DoJ May Testify at Next Online Poker Hearing

DoJ May Testify at Next Online Poker HearingRep. G.K. Butterfield (D-NC), a ranking member of the House Subcommittee on Commerce, Manufacturing, and Trade, sent a letter to the Chairman of the subcommittee, Rep. Mary Bono Mack (R-CA), urging her to invite authorities from various federal agencies, including the Department of Justice (DoJ), to testify at the next online poker hearing since several of those agencies are expected to oversee regulations of online gaming and poker if legislation is to be enacted at the federal level.

The subcommittee, which held internet gaming hearings in October and November, has listened to witness testimony from representatives of the National Council on Problem Gambling, National Indian Gaming Association and the American Gaming Association, to name just a few. However, Butterfield is of the opinion that the subcommittee “cannot obtain informed answers about the effectiveness of gambling regulation or consumer protection if we fail to invite key federal government agencies to testify as witnesses.

The lawmaker from North Carolina has suggested to Bono Mack that the next gambling hearing’s witness list should include voices from the U.S. Department of Commerce, Department of the Treasury and the Federal Trade Commission, in addition to the DoJ.

The legalization of online gaming would call on several federal bodies, each having different roles, Butterfield said. Currently, the DoJ is responsible for enforcing the Wire Act, which it has used in the past to treat internet gambling as illegal. The DoJ also administers the Unlawful Internet Gambling Enforcement Act (UIGEA), the statute that forbids banks and financial institutions from accepting checks, wire transfers, credit card charges and other types of payments affiliated with unlawful online wagers. The Department of the Treasury, under UIGEA, was required to establish procedures and regulations pertaining to financial institutions that would “identify and block or otherwise prevent or prohibit restricted transactions.

Of the two bills currently before Congress proposing legalization of online poker, HR1174, co-authored by Representatives Barney Frank (D-MA) and John Campbell (R-CA), the Department of the Treasury would be responsible for implementing the licensing for online gambling sites. Under HR2366, Rep. Joe Barton’s (R-TX) bill, the Department of Commerce would be in charge of overseeing the tribal or state licensing of internet poker vendors. Although it hasn’t been mentioned in the current proposed bills, the Federal Trade Commission administers marketing and fair business practices and has the required e-commerce expertise needed to protect internet gamblers’ data and privacy.

It is apparent that Butterfield has a point in suggesting that federal regulators need to be heard from in the debate of online gaming and poker legislation. Testimony from the DoJ would be especially compelling in light of the Black Friday indictments of the three largest poker websites that has changed the entire landscape of the online poker industry, virtually shutting down play to U.S. players and affecting, among others, the livelihood of thousands of online poker pros.

If Bono Mack concurs with Butterfield’s suggestion of inviting federal authorities to provide testimony at the next subcommittee hearing on internet gaming, which has yet to be scheduled, it will be interesting to see who from the DoJ will be called upon as a witness. Preet Bharara, the U.S. Attorney from the Southern District of New York who is responsible for the fraud and money laundering charges levied against PokerStars, Full Tilt and Absolute Poker, would be a compelling witness, to say the least. By labeling Full Tilt Poker a “global Ponzi scheme” a couple of months ago, Bharara has caught the attention of many business and financial industry executives who would normally not be interested in the happenings of the poker industry.

The DoJ is also currently involved in acquisition negotiations with Groupe Bernard Tapie (GBT) and Full Tilt in which GBT has agreed to purchase the shuttered poker site for $80 million after Full Tilt’s shareholders agree to forfeit the company assets to the DoJ. As part of the deal, GBT is expected to pay back non-U.S. players, while the DoJ has accepted responsibility to reimburse U.S. players with unpaid account balances who file claims for their money directly to the DoJ. In any DoJ testimony at an upcoming subcommittee gaming hearing, it is not known how much information the DoJ would provide on either the Black Friday indictments, the sale of Full Tilt to the French investment firm of GBT or the reimbursement of Full Tilt’s U.S. players. The DoJ has, in the past, shied away from making any elaborate statements or comments in such matters that are ongoing or pending, except for the “global Ponzi scheme” statement.

Butterfield’s letter to Bono Mack also mentions the problem of underage children having access to online gambling activities. In citing October 2010 research conducted by the Annenberg Public Policy Center, the study found that more than 6% of boys in the age range of 14 to 17, approximately 530,000 adolescent boys, admitted to using an online gambling site in September of the same year. The rate for teenage girls was lower, but increasing. In addition, several U.S. newspapers have reported that gaming sites located offshore were profiting from bets placed on high school football games. And in the United Kingdom, it is known to be common for wagers to be accepted for teenage soccer matches. Butterfiled notes that these are some of the challenges faced by federal regulators in regards to the regulation of online gaming.

If the Subcommittee is to proceed with the federal legalization and regulation of Internet gambling, it must do it right. I respectfully request that our Subcommittee seek formal comments from federal entities that would be involved with any legalized gambling regime,” Butterfield concludes, in his proposal to hear the testimony of federal agencies.