The seizure of over $30 million in online poker payment processor funds has sent shockwaves through the industry. One of the foremost gambling law experts is Professor I. Nelson Rose of the Whittier Law School in Costa Mesa, California. Rose sat down with Poker News Daily to discuss the legal challenges of the seizure.
The U.S. Attorney’s Office for the Southern District of New York called for the freeze of over $30 million belonging to more than 24,000 online poker players. Authorities cited the Wire Act of 1961 and Illegal Gambling Business Act as statutes that legitimized their actions, which the Poker Players Alliance (PPA) claims violated due process. Rose told Poker News Daily that a variety of states, including New York, do not have legislation outlawing internet gambling: “There is no Federal law that applies to players and half of the states don’t have laws on the books that make it a crime to place a bet. It’s a tremendous gamble on the part of the U.S. Department of Justice to go after players and even more of a gamble to go after poker players.” Much of the enforcement until this point has been directed at online sports books and their payment processors.
The PPA is engaged in a dialogue with the Southern District over the contents of the accounts that were seized from banks in California and Arizona. However, the professor questions who will ultimately have standing to challenge the Southern District’s actions: “A lot of the payment processors are making good on the money that’s owed to players, which means they haven’t been injured and wouldn’t have standing. Payment processors won’t want to show up in court in the U.S. and, even if you could find a player, would they be willing to testify under oath?” In total, several obstacles exist on both sides in order to reach a resolution.
The Obama Administration assumed office on January 20th, one day after the regulations of the Unlawful Internet Gambling Enforcement Act (UIGEA) were enacted. The entire financial services industry must come into compliance by December 1st, a date that is quickly approaching. Many in the industry were surprised by the continuing attack on the internet gambling industry by an administration that was assumed to be more amiable to the cause. Rose explained, “The unusual thing is that this is the Obama Administration. This isn’t the George W. Bush Department of Justice, so it’s unusual that they’re continuing to use intimidation.”
Rose shared several other explanations that have been floating around the online poker industry as to why the seizure occurred. One theory states that the National Football League (NFL), a longtime opponent of any expansion of internet gambling, pushed the Southern District to act in retaliation for the introduction of Congressman Barney Frank’s Internet Gambling Regulation, Consumer Protection, and Enforcement Act (HR 2267) on May 6th. Frank also introduced the Reasonable Prudence in Regulation Act (HR 2266) on the same day, which would delay the regulations of the UIGEA from being enforced until December 1st, 2010.
Another possibility is that the Southern District acted in order to boost the chances of either Frank bill passing. Rose explained the reverse psychology: “When Bingo was illegal in California, police raided a retirement home to help the public understand that the law was ridiculous.” Finally, Rose speculated that the Federal Government may have acted for monetary reasons given the difficulty of finding an opposing party to appear in court. Jeff Ifrah, attorney for the payment processors in New York, told Poker News Daily that the seizure could have been timed to coincide with the 2009 World Series of Poker (WSOP).
HR 2267 is supported by major industry companies like Harrah’s and YouBet.com. The measure is up to 30 co-sponsors, including four that signed on late last week: Steve Driehaus (D-OH), Raul Grijalva (D-AZ), Steve Israel (D-NY), and Jared Polis (D-CO).
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