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May-13-2009,
Barney Frank's New Bill Provides Little Satisfaction to the Sports Betting Industry...By Hartley Henderson

Sports bettors hoping for a law that would legalize their activity online had their dreams dashed when Barney Frank released his latest online bill. Prior bills initiated by Frank gave leagues that didn't want gambling on their games the chance to opt out of any online legislation, and there were suggestions that Frank's new bill would eliminate that opportunity to opt out. That in fact turned out to be the case, but unfortunately it was replaced by wording which specifically made sports betting online illegal. In a preview of the bill as told to a Congressional newspaper, Frank stated:

"The expression by the professional leagues of shock at the notion that people would actually bet on games was one of the least persuasive emotional outbursts I have encountered, but we acknowledged the reality of it. No one will be betting on professional sports games."

Of course Frank's comment is inane. People have bet on sports for decades in the U.S. and will continue to do so regardless of what the new bill states. Sportsbooks in Las Vegas continue to do good business, as do offshore books. And even if by some miracle Frank or the leagues could shut them all down, Americans would simply turn back to illegal underground bookmakers who would be only too happy to take the action and grant credit with serious repercussions for bettors who didn't pay up. Fat Tony or Louie the Lip don't really care what the UIGEA or similar bills state. In fact many Americans bet on sports by boarding ships off the coast of Florida that sail to international waters only a few minutes away and anchor and then return to shore. Apparently this is perfectly legal. Why it is technically legal to bet offshore on a boat from the U.S., but is not legal to bet offshore from a computer in the U.S. is mystifying. Furthermore, Delaware, Oregon and New Jersey are doing everything in their power to offer sports betting to residents of their states or to visitors from other states who choose to place wagers at licensed establishments within the states. Oregon and Delaware received exemptions from the 1992 sports gambling act since they had already been offering some sort of sports betting prior to the passing of the act, but New Jersey is challenging the law on the grounds that it is unconstitutional to allow betting in some states and not others. Senator Raymond Lesniak told a New Jersey newspaper recently:

"Billions of dollars are being bet offshore through the Internet or through organized crime, and those are revenues that could be going to New Jersey...But we can't regulate it and run it in the state of New Jersey, and that's just unfair."

If New Jersey's challenge is successful it is almost certain that the federal law will be changed to reflect the inequity and land based sports betting will be legal to all states across the board.

Of course Frank's bill doesn't deal with land based gambling, but rather with amending the UIGEA which involves online betting. However, if the goal of the bill is to simply block offshore wagering on sports while legalizing all other forms of gambling it won't work. The UIGEA has done little to stem offshore wagering on sports and this new bill will not change that. Sure, the bill has made it difficult for Americans to get money to offshore sportsbooks or receive winnings from them, but in the end Americans are sending and receiving funds. As well, sources close to me have stated they know of many new payment processors who are ready to implement new payment systems within the near future for Americans that fall within the regulations of the UIGEA. The new payment systems won't differentiate between funds for sports, poker or casinos. The only thing Frank's bill will accomplish is creating more confusion for the banks who will now not only have to separate "illegal" online gambling vs. "legal" land based gaming, but will also have to identify sports betting vs. poker or casino betting. And contrary to what Frank and others may think, it isn't that simple. Most gambling establishments offer many ways to gamble. So is a bet with Party Gaming for sports, casinos or poker? Is a payment to Betfair for poker or the betting exchange? Is a deposit made to Harrah's Entertainment for the sportsbook, the poker room or the casino? Unless Frank can somehow convince companies that have several betting options to get rid of some of their betting options, the new bill will be almost impossible to implement. Also, it is almost certain that if New Jersey is successful and sports betting is legalized countrywide, many states will want the option of providing online wagering for their citizens.

A bill to repeal the UIGEA with no restrictions as Frank first suggested would have been much easier to accept, but for some reason Frank has decided to cede to the sports leagues' lobbies. But the question that has to be asked is why the leagues feel they need the exemption from a new bill. The leagues should be required to justify their demands for exemption with solid reasoning as to what possible ramifications there are if people can bet on their games online. This suggestion may sound horrifying to some that leagues must justify their stances, but the horse racing industry, native casinos and lotteries had to provide reasoning for getting an exemption to the UIGEA, so sports leagues should be required to give reasoning as to why people shouldn't be allowed to bet on games. In fact there is also precedence for it. When Toronto tried to start up a team in the NBA, Commissioner Stern told the Ontario government they could only have the team if they took NBA games off the government's Sport Select lottery. Instead of saying "absolutely sir," as Frank seems to be doing with this bill, the Ontario government essentially replied, "why should we?" The government was right. The NBA owns its league but it doesn't own the rights for people or governments to profit from the use of its product that has nothing to do with copyrights. Microsoft owns Microsoft Excel, but it certainly doesn't own books that are written on how to use the product. In the end the Ontario government compromised, telling the league it will take NBA betting off its game sheets, but in return the Raptors Foundation had to provide funding equivalent to what the government would lose by not offering the NBA on Sport Select. So similarly the leagues should give solid reasoning as to why their games are so important that people can't bet on them, and more importantly why U.S. States and online gambling firms shouldn't profit from them. And the argument that they simply don't want it or that it "harms the integrity of the sports" won't wash. Other countries around the world have proven that gambling on sports helps improve the integrity of the games because gambling firms and bettors can identify cheating and scandals. In fact even the NHL seems to have acknowledged this with the MOU they signed with Betfair. The NHL just refuses to promote it. If the leagues can't give valid reasons, then like with the Ontario government the leagues should be required to compensate anyone who would lose out by not being able to offer gambling on the product. In the case of the NFL that amount will be in the billions of dollars.

