District of Columbia Council divided on how, whether to be 1st in US to offer gov’t-sponsored online gambling

DC Council divided on how, whether to be 1st in US to offer gov’t-sponsored online gambling

By Associated Press

January 26, 2012

http://winsgame.com

WASHINGTON — The District of Columbia Council remains bitterly divided on how, or even if, the nation’s capital should have the first government-run online gambling venture in the United States.

Online gambling is already legal in the district, but it became law in an unusual way. A councilmember inserted language that would allow online poker, blackjack and other games into a budget bill and it became law last spring when Congress declined to intervene. Some councilmembers were unhappy with that process and want to roll back online gambling before it starts.

 

On Thursday, D.C. Lottery officials said during a council committee hearing that with the council’s blessing, they could launch the website to offer the online games within 30 days. But Councilmember Jack Evans, who chairs the committee that’s considering a bill to repeal the law, said he’s not concerned if there’s a delay in rolling out online gambling, or even if D.C. is the first in the nation to do so.

“Given where we are now, should we go back and revisit it or not? That’s what I’ll decide,” said Evans, a Ward 2 Democrat. “There’s no rush to get this done.”

The repeal bill was introduced last year by Councilmember Tommy Wells, D-Ward 6, and at least two of the 12 other councilmembers support it. The councilmembers who want to repeal online gambling also are concerned about the district’s $39 million contract with Intralot, its Greece-based lottery vendor.

While online gambling essentially is banned in the United States, the Justice Department clarified last month that states can authorize it within their borders. Several states are expressing interest, but only Nevada and the district have approved laws or regulations authorizing online gambling. Officials in Nevada have said they hope to begin offering online poker by the end of the year.

The lottery’s executive director, Buddy Roogow, said Thursday that the lottery no longer plans to offer the online equivalent of slot machines out of respect for district voters, who have rejected slots in the past. Games would be free for 30 to 60 days after the launch to allow for software to be tested, he said.

Players would have to be at least 19 years old and would only be allowed to wager $250 a week. The low limits are intended to appeal to recreational players and not professional gamblers. The lottery intends to verify Internet protocol addresses and use global positioning software to ensure that players are within the borders of the district. Interstate online gambling remains illegal.

The office of Chief Financial Officer Natwar Gandhi has estimated that online gambling will bring in $13 million over four years after Intralot takes a 50 percent cut. The figure has not been revised to reflect that other states might move in ahead of the district.

During the hearing, Council member David Catania, I-At Large, accused Gandhi of “going rogue” by inserting the online gambling language into the lottery contract without approval from the council and suggested that Gandhi should step down. He threatened to sue Gandhi’s office for illegally altering the contract if online gambling goes forward.

“I’m pretty sure we can throw a monkey wrench into this,” Catania said at a hearing on the program.

Gandhi said there was nothing improper about the change to the contract. The D.C. Inspector General has cleared Gandhi’s office of illegal conduct, but his report raised questions about the way the gambling language was added.

The contract did not specify that Intralot would be able to bring online gambling to the district. Instead, it only included language about “nontraditional games.” After it was approved in 2009, the contract was amended to specify that Intralot could implement an online gambling system.

Some councilmembers have said they did not know they were putting the district on a path toward online gambling when they approved the contract, and civic activists have complained about a lack of transparency in the process.

Councilmember Michael A. Brown, I-At Large, who has led the push for online gambling by inserting the measure into the supplemental budget bill, said there still was value in coming first. He expects people to travel to the district from nearby states to play legal online poker instead of playing on unregulated overseas sites.

“Very rarely do we get an opportunity to get the revenue out of pocket from people who visit this city,” Brown said. “I do think if you’re first to the marketplace, you do get a little bonanza from that.”

U.S. Cracks Down on Online Gambling

April 15, 2011

U.S. Cracks Down on Online Gambling

By MATT RICHTEL

NY Times

In an aggressive attack on Internet gambling, federal prosecutors on Friday unsealed fraud and money laundering charges against operators of three of the most popular online poker sites. The government also seized the Internet addresses of the sites, a new enforcement tactic that effectively shuttered their doors.

Prosecutors charged that the operators of Full Tilt Poker, PokerStars and Absolute Poker tricked banks into processing billions of dollars in payments from customers in the United States. They said the actions violated a federal law passed in 2006 that prohibits illegal Internet gambling operations from accepting payments.

The sites have their headquarters in places where online gambling is legal — Antigua and the Isle of Man — a hurdle that has made it difficult for authorities in the United States to crack down on the industry. The indictment shows the intensifying game of cat-and-mouse between prosecutors and gambling sites that generate billions of dollars in transactions.

The online poker operators sought to avoid detection by banks and legal authorities by funneling payments through fictitious online businesses that purported to sell jewelry, golf balls and other items, according to the indictment. It says that when some banks processed the payments, they were unaware of the real nature of the business, but the site operators also bribed banks into accepting the payments.

Preet Bharara, the United States attorney for the Southern District of New York, said in a statement that the defendants “concocted an elaborate criminal fraud scheme, alternately tricking some U.S. banks and effectively bribing others to assure the continued flow of billions in illegal gambling profits.”

