Loyal Gambling Review readers, if such a thing exists, have probably noticed that Ricky Bauer and I have a decidedly anti-UIGEA stance and while we’re not exactly fans of Barney Frank, we appreciate his efforts to repeal the law. Well, today I read an opposing viewpoint from an industry lawyer that I find interesting and provocative, so I thought I would share.

In a recent article, Martin Owens contends that Barney Frank’s gambling legislation is unnecessary, possibly even detrimental to the industry, and doesn’t stand a chance of passing anyway. Recently I have written that I am not optimistic of Frank’s chances, but what about the other two? Martin Owens is a California attorney who specializes in internet law and is the author of a book called Internet Gaming Law, so he’s infinitely more qualified to comment on the subject than me.

While the Unlawful Internet Gambling Enforcement Act (UIGEA) was passed in 2006, regulations for the law weren’t passed until 2008. According to Owens, while the law was written by Capitol Hill politicians, the regulations were written by professionals in the financial industry to protect themselves from UIGEA. Yes, that’s right. The regulations for UIGEA protect the financial industry from UIGEA. UIGEA basically gives the government the power to prosecute any financial institutions who transfer funds from “unlawful internet gambling.” The problem is that there is no definition in that or any federal law about what constitutes “unlawful internet gambling.” If you don’t know whether the gambling was legal or illegal, how are you supposed to know if the funds are from a restricted transaction? Currently, there are only 6 states in the Union that have laws prohibiting online gambling. According to Owens, the regulations in UIGEA provide safety for the financial service providers (FSPs) because “as long as they install proper procedures to identify and block these ‘restricted transactions,’ American FSPs will not be penalized, even if a wicked internet bet or two does slip through the cracks.” According to Owens, thanks to the new regulations, UIGEA has become “unintelligible, unenforceable and mostly unimportant. It is doubtful that any person or company could be prosecuted for anything under the UIGEA in its present state.”

A major problem with Frank’s bill is that it takes rights away from the states and gives them to the federal government. As you may be aware, Gambling Review is a big proponent of states’ rights. In Frank’s bill, the power to license online casinos lies solely in the hands of the Treasury Department. States and tribes don’t voluntarily join the federal internet licensing program. They are automatically enrolled, though they do have the option to opt out within 90 days of the passage of the bill. And if Frank’s bill is passed, guess who profits from taxing the online casinos and players? It’s the federal government, not the states.

A major issue with Frank’s bill, though, is tribal casinos. There are already legal conflicts between tribal casinos and the states in which they operate, due to loopholes and general confusion from tribal gambling laws. In Frank’s bill, a tribe’s internet gambling decisions are completely independent from the state in which the tribe is located. Owens put forth a hypothetical question, if a tribe said yes to internet gambling but the state opts out, “what about the internet connection in and out of the reservation?” He also asks “since the Indian Gaming Regulatory Act only allows Indian gambling to take place on Indian land, will the gaming tribes be able to meaningfully participate online in the first place?” It is an interesting question. Currently, it is legal for American citizens to gamble in Indian casinos because they are on sovereign tribal land, not United States soil. However, there is question about whether it would be legal to log onto a tribal online casino from US land in a state that opts out. Equally important, though, is this question: Why would anyone bother using a tribal online casino if there are plenty of non-tribal alternatives? It’s not more convenient, since all of the casinos are available on your home computer.  It seems that Frank’s bill would provide more competition for the tribal casinos without letting them get in on the new action.

All of this begs the question, if Barney Frank’s bill would not protect financial service providers more than they already are, will cut into the profits of tribal casinos, and will potentially take tax money away from individual states that are hurting in this recession, is it a good thing after all? This is just another example of whenever the federal government does something, it’s never simple and things are never as they seem.