that the Department of Public Safety’s actions constitute a breach of First Amendment rights under the United States Constitution. In the same count, iMEGA charges that the list of 200 sites “is under-inclusive because the Defendant has attempted to block access to only an ‘initial sample’ of about 200 sites even though, by his own admission… ‘thousands’ of such sites exist.”

The lawsuit adds that the State of Minnesota is in violation of the Commerce Clause of the United States Constitution. This portion of the legal action notes that areas outside of Minnesota will likely be affected. It asserts that censorship will “have a significant and irreparable harmful effect on interstate commerce by interfering with commercial and other speech of both Internet speakers and listeners, including Plaintiff and its members and their customers, beyond the borders of Minnesota.” iMEGA has used similar arguments in Kentucky, where the organization is seeking to overturn the actions of Governor Steve Beshear, who ordered the seizure of 141 internet gambling domain names, including those belonging to PokerStars, Full Tilt Poker, Ultimate Bet, and Doyle’s Room. iMEGA has until June 1st to file its brief with the Kentucky Supreme Court.

Brennan noted that significant monetary costs might deter the Department of Public Safety from pushing forward with its actions. He explained, “When we start including things like recouping legal fees into our lawsuit, it puts a dollar figure on it not only in repaying us, but also in defending the suit. It’s going to force them to make a decision on whether to commit resources to this effort. If they decide it’s not worth it, they might cut their order.”

We’ll have more for you on the Minnesota internet gambling battle right here on Poker News Daily.

iMEGA Files Suit Against Minnesota Agency over Internet Censorship

The Interactive Media Entertainment and Gaming Association (iMEGA) filed suit on Wednesday against the leading official in a Minnesota state agency’s attempt...

iMEGA Sends Letters to Minnesota Internet Service Providers

In the wake of the order by the Minnesota Department of Public Safety to 11 internet service providers (ISPs) calling for the blockage of 200 internet gaming domain names, the Interactive Media Entertainment and Gaming Association (iMEGA) has struck back.

iMEGA sent a letter of its own to ISPs, which states, “iMEGA wants you to know that it believes that the Notice lacks any legitimate foundation in the law and requests that you not block access to the websites identified.” The Department of Public Safety charged that ISPs were in violation of the Wire Act of 1961, which has traditionally applied to online sports betting. Nevertheless, USA-friendly online poker sites such as Bodog, Full Tilt Poker, and Players Only were among the 200 affected. Also coming under fire were a number of online poker rooms that do not accept U.S. customers, such as Everest Poker, Titan Poker, and CD Poker. The former is even the on-felt sponsor of the 2009 World Series of Poker (WSOP) in Las Vegas, which begins later this month from the Rio.

iMEGA asserts that the Wire Act “simply does not apply to website operators and imposes no duty upon you to comply with the Minnesota Department of Public Safety’s request.” The question of whether multi-faceted companies such as Verizon and Comcast, which offer residential home telephone service, high-speed internet, and cable television, constitute “common carriers” as outlined by the Wire Act was also addressed. To answer it, iMEGA quoted a Congressional statement: “It is the policy of the United States… to preserve the vibrant and competitive free market that presently exists for the internet and other interactive computer services, unfettered by Federal or State regulation.”

iMEGA charges that the Minnesota Department of Public Safety is overstepping its bounds, noting that ISPs have been asked to “block access to certain websites by your Minnesota end-users even though these websites are not located within Minnesota.” The trade organization also warns that, prior to blocking a site, ISPs must provide written notice to their customers of any service changes. The letter questions whether the Department of Public Safety’s request entails a violation of the Commerce Clause of the United States Constitution or a “blatant” trampling of First Amendment rights.

For ISPs that are unfamiliar with the internet gambling industry in the United States, iMEGA’s letter points out, “The Notice shows evidence of selective enforcement insofar as the list of websites identified is not exhaustive. The website list is also inaccurate insofar as it lists some websites that are not accessible by Minnesota end-users and other websites that are defunct.” In addition, it questions why Time Warner Cable, which provides internet services to Minnesota residents, was not among the 11 companies that received notices.

