by Andrew Walden
Contrary to what is being being told to Hawaii legislators as they consider SB755, financial transactions connected to Internet gambling are illegal under US federal law.
Even worse, debate within the US gaming industry shows that state bills such as SB755 are being promoted by foreign Internet gambling sites which have flouted US law. Legal mainstream US gaming companies represented by the American Gaming Association are opposing state-by-state solutions in favor of a change in federal law which would exclude the illegal foreign operators.
In short, if SB755 passes, allowing the licensing of Internet Poker Casinos, Hawaii legislators and Governor Abercrombie would be assisting foreign organizations which have allegedly been operating in violation of US law. Hawaii would be at loggerheads with the lawful members of the American Gaming Association. Gambling advocates need to ask themselves which type of operators they want to welcome into Hawaii. With political corruption always a concern related to gambling, Hawaii voters need to ask themselves whether SB755 is their nightmare scenario.
According to the Financial Times, and poker industry publication Bluff, Full Tilt Poker, one of the world’s top Internet poker sites—and potentially a key beneficiary of SB755--is now under Federal investigation for money laundering:
In addition to investigating potential violations of gaming laws within the States, the inquiry is also looking into accusations of money laundering by the company. The Times elaborated on the nature of the investigation:
“FBI agents or prosecutors have spoken to at least two people involved in disputes with Full Tilt, paying special attention to the possibility of money-laundering violations, those familiar with the inquiry say. Money-laundering charges might be attractive to the government as they would compel co-operation from authorities even in countries where gambling is legal.”
The move is seen by many to be in anticipation of the June 1st enforcement deadline of the Unlawful Internet Gambling Enforcement Act (UIGEA). The act had previously been delayed six months, but there appears to be no future delays for the legislation. This move is being seen by many within the online gambling industry as an attempt by the Justice Department to make an example out of one of the biggest sites currently serving US customers once the UIGEA goes into effect.
In 2006 President Bush signed the Unlawful Internet Gambling Act (UIGA), contained within a larger port security bill. Fox News reported:
Tucked into the Security and Accountability for Every Port Act (SAFE) is the Unlawful Internet Gambling Act (UIGA), which is sure to anger the millions of people who play online poker. The UIGA would make it illegal for banks, credit card companies and other financial intermediaries to transfer funds to online gambling sites. It does not outlaw the sites, just makes it illegal to settle online wages….
The Internet gambling provision tackles the difficult task of enforcing bans by prohibiting players from using credit cards, checks and electronic fund transfers to settle their online wagers.
The measure's supporters include the National Football League as well as conservative and antigambling groups. Some banking groups have lobbied against it.
Federal officials have made recent arrests involving offshore companies operating Internet gambling sites. The Internet gambling industry is headquartered almost entirely outside the United States, although many of its customers live in the U.S.
UIGA came into effect June 1, 2010—about the time the investigation of Full Tilt became public knowledge. Now, in an effort to outflank efforts by lawful US Gaming industry, the foreign Poker sites are pushing for state-by-state regulation in order to improve their bargaining position. AP today outlines the issues this effort brings before the Nevada Gaming Commission. This writer has added appropriate commentary:
After a two-hour hearing, the Nevada Gaming Commission approved a relationship between Caesars Entertainment Corp. and 888 Holdings PLC, which runs online casinos in the United Kingdom and is publicly traded on the London stock exchange.
About three hours later, Wynn Resorts Ltd. announced it had formed a strategic alliance with PokerStars to try to legalize and run an Internet poker business in the United States. Thursday morning, PokerStars representatives pushed lawmakers in Carson City to adopt a bill that would legalize online poker statewide.
Steve Winn doesn’t want Caesars to get a competitive advantage. And yes, dear legislators, Steve Wynn says Internet poker is currently illegal under US federal law.
"The lack of regulation of Internet gaming within the U.S. must change," said Steve Wynn, the billionaire chief executive of Wynn Resorts, which owns real-life casino-resorts in Las Vegas and Macau.
"We must recognize that this activity is occurring and that law enforcement does not have the tools to stop it," he said. "It is time that the thousands of jobs created by this business and the potentially significant tax dollars come home to the U.S." …
The $4.6 billion online poker industry is 60 percent controlled by the top two operators, Levy said. Those operators are PokerStars and Full Tilt Poker….
Notably, SB755 allows for exactly two Internet Casino licenses. One of the two is trying to go straight--and legitimizing the illegal is a Las Vegas tradition. The Hawaii tradition is the illegal delegitimizing the elected.
Wynn Resorts said it and PokerStars planned to chase federal legislation, then run a jointly named website for Americans.
Mark Scheinberg, chairman and founder of PokerStars, said the alliance with Wynn is a critical step toward a closely regulated Internet gambling business in the United States….
PokerStars continued offering online gambling and sponsoring players in the United States despite federal legislation in 2006 that made the activity technically illegal. PokerStars' roster of sponsored professionals has some of the game's most famous faces, including Daniel Negreanu, Chris Moneymaker and Vanessa Rousso.
This underlines the connection between poker tourneys and illegal Internet Poker.
If any legislation passes, a crucial point will be how the law chooses to treat sites like PokerStars. A last-minute federal effort by U.S. Sen. Harry Reid that fell short in December would have punished sites that offered gambling to Americans after 2006 by making it tougher for them to get a license under new regulations. That legislation was backed by the casino industry's top lobbying group, the American Gaming Association.
Because the AGA wants the action for its own members. But Caesars’ and Wynn’s partnerships covers their bet on federal legislation with a side bet on State legislation.
Since then, PokerStars has been pushing for the Nevada bill and other states, including New Jersey, California, and Hawaii have begun considering the issue as they try to raise tax revenue and create jobs.
Because the violators of the 2006 law will have a better chance in the federal arena if they get some credibility from the states.
Caesars executives have said the company, which owns more than 50 casinos in several countries including Caesars Palace and the annual World Series of Poker, is against state-only legislation and would prefer a federal solution.
Ceasars wants to hold out for Federal legislation which would exclude the violators and keep all the business for AGA members. Does Hawaii want to make a home for lawbreakers at the risk of alienating legitimate gaming industry behemoths? Given the nature of Hawaii legislators, one might see the advantage of dealing with criminals, but from the standpoint of the public, this is the wrong way to introduce gambling, if gambling is to come to Hawaii at all.
Caesars' new deal with 888 allows the companies to work together to run online gambling sites in the United Kingdom, and free-money sites in other jurisdictions using Caesars brands.
Caesars has been considering online gambling for years, and is positioning itself to be ready in case lawmakers eventually make online gambling legal in the United States.
Yes, dear legislators, Caesars says Internet poker is currently illegal under US federal law.
"The UK is not the end of our plan or our vision," said Mitch Garber, chief executive of Caesars subsidiary Caesars Interactive Entertainment.
Caesars and 888 executives and lawyers told the commission they have been careful in assessing their relationship and the legalities of Internet gambling. 888 stopped offering online wagers in the United States after the law changed in 2006.
The lawful 888 is traded on the London Stock Exchange. The questionable PokerStars, and possible federal investigators’ target Full Tilt, are registered in the offshore UK tax havens Isle of Man, and The Channel Islands Bailiwick of Guernsey, respectively.
For gambling opponents, the potential of unlawful companies making massive campaign contributions and becoming a primary source of revenues into the Hawaii State General Fund is proof positive that gambling is undesirable for Hawaii.
Nevada’s tough Gaming Commission has straightened out even the most hardened mobsters, but in Hawaii, the model is the Honolulu Liquor Commission.