House of Cards

Canuckia gets tough

The controversy in Canada surrounding the expansion of online gambling took another turn this week as the attorney general of Alberta weighed in on the recent attempt by the Alexander First Nation to begin offering the same online gambling services as the Kahnawake tribe in Quebec.

The Kahnawake of Quebec offer a full service online gaming jurisdiction, with hosting as well as a light regulatory touch. Like much of the online gaming industry, it has existed in a strange kind of legal limbo, in which little of its asserted jurisdictional claim has been tested in the courts.

Although a sovereign nation, the Kahnawake still answers to Canadian law on certain matters of criminal law and international trade. The province of Quebec has never tried to assert any sovereignty over the tribe in the area of online gambling, and the tribe's gaming activities continue to flourish, licensing online behemoths such as Bodog. The Alexander First tribe has eyed the developments in Quebec eviously, and is eager to follow suit.

But the Alexander Gaming Commission is still negotiating with a handful of international e-gambling operations for the lease of server space in the band's 25,000-square-foot data centre. No contracts have been inked yet.

The authorities in Alberta have a somewhat different take on the matter, however. The tribe still falls under the Canadian criminal code, and the code forbids gaming operations not licensed by a provincial government.

"I'm not concerned about another Oka (where a standoff with armed Mohawks left one mountie dead). All that concerns me is defending the law," said solicitor general Fred Lindsay. "I understand the band has special rights. But they still fall under the Criminal Code of Canada. I expect them to abide by the law. If they don't, we will do what we have to do. We'll (lay charges). You bet."

Well, not if the jackbooted blue helmets at the UN have their way. In a bizarre twist, the tribe claims to have received a letter of support from the UN on the issue.

According to Online-casinos.com, chief Ray Arcand and the Alexander Council announced in a press release entitled United Nations Declares Support for Alexander First Nations Online Gaming Regulation and Data Hosting Facility receipt of a letter from the United Nations, allegedly supporting the Alexander First Nation's regulation of online gaming and the development of a hosting facility much like the one operated by the Kahnawake in Quebec.

"We are most gratified to receive this support from the United Nations, as we build a safe, secure regulatory environment for people to enjoy online gaming," chief Arcand said, without actually quoting the letter.

"Our goal is to enable citizens of regions where online gambling is allowed, the opportunity to participate in fair, honest play, where they can relax and enjoy themselves, knowing they are well protected by a world-leading regulatory environment. The expression of support from the United Nations is an honour, and makes our whole community proud of our achievements."

How the EC got its balls back

The European Commission last week sent "reasoned opinions" to France, Germany, and Austria regarding their respective failures to open their markets to cross border trade in gaming services, according to a press release from Bwin, one of the interested parties in the case. Bwin has a particular connection with the case, since two of its executives were arrested in Monaco last year by French authorities at a press conference in which they were to announce Bwin's sponsorship of a local soccer team.

Under Article 226 of the Treaty on European Union, a "reasoned opinion" is the second step in infringement proceedings against member states, after what is known as "formal notice" is given. In early 2006, the European Commission initiated such proceedings in seven EU member states following a series of complaints lodged by gaming conglomerates. It followed that up in the fall, when it sent letters of "formal notice" to Germany, France, and Austria.

The "reasoned opinion" could well be the end of the road for prohibitionist holdouts like France. A reasoned opinion of this sort generally leads to a referral to the European Court of Justice, and it's hard to see how the French (or the Germans for that matter) can justify holding on to national casino and horseracing monopolies at the expense of other member states.

Bwin has been in hot water in Germany as well. EU Industry Commissioner Guenter Verheugen wrote to German regional state governments ordering them to change a draft treaty on the betting issue that individual German states cobbled together late last year.

"We asked Germany to reconsider the total ban on lottery and sports betting on the internet. We think a proposed total ban is disproportionate and there are less restrictive measures, such as mandatory prior registration and strict guarantees on identification," the Verhheugen said.

