Will the President sign the ill-conceived law?
08.10.2006The Dow Jones news service reported this week that President Bush would sign the Frist-amended version of bill HR 4411 - The Unlawful Internet Gambling Enforcement Act - on the last day of the procedural deadline for such matters, which happens to be the omen-heavy Friday 13 for those who are superstitious.
Whilst the President is unlikely to fall into that category, he may well be puzzled when he addresses this issue at the end of next week and notes the attachment of a proposal that seeks to disrupt US cash flows to online gambling companies to a totally irrelevant but far more significant port security bill designed to keep nuclear, chemical, or biological weapons out of shipping containers on their way to the United States.
The American political system that allows this sort legislative short-cut to be used by procedure-savvy politicians like Senators Kyl and Frist has angered many because it represents to them a circumvention of the democratic process.
The anti-online gambling measure was languishing in the Senate having been approved by the House of Representatives. Reports suggest that there were holds on the proposal by dissenting politicians and that, as in the previous ten years it would likely run out of time in the 109th Congress. That would necessitate starting all over again next year.
The bill was already contentious due to the manner in which issues such as exceptions, commonly called "carve-outs" had been engineered to avoid conflict with large betting lobbies and the authority of individual states. The US banking community had expressed reservations about the burden enforcement would place on the sector. And it contained language that would seek to revamp the hotly debated old Wire Act of 1961.
Senator Frist, a controversial Republican who claims the moral high ground on gambling but is not averse to accepting campaign contributions from certain sections of that community, made the bill one of his priorities. The cynical have suggested that this was more a case of political pandering to the religious right in the run-up to mid-term elections than to guard the morals of the American people - many of whom deeply resent his decision to control their chosen form of entertainment.
Initially rebuffed in his attempts to attach the gambling proposal to an important Defence bill, Frist zeroed in on the Safe Ports Act, a "must-pass" security law to keep nuclear, chemical, or biological weapons out of shipping containers on their way to the United States, an alarming percentage of which are not checked by the authorities.
In order to negotiate the attachment of his online gambling measure to this totally unrelated bill Frist had to compromise on issues like the Wire Act update, which was cut much to the disappointment of the original architect of the bill, Rep. Bob Goodlatte. The cynical carve-outs for horse racing, fantasy sports and state lotteries remained, however.
But, it got the job done and through dint of some astute timing Frist contrived late on a Friday night to present the proposal to Congressional representatives who had not had sufficient time to study it, let alone understand its implications. There was some heated debate before a vote taken in the wee small hours of Saturday morning approved the bill and its attachment, followed immediately by a voice vote to ram it through the Senate.
Those present were by now probably stressed, tired and anxious only to get on with the recess and electioneering before returning for the closing days of Congress on November 7.
It is important to note that the modified version of H.R. 4411 that was passed doesn't criminalise the act of online gambling per se, but does seek to stop American players from using U.S. financial institutions and their banking tools to deposit or withdraw funds at Internet gambling sites. It does not extend the reach of US jurisdiction in regards to companies that do not fall under US law due to their domicile in other countries. And it doesn't change present arguments on the applicability or otherwise of the Wire Act to online poker and casino gambling over the Internet.
What it does do is seek to disrupt American financial channels that are available to US players in funding their international Internet gambling entertainment, and it sets aside a period of 9 months for the banking and enforcement authorities to come up with workable regulations.
The proposal remains just that - a proposal - until it is signed into law or vetoed by the President.
Unfortunately, the volatile online gambling business cannot apparently pause to consider the fundamental nature of this legislation.
Public companies with largely uninformed investors are especially vulnerable, and by the end of the first day of trading after the Washington vote many well established and integrity driven companies in Europe had seen their values cut by fifty percent or more. Inaccurate and often pessimistic media assessments and panicking investors wiped GBP 4 billion off the value of London listed companies, and the more timid operators were scrambling to cut off US players as fast as they could.
The smarter money and knowledge is taking more time to study the situation, especially those unburdened by the need to placate badly advised investors. These operators have kept their options open, and there will surely be workarounds and a refusal to accept that American politicians can bend the control of the global Internet to their somewhat suspect moral will.
American players themselves are likely to feel prematurely abandoned by certain operators, and they will remember their exclusion.
The tons of newsprint that the issue has generated has also put the spotlight on the hypocrisy of a legislative body which seeks to single out one form of gambling for persecution at the expense of its citizens in a country where it is difficult not to stumble into or over land casinos, riverboat casinos, horse racing and just about every other form of gambling known to man.
Finally, the new law plays into the hands of the Antiguan litigators fighting the discriminatory attempts by American politicians to halt or hamper online gambling at the World Trade Organisation.
The success of Senator Frist's cunning political manouevreing was unexpected by many, but already a more aggressive response than hauling up the white flag of surrender is becoming apparent. Literally millions of US players are incensed by the arrogance of the politicians in trying to hamper their Internet entertainment, civil rights bodies are alarmed and it is rumoured that online gambling companies are already pumping money into making their opposition publicly heard in the United States.
Whether the President signs this bill into law next Friday or not, the $12 billion global online gambling industry will survive. Inevitably, if the new measures can be made effective the industrys growth rate will not initially achieve its historical 21 percent per annum, but there can be no doubt that it will continue to expand in Europe, Asia and elsewhere.
More progressive politicians, notably in the UK will in the meantime show that online gambling can be successfully regulated and taxed, leaving the USA with an archaic prohibition that is unlikely to work and could make US gamblers more vulnerable.