Representatives for the poker sites could not immediately be reached.

On Friday, authorities arrested two defendants, including John Campos, the vice chairman of a small bank in Saint George, Utah, who they said processed gambling transactions in exchange for a $20,000 fee and a $10 million investment in the bank by poker site operators and their associates. The United States attorney’s office is working with foreign law enforcement in hopes of extraditing defendants located abroad and seizing their assets.

Experts in gambling law said that the forceful action raises tricky questions about gambling laws and the government’s reach. These experts said it was not clear, for example, whether countries that sanctioned and licensed such activity would allow extraditions.

Lawrence Walters, a lawyer who represents online gambling operations, though not those involved in these cases, said the indictment might raise an even more fundamental question: Is online poker actually illegal? Federal law prohibits sports betting, but experts are divided over whether it clearly prohibits online games like poker and blackjack.

In the indictment, prosecutors seemed to skirt the issue. They based parts of their prosecution on state laws in New York and elsewhere that prohibited unlicensed gambling, including poker. Legal experts said the prosecutors needed to rely on such prohibitions as a foundation for going after the claims of money laundering and fraud. But Mr. Walters said this strategy might face challenges. He said it was not clear that the state laws applied to foreign-based gambling operations, given that under federal law, international commerce was regulated at the federal level.

“This appears to be a precedent-setting case,” Mr. Walters said. “It will be the first time the Department of Justice takes on the looming question of whether federal law prohibits online poker.”

Opponents of online gambling have been trying to figure out for years how best to police casinos that can be located abroad but reach easily into American homes. According to statistics provided by the Poker Player’s Alliance, an advocacy organization led by former Senator Alfonse D’Amato of New York, seven million Americans play online for money once a month.

In a statement, Mr. D’Amato criticized the prosecution. “We are shocked at the action,” he said, adding, “Online poker is not a crime and should not be treated as such.”

ComScore, a company that measures Internet traffic, said that in March, Full Tilt Poker had 2.6 million visitors from the United States, PokerStars had 1.9 million and Absolute Poker had 1.3 million. ComScore also reported that 1.4 million people visited Ultimate Bet, a site that the federal indictment says joined forces last year with Absolute Poker. Those were the nation’s four most popular poker sites, ComScore said.

On Friday, visitors to those sites were met with a message that begins: “This domain name has been seized by the F.B.I.” The government used the same controversial tactic of seizing domain names in actions last year against sites accused of copyright violations. Losing a domain name can be costly for a company that has invested in promoting it as the main route to its site. But the tactic can also be of only temporary effectiveness, because the company can switch to a new Web address that is outside the reach of law enforcement in the United States — one that, for example, does not end in .com.

According to the indictment, the fraud and money laundering scheme evolved from deception to bribery. Initially, after the enactment of the 2006 law aimed at limiting payment processing for online gambling, the defendants sought to dupe banks by creating fake companies, according to the indictment.

But the indictment says that as financial institutions got wise to those efforts, several defendants sough to persuade smaller banks to process the transactions by making multimillion-dollar investments in them.

Online gambling banned in South Africa

Online gambling banned in South Africa

KARABO KEEPILE | JOHANNESBURG, SOUTH AFRICA - Aug 25 2010 

It is now illegal to gamble using digital products in South Africa, the Gauteng Gambling Board said after a Friday court ruling.

The judgement on the jurisdiction of online gambling transactions in the country was handed down by the North Gauteng High Court on August 20.

This means that online gambling operators in South Africa and players will be in contravention of the law, and according to Business Day, could face a fine of R10-million or 10 years in jail, or both.

According to the Gauteng Gambling Board's head of legal services, Lucky Lukhwareni, online casinos are now liable for prosecution.

"That's why we approached the media to alert them of the judgement which makes online casino operations illegal, and if they continue we will have them arrested and fight for conviction," Lukhwareni said in a media statement.

Source: Mail & Guardian Online

A New Chance for Online Gambling in the U.S.

April 27, 2009
A New Chance for Online Gambling in the U.S.
By ERIC PFANNER

PARIS — Is online gambling coming in from the cold?

When the U.S. Congress cracked down on Internet betting in 2006, the big, publicly traded European companies that had dominated the business closed up shop in the United States. Growth in the booming industry shifted away from these companies, once the darlings of the stock market, to private operators in offshore locations like Antigua and the Isle of Man.

But now, executives of some of the European companies whisper excitedly that they may soon get a second chance in the United States. Meanwhile, a number of European countries that have long maintained barriers are moving, under pressure from regulators, to legalize, and tax, online gambling.

“There’s still a lot of gambling going on, where there’s no revenue coming in to the governments,” said Gavin Kelleher, an analyst at the research firm H2 Gambling Capital in Ireland. “They realize they could use the revenue.”

The biggest potential change would be in the United States, where, perhaps within days, Representative Barney Frank, Democrat of Massachusetts, is expected to introduce legislation aimed at overturning the Unlawful Internet Gambling Enforcement Act.

“He supports the repeal and wants to move forward on it,” said Steve Adamske, communications director for the House Financial Services Committee, of which Mr. Frank is chairman.