John Fleischaker of Dinsmore and Shohl LLP’s Louisville office sign the letter. ISPs were expected to respond within two to three weeks of receiving the Minnesota Department of Public Safety’s notice. In addition to the aforementioned online poker sites, the casino arms of Ladbrokes and Party Gaming are also listed; publicly traded companies on the London Stock Exchange own both sites. Party Gaming yanked its online poker site, Party Poker, from the U.S. market shortly after the 2006 passage of the Unlawful Internet Gambling Enforcement Act (UIGEA). The company has even signed a non-prosecution agreement with the U.S. Government. One of its co-founders, Anurag Dikshit, admitted to violating Federal law and is in the midst of paying a $300 million fine.

Today, Congressman Barney Frank (D-MA) introduced legislation outlining a comprehensive licensing and regulatory framework for the internet gambling industry that focuses on consumer protections. In addition, the Massachusetts lawmaker and Chairman of the House Financial Services Industry introduced legislation to delay the implementation of UIGEA regulations by one year to December 1st, 2010.

Barney Frank to Introduce Internet Gambling Legislation on Wednesday

According to a statement released by the office of Congressman Barney Frank (D-MA), legislation to exempt licensed internet gaming companies from the Unlawful Internet Gambling Enforcement Act (UIGEA) will be introduced on Wednesday.

The legislation is expected to establish a comprehensive licensing and regulatory framework for the internet gambling industry in the United States. In essence, it will likely be similar in scope to last session’s HR 2046, the Internet Gambling Regulation and Enforcement Act. The press statement sent out on Tuesday morning reads, “Tomorrow, Financial Services Committee Chairman Barney Frank (D-MA) will hold a press conference to unveil legislation that will enable Americans to bet online and put an end to an inappropriate interference with their personal freedom.” The bill would “create an exemption to the UIGEA for operators that are licensed and regulated. UIGEA, which was enacted in 2006, restricts the use of the payments system for Americans who seek the freedom to gamble online.”

The new legislation does not repeal the UIGEA. Also, according to the Safe and Secure Internet Gambling Initiative, it may not include a provision to tax the industry. During the last Congress, which concluded in December, Congressman Jim McDermott (D-WA) introduced HR 2607, which called for the taxation of 2% of all funds deposited onto regulated internet gambling sites by U.S. customers. The money would then be “deposited in the general fund of the Treasury and treated as revenue,” according to the legislation’s text. Similar companion legislation may be needed once again. A study released by PricewaterhouseCoopers revealed that similar legislation to McDermott’s combined with Frank’s HR 2046 could generate up to $52 billion in revenue over a 10 year period.

The press conference is scheduled for 10:00am ET on Wednesday morning in Room 2220 of the Rayburn House Office Building. The Safe and Secure Internet Gambling Initiative added, “The legislation is expected to include a number of significant consumer protections, including safeguards against compulsive and underage gambling, money laundering, fraud, and identity theft.” HR 2046 was officially introduced to the world on April 30th, 2007 and attracted 48 co-sponsors. However, it was not passed into law during the 110th Congress, leading to Wednesday’s re-introduction of what appears to be similar legislation.

The UIGEA was passed during the waning moments of the 2006 Congressional session and was attached to an unrelated security measure called the SAFE Port Act. Then-Senate Majority Leader Bill Frist (R-TN) was instrumental in its passage. The UIGEA deemed financial transactions between U.S. customers and illegal online gambling operations to be against the law, although no clarification was given as to what constituted “illegal gambling.” The UIGEA’s vagueness has led to a lawsuit by the Interactive Media Entertainment and Gaming Association (iMEGA) to declare it unconstitutional. The Third Circuit Court of Appeals will hear the case on July 6th following a decision by District Court Judge Mary L. Cooper last March, who granted iMEGA standing, but disagreed with many of the organization’s core arguments.

Last week, internet gambling came under fire in Minnesota, where the state’s Department of Public Safety issued written notice to 11 internet service providers (ISPs) calling for blocking access to 200 websites. The list of sites affected by the order includes USA-friendly rooms Bodog, Full Tilt Poker, and Players Only. It also features a bevy of sites that do not accept players from the United States, including World Series of Poker presenting sponsor Everest Poker, iPoker Network flagship site Titan Poker, and Party Gaming’s casino arm, Party Casino. Party Gaming, a publicly traded company on the London Stock Exchange, pulled out of the U.S. market after passage of the UIGEA in 2006. Its online poker room, Party Poker, is not among the 200 sites.

We’ll have a full breakdown of the bill when it is released on Wednesday right here on Poker News Daily.

Chris Wallace (Fox) Calls out Minnesota over Internet Gambling Ban

In the fight for the rights of online poker players in Minnesota, PokerXFactor.com instructor and St. Paul resident Chris “Fox” Wallace has taken a stand, calling for the Justice Department to arrest him if playing online poker is illegal.

Wallace’s actions follow written notice served to some of the country’s largest internet service providers (ISPs) such as Comcast, Charter, Qwest, and AT&T. The notices, which were authored by the Minnesota Department of Public Safety and received on Monday, call for 200 internet gambling websites to be inaccessible by the state’s residents. Appearing on the list of affected sites were U.S.-friendly rooms Bodog and Full Tilt Poker along with a bevy of online poker establishments that do not accept customers from the United States. The latter group includes Action Poker, CD Poker, Noble Poker, Mansion Poker, and Titan Poker. It also includes the title sponsor of the 2009 World Series of Poker (WSOP), Everest Poker, whose logos will don tables in the Amazon Room at the Rio for the second straight year. The Department of Public Safety is also calling for companies to block telephone access to the sites’ support numbers.

Wallace told his hometown newspaper, the Minneapolis Star-Tribune, last week, "I have e-mailed the Justice Department and I've volunteered to be arrested. I play online poker. Come and get it." He revealed that he faces a potential loss of $2,000 per week. If the ISPs successfully block the sites in question, he not only would potentially be unable to play online, but also would be barred from browsing any of the domain’s pages. David Axtell, an attorney at Leonard Street and Deinard in Minnesota, told the Star-Tribune, "This is an old law put in place before the Internet and there may be an argument that it doesn't cover Internet service providers.”

The law in question is the Wire Act, which was passed in 1961 and has historically applied only to online sports betting. Many question whether the age-old law is applicable to online poker, casino, and Bingo games; each genre of internet gambling had sites appear on the list of 200 released last week. Interactive Media Entertainment and Gaming Association (iMEGA) Chairman Joe Brennan questioned the Government’s professionalism in generating its list. According to a statement found on iMEGA’s website, Brennan explained, “We question how much thought was put into the selection of these sites. To propose censoring Minnesota residents’ Web access and not to know which sites are even in the U.S. market makes me wonder just how seriously the Department of Public Safety is taking this action. It comes off as a half-baked attempt at intimidation rather than thoughtful enforcement.” The list of 200 was generated randomly without regard to what type of internet gambling each site was engaged in.

Other websites that are affected include Betfred, Betway, Bet U.S., Crazy Poker, Euro Poker, Gnuf’s online casino arm, Hollywood Poker, Intertops Casino, Players Only, Total Poker, Ladbrokes Casino, and Party Casino. Publicly traded companies on the London Stock Exchange own the latter two sites. At the time of writing, neither had written statements about the Minnesota internet gaming issue given to the Exchange. Party Gaming entered into a non-prosecution agreement with the U.S. Government last month and agreed to pay a $105 million fine. In the process, it admitted to processing transactions from U.S. customers using third parties, which was “contrary to certain U.S. laws.” Upon passage of the Unlawful Internet Gambling Enforcement Act (UIGEA) in 2006, Party Gaming exited the market.

ISPs have up to three weeks to respond to the Minnesota Department of Public Safety. The state has legalized Indian casinos, card rooms at horse racing tracks, and a lottery that features second chance drawings online. Next week may see Congressman Barney Frank (D-MA) introduce legislation to clarify or overturn the UIGEA. The bill, which was originally scheduled to be introduced in March, may outline a complete licensing and regulatory framework for the industry similar to last Congressional session’s HR 2046, the Internet Gambling Regulation and Enforcement Act.

List of 200 Banned Internet Gambling Sites in Minnesota Released

The list of 200 internet gambling sites that have come under fire by the Minnesota Department of Public Safety has been released. Many of the websites identified do not accept players from the United States, leaving leaders in the industry scratching their heads.

Headlining the contingent of targeted sites is Party Casino, which is owned by the same publicly traded parent company as its online poker room counterpart, Party Poker. Neither accepts U.S. players and to complicate matters further, Party Gaming, which can be found on the London Stock Exchange under the symbol “PRTY,” recently reached an agreement with the U.S. Department of Justice admitting to Wire Act violations similar to one struck by company co-founder Anurag Dikshit in December. Party Poker is not on the list. Also appearing is PokerRoom, which shut its doors earlier this month along with sister site CasinoRoom (which is also on the list) and funneled customers to bwin.

Bodog appears on the list as “BoDog.com,” but the corresponding URL points to its casino arm. Bodog accepts players from the United States, as does Full Tilt Poker, whose domain is officially under fire by the Minnesota Department of Public Safety. Cake Poker Network site Players Only also is part of the group of 200 affected sites. Notably absent are PokerStars, Ultimate Bet, Absolute Poker, Lock Poker, Carbon Poker, Doyle’s Room, and Cake Poker. No informational or forum sites appear to be targeted at the moment. The list spans genres such as online poker, online casinos, and online sports books.

The Action Poker Network’s flagship site appears on the list, as does Titan Poker, one of the largest sites on the massive iPoker Network. Neither site accepts U.S. players. Fellow iPoker Network site Betfred’s future may now be in jeopardy, as is the longevity of Microgaming site Betway. iPoker Network sites CD Poker, Mansion Poker, and Noble Poker all appear on the list of 200 sites. One of the most visible rooms to find itself in hot water is Everest Poker, which is the official sponsor of the 2009 World Series of Poker (WSOP), which kicks off next month from the Rio in Las Vegas. This is Everest Poker’s second year as the spectacle’s presenting sponsor. Its logo will don WSOP felts and also appear in signage at the Rio.

Other websites that have been flagged by the Minnesota Department of Public Safety include Gnuf, Golden Palace, Hollywood Poker, and InterTops Casino, which actually appears twice on the list. Publicly traded company Ladbrokes’ online poker site, despite not accepting U.S. players, is on the list, as are PokerRoom School, River Belle, and Spin Palace. Crazy Poker’s dot com and U.K. domain names are both listed. According to Alcohol and Gambling Enforcement Division Director John Willems, the list of 200 sites was drawn “randomly” without regard to the type of internet gambling employed.

The Interactive Media Entertainment and Gaming Association (iMEGA), which has been at the forefront of the fight for the industry in Minnesota, was puzzled by the final list distributed by the Department of Public Safety. Joe Brennan, its Chairman, commented in a press release on the organization’s website, “We question how much thought was put into the selection of these sites. To propose censoring Minnesota residents’ Web access and not to know which sites are even in the U.S. market makes me wonder just how seriously the Department of Public Safety is taking this action. It comes off as a half-baked attempt at intimidation rather than thoughtful enforcement.”

The ISPs that received notice have up to three weeks to respond. They include some of the largest telecommunications corporations on the planet: Verizon, AT&T, Qwest, and Direct TV, just to name a few. The letter sent to each ISP reads, “We are therefore requesting these enterprises not be allowed to transmit gambling information to your Minnesota customers.” The letter also states that the Federal Communications Commission (incorrectly labeled as “Federal Communication Commission”) received a copy. Each gambling site is listed alongside its IP address and telephone number, although the latter is not present for every site on the list. The Department of Public Safety is also calling for telephone access to be blocked where appropriate.

View the entire list of 200 internet gambling sites in jeopardy in Minnesota.

Americans for Tax Reform Sides with Internet Gambling in Minnesota

The Americans for Tax Reform (ATR) has come out in support of the internet gaming industry in Minnesota. The state’s Department of Public Safety has served written notice to 11 major internet service providers (ISPs) calling for blocking access to 200 internet gambling websites.

Written notice was served on Monday. However, it was made public on Wednesday in a press release issued by the State. Siding with the internet gambling industry shortly thereafter was the ATR, which is based in Washington, D.C. and headed by Grover Norquist. The organization has been intricately involved in the battle for control of 141 internet gambling and online poker domain names in Kentucky and is one of the first to support the industry in Minnesota.

Norquist told Poker News Daily that the actions by the Department of Public Safety parallel a growing nationwide trend for control of the internet: “The State of New York wants to tax people who download movies. There is an effort throughout the states to tax internet sales on sites like eBay. One of the reasons that the internet is so helpful is that it allows competition. The best way to keep taxes low is to allow people to be able to access other jurisdictions.” If successful, 200 websites would be completely inaccessible by Minnesota residents. The affected ISPs, which have up to three weeks to respond, include AT&T, Charter, Comcast, and Qwest.

Poker players in Minnesota may be left with legal card rooms at racetracks and the state’s tribal casinos as the only options if the action to block 200 websites is successful. Norquist explained, “You can’t always pick up and move, but on the internet, you can buy things in other states and other countries. That’s one of the reasons why the internet is so helpful. It’s none of the government’s business what you do online. We just went through this in Kentucky.” In the Bluegrass State, the Kentucky Court of Appeals overturned the seizure of 141 internet gambling domain names, including those belonging to massive industry staples like PokerStars and Full Tilt Poker. The case now moves on to the Kentucky Supreme Court.

Norquist explained his ideal vision for the future of the internet: “We want to keep the internet deregulated and untaxed because it’s so important in terms of protecting individual liberties. It’s not helpful to have politicians pushing people around.” The ATR was founded in 1985 at the request of President Ronald Reagan. It has pioneered the Taxpayer Protection Pledge, which it describes as “a written promise by legislators and candidates for office that commits them to oppose any effort to increase income taxes on individuals and businesses.” In the current Congress, which convened in January, a total of 172 Representatives and 34 Senators have subscribed to it. Last year, the ATR created the Center for Fiscal Accountability. It also organizes an annual Cost of Government Day.

The ATR may now work hand in hand with industry organizations like the Interactive Media Entertainment and Gaming Association (iMEGA) and the Poker Players Alliance (PPA), which have already dispatched legal teams to Minnesota. In Kentucky, a broad coalition was formed to counter the Justice and Public Safety Cabinet. Rich Muny, the PPA’s State Director for Kentucky and member of the organization’s Board of Directors, told Poker News Daily, “Poker players throughout America should be very concerned, as should internet freedom lovers regardless of where they stand on gambling. Once we establish a process of government regulating the internet, where does it stop?”

Other organizations that stood by the internet gambling industry in Kentucky included the Center for Democracy and Technology, eBay, the Bluegrass Institute, and the American Civil Liberties Union. Stay tuned to Poker News Daily for the latest from Minnesota.

Minnesota Seeks to Block Internet Gambling Sites

Fresh off a similar incident that has been appealed to the Kentucky Supreme Court, the Minnesota Department of Public Safety has notified internet service providers (ISPs) that they must prevent access by the state’s residents to 200 internet gambling sites.

The total number of sites to be blocked currently stands at 200. However, at press time, the affected domain names are not yet known. According to the internet gaming press release, Written notice was given by the Minnesota Department of Public Safety’s Alcohol and Gambling Enforcement Division to AT&T, Charter, Comcast, Direct TV, Dish Network, Embarq, Sprint, Frontier Communications, Qwest, Verizon, and Wildblue Communications. John Willems, Director of the Division, commented in a press release distributed on Wednesday, “We are putting site operators and Minnesota online gamblers on notice and in advance. Disruption of these sites’ cash flow will negatively impact their business models. State residents with online escrow accounts should be aware that access to their accounts may be jeopardized and their funds in peril.”

The press release cites the Wire Act of 1961 and overtly charges, “Online gambling is illegal in all U.S. states.” The Interactive Media Entertainment and Gaming Association (iMEGA) has already dispatched a legal team specializing in First Amendment rights to Minnesota to combat the Department of Public Safety. Its Chairman, Joe Brennan, told Poker News Daily, “I'm somewhat troubled by the shaky legal premise on which Minnesota has based this order. They are asserting that there is some blanket Federal prohibition against gambling on the internet, when in fact none exists. In a similar fashion to Kentucky, you have the aggressor citing assertions that are not supported by the laws that are on the books.”

The letters to ISPs were delivered on Monday. The companies have “two to three” weeks to respond. Then, the Department of Public Safety has pledged to take the complaint to the Federal Communications Commission. In addition to the 200 sites whose access may be at risk in the immediate future, the Division expects further expansion: “Willems anticipates the program expanding to address thousands of sites, depending on compliance.” In Kentucky, a total of 141 domain names are in limbo as part of a forfeiture hearing that may be heard by the Kentucky Supreme Court. In Minnesota, no such seizure occurred. Instead, the Department of Public Safety is merely seeking that ISPs block access. Internet gambling is identified specifically.

In addition to their websites being inaccessible, the Department of Public Safety is also calling for the 200 companies’ phone numbers to be blocked. It explained, “For more than two decades, telecoms have shut down telephone numbers at the request of law enforcement agencies when believed to be involved in illegal activities, such as sports book-making telephone numbers.” iMEGA and the 1.2 million member strong Poker Players Alliance (PPA) are among those seeking to prevent the blockage from becoming a reality. In Kentucky, the American Civil Liberties Union (ACLU) and Bluegrass Institute rallied behind the internet gambling industry. In January, the Kentucky Court of Appeals in Louisville overturned a lower court ruling that upheld the seizure order by a two to one margin. The Commonwealth, led by Justice and Public Safety Cabinet J. Michael Brown, immediately appealed.

Matt Werden, the PPA’s State Director for Minnesota, commented in a press release on Wednesday, “This isn’t simply a heavy-handed tactic by the government; this is a clear misrepresentation of Federal law, as well as Minnesota law, used in an unprecedented way to try and censor the Internet. I don’t know what U.S. Code they’re reading, but it is not illegal to play this great American pastime online and we’re calling their bluff.”

Grover Norquist, President of the Americans for Tax Reform, added, “This is nanny-statism at its worst – the government barging into a private matter because people are supposedly too stupid to make decisions and take care of themselves. Individual liberty should not be supplanted by the whims of politicians looking to soak even more money from an over-taxed, over-regulated population while feigning concern over safety issues.” Brennan told Poker News Daily that early speculation revealed that pressure from Indian casinos may be behind the move, although this was not verified. PokerXFactor.com instructor and Minnesota resident Chris “Fox” Wallace speculated that fledgling legal card rooms at racetracks may be to blame.

Willems admitted to the Minneapolis Star Tribune that he did not know how many Minnesota residents gambled online nor provided an estimate. Instead, he stated that he has had gamblers claim they lost $200,000 and needed to borrow money. The Department of Public Safety’s press releases closes by asserting that the internet gambling industry may provide “funding for criminal and terrorist organizations.”

A call placed to press release author Dennis Smith of the Minnesota Department of Public Safety was not returned as of press time. Stay tuned to Poker News Daily for the latest on this developing story.

iMEGA UIGEA Appeal to be Heard on July 6th

In breaking news out of the United States, it was revealed that the Third Circuit Court of Appeals will hear lawyers from the Interactive Media Entertainment and Gaming Association (iMEGA) argue why the Unlawful Internet Gambling Enforcement Act (UIGEA) is unconstitutional.

Last March, Judge Mary L. Cooper granted the organization standing to sue on behalf of the internet gambling industry. However, she disagreed with many of iMEGA’s arguments in the process, prompting the appeal. In a letter from the Third Circuit Court of Appeals, its clerk informed the parties involved that the case has “been tentatively listed on the merits on Monday, July 6, 2009 in Philadelphia [Pennsylvania]. It may become necessary for the panel to move this case to another day within the week of July 6, 2009. Counsel will be notified if such a change occurs.” Further information will be given as to whether oral arguments will be heard, and if so for how long, within one week of the disposition date.

Within seven days, iMEGA and attorneys for the U.S. Department of Justice must advise as to who will serve as counsel in the proceedings on July 6th. Each party must also identify whether its attorney is a member of the bar of the Court. iMEGA Chairman Joe Brennan is looking forward to the organization’s day in court, which is now just two months away. He told Poker News Daily, “The court is going to look at the entire case without technicalities and filing dates. They are going to solely decide it on the merits, not based on anything political or regarding procedure. That’s why you have a judicial system.”

iMEGA is in the midst of a spat with the Federal Government over whether information on the North Dakota and New Hampshire lotteries should be included in the record. Since its brief was filed, iMEGA has learned that customers trying to purchase legal lottery tickets with credit cards are being blocked from doing so. State lotteries have a specific carve-out from the UIGEA. The issues have arisen apparently due to the onset of the UIGEA regulations, which were enacted on January 19th and command full compliance by the financial services industry by December 1st. The regulations have caused Visa and MasterCard to engage in over-blocking rather than risk breaking the law.

The Department of Justice claims that because the new information was not filed by the proper deadline in iMEGA's brief, it should not be included in the record. Also absent from iMEGA’s official brief are the final regulations of the UIGEA, which were accepted by the White House Office of Management and Budget (OMB) in November as so-called “midnight rules.” Brennan told Poker News Daily why the request to supplement the record might be taken seriously by the Court of Appeals: “They are aware that their decision is going down in the history books. They know, we know, and the Department of Justice knows that not accepting our information may be grounds for an appeal.” If unsuccessful, iMEGA could appeal once again to the Third Circuit or seek the intervention of the U.S. Supreme Court.

Originally, the Third Circuit had asked iMEGA for its availability this month for oral arguments. On the two month delay, Brennan speculated, “It tells me that the Court is giving the case more serious consideration than a lot of people thought they were.” There has been no indication as to when the Court of Appeals will decide the future of iMEGA’s request to supplement the record. The case is numbered 08-1981 and is entitled “iMEGA v. Attorney-General USA, et al.”

iMEGA is also a leading party in the case pitting the Commonwealth of Kentucky’s Justice and Public Safety Cabinet against the owners of 141 internet gambling domain names, which risk forfeiture. iMEGA has until June 1st to file its brief in the case.

iMEGA Will File Kentucky Supreme Court Brief by June 1st

On April 2nd, the Kentucky Clerk's Office approved the Commonwealth’s brief in a case that pits the state against owners of 141 internet gambling domain names. The approval means that the Interactive Media Entertainment and Gaming Association (iMEGA) must file its brief to the Kentucky Supreme Court by June 1st.

The timeline is setting up a summer showdown in the United States between the organization and the Kentucky Justice and Public Safety Cabinet. In January, the Kentucky Court of Appeals ruled by a two to one margin that the State lacked jurisdiction to seize and force the potential forfeiture of 141 internet gambling domain names, including those belonging to online poker sites such as PokerStars and Full Tilt Poker. The industry originally received word of the forfeiture back in September.

Although Commonwealth attorneys originally asked for more space to outline their discord or more time to pare the document down, the final brief weighed in at 50 pages, which is the maximum number allowed by law. The State’s brief opens, “Wagers are accepted in an unregulated underworld without effective age verification, identification, or financial accountability… Persons can instantly wager and lose retirement savings or college funds in secrecy.”

The State also notes that internet gambling may be cutting into its revenues for legalized forms, including horse racing. The city of Louisville is just three weeks away from playing host to the annual Kentucky Derby, which is held on the first Saturday in May. The spectacle takes place at Churchill Downs and brings in an extensive amount of revenue to the state’s economy. The Commonwealth’s brief claims that 2,500 “unregulated sites” solicit U.S. customers. They include 1,083 online casinos, 592 sports books, 532 online poker rooms, 224 Bingo sites, 49 skill game websites, 30 betting exchanges, 25 lotteries, and 17 backgammon sites. These figures are sourced from a Casino City study in 2006.

The brief also gives a lengthy history of arrests and admissions of guilt in the internet gambling industry. Commonwealth attorneys alluded to Party Gaming Co-Founder Anurag Dikshit’s $300 million settlement with the U.S. Government in December of 2008, decisions by ClearChannel and Infinity Broadcasting to cease running advertisements for online gambling sites in 2003, a $7.2 million settlement between Sporting News and the U.S. Department of Justice in 2006, and the arrests of the founders of Neteller.

The question of whether iMEGA and the Interactive Gaming Council (IGC) have standing to sue is also brought into light. The brief asserts, “IGC and iMEGA have refused to identify a single owner they seek to represent. iMEGA has even failed to identify any Domain Defendants its unidentified members claim to own. Appellant has no way to verify whether the associates have the authority to represent an actual entity claiming ownership interest in a domain.” Last March, Judge Mary L. Cooper granted iMEGA standing to sue to declare the Unlawful Internet Gambling Enforcement Act (UIGEA) unconstitutional. That case also currently sits in appeal.

In October, Judge Thomas Wingate did not overturn the seizure order by Kentucky Governor Steve Beshear. The decision prompted iMEGA and the IGC to file a petition for the state’s Court of Appeals to intervene. The organizations’ pleas were granted, setting up a December hearing in Louisville. In January, Judges Michelle Keller and Jeff Taylor agreed that the Commonwealth did not have proper jurisdiction to force the forfeiture of the 141 internet gambling domain names in question. Judge Michael Caperton submitted a dissenting opinion arguing that domain names are part of a much larger “gambling device,” a term that traditionally refers to physical objects like slot machines or roulette wheels found in an underground casino.

No date has been set for the Kentucky Supreme Court to hear the case. Stay tuned to Poker News Daily for the latest from the battle in the Bluegrass State.

BetOnSports Ex-CEO David Carruthers Pleads Guilty

In breaking news out of St. Louis, former BetOnSports CEO David Carruthers has pled guilty to “federal racketeering conspiracy charges,” according to the Associated Press. He faces up to 33 months in prison and sentencing is scheduled for October 2nd.

According to a statement released by iGamingNews on Wednesday, “Mr. Carruthers agreed to not appeal provided that the sentence doesn't exceed 33 months, which is under the terms of the agreement, as well as to not engage in offshore gambling businesses during the time of supervised released or thereafter.” Carruthers also agreed to cooperate against BetOnSports founder Gary Kaplan and others still in custody.

Carruthers has been under house arrest since 2006 and even ran the St. Louis Marathon during his detention, posting a time of four hours, five minutes, and 27 seconds. He was originally detained in Texas while in transit from the United Kingdom to Costa Rica before being moved to St. Louis. According to the St. Louis Post Dispatch newspaper, despite believing that internet gambling and sports wagering may have been illegal in the United States under laws such as the Wire Act of 1961 and Unlawful Internet Gambling Enforcement Act (UIGEA), Carruthers “continued to advertise to U.S. customers that the company was 'legal and licensed' while 'furtively or covertly' collecting bets and paying out money owed to gamblers.”

Interactive Media Entertainment and Gaming Association (iMEGA) Chairman Joe Brennan speculated as to why Carruthers would finally plead guilty, ending the three year ordeal. He told Poker News Daily, “Carruthers is a citizen of the United Kingdom and isn't a resident of the United States. He was a foreign national that had been detailed in transit. He went three years trying to make the best of a bad situation and wants to go home.”

In July of 2006, Carruthers was fired as CEO of BetOnSports. The company stated at the time, "Clearly, while he remains in the custody of the U.S. government, he is unable to perform his duties.” In August of that year, the company vacated the U.S. market entirely, two months prior to then-President George W. Bush signing the SAFE Port Act and its accompanying UIGEA rider into law. Brennan noted that while BetOnSports was navigating its future business plans, Carruthers was still held up in Missouri: “The U.S. Government won a war of attrition. He's an older guy who hasn't been home in three years. He was under house arrest with no trial.”

The admission of guilt comes on the heels of a plea bargain made by former Party Gaming Co-Founder Anurag Dikshit in a New York court room last December. Dikshit agreed to pay $300 million over three installments and faces up to two years in prison. However, his sentencing has been delayed until December of 2010. Comparing the two high profile internet gambling proceedings, Brennan explained, “Carruthers' case is obviously more severe than Anurag's, who is free to go wherever. It's disappointing to see a guy who has been standing on his principles beaten down enough to forge a plea.”

Visiting BetOnSports.com from the United States yields the text, “This website does not accept wagers on sports or sporting events from persons in the United States. It is a violation of United States Law to transmit sports wagers or betting information to this website from the United States.”

We'll have more for you on this breaking story has it develops right here on Poker News Daily.