Transcript www.klgates.com

BLACK FRIDAY IMPACTS
Linda J. Shorey
Copyright © 2011 by K&L Gates LLP. All rights reserved.
What Motivated DOJ To Act?
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Opinions
 Increasingly bold activity by Pokerstars in U.S.
 Payment processors lying to banks about their
activities.
 Poker Companies’ use of less-than-savory
payment processors.
 Possible evidence of connection between the
Poker Companies and activities of the less-thansavory payment processors.
 All of the above and more.
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Was DOJ’s Action An Attempt To Influence
The Legislative Debate On Internet Gambling?
Maybe or maybe not; DOJ’s not talking.
 Some say this is not a gambling case but a bank fraud
case (they point to permitting return of accounts and
seized domain name usage for non-U.S. players).
 Some say this is a gambling case to stop online poker
(they point to choice of poker operators only and none
of the sports wagering operators still accepting wagers
from U.S. players).
 Ultimately, however, Congress and State Legislatures
are more influenced by their constituents (and lobbyists)
than by DOJ activity, and poker has support.
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Some Winners & Losers
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Who Loses?
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Stars & Tilt,
U.S. online poker players,
Online players in other countries,
Absolute/Ultimate, and
Other U.S.-facing poker sites who had plans to
continue to operate in some fashion in the U.S.
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Who Might Benefit?
 Big Casinos,
 Certain non-U.S. Poker Operators - Those never taking wagers from U.S.-based
players, and
 Those who stopped taking wagers from U.S.based players in October 2006,
 U.S.-based online subscription and play-for-free
poker operators.
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Impact Uncertain Or As Yet Unknown
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PPA,
Those receiving “gifts” or campaign contributions,
Land-based poker tournaments,
Networks televising poker tournaments,
Banks, and other financial institutions, in the
Internet gambling payment processing system
and lawful Internet gambling businesses needing
their services, and
 Likely others.
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Legislative Efforts - Congress
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In Play - HB 1174
On March 17, 2011, Rep. John Campbell (R-CA) introduced
H.R. 1174 – "Internet Gambling Regulation, Consumer
Protection, and Enforcement Act."
 Identical to H.R. 2267 (introduced by Rep. Barney Frank
(D-MA) in prior congressional session), as amended and
reported by the House Financial Services Committee on
July 28, 2010.
 Provides framework for issuance of licenses to “operate
an Internet gambling facility” (defined as “the direction,
management, supervision, or control of an Internet site
through which bets or wagers are initiated, received or
otherwise made, whether by telephone, Internet, satellite,
or other wire or wireless communication”) and for the
regulation of licensees.
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On Deck
Action in the Senate (bill, addition to conference
committee bill, etc) undertaken by Senator Harry Reid
and limited to poker.
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Hurdles For Congressional Action
 Multiple Interested Parties Not on Same Page
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Large Casinos
Regional Casinos
Horseracing Industry
Tribes
States
Non-U.S. Operators
 Congressional Leaders Who Oppose I-gambling
 Rep. Bachus (R-AL) – Chair of House Financial
Services Committee
 Senator Kyl (R-AZ)– Republican Whip
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Did Black Friday Impact Congressional Efforts?
 Possible positive
 Unifies members of American Gaming Association
 Illustrates need for consumer protection through
regulation
 Mobilizes players to become engaged in –
 Grassroots activity
 Supporting PPA
 Possible negative
 Members opposed to online gambling argue UIGEA is
working
 Support for claims that the online gambling industry
associates with disreputable/criminal actors
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Legislative Efforts - States
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States With Legislative Activity in 2011
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Status of Legislative Efforts
Done for 2011
 Hawaii – Legislative session ended May 5
 Florida – Legislative session ended May 7
Passed and now law
 Washington D.C. – Congressional period to object
ended April 7, law effective April 8
Passed Legislature and before Governor
 Iowa – Passed legislature May 3
Passed Legislature but vetoed by Governor
 New Jersey – Governor Christie vetoed March 3
Introduced and in Committee
 California
 Nevada
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Washington D.C. Law #L18-370
The Lottery Modernization Act of 2010 (Subtitle G of
the District’s 2011 budget legislation) changes D.C.
law to provide that a “lottery or lottery game means
both games of skill and games of chance that are
operated by and for the benefit of” the District, IF
 When offered over the Internet, it can be
confirmed that those playing are located in the
District; and
 “No method, media or device for play of the
games of skill and games of chance” violates
federal law.
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New Jersey S490/A2570
 The legislation that would have permitted
licensed New Jersey casinos to offer their
authorized games over the Internet to persons
located in NJ was vetoed by Governor Christie
because, among other things, he believed it
violated the NJ Constitution.
 Senator Lesniak, sponsor of the vetoed
legislation, has indicated he intends to introduce
a joint resolution that would provide for a
constitutional amendment referendum to appear
on the November 2011 ballot.
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Iowa -- SF 526
Requires the administrator of the state racing and
gaming commission to prepare and provide the
legislature, by December 2, 2011, a report “regarding
the creation of a framework for the state regulation of
intrastate internet poker.”
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Nevada -- AB 258
 As introduced on March 1, would have permitted
Nevada to be a hub for interstate online poker and
provided that applicants for a NV license would not be
denied licensure solely because they accepted wagers
from U.S., if licensed in another jurisdiction.
 As amended on Apr. 25, the bill provides that
 no license for interactive gaming will be effective until
 A federal law is enacted that authorizes it, or
 The U.S. DOJ informs Nevada gaming authorities, in writing, that
it is permissible.
 Applicants must meet federal law qualifications for
interactive gaming
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California – SB 40 and SB 45
 SB 40
 Authorizes and provides for regulation of intrastate Internet
poker.
 Permits licensure of up to 5 operators, but the operators
must be a federally recognized tribe or tribal authority, a
licensed card room, or an entity owned by a combination of
tribes/tribal authorities and/or card rooms.
 SB 45
 Authorizes and provides for regulation of intrastate Internet
gambling.
 Permits licensure of up to 3 qualified bidders as hub
operators.
 Federally recognized tribes may bid but would do so “subject
to the jurisdiction of the state.”
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Did Black Friday Impact State Efforts?
 Nevada - Yes
 Others – No immediate direct effect
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What May Impact State Operation After
Legislation Enacted?
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Action by U.S. DOJ
Liquidity
Blocking by banks
Tax rates
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Prediction
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Two Year Forecast
 Federal
 50-50 chance of federal authorizing legislation in 2011
 25-75 chance of federal authorizing legislation in 2012
 State
 0 chance of state authorizing legislation in 2011
(including the ability of D.C. to implement its law)
 50-50 chance of state authorizing legislation in 2012
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QUESTIONS??
Linda J. Shorey
K&L Gates LLP
+1.717.231.4510
[email protected]
www.klgates.com
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