Another View of the Gambling Bill

Another View of the Gambling Bill October 10, 2006

Allyn Jaffrey Shulman, writing in Card Player, has a very optimistic take on the new gambling bill from the poker industry’s perspective. It’s perhaps a bit too optimistic, but it does suggest another possible basis for a court challenge. I’ll post a long excerpt below the fold:

Even though the Attorney General’s office has publicly taken the position that the 1961 Wire Act forbids online poker, in 10 years they have not put their money where their mouth is. Why? The judiciary (that is, the interpreting body) has already held that the 1961 Wire Act doesn’t speak to poker. It only applies to sports betting.

The case in point to which I refer is “In Re Mastercard International,” decided by District Court Judge Stanwood R. Duvall, Jr. in 2001. Among other issues, Judge Duval was faced with the question of whether the Wire Act applied to online gambling. The posture of the case was interesting because many deadbeat gamblers attempted to avoid online gambling debts they had incurred by alleging that the money they owed their credit card companies amounted to illegal gambling debts in violation of the Wire Act. As a matter of fact, there were so many similar suits filed by so many gamblers who did not want to pay their losses that the lower court consolidated 33 such similar charges.

Judge Duvall ruled that the Wire Act only prohibited wagering on sports events and he dismissed all 33 cases, noting that “Comparing the face of the Wire Act and the history surrounding its enactment with the recently proposed legislation, it becomes more certain that the Wire Act’s prohibition of gambling activities is restricted to the types of events enumerated in the statute, sporting events or contests.” In other words, online poker was not within the reach of the Wire Act’s prohibition. The District Court of Appeal agreed with Duvall’s ruling that the 1961 Wire Act does not apply to online poker.

I must mention one caveat. District courts are permitted to disagree with one another until the Supreme Court steps in. However, in this case Judge Duvall’s reasoning is so sound that it is close to irrefutable. There is a well established body of law regarding statutory construction and Judge Duvall followed the procedure to a tee.

Even Representative Goodlatte, who authored one of the online gaming bills in the House, acknowledges the limitations of the Wire Act. “We need to modernize the Wire Act, which is 45 years old, and does not apply to all forms of gambling,” says Goodlatte, adding, “It clearly applies to sports betting.”

This is a very, very important point. And it’s powerful grounds for a court challenge if the Treasury Department requires that banks and credit card companies block transfers to poker sites. Shulman is correct to point out that the bill does not change the definition of “unlawful gambling” a bit, it only defines it as an activiey “where such bet or wager is unlawful under any applicable Federal or State law.” And since there is no court ruling interpreting the Wire Act as applying to online poker, and one Federal court ruling explicitly denying that it applies to online poker, there’s a very strong argument to be made here in Federal court.

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  • Mattt

    Robert Cringely, a popular technology writer, has a good article arguing that the the law is difficult to enforce and easy to circumvent. He also argues that the gambling companies whose stocks tanked will recover:

  • maurile

    Shulman neglects to discuss how the UIGEA will interact with various state laws. Online poker is not prohibited by the Wire Act, but it is prohibited under many state laws. Money transfers to poker sites on behalf of customers in those states are thus prohibited by the UIGEA.

  • Ed Brayton

    I think the only two states where it’s been made illegal are Louisiana and Washington. And yes, the bill does make it illegal to transfer money in those states.