Of course many Congressmen and Senators will point to the 1961 Wire Act as reasoning as to why sports betting online should never be allowed to take place, but at some point the Supreme Court has to question the validity of that law in this day and age. When the law was passed in 1961 the purpose was clear. Many illegal bookmakers (mostly connected to the mob) were using phone lines to conduct their bookmaking businesses. The law was aimed at giving the Justice Department some ammunition to arrest the mob figures or their runners. The only ones who would suggest that the Wire Act was meant to apply to places like Party Gaming, Harrah's Entertainment or Betfair are those like Joan Rivers who ignorantly suggested on Celebrity Apprentice that poker players were all part of the Mafia or Senator Ted Stevens who was concerned that excess gambling would block up the "internet tubes". In fairness the U.S. Court of Appeals did rule that the Wire Act applied to all sports gambling done on the internet, but there is suggestion that if it ever got to the Supreme Court the law would face a stiff challenge on its legality.

There have been suggestions made that proponents of the new bill don't want sports betting legalized because they want to focus on games of skill. In fact Robert Wexler's companion bill titled the Skill Game Protection Act states just that. But what constitutes skill is very subjective and many would argue that there is far more skill involved in correctly handicapping football games than there is in 99% of the games online. Sure, when people watch the World Series of Poker they see the skill of Greg Raymond, Daniel Negreanu, John Juanda, etc., but the truth is that most online poker is played by people that couldn't calculate odds if you gave them a 5 day course on it. There is a big difference between $10,000 buy-in tournaments like the WSOP and online games with blinds between 5 cents and $2 which make up most internet poker. And as for tournaments, what skill is involved in super turbo tournaments where blinds go up every 3 hands? Within a few hands it turns into a game where everyone just goes all in regardless of the cards. Alternatively, when a person is wagering $500 or more on a sports game they make sure there is skill involved. In fact sports services like Stu Feiner made a living by employing their skill to provide tips with careful reasoning to potential bettors. There is belief that Safe & Secure supports Frank's bill because they are only interested in poker, but Michael Waxman, a spokesman for the company seemed to suggest otherwise:

"We agree that poker is a game of skill and fully support the regulation of the game online. However, we...also believe that Americans should have the freedom to gamble on sports, casino games and other activities in a safe and secure environment."

Last, it must be noted that a reason given by Frank for this bill is concern over the U.S.'s international violations and the rift it has created with other countries. Frank seemed troubled at the U.S.'s decision to rewrite its commitments at the WTO which resulted in Antigua receiving $21 million in compensation and the EU upwards of $1 billion, as well as the Remote Gambling Association's complaint of selective prosecution of EU based operators. Frank hopes the new bill, if passed, will resolve that tension. Unfortunately for Frank, the majority of those hurt were sports betting operators. In fact almost all companies operating in Antigua now are sportsbooks. The country currently has 14 active licensees listed on its website: http://www.antiguagaming.gov.ag, and 9 of them are sports betting companies. Furthermore, most of the arrests made on EU gambling operators (which is primarily what the EU and RGA are complaining about) were for sports betting operators from BetonSports and Sportingbet. So if Frank is hoping to appease both jurisdictions with this bill it is unlikely to work.

Without question many gambling operators and organizational representatives for poker and casinos are thrilled with the bill. And even some who promote sports betting see this as a "good first step." In fact Joe Brennan Jr. from iMEGA was very pleased with the bill, despite the fact that his organization wants online sports betting legalized. He stated:

"We're glad the congressman has finally introduced the bill. While there is a lot of work still to be done before this ever becomes law, it's good to see progress as well as the support of new parties like Youbet and Harrah's."

To those in the sports betting industry, however, the bill falls far short, and most would prefer no bill at all to this one. Not only does it throw sports betting under the bus, but it tries to legitimize the leagues' stance that it is superior to other forms of gambling and hence deserves an exemption. It's ironic as well that other countries view sports betting as more civil than other forms of gambling because it helps legitimize games and also because it doesn't take advantage of the bettors like casinos and lotteries do. Good handicappers can win against the house in sports betting, but it is impossible for anyone to win in the long run on slot machines, roulette or lotteries because they are totally random and based on luck with the house edge built in. Australia has recognized this and told its citizens that they are permitted to bet sports online, but it doesn't want them wasting money on gambling where they can't win. In America (and Canada) the states would rather citizens only bet on games where they can't possibly win, hence essentially making the legalized gambling a hidden tax. It's truly unfortunate, but is also a sign of the times.

05-13-2009
Hartley Henderson
Majorwager.com
henderson@majorwager.com

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