Apparently the French aren't getting the message.

Even after the recent decision by the European Court of Justice in the Placanica case that criminal penalties are almost never appropriate in online gambling cases, the French have continued to draw a hard line.

A French court stuck Patrick Partouche of the Partouche group with some hefty fines and suspended jail time. Partouche Interactive operated out of Belgium, and Partouche himself was working behind the scenes with the online poker site Poker770.com.

In what seems to be a clear violation of the ruling in Placanica, Patrick Partouche was given a 12-month suspended sentence and a €40,000 fine yesterday for his involvement with online poker site Poker770.com.

Partouche International also got stiffed €150,000 for its online gaming activities targeting French players. This comes on the heels of requests for "interviews" with numerous online gambling executives, and the increasingly hardline pressure on those accepting advertising from online gambling companies.

Brown blows

Rumours that Gordon Brown would entice online gaming operators back to the UK with a minimal tax rate of two per cent proved off the mark, as he proposed a tax rate of 15 per cent.

That provoked a big yawn from the gambling companies, and a general sense that Brown blew an opportunity to take the industry in a positive direction.

Sportingbet on the rise

Insurance giant Prudential upped its stake in Sportingbet Plc last week, continuing a streak of good news for the company.

The company took it in the shorts after the passage of the Unlawful Internet Gambling Enforcement Act (UIGEA) as its shareprice crumbled from a high of £451.75 to a low of just £0.31 at one point. The purchase, along with a rare spate of good news for the industry as a whole, drove its share price up about 10 per cent overnight. The possible takeover by Austrian operator Bwin has also applied upward pressure to the stock's value.

More Congressmen enter the fray

Barney Frank is not the only one contemplating changes in the way the United States approaches the online gambling business. According to a report in Onlinecasinonews.com, Nevada lawmakers Shelley Berkley and Jon Porter have decided to back a study to determine whether online gambling can be regulated, rather than banned.

The 18 month study would provide an avenue for discussion, at the very least. It seems doubtful, however, that the Democratic Congress would expend a lot of political capital on passing online gaming reform when it can continue holding the Bush Administration's proverbial feet to the fire over any number of administrative failings.

In short, they'd rather have Rove by the balls than regulate online gaming, particularly in the runup to the 2008 presidential election.

Chinese khaki torture

The Chinese have taken an even stronger stand than the French, as khaki-wearing internet junkies are now being sent to military juvenile bootcamps to learn the error of their ways.

According to Reuters, the Chinese have decided that tough love is the only approach for these miscreants, who gamble in virtual currencies and in extreme cases pay the ultimate sacrifice for their internet obsessions.

The Internet Addiction Treatment Centre (IATC) in Daxing county utilises both "therapy" and military drills to essentially deprogram the millions of young net addicts that at least in the Chinese press are tearing the country apart, much akin to America's mysterious crack babies of the early 90s.

The government recently busted a massive internet gambling ring in Shanghai, and has discussed banning games it considers overly violent.

China's explosive growth has created an entire generation of nouveau riche addicted to online games, gambling, pornography, cybersex, and chats. "I gradually became obsessed," said Li Yanlin, a university student whose grades plunged after he became addicted to internet games. But after several weeks at the Daxing facility, the 18-year-old said he "recognised the falseness of online gaming".

I'll bet.

According to the report, the centre is run by an army colonel from the Beijing Military Hospital. Patients from the ages of 14 to 19 live in common dormitories. At 6.15am come the morning calisthenics, and then a lively march on the cracked concrete grounds in military fatigues. Complete with Hollywood-style drill sergeants barking orders, the camp seems like Jerry Bruckheimer's bizarre fantasy of what life in a totalitarian society must be like. In a softer touch, they also get group and solo counselling. After all, who really needs violent video games? Therapy apparently includes patients simulating war games with laser guns.

That ought to do the trick. ®

Burke Hansen, attorney at large, heads a San Francisco law office