Mr. Frank tried and failed to do so once before, in 2007. But advocates of liberalization think they might get a friendlier hearing in Washington this time around. President Barack Obama, they note, boasted of his poker prowess during the election campaign. And the Democrats, who are seen as less hostile to Internet gambling than the Republicans, have tightened their grip on Congress.

A study by PricewaterhouseCoopers says the U.S. government could raise more than $50 billion over 10 years from taxes on legalized online gambling.

“I’d be amazed if it didn’t happen over the next two or three years,” said Clive Hawkswood, chief executive of the Remote Gambling Association, a trade group based in London. “It’s just a question of what exactly the regulations will say.”

Some analysts say that may be getting a little bit ahead of the game. Opponents of a repeal, including the Christian Coalition of America and the National Football League, have vowed to fight any new effort to end the ban.

Michele Combs, a spokeswoman for the Christian Coalition, said the group was gearing up for a “massive campaign” of letter-writing and lobbying to try to prevent any loosening of the law.

“We’re not saying people shouldn’t go to Las Vegas,” she said. “But when it’s in your home, it’s too easy. It breaks up families.”

U.S. sports leagues, meanwhile, worry that the ease of online betting increases the chances of game-fixing. Even the most bullish advocates of online gambling acknowledge that Internet sports betting — as opposed to poker or casino games — is highly unlikely to be legalized.

“There’s a better chance now for some sort of gaming legislation to be approved,” said Nick Batram, an analyst at KBC Peel Hunt, a brokerage firm in London. “But it took longer than expected to put anti-gaming legislation in place, and it will probably will take longer than expected to remove it.”

Since the 2006 law was passed, North America, once the biggest market, has been passed by Europe and Asia, according to figures from H2 Gambling Capital. The law makes it illegal for financial institutions to handle payments to online gambling sites. But enough people have found ways around it, some by using overseas payment processors, to ensure that online gambling remains a thriving business. H2 says online gambling generated revenue of $6 billion last year in North America, more than a quarter the global total of $22.6 billion, up from $17.6 billion in 2006.

Pulling out of the United States cost PartyGaming about three-quarters of its business. Its position as the biggest online poker provider has been taken over by PokerStars, a privately held operator based on the Isle of Man.

This month, PartyGaming agreed to a $105 million settlement with the U.S. attorney’s office in New York, involving the period before 2006, when it acknowledged that its activities had been “contrary to certain U.S. laws.” In turn, the U.S. authorities agreed not to prosecute the company, which is listed on the London Stock Exchange, or its executives.

The agreement fueled speculation that PartyGaming might be trying to position itself for a return to the U.S. market, if online gambling were legalized.

Analysts say one possibility for European companies like PartyGaming, should the ban be lifted, would be to form partnerships with American casino operators. That would allow the European companies to share their online expertise. Operating alone, they might struggle to obtain licenses, given their history of run-ins with U.S. law enforcement, analysts said.

“It’s my feeling that even if the market were opened up, the U.S. government, in a palatable way, would probably find a way to give local companies a favorable position,” Mr. Batram said.

So far, Las Vegas executives have maintained a cautious stance about legalization of online gambling. Steve Wynn, chief executive of Wynn Resorts, said in an e-mail message that he thought it would be “impossible to regulate.”

“Even though it would be a benefit to our company, we are strongly opposed,” he said.

But speculation that Las Vegas casino operators were looking into the possibilities was fueled by recent reports that Harrah’s Entertainment, which owns Caesars Palace and other casinos, recently hired Mitch Garber, former chief executive of PartyGaming, for an unspecified role. Harrah’s did not return calls.

Mr. Ryan said that PartyGaming planned to focus on acquisition opportunities to increase its market share in Europe and elsewhere, something that was difficult as long as investors were worried about the U.S. litigation. “We think Mr. Frank’s efforts are quite meaningful to the sector,” he said.

Several other online gambling companies whose shares are traded in London, including 888 Holdings and Sportingbet, are still in talks with the U.S. Justice Department. Analysts expect them, along with companies like Bwin International, whose stock is traded in Vienna, to be involved in a round of consolidation in the industry — along with a possible eventual move back into the United States.

As they await developments in Washington, online gambling companies are looking for growth in Europe and Asia. Under pressure from regulators in Brussels, several European Union members, including France, Italy, Spain and Denmark, have been moving to legalize some kinds of online gambling, turning it into a regulated and taxed business. Britain was the first big European country to do so, in 2005.

Other countries, like Germany, Greece and the Netherlands, continue to hold out, though, in what the European Commission sees as an effort to protect government-sponsored gambling monopolies from private competition.

The commission in March published a report arguing that the United States was violating World Trade Organization rules by keeping out European online gambling companies, given that online betting on horse racing is permitted in the United States. But the commission said that it favored negotiations, rather than legal action, to end the dispute.

Also in March, however, the European Parliament adopted a separate measure supporting the right of individual E.U. member states to make their own rules on online gambling.

“It’s interesting that the European Commission is telling the U.S. it’s persecuting European companies when it can’t even get its own house sorted out,” Mr. Batram said.