Original URL: http://www.theregister.co.uk/2007/06/11/wexler_skill_games_exemption/

Congressman seeks exemption for games that mix skill and chance

Skill games redux

By Burke Hansen

Posted in Law, 11th June 2007 10:07 GMT

GIGSE 2007 Two more pieces of legislation designed to reform the American gaming market found their way into Congress last Thursday.

Although the testimony on Friday in support of Barney Frank's Internet Gambling Regulation Act (IGRA) garnered more attention, the introduction of legislation known as the Skill Game Protection Act (SGPA) by Robert Wexler of Florida to carve out exemptions from the controversial Unlawful Internet Gambling Enforcement Act (UIGEA) for games of skill such as poker, backgammon, mah jong, and chess could prove more significant in the long run.

The legislation stands a better chance of passage than the complete reform proposed by Frank, since it seeks to clarify the Wire Act by specifically exempting the popular games from its purview, rather than rewriting all federal gambling-related laws.

Just what the Wire Act covers has always been the matter of dispute, since the plain language of the statute only directly mentions sports betting. After all, in 1961, when the Wire Act passed, nobody played poker or backgammon over the telephone. Since the UIGEA piggy backs on other legislation to determine what wagers are "unlawful", the bill would effectively add significant new "carve outs" to a bill already riddled with industry-specific exemptions, such as for horse racing or fantasy sports leagues.

Of course, the passage of the SPGA would complicate an already difficult situation between the US and the World Trade Organisation (WTO), where the US is embroiled in a long-running dispute with Antigua over the cross-border supply of gaming services.

The stinging WTO compliance panel report released in March this year specifically took the US to task for expanding domestic remote gaming while fighting tooth and nail with the Antiguans over opening its domestic market to remote gaming services. However, the exemptions for these popular games would be relatively uncontroversial compared to online slots or online sports betting, and would probably be supported by large numbers of Americans.

As the head of the Poker Players Alliance (PPA), former Senator Alfonse D'Amato, noted: "Congressman Wexler's legislation is necessary to provide equitable treatment for true games of intellect and competitions among individuals. This skill based competition is the true spirit of the game, and the reason for its popularity whether it is played at the World Series of Poker, over the internet or at your kitchen table."

With televised poker matches wildly popular in America, and the game almost an American tradition, many Americans would probably agree.

Courts have struggled in the past to determine to what extent games like poker and backgammon should be treated as games of skill versus games of luck, and the bill would bring much-needed clarity to an area of law ill-suited for judicial determinism. Besides, the general shortage of appeals in this area had given judges few opportunities to rule on the relevance of the Wire Act outside of sports betting, and has left the law in a state of confusion.

The SPGA clarifies the 1961 Wire Act's references to "bets or wagers" so as "not [to] include operating, or participation in, poker, chess, bridge, mahjong or any other game where success is predominantly determined by a player's skill".

The taxman cometh

Aside from the potential headaches with important trading partners the current policy incurs, many have wondered why the US would forego the significant tax revenue potential of legalized online gaming.

Congressman Jim McDermott of Washington sought to rectify that last week, also on Thursday, as he introduced the Internet Gambling Regulation and Taxation Enforcement Act (IGRTEA), a bill that seeks to tax the industries Barney Frank seeks to bring out of the shadows.

Mr McDermott summarized the ambivalence many in this relatively religious country feel about the online gambling industry in his remarks on the floor after introducing the bill.

Mr. Speaker, I was raised in a fundamentalist Christian home that cast a dim view on gambling. I didn't care for it much then, and I don't care for it now. While the Bible never directly uses the word "gambling," there are plenty of references to it in Scripture, and none of them are very kind.

Still, from lotteries to casinos, gambling is part of the American scene today. Across the country, governments derive revenue from gambling that flows into public coffers. Whether you call it a sin tax or self-imposed tax, it helps fund good social programs.

Today, gambling has migrated online where it is unregulated, off shore and exporting billions of U.S. dollars. Basically, we have a Wild West show with few protections for Americans against fraud, underage gambling and privacy. My colleagues, Barney Frank and Peter King, have introduced legislation to establish some order and law online with licensing and regulation. I am introducing a companion bill today that establishes the process to collect some of the gambling revenue online just as we do in the communities.

If we decide as a Nation to enable gambling online, the billions of dollars flowing out of this country should remain here to help us fund schools and bridges and a host of social programs that need more than luck to succeed.

Skill gaming could well be the trojan horse the online gambling industry needs to find its way out of the regulatory wilderness. ®

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