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November-05-2006,
Can Online Poker Save the Online Gaming Industry in America?...By Hartley Henderson

A lot of people believe that the poker phenomenon was the catalyst which caused so many senators and congressmen to seek a ban on internet betting in the United States. While it's true that Kyl introduced his first bill against online wagering in 1997, arguing that the internet was the same as a telephone and hence all online gambling was in violation of the 1961 U.S. wire act, the activity was occuring on such a small scale and there really wasn't much interest in the bill at the House of Representatives. Consequently, the bill never got much traction. The pursuit by Kyl to ban online gambling really took a blow in the United States in November 2002, when the U.S. Court of Appeals threw out a case brought on by Larry Thompson and Lawrence Bradley against Mastercard in which they claimed that Mastercard should be responsible for paying their gambling debts since the credit card company helped in racketeering. More to the point, because online gambling wasn't legal, Mastercard broke the law by allowing gamblers to bet like idiots. The U.S. court of Appeals rightly threw out the case claiming that Mastercard had done nothing wrong and that the complainants' debt was a result of their own compulsive behaviour. More importantly, the Court of Appeals in line 24 of their argument stated: "Because the Wire Act does not prohibit non sports online gambling, any debt incurred in connection with such gambling are not illegal." Thus, a high court of the United States argued that the wire act did not apply to non sports betting, meaning that any arguments citing the wire act for betting at casinos, poker playing and similar online gambling held no water. This court decision was a big blow to Kyl and others in the government who were less concerned with sports betting than casinos, since the real purpose for wanting the ban was to protect land based casinos and lotteries in their own states. After all, only Nevada allowed sports betting.

In 2003, however, everything changed after Chris Moneymaker, a fