Poker News

No Decision Handed Down in Kentucky Internet Gambling Case

The Kentucky Supreme Court failed to hand down a decision on Thursday in the case involving the seizure and potential forfeiture of 141 internet gambling domain names.

The list of sites that could be affected includes PokerStars and Full Tilt Poker. Officials from the Interactive Media Entertainment and Gaming Association (iMEGA) and others involved in the case had anticipated a Thursday release of the Kentucky Supreme Court's decision. However, none was passed down as the day came and went.

A press release distributed by iMEGA on Thursday added that the next time the case could be addressed is late March. iMEGA Chairman Joe Brennan told Poker News Daily what his reaction was to no decision being rendered by the Commonwealth's highest court: “Everyone was surprised in Kentucky. The rumor mill thought the decision was going to be rendered. That could have been why their attorneys acted so quickly at the end of December, so if they got an adverse decision, they could keep it alive.”

No dates for releases of court opinions are listed in February. The next date shown for verdicts to be handed down on the Kentucky Supreme Court's calendar is March 18th. Others include April 22nd, May 20th, June 17th, August 26th, September 23rd, October 21st, November 18th, and December 16th. Twenty pages' worth of decisions were handed down on Thursday in the Frankfort court.

Back in October, oral arguments were heard by the six of the seven justices that comprise the Kentucky Supreme Court. In December, two months after the proceedings occurred, attorneys for the Commonwealth filed a motion to add names to its original complaint. Its counsel explained the reasoning behind identifying more defendants two months after oral arguments transpired: “In the course of the litigation and the Commonwealth’s continuing investigation, the Commonwealth has learned the identity of certain entities and individuals involved in internet gambling operations, some of whom are U.S. citizens.”

The motion called for a hearing in front of Judge Thomas Wingate on January 20th. However, because the motion was never acted on by the Kentucky Supreme Court, no such hearing took place. Wingate upheld the initial seizure order as part of a decision rendered in October 2008. The last-second move by Commonwealth attorneys to add names to the record, to some in the industry, indicated that the Kentucky Supreme Court was readying to hand down a verdict. However, those inclinations ultimately proved to be false.

The case centers on whether domain names, which are housed in the depths of cyberspace, constitute “gambling devices” under Kentucky state law. The two-word phrase traditionally refers to physical objects like roulette wheels and slot machines that you'd find in an underground casino. The domains were allegedly seized without due process back in September 2008. Wingate mandated that the affected sites cease taking customers from Kentucky immediately, else risk losing access to their domain name worldwide.

For now, it appears that the future of domain names like FullTiltPoker.com and PokerStars.com will remain up in the air in the Bluegrass State. Also involved in the case is the Poker Players Alliance (PPA), the industry's 1.2-million member strong lobbying force. The PPA filed an amicus brief to the Kentucky Supreme Court charging that poker is a game of skill and therefore not gambling under state law.

Original estimates pinned a decision in the Kentucky Supreme Court between three and six months after oral arguments took place, or sometime between January and April. Stay tuned to Poker News Daily for the latest on the case.

Internet Gambling Bill Introduced in New Jersey

Legalized internet gambling and online poker may be coming to New Jersey. State Senator Raymond Lesniak introduced S 3167, which specifically legalizes the internet version of popular brick and mortar games like poker, roulette, baccarat, blackjack, craps, the big six wheel, slot machines, mini baccarat, red dog, pai gow, and sic bo.

Servers and monitoring offices for internet gaming companies created under the bill must be located in Atlantic County, New Jersey. The State is charged with protecting consumers under the bill, which explains that a government division would develop “technical standards for approval of software, computers and other gaming equipment used to conduct internet wagering, including mechanical, electrical or program reliability, security against tampering, the comprehensibility of wagering, and noise and light levels, as it may deem necessary to protect the player from fraud or deception and to insure the integrity of gaming.” Online accounts would only be open to players age 21 or older, mirroring the standards of the brick and mortar casino world.

Online poker is mentioned by name several times, mitigating any doubt that the game may not be legal if Lesniak’s bill were enacted into law. Internet gambling outfits would be subject to a 20% tax paid to the state’s casino revenue fund. An additional tax will see a portion of its proceeds go to the New Jersey Racing Commission “to be used for the benefit of the horse racing, including but not limited to the augmentation of purses.”

The act would take effect immediately upon future Governor Chris Christie signing it into law, setting up a model for intrastate online gaming that other jurisdictions could soon mimic. The New Jersey Casino Control Commission would establish a Division of Internet Wagering to oversee operations and licensing. Permit holders would be required to pay an up-front licensing fee of $200,000, with renewals running $100,000. In addition, operators would be required to fork over a $100,000 non-refundable deposit and $100,000 annual fee that would go towards treating compulsive gambling.

The Interactive Media Entertainment and Gaming Association (iMEGA) has been one of the leading forces pushing for legislation in New Jersey. Its Chairman, Joe Brennan, commented in a press release distributed by the trade organization, “We’re happy that New Jersey has taken this issue into their own hands. New Jersey is recognized as having the toughest gaming regulators in the U.S., but as a leading gaming state with a long track record of doing things the right way, internet gambling will have a great home here and the opportunity to begin normalizing the industry.”

Legal online wagering on horse racing is available to New Jersey residents on 4NJBets.com. Those placing wagers must be 18 years of age and have completed a form W9 for tax purposes. An automated phone betting system supplements the website, allowing multiple avenues for New Jersey residents to place wagers on their favorite ponies. Popular New Jersey tracks include Monmouth, Meadowlands, and Freehold.

On a national level, New Jersey Senator Robert Menendez has introduced S 1597, the Internet Poker and Game of Skill Regulation, Consumer Protection, and Enforcement Act. As its name implies, the measure legalizes skill games like online poker in a similar fashion to Congressman Barney Frank’s (D-MA) HR 2267 in the House. S 1597 was introduced in August, but has not yet picked up any co-sponsors. Menendez’s bill defines “skill game” simply as “an Internet-based game in which success is predominantly determined by the skill of the players, including poker, chess, bridge, mah-jong, and backgammon.”

In the meantime, iMEGA anxiously awaits a decision from the Kentucky Supreme Court on the future of 141 internet gambling domain names, including those belonging to PokerStars and Full Tilt Poker, that face potential forfeiture. A decision may be handed down as soon as January 21st.

New Defendants in Kentucky Internet Gambling Case Remain Unknown

Following a chain of e-mails sent last week by attorneys for the Commonwealth of Kentucky, the names of additional defendants in the state’s legal action against the owners of 141 internet gambling domain names remain a mystery.

In October, the Kentucky Supreme Court heard the case, which pits industry organizations like the Interactive Media Entertainment and Gaming Association (iMEGA) and the Interactive Gaming Council (IGC) against the Kentucky Justice and Public Safety Cabinet, led by Secretary J. Michael Brown. Despite a ruling by the state’s highest judicial body potentially being handed down any day now, Kentucky attorneys filed a motion to add parties to its complaint last week. How the latest filing will affect the Kentucky Supreme Court’s decision, if at all, remains unknown. The additional parties in question were U.S. citizens and companies engaged in internet gambling.

When lawyers for iMEGA tried to obtain a list of the additional names, counsel for the Commonwealth turned them down. iMEGA Chairman Joe Brennan told Poker News Daily, “They've basically said that they don't recognize our standing. They're just ignoring what happened in the Court of Appeals, which confirmed our standing.” In a chain of e-mails between opposing attorneys available on iMEGA’s website, William Hurt of Kentucky counsel Hurt, Crosbie, and May states, “I do not believe anyone has standing to file a response or motion to strike.”

Brennan lashed out at the State’s attorneys, who are purportedly working on a contingency basis, as part of a press release sent on Monday: “They were counting on a big payday from our members in the form of settlements to get their own property back, but it doesn’t look like that’s going to happen. Since they don’t get one nickel from the state to pursue this, it’s clear that the drive for big money has taken over and any sense of fair play or due process has gone out the window.”

The 141 internet gambling domain names in question include those belonging to online poker giants like PokerStars and Full Tilt Poker. If the Commonwealth of Kentucky were successful, these domains would be inaccessible not just in the southern state, but also around the world. The domains were seized back in September of 2008 on the grounds that they constituted “gambling devices,” a term that traditionally refers to tangible objects like slot machines and roulette wheels that you’d find in an underground casino.

In January, the Kentucky Court of Appeals ruled by a two-to-one margin that the Commonwealth did not have jurisdiction to act, setting up an appeal by the State to its Supreme Court. iMEGA attorney Jon Fleischaker noted in an e-mail, “The Court of Appeals ruled that we had standing in this case, and by implication, a right to intervene. I believe the Supreme Court is likely to rule the same thing.” Hurt retorted that the State would “object to anything that you file, but will nonetheless continue to send you notice.”

Brennan told Poker News Daily that Circuit Court judge Thomas Wingate did not act on the motion to add names filed by Kentucky’s attorneys last week and the next day that it can be considered is January 21st. The motion calls for a hearing on January 20th in front of Judge Wingate, although its future appears to be in doubt. Judge Wingate upheld the State’s actions as part of an October 2008 decision.

The Kentucky Supreme Court has given no indication as to when it will hand down a ruling. As it currently stands, the Kentucky Supreme Court does not have any oral arguments scheduled on its calendar until January 13th. However, Brennan expected a decision from the Kentucky Supreme Court to be issued in January.

Poker Industry Reacts to House Financial Services Committee Hearing

On Thursday, the House Financial Services Committee, Chaired by Congressman Barney Frank (D-MA), hosted a hearing on two internet gambling bills. Twenty-four hours later, the online poker industry has had a chance to respond.

In one portion of Thursday’s hearing, Congressman Spencer Bachus (R-AL) referenced a letter he received from the FBI noting that the integrity of online poker games could be compromised. On the letter sent by Shawn Henry, the Poker Players Alliance (PPA) retorted, “The PPA takes issue with certain representations made by Mr. Henry, but believes that the larger point is the more important one: Mr. Henry’s letter makes a compelling case for licensing and regulation of internet poker as proposed in HR 2267.” Bachus is the Ranking Member of the House Financial Services Committee and a staunch opponent of internet gambling interests.

Safe and Secure Internet Gambling Initiative (SSIGI) spokesperson Michael Waxman gave Poker News Daily his two cents on the 90-minute long hearing that took place on Thursday morning in one of Congress’ most powerful committees: “The hearing and witness testimony clearly portrayed why Congress should scrap an unrealistic attempt to ban internet gambling and regulate the burgeoning underground marketplace since it is the only effective way to protect consumers.” Witnesses covered the gamut, ranging from the banking industry to problem gambling interests.

Early on in the proceedings, Bachus questioned Frank as to why no representatives from the U.S. Treasury or Federal Reserve were present at the hearing. Frank responded that he had not received any such request. However, the Committee’s Chairman later recanted his statement after producing an e-mail dated 40 hours before the hearing began from Bachus’ staff calling for the Treasury or Fed to be present. The awkward exchange ultimately led to agreement that an additional hearing should take place featuring members of the two government organizations, setting up more debate on the internet gambling issue in 2010. The Treasury and Fed granted a six-month delay in compliance with the regulations of the Unlawful Internet Gambling Enforcement Act (UIGEA).

On the proceedings, Interactive Media Entertainment and Gaming Association (iMEGA) Chairman Joe Brennan told Poker News Daily, “It’s good to see that the ball is rolling again. The trick is going to be if things are sustained beyond the hearing. The industry has this pace of getting a public hearing every six months, but there seems to be little follow-up. Seeing that the minority wanted to hear from the Treasury and Fed, it may be the opposition who keeps the ball rolling.” No hearing has been scheduled, although PPA Executive Director John Pappas expected swift movement to mark up HR 2267.

Bachus’ generalizations about millions of young Americans becoming addicted to online gaming if legalization were to occur rubbed many in the industry the wrong way. On some of the claims made by the high-ranking Alabama Congressman, PocketFives.com poster “RI Tony” commented, “This Bachus guy is a classic example of why I hate politicians. There would be no way to change this guy’s mind. He’s simple minded and arrogant, thinking he can legislate morality. Oh yeah, and like I’m going to play poker on my Blackberry as I’m driving or waiting in line at the supermarket as he suggested people would. Idiot.” Online sites like Cake Poker already offer a mobile client.

Bachus asserted, “If Congress repeals the law, online casinos will proliferate. In the next five years, I feel that if [we] are successful in creating a federal right to gamble on the internet, we will create a generation of millions of Americans who from their youth will be addicted to internet gambling and, therefore, life-long problem gamblers.” Frank labeled Bachus’ comments “hyperbole” and “based on no factual basis whatsoever.”

In June of 2008 during a separate committee hearing, Bachus relayed a study from McGill University claiming that one-third of college students who gambled on the internet attempted suicide. In fact, no such study had ever taken place. A representative for the university quipped, “I am confident the Congressman doesn’t read research – he could not misinterpret this.”

Stay tuned to Poker News Daily for the latest from Capitol Hill.

UIGEA Regulations Officially Delayed Six Months

Online poker players in the United States have a lot to be thankful for this holiday season. On Friday, CNBC and the Associated Press confirmed that U.S. Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke had granted requests to delay the mandatory compliance date of the regulations of the Unlawful Internet Gambling Enforcement Act (UIGEA) by six months to June 1st, 2010.

Word of a potential delay first broke on Wednesday from Interactive Media Entertainment and Gaming Association (iMEGA) Executive Director Joe Brennan. However, no official comment had been handed down from Geithner, Bernanke, the Poker Players Alliance (PPA), or the office of Congressman Barney Frank (D-MA). Around 12:15pm ET on Friday, cable station CNBC ran a segment touting the successful six-month delay and an Associated Press article had hit cyberspace 15 minutes earlier.

The six-month delay will take the internet gambling industry to June 1st, 2010. In the interim, the theory goes that sensible legislation governing the industry in the United States will be passed. Frank introduced HR 2267 back in May. The bill, which has attracted 63 co-sponsors, establishes a full licensing and regulatory framework for online gaming outfits to solicit U.S. customers.

An Associated Press article sourced both the Treasury and Federal Reserve as saying that the UIGEA’s regulations would indeed be pushed off until mid-2010. The news service explained, “The delayed rules would curb online gambling by prohibiting financial institutions from accepting payments from credit cards, checks or electronic fund transfers to settle online wagers. The financial industry complained that the new rules would be difficult to enforce because they did not offer a clear definition of what constitutes internet gambling.” Since the UIGEA was approved in 2006, a Third Circuit Court of Appeals ruling stated that the legality of internet gambling may depend on state law, similar to the way that the brick-and-mortar version is governed.

Next Thursday, December 3rd, the House Financial Services Committee will hold a hearing discussing the merits of HR 2266 and HR 2267. The former bill delays mandatory industry compliance with the UIGEA regulations by one year to December 1st, 2010. Its relevance given Friday’s confirmation that the regulations would be pushed back six months is up in the air. The hearing kicks off at 10:00am ET in Room 2128 of the Rayburn House Office Building. Witnesses for the informational hearing have not yet been announced and the proceedings can be followed via a live webcast accessible from the Committee’s website.

Potential overblocking by credit card companies like Visa and MasterCard led the PPA, two horse racing organizations, and members of Kentucky’s Congressional delegation to petition Geithner and Bernanke, urging that the regulations of the UIGEA be shuttled back to December 1st of next year. PPA Executive Director John Pappas told Poker News Daily, “Many believe what you’ll see is overblocking of legitimate transactions. It’s not a good thing for players. It won’t just affect poker; it’ll affect horse racing, lotteries, and other online entities.”

Around 1:00pm ET, the PPA confirmed the news. The organization’s Chairman, Alfonse D’Amato, commented in a press release, “The PPA is extremely pleased with the decision by the Federal Reserve and Treasury to grant the six month extension. This is a great victory for poker, but an even greater victory for advocates of good and fair public policy.”

Stay tuned to Poker News Daily for the latest news and events from Capitol Hill.

UIGEA regulations postponed by six months

Report: UIGEA Regulations Postponed Six Months

The regulations of the Unlawful Internet Gambling Enforcement Act (UIGEA) have been delayed six months from December 1st, according to Interactive Media Entertainment and Gaming Association (iMEGA) Chairman Joe Brennan.

Neither U.S. Treasury Secretary Timothy Geithner nor Federal Reserve Chairman Ben Bernanke had made any official comment regarding a six-month delay at press time. The two government officials received petitions to stay the UIGEA’s regulations by one year in letters filed by the Poker Players Alliance (PPA), National Thoroughbred Racing Association, the American Greyhound Track Operators Association, and members of Kentucky’s Congressional delegation. Congressman Spencer Bachus (R-AL) and Senator Jon Kyl (R-AZ) asked the two officials to uphold the original December 1st industry compliance deadline in a dissenting opinion.

The news comes one week ahead of a hearing in the House Financial Services Committee regarding two internet gambling bills introduced by Congressman Barney Frank (D-MA) in May that would alter the landscape of the industry in the United States. The first, HR 2266, would have postponed the regulations of the UIGEA by one year to December 1st, 2010. Its viability given today’s news of a likely six-month postponement is up in the air. The measure had attracted 53 co-sponsors on both sides of the aisle.

HR 2267, claiming 63 co-sponsors, creates a full licensing and regulatory framework for the internet gambling industry in the United States. It marks Frank’s latest attempt to undo the UIGEA, which was passed in 2006 after being attached to an unrelated port security measure at the prompting of then-Senate Majority Leader Bill Frist (R-TN). In the Senate, the SAFE Port Act was passed by unanimous consent.

On the hearing next week, which will be held at 10:00am ET in Room 2128 of the Rayburn House Office Building on Thursday, Safe and Secure Internet Gambling Initiative spokesperson Michael Waxman told Poker News Daily, “Chairman Frank is clearly indicating his commitment to switch the government’s position on Internet gambling, replacing attempts to prohibit the activity with a regulatory framework where consumers are protected. Chairman Frank’s commitment is further reinforced by scheduling this hearing and taking up this issue on the heals of the push for financial industry reform, which has been the committee’s exclusive focus the last six months.”

The six-month window will take the internet gambling industry to June 1st, right before election season in the United States in 2010. While issues like health care and a sagging economy have taken center stage since late 2008, internet gambling may finally see its day in the sun. Brennan explained his thoughts on the breaking news: “It’s encouraging that you’ve had this stay on the compliance, but it’s unfortunate that it took this long. We should all hope that in the next six months, a bill that already has 63 co-sponsors can be heard.”

To be clear, no official comment from the Treasury or Federal Reserve was available at the time of writing. With December 1st occurring next Tuesday, a stay likely had to be granted today or Monday, November 30th given the Thanksgiving holiday in the United States. Word breaking on Black Friday was also a possibility.

Stay tuned to Poker News Daily for the latest on this developing story.

No Markup Planned for December 3rd Internet Gambling Hearing

On Tuesday night, it was revealed that a hearing will occur next Thursday, December 3rd in the House Financial Services Committee. Taking center stage are two bills related to the Unlawful Internet Gambling Enforcement Act (UIGEA).

Poker Players Alliance (PPA) Executive Director John Pappas told Poker News Daily that no markup will occur at the hearing, which will be purely informational in nature: “It’s just an informational hearing. I don’t think the witnesses have been set yet and we’ve been in touch with the Committee about that. The PPA has been building the groundwork for this hearing for some time now. We look forward to it.” A representative from the House Financial Services Committee confirmed that no markup will occur. The hearing will take place in Room 2128 of the Rayburn House Office Building at 10:00am ET.

Depending upon the outcome of the internet gambling hearing next Thursday, either HR 2266 or HR 2267 could be scheduled for markup, potentially within a week. Congressman Barney Frank (D-MA) introduced both bills back in May. HR 2266 delays mandatory financial services industry compliance with the regulations of the UIGEA by one year to December 1st, 2010. It has attracted 53 co-sponsors on both sides of the aisle and is dubbed the Reasonable Prudence in Regulation Act. As it stands now, the financial services industry must fall into line with the UIGEA by Tuesday, December 1st.

When asked if the December 1st compliance date passing makes HR 2266 moot, Safe and Secure Internet Gambling Initiative (SSIGI) spokesperson Michael Waxman told Poker News Daily, “It could be unless Frank decides that the financial services sector needs a reprieve. Many companies have already expressed concern that the implementation of the law will be burdensome. I believe we’ll hear back from them again as they are forced to abide by the rules.”

HR 2267, the Internet Gambling Regulation, Consumer Protection, and Enforcement Act, establishes a full licensing and regulatory framework for the internet gambling industry in the United States. It boasts 63 co-sponsors and, when coupled with a tax bill introduced by Congressman Jim McDermott (D-WA), could bring in as much as $42 billion over a 10-year period, according to a study by the Joint Committee on Taxation.

Many in the industry have pondered the status of the internet gambling and online poker industries in the United States after December 1st. Interactive Media Entertainment and Gaming Association (iMEGA) Chairman Joe Brennan told Poker News Daily, “Poker players are going to have to get used to the kind of speed of deposit and withdrawal that online sports betters have had to get used to. To my knowledge, all of the top sports books have moved their processing offshore. I don’t expect there to be the wealth of electronic transfer methods and you’re probably going to see an increased use of checks drawn on international banks.”

One possible outcome in the post-December 1st internet gambling industry is overblocking by credit card companies like Visa and MasterCard. The 12-letter term began popping up earlier this year, when legal online lottery purchases in North Dakota and New Hampshire were denied. In essence, credit card companies could disallow any transaction that appears to look remotely like internet gambling in an effort to comply with the 2006 law. Overblocking also led several members of the Kentucky Congressional delegation to petition U.S. Treasury Secretary Timothy Geithner seeking the delay of UIGEA regulation enforcement. The group fears that legal online wagering on horseracing could come to a screeching halt as a result.

The PPA, National Thoroughbred Racing Association, and the American Greyhound Track Operators Association issued a letter to Geithner and Federal Reserve Chairman Ben Bernanke seeking delay of the UIGEA’s regulations. As of the time of writing, the request had not yet been acted on.

Stay tuned for the latest from Capitol Hill right here on Poker News Daily.

Poland Limits Gambling, Poker to Brick and Mortar Casinos

Poland’s Senate approved a measure limiting gambling to casinos, stunting access to poker and other games outside of a structured establishment. The bill cleared the Senate by a 48 to 3 margin, with 30 lawmakers not voting.

The Krakow Post noted that the new crackdown on gambling outside of licensed casinos may also spell trouble for internet gambling and online poker: “The legislation also affects Internet gambling, which will no longer be allowed under Polish law. However, the enforcement of this aspect of the bill will inevitably prove much more difficult than even the removal of thousands of slot machines.” Around 50,000 slot machines, which can be found in places like bars and restaurants around the country, will be removed as a result of the new law.

Polish President Lech Kaczynski must still apply his John Hancock to the piece of legislation in order for it to become official. The Post quoted Poland’s Prime Minister as saying that he expects Kaczynski to sign by the end of the month. In addition to ridding the European country of 50,000 slot machines and potentially slowing the growth of internet gambling, the bill passed by Polish lawmakers also sets a legal gambling age of 18.

The Agence France Presse, or AFP news service, shed some light into this month’s vote: “The decision by parliament comes nearly a month and a half after [Prime Minister] Tusk was forced to sack several key ministers and political allies over allegations of influence peddling within his cabinet regarding the gambling legislation.” World Bulletin explained what a portion of the funds raised will be used for: “Tusk has said the restrictions will prevent young people from becoming addicted to gambling. The government will funnel tax revenues raised under the bill into foundations promoting physical education and culture.”

No general election is scheduled in Poland until 2011 and the scandal in question involved casino owners. The new bill also increases the tax rate on casinos, helping raise additional money for Poland’s government. On the TwoPlusTwo forums, a translated article that originally appeared on Bankier.pl revealed that the tax rate on tournament poker would also increase as part of the new measure, although this component was not reported by the AFP or World Bulletin. TwoPlusTwo poster “novahunterpa” commented, “Looks like every country is either trying to ban online poker and gambling or restrict it to state monopolies.”

One month ago, Poland saw the invasion of the PokerStars-sponsored European Poker Tour (EPT), which made its annual stop in Warsaw. The 25,000 PLN buy-in event was held at the Casinos Poland Hyatt Regency and French businessman Christophe Benzimra emerged victorious from the 203 player field. The online poker site claimed that EPT Warsaw was one of the largest poker tournaments ever held in Poland. No indication has been given as to whether the new law will affect the EPT’s Season 7 Warsaw stop.

Among those keeping a watchful eye on the situation in the European country was Interactive Media Entertainment and Gaming Association (iMEGA) Chairman Joe Brennan, who told Poker News Daily, “The genie is out of the bottle when it comes to online gambling. Whether it’s restricting it for consumer protection or guaranteeing the franchise for Poland’s brick and mortar casinos, the fact is that the Polish people have already voted with their feet, their wallets, and their computers by seeking out online gambling. Poland is going to have a hard time putting the genie back in the bottle, as would any country.”

Notable poker personalities hailing from Poland include Poker Hall of Fame member Henry Orenstein, a WSOP bracelet winner who also invented the hole card camera. Orenstein was born in Hrubieszów and currently lives in the United States. Michael Gracz was born in Warsaw and, like Orenstein, now calls the USA home.

Kentucky Cabinet Secretary Discusses Internet Gambling Battle

One month ago, the Kentucky Supreme Court heard arguments in a case that pits the state’s Justice and Public Safety Cabinet against the owners of 141 internet gambling domain names, including those belonging to industry titans like PokerStars and Fill Tilt Poker.

Heading the Cabinet is J. Michael Brown, who was present during oral arguments in the Frankfort courtroom and brought the legal action against the domain names in question one year ago. Brown told Poker News Daily that nothing discussed during the October 22nd hearing caught him off-guard. He added, “In discussing some of the procedural background, members of the court touched on some of the underlying issues, everything from whether a domain name is a device and how a device is defined to what measures the Commonwealth can employ to defend itself against unregulated internet gambling.”

Representing the internet gambling sites were a consortium of lawyers, including those from the Interactive Media Entertainment and Gaming Association (iMEGA), the Interactive Gaming Council (IGC), and several of the targeted sites. Despite the large presence of trade organizations during the proceedings, Brown and company questioned why no domain owners had come forth to defend themselves. The Secretary told Poker News Daily, “Who were the stakeholders on the other side? There didn’t seem to be anyone standing up saying that they represent these innocent owners. Their arguments were all over the map, from the First Amendment to likening it to a criminal proceeding. I was pleased that the court spent time looking at the underlying issues.”

Many in the industry have cautioned that the outcome of the Kentucky internet gambling case may set a precedent worldwide. More light could be shed on where domain names are located and who has rights to seize or regulate them as a result of the seven-member Kentucky Supreme Court’s decision. On the global implications of the Commonwealth’s actions, Brown frankly stated, “I’m only focusing on Kentucky. Our interest is in the unregulated gambling that we believe has been going on. I don’t know that our Supreme Court is ready to look at it as a worldwide precedent because a lot of the underlying facts haven’t been completely developed.”

Influencing the Commonwealth is the presence of a booming horse racing industry in Kentucky, headlined every May by the running of the Kentucky Derby. The spectacle, which unfolds from Churchill Downs in Louisville, generates a considerable amount of revenue for the State, bringing in high rollers, celebrities, politicians, and horse racing fans from around the globe.

The 141 internet gambling domain names are owned by companies located in places like Costa Rica, Gibraltar, Canada, and Isle of Man. Brown explained, “You have people who own and operate domain names. In order to regulate them, you have to go to the registrars because the actual owners are all offshore.” Registrars include giants like GoDaddy.com, which features Team PokerStars Pro member Vanessa Rousso as one if its spokesmen.

When the Kentucky Supreme Court will hand down a decision in the case is not yet known. Joe Brennan, Chairman of iMEGA, told Poker News Daily that he would set an over/under of March, 2010. Rich Muny, Kentucky State Director for the Poker Players Alliance (PPA), contrastingly, expected a decision to be rendered by Christmas.

The 141 internet gambling domain names were seized in September of 2008 on the grounds that they were illegal “gambling devices,” a term that traditionally refers to tangible objects like slot machines and roulette wheels that you’d find in an underground casino. Judge Thomas Wingate upheld the Commonwealth’s actions one month later before the industry sought the intervention of the Kentucky Court of Appeals. The judicial body ruled against the State by a two-to-one margin in January, setting up October’s showdown in the Kentucky Supreme Court.

Stay tuned to Poker News Daily for the latest from the Commonwealth of Kentucky.

Internet Gambling Revenue Analysis Released by Joint Committee on Taxation

Today, Congressman Jim McDermott (D-WA) released a study by the Joint Committee on Taxation (JCT) revealing that up to $41 billion could be generated by regulating and taxing the internet gambling industry over a 10-year period.

This is one of several studies to be released by various outfits, but is the first to be handed down by an agency of the United States Government. On the importance of the JCT’s findings, McDermott commented in a press release distributed on Thursday, “I suspect that many of my colleagues… will take more interest in this issue once they see $41 billion available that they can match up with any number of worthy programs.” Being debated on Capitol Hill is major health care reform, one social program that could conceivably be funded through internet gambling.

McDermott continued, “I would suspect it’s only a matter of time before Congress appropriately moves to regulate the industry in order to protect consumers and reverse the flow of billions of dollars currently lost offshore as Americans gamble billions online despite attempts to prohibit the activity.” In May, the Washington Congressman unveiled HR 2268, the Internet Gambling Regulation and Tax Enforcement Act. The measure imposes a fee of 2% of deposits on licensed internet gambling operators.

HR 2268 is a companion bill to Congressman Barney Frank’s HR 2267, which establishes a comprehensive framework for companies to solicit U.S. customers. The two bills were introduced on the same day and HR 2267 is up to 62 cosponsors on both sides of the political spectrum. Safe and Secure Internet Gambling Initiative (SSIGI) spokesperson Michael Waxman told Poker News Daily, “This is a very significant development in support of the push to regulate the industry. We would expect that there will be more conversation and more interest in internet gambling regulations as Congress is attempting to figure out funding for health care and other various programs.”

Today, Democrats in Congress unleashed health care reform that comes with a price tag of nearly $900 billion. While not able to cover the full amount, legalizing internet gambling could, in theory, put a dent in the price tag. The JCT’s analysis does not include online sports betting, which is barred in Frank’s legislation. Moreover, the findings assume that states will not opt out of HR 2267. A February study by the U.S.-based firm PricewaterhouseCoopers revealed that up to $52 billion could be raised by taxing internet gambling companies over a 10-year period.

On the significance of a $4 billion per year revenue stream when programs like health care run over 200 times that total, Interactive Media Entertainment and Gaming Association (iMEGA) Chairman Joe Brennan explained, “It’s realistic to see it packaged with a number of revenue enhancers. As a standalone, in my opinion, it’s not enough money to be able to get people off the mark who have been against this in the near-term.”

Information released today by the SSIGI noted that Frank planned to hold a markup hearing on HR 2267, but the House Financial Services Committee has released no official information. For the balance of the week, Frank’s committee will be bogged down in discussion of systematic regulation, overdraft protection, and investor protection. The grizzly state of the U.S. economy has been the committee’s main focus since September of 2008.

Frank has also introduced HR 2266, the Reasonable Prudence in Regulation Act. The measure delays industry compliance with the regulations of the Unlawful Internet Gambling Enforcement Act (UIGEA) by one year. As it stands, the financial services industry in the United States must come into full compliance with the 2006 law by December 1st, which is just five weeks away. The Poker Players Alliance (PPA), the industry’s main lobbying force, has been working feverishly to delay the deadline through other means, including appealing directly to U.S. Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke.

The JCT study assumes that wagering taxes will be levied and that HR 2267 will be amended so that internet gambling companies doing business in the United States must also be incorporated in the United States. Read the full internet gambling study.

Stay tuned to Poker News Daily for the latest news from Capitol Hill.

Anurag Dikshit’s Sale of Party Gaming Stock Receives Mixed Reaction

One of the major poker headlines this week was the news that Party Gaming Cofounder Anurag Dikshit would divest himself of nearly 114 million shares of the company’s stock, which is traded in London under the symbol “PRTY.” Now, the industry has had a chance to react.

The internet gambling think tank sported mixed reactions to the news, as Dikshit’s departure meant that a man who admitted to violating U.S. law in a New York courtroom one year ago would no longer hold any interest in the company. Interactive Media Entertainment and Gaming Association (iMEGA) Chairman Joe Brennan told Poker News Daily, “The thing to take away is that this is probably good overall for Party Gaming. When you have one of their founders pleading guilty, if and when things start to get normalized in the U.S. and Party Gaming comes into the market, they need to clear it off the books. The fact that he’s exiting the company is good for its future.”

When internet gambling will be legalized and regulated in the United States is anyone’s guess. Congressman Barney Frank (D-MA) introduced HR 2267 in May as one solution. The bill outlines a framework for the explicit legalization of the industry and, although the measure is up to 62 cosponsors, it has not yet been scheduled for markup in the House Financial Services Committee.

On how members of Congress and others outside of the industry would react to Dikshit’s exit, Brennan explained, “If Dikshit leaving Party Gaming can be a benefit to that company, I would say that it does the same broadly for the industry.” Financial analyst Nick Batram told Bloomberg that Dikshit’s departure meant that Party Gaming “may also find it easier to raise funds from institutional investors rather than the founders for large sports gambling acquisitions.” The Wire Act of 1961 has historically been interpreted to mean that online wagering on sports is not permitted in the U.S.

Dikshit will purportedly turn over the proceeds of his sale, which will likely total more than ?188 million, to his charitable foundation. On the TwoPlusTwo online poker forums, posters questioned Dikshit’s charitable motives: “If he donated to an established charity that could not be mistaken for a front, then that would be impressive,” one skeptic noted. Some have speculated that tax benefits are the real reason behind his actions. Brennan told Poker News Daily, “He wants to get out of the business and focus on his charitable endeavors.”

The sale of two-thirds of Dikshit’s stake sent shares of Party Gaming plummeting. Trading above 284 pence on October 19th, the stock dove to 240 pence in 24 hours, a dip of 15%. PRTY closed trading on Friday on the London Stock Exchange fetching 243 pence, 135 pence above its asking price one year ago.

An article in the Financial Times summed up the reaction from most of the industry: “The truth, however, is that while the distancing of Mr Dikshit can’t be bad for Party Gaming, it is still frustratingly unclear what the odds are on a successful return to the U.S. market.” In five weeks, the financial services industry in the United States must fall into full compliance with the regulations of the Unlawful Internet Gambling Enforcement Act (UIGEA). The impact of the December 1st deadline remains to be seen, but the Poker Players Alliance (PPA) recently authored a letter to U.S. Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke asking for the UIGEA’s regulations to be delayed by one year.

Party Gaming Cofounders Ruth Parasol and Russ DeLeon, a husband and wife team, have not yet announced their intentions to sell stock or formulate a plea agreement with the U.S. Government.

Poker Industry Reacts to Kentucky Internet Gambling Hearing

On Thursday, attorneys representing the owners of 141 internet gambling domain names took to the floor of the Kentucky Supreme Court. Their goal: prevent the forfeiture of URLs belonging to industry giants like PokerStars, Ultimate Bet, and Full Tilt Poker.

Twenty-four hours later, the online poker industry has had an opportunity to digest the proceedings, which played out in Frankfort. Among those looking on via a live webcast of the 90-minute oral arguments was Poker Players Alliance (PPA) Executive Director John Pappas, who told Poker News Daily from Washington, D.C., “Aside from wishing I could be down there, I think the presentation of the prosecution was extremely weak and there were a lot of holes in it in that the Supreme Court justices pointed out. The attorneys for the side of the online sites did a very good job of presenting compelling, reasonable reasons for dismissing this case.”

Word of the seizure broke last September and sent shockwaves throughout the internet gambling industry. If successful, the action by the Commonwealth would render the 141 domain names inaccessible not just in Kentucky, but also worldwide. Interactive Gaming Council (IGC) attorney Ian Ramsey told Poker News Daily, “We felt very good about the arguments we presented. We felt we had the opportunity to present the material issues for this court to consider and welcome a well-reasoned decision.” When the Kentucky Supreme Court will hand down a decision is anyone’s guess; timelines have ranged from 60 days to four months.

Present in the courtroom on Thursday with Ramsey was PPA Kentucky State Director Rich Muny, who has been intricately involved at the local level in the case. Muny took time out from lunch shortly after the hearing and noted, “I thought it went really well. The justices heard from both sides and asked informed questions of everyone. We had great legal counsel in the case and it seemed like questions were targeted more at the Commonwealth than at us, which may indicate which way they’re leaning. It would be worse if we got peppered with difficult questions.” Ramsey added that the six justices present asked considerably more questions than they have in past hearings.

Interactive Media Entertainment and Gaming Association (iMEGA) counsel Jon Fleischaker was the third attorney to take to the podium on Thursday. His animated testimony seemed to speak volumes about the frustrated nature of the industry, which has several of its most well-known domain names at risk. iMEGA Chairman Joe Brennan told Poker News Daily, “John brought the passion today that a lot of people in the industry have felt. This is something that’s just plain wrong and it was great to see that today in court.” Fleischaker called the prosecution’s arguments “unheard of” and “wrong.”

On whether anything in Thursday’s hearing took Brennan and company by surprise, the iMEGA executive commented, “I thought everything went according to plan. We knew the cards that the Governor and the Secretary’s attorneys had with their briefs. They came out of the gate with a weak hand. They continue to make assertions and misrepresent the law and the status of internet gambling.”

In the process, Commonwealth attorney Eric Lycan labeled iMEGA and the IGC “illegal gambling trade associations.” Lycan added that the confiscated domain names would be put up for public auction, following similar action undertaken in the past by the IRS.

A two-to-one ruling by the Kentucky Court of Appeals in January in favor of the internet gambling industry prompted the Justice and Public Safety Cabinet to appeal.

iMEGA Readies for Kentucky Supreme Court Internet Gambling Hearing

In one week, attorneys for the Interactive Media Entertainment and Gaming Association (iMEGA) will take to the floor of the Kentucky Supreme Court to argue why the Commonwealth did not have jurisdiction to seize 141 internet gambling domain names, including those belonging to PokerStars and Full Tilt Poker.

Next Thursday marks an important day for the internet gambling industry in Kentucky and around the world. One year ago, the Kentucky Justice and Public Safety Cabinet, under the leadership of J. Michael Brown and the direction of Governor Steve Beshear, seized domain names belonging to some of the online poker industry’s giants. Arguments are scheduled for 11:00am on Thursday, October 22nd. Each side has 15 minutes to state its case and the proceedings are the final order of business on the docket for next week, leading iMEGA officials to believe that arguments may run longer than the scheduled time.

iMEGA Chairman Joe Brennan told Poker News Daily, “Since there’s no law as to how to approach this, the Governor and his attorneys went out and came up with a process on their own. They never named who was being served and basically asked people to come to court and identify themselves.” A total of 141 internet gambling domain names were seized under the grounds that they were “gambling devices,” a term that commonly refers to roulette wheels, dice, and other tangible items found in an underground casino.

In January, the Kentucky Court of Appeals ruled by a 2:1 margin that the Commonwealth did not have jurisdiction to act, while the lone dissenting judge argued that a domain name was part of a larger “gambling device.” Brennan explained, “Appellate Courts tend to take a conservative, narrow, statutory look. The gambling device statute is one thing, but there is ample case law regarding due process. I am absolutely certain that you’re going to see the Governor’s attorneys get up and talk about what crooked operators we’re dealing with.”

The trade organization argues that the Commonwealth violated due process by seizing the 141 domain names in question. Its brief to the Kentucky Supreme Court explains, “No real defendants were named, no process was issued, and no owner of any domain names was notified. In short, this was an action by the Commonwealth to seize property without the slightest pretext of complying with the fundamental dictates of due process.” Judge Thomas Wingate upheld the Commonwealth’s actions in a court ruling submitted last October.

Kentucky law describes a “gambling device” as “a machine or mechanical device… designed and manufactured primarily for use in conjunction with gambling.” iMEGA added in its brief that if Kentucky does not wish to permit internet gambling within its borders, then it should pass laws through the General Assembly. Brennan expects a decision by the Kentucky Supreme Court to be handed down in “a matter of months” following Thursday’s hearing, which will take place in Frankfort. A diverse group of organizations have submitted amicus briefs, including the Poker Players Alliance (PPA), American Civil Liberties Union (ACLU), the Center for Democracy and Technology, the Electronic Frontier Foundation, the Internet Commerce Association, eBay, and Network Solutions.

iMEGA is fresh off a mostly positive ruling in the Third Circuit Court of Appeals, which clarified the Unlawful Internet Gambling Enforcement Act (UIGEA) by noting that internet gambling’s legality depends on the laws of individual states. iMEGA claims that legal internet gambling is possible in 44 states, while its brief to the Kentucky Supreme Court explains that eight criminalize the industry to some degree: Illinois, Indiana, Washington, Louisiana, Oregon, Nevada, Montana, and South Dakota.

The Third Circuit disagreed with iMEGA’s assertions that the UIGEA trampled on First Amendment and privacy rights and dismissed the notion that it should be void for vagueness. Neither the Federal Government nor the trade organization has announced an appeal to the U.S. Supreme Court.

We’ll have a full recap of the iMEGA Kentucky Supreme Court hearing right here on Poker News Daily.

Senator Wyden Withdraws Proposal to Use Internet Gambling to Fund Health Care

The debate on Capitol Hill rages on over health care reform, which, according to Senator Orrin Hatch (R-UT), will likely come with a nearly $1 trillion price tag. Senator Ron Wyden (D-OR) proposed using internet gambling revenue to defray some of the cost, but withdrew his amendment this week.

In a column that appeared in the Deseret News, Hatch noted, “At a time when we have trillion-dollar-plus deficits and an unemployment rate reaching double digits, [this health care reform] is a colossal mistake I cannot support.” With the massive cost turning many off, Wyden suggested using tax revenue from Congressman Barney Frank’s (D-MA) Internet Gambling Regulation, Consumer Protection, and Enforcement Act (HR 2267). The bill establishes a full licensing and regulatory framework for the internet gambling industry in the United States.

Michael Waxman, spokesperson for the Safe and Secure Internet Gambling Initiative, commented in a press release shortly after the amendment was introduced, “We applaud Senator Wyden’s proposal to collect and put to good use tens of billions in internet gambling revenue that would otherwise be lost in the underground marketplace. The Senate Finance Committee should approve this resolution, finally putting to an end a failed prohibition on Internet gambling that leaves Americans unprotected and unlicensed offshore operators as the only beneficiary in a thriving marketplace.”

HR 2267 was introduced in May and has attracted 58 cosponsors, the newest of which are William Lacy Clay (D-MO), Christopher Murphy (D-CT), and Adam Schiff (D-CA). Interactive Media Entertainment and Gaming Association (iMEGA) Chairman Joe Brennan told Poker News Daily, “There are not many places you can go to find ‘free money’ right now. Internet gambling is one of them. You’re not going to have many industries wanting to be taxed.” Also in Congress is HR 2268, the Internet Gambling Regulation and Tax Enforcement Act. The measure, introduced by Congressman Jim McDermott (D-WA), assesses a tax of 2% of deposits on licensed internet gambling outfits in the United States. HR 2268 was introduced on the same day as HR 2267 and has attracted four cosponsors.

A recent study by PricewaterhouseCoopers indicated that over $60 billion could be generated from taxing the internet gambling industry over a 10 year period. However, that figure includes legalized online wagering on sports. On Wednesday, “The Hill” published an article noting that Wyden had withdrawn his proposed amendment. The Senator’s Communications Director told the publication, “The last thing Senator Wyden wants to do is make it more difficult to expand subsidies for working families by introducing a new contentious issue to the debate. So when he offers the amendment, he will do it with other funding mechanisms.”

Wyden’s attempt to demonstrate tangible uses for internet gambling revenue comes on the heels of McDermott’s introduction of HR 6501 in July of 2008. McDermott’s bill, dubbed the Investing in Our Human Resources Act, provided up to $40 billion in assistance for those currently or formerly in foster care and those in declining job markets. HR 6501 was not acted on during the 110th Congress. McDermott’s proposal was not well-received, as Congresswoman Shelley Berkley (D-NV) labeled it “a classic case of putting the cart before the horse.” Former Congressman Jon Porter (R-NV) piled on, saying that HR 6501 marked “a frivolous attack on the gaming community to pay for services that local governments, states, and the federal government should already be providing.”

Last month, Senator Robert Menendez (D-NJ) introduced S 1597, the Internet Poker and Games of Skill Regulation, Consumer Protection, and Enforcement Act. The bill, as its name implies, focuses on licensing games such as poker, bridge, chess, mahjong, and backgammon “in which success is predominantly determined by the skill of the players.” Menendez’s measure has not attracted any cosponsors.

Congress is targeting October 30th as its adjournment date for the 2009 calendar year.

Kentucky Supreme Court to Hear Internet Gambling Case

In January, the Kentucky Court of Appeals ruled by a 2:1 margin that the Kentucky Justice and Public Safety Cabinet did not have jurisdiction to seize 141 internet gambling domain names. In October, the Kentucky Supreme Court will hear the case.

The Cabinet appealed immediately following the Court of Appeals decision, which kicked off the 2009 calendar year in the online poker world. Now, attorneys for the Interactive Media Entertainment and Gaming Association (iMEGA) and Commonwealth of Kentucky will take to the floor of the state’s Supreme Court on Thursday, October 22nd at 11:00am local time. On the 10-month turnaround, iMEGA Chairman Joe Brennan told Poker News Daily, “My understanding is that the October 22nd date is fairly expeditious when it comes to the Kentucky Supreme Court. Usually, appellate courts don’t hear things that quickly when there’s nothing driving it. The fact that the court is going to hear oral arguments so soon confirms that it has an interest in the subject matter.”

A bevy of organizations have submitted documents supporting iMEGA’s challenge against the Commonwealth of Kentucky, including the Poker Players Alliance (PPA), eBay, and the American Civil Liberties Union (ACLU). iMEGA is represented by Jon Fleischaker of Dinsmore and Shohl, which is based in Louisville, Kentucky. Brennan forecasted, “We saw the briefings that the Governor’s attorneys brought to the table and they don’t have a lot they can hang their heads on other than making a claim for a Federal ban on internet gambling that doesn’t exist. There’s no Federal law against gambling on the internet and no law in Kentucky. I’m pretty sure we’re going to beat them again.”

Last September, the Commonwealth seized the 141 internet gambling domain names in question, including those belonging to PokerStars, Full Tilt Poker, and Ultimate Bet, on the grounds that they constituted “gambling devices,” a term traditionally reserved for physical objects like dice and slot machines that you’d find in an illegal casino. In October, Judge Thomas Wingate upheld the Commonwealth’s actions, which were prompted by Governor Steve Beshear. iMEGA then sought the intervention of the Court of Appeals, which agreed with the trade association by a 2:1 vote in January.

The news comes on the heels of iMEGA falling short in its constitutional challenge of the Unlawful Internet Gambling Enforcement Act (UIGEA). A three-judge panel in the Third Circuit Court of Appeals disagreed with many of the organization’s basic arguments, but ruled that internet gambling may be legal in the U.S. dependent upon state law. On the UIGEA, the Court declared, “The Act itself does not make any gambling activity illegal. Whether the transaction… constitutes unlawful internet gambling turns on how the law of the state from which the bettor initiates the bet would treat that bet, i.e., if it is illegal under that state’s law, it constitutes ‘unlawful internet gambling’ under the Act.” IMEGA claims the decision could pave the way for legal internet gambling in 44 states.

iMEGA can appeal the Third Circuit’s ruling, although no decision has been made as to whether the organization will pursue that course of action. Brennan explained, “If we were to do something, it’d be applying to the Supreme Court or starting a new challenge against the UIGEA regulations. At this point, I wonder what the best use of our resources is. The Government managed to get the UIGEA upheld in a way that the states have a right to determine what kind of gambling is allowed within their borders.” The Third Circuit dismissed iMEGA’s claims that the UIGEA should be “void for vagueness” and that the 2006 law tramples on privacy rights, among other arguments.

Kentucky’s economy thrives on the presence of horse racing, whose premier event is the annual Kentucky Derby, held each May in Louisville. The parent company of Churchill Downs, the venue of the Derby, also owns and operates TwinSpires.com, which accepts real money wagers from Kentucky residents. Moreover, the state’s lottery offers an online second chance option.

Stay tuned to Poker News Daily for the latest from the Kentucky internet gambling case.

iMEGA, Poker Players Alliance React to UIGEA Ruling

Twenty-four hours ago, the Interactive Media Entertainment and Gaming Association (iMEGA) came up short in its bid to overturn the Unlawful Internet Gambling Enforcement Act (UIGEA). In the process, internet gambling may now become an industry governed by state law.

The Third Circuit Court of Appeals emphasized that the legality of internet gambling transactions may ultimately depend on where the bettor and operator are located. If the industry is permitted in both jurisdictions, then online poker players may be able to return to the felts in droves. The opinion, which was penned by Judge Dolores Sloviter, read in part, “Whether the transaction…constitutes unlawful internet gambling turns on how the law of the state from which the bettor initiates the bet would treat that bet, i.e. if it is illegal under that state’s law, it constitutes ‘unlawful internet gambling’ under the Act.”

In a press release distributed by iMEGA following Tuesday’s historic ruling, Chairman Joe Brennan noted, “The court made it clear - gambling on the internet is unlawful where state law says so. But there are only a half-dozen states which have laws against Internet gambling, leaving 44 states where it is potentially lawful. It’s not perfect, but it’s a good start.” Internet gambling law varies by state based on the type of transaction, number of times the consumer is raked, and game type, among other factors. Several states allow online lottery transactions and wagering on horse racing, while others like Utah and Hawaii ban all forms of commercial gambling.

What happens next is anyone’s guess. States may soon find it prudent to clarify laws and statutes related to internet gambling. In the meantime, a push by the Poker Players Alliance (PPA) on Capitol Hill for legalized and regulated online poker may come to fruition through future passage of a bill by Congressman Barney Frank (D-MA). PPA Executive Director John Pappas told Poker News Daily, “While I am disappointed that iMEGA’s full arguments did not prevail, it was encouraging to see the courts reaffirm that the UIGEA does not make playing internet poker illegal. The PPA and our legal team have long argued that the UIGEA should not force banks to block poker transactions in a vast majority of states. This decision might very well help as banks make those determinations on what to block; simply follow state law.”

On handing over the determination of whether internet gambling is permissible to the states, Brennan commented in the same press release, “States have always held the power to regulate gambling in this country, not the Federal government. The court’s ruling seems to say ‘back to the future’ when it comes to regulating internet gambling, so we will turn our attention to the states to make the case that this industry can be properly regulated and produce badly needed tax revenue.” Land-based gambling is already governed at the state level, with Nevada, New Jersey, and Mississippi leading the way. A bevy of riverboat casinos have also sprung up in states like Illinois, Indiana, and Missouri.

Brennan told Poker News Daily that the organization has not yet decided whether it will appeal the three-judge panel’s decision. The magistrates dismissed iMEGA’s claims that the UIGEA violated the First Amendment, Tenth Amendment, privacy rights, and treaty obligations over the course of its 10-page ruling. In the end, the cloudy law, which was passed during the waning moments of the 2006 Congressional session, was not declared unconstitutional, as iMEGA had hoped. However, the court’s ruling may have ultimately led to the same endgame, clarification of the legality of internet gambling and online poker in the United States.

Stay tuned to Poker News Daily for the latest reaction to iMEGA’s UIGEA challenge.

UIGEA Clarified: Legality of Internet Gambling Depends on State Law

A three-judge panel disagreed with many of the arguments made by the Interactive Media Entertainment and Gaming Association (iMEGA) on Tuesday as to why the Unlawful Internet Gambling Enforcement Act (UIGEA) should be deemed unconstitutional. In the process, however, internet gambling may now be a states’ rights issue.

The Third Circuit Court of Appeals passed down the historic ruling on Tuesday morning, which included the following text that should be of interest to online poker players: “It bears repeating that the Act itself does not make any gambling activity illegal. Whether the transaction… constitutes unlawful internet gambling turns on how the law of the state from which the bettor initiates the bet would treat that bet, i.e., if it is illegal under that state’s law, it constitutes ‘unlawful internet gambling.’” In essence, internet gambling apparently may be treated the same as brick-and-mortar gambling, which is governed at the state level. As it currently stands, six states have laws on the books outlawing internet gambling to various degrees.

The judges also indicated that the legality of internet gambling also depends on where the company accepting the wager is located: “The Act prohibits a gambling business from knowingly accepting certain financial instruments from an individual who places a bet over the internet if such gambling is illegal at the location in which the business is located or from which the individual initiates the bet.”

The panel, while seemingly clarifying the 2006 law, rejected iMEGA’s claims that the UIGEA was “void for vagueness” and violated First Amendment rights. On the latter point, the court explained that “acceptance of a financial transfer” is not a First Amendment right.

Despite the UIGEA not being overturned as a result of Tuesday’s actions, iMEGA Chairman Joe Brennan told Poker News Daily, “The judges went to pains to clarify that the law did not make internet gambling itself illegal. The UIGEA made no act illegal other than the payment processors taking money. The UIGEA defers to state laws to make the determination.” As long as the bettor and the internet gambling outfit are both located in jurisdictions where the activity is not outlawed, the UIGEA is not violated.

Brennan told Poker News Daily that he had not determined whether iMEGA would appeal the Third Circuit’s decision. It is also unclear whether the U.S. Government would appeal. Still also at issue is the Wire Act of 1961, which some would argue makes online poker and other forms of internet gambling illegal in the United States at the federal level. Brennan explained, “The Wire Act only affects businesses. Is the Wire Act still a problem? Yes, but it doesn’t make it illegal.” A feature by the CBS news program “60 Minutes,” for example, labeled online poker illegal multiple times, even though organizations like the Poker Players Alliance (PPA) contend that the 1961 law does not apply to internet poker.

The three-judge panel also rejected iMEGA’s claims that the UIGEA violated privacy rights and the Tenth Amendment. The latter asserts, “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.” The Third Circuit instead claimed that as a third party, iMEGA lacked standing to argue the point.

What effect Tuesday’s decision will have on the internet gambling industry in the United States remains to be seen. Congress returns from session after Labor Day, when the PPA plans to push Barney Frank’s (D-MA) HR 2266, which delays financial services industry compliance with the regulations of the UIGEA by one year to December 1st, 2010. The measure has 35 co-sponsors and was introduced in early May.

iMEGA plans to release additional analysis on its UIGEA challenge later today. Stay tuned to Poker News Daily for the latest poker legislation headlines.

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.

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.

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.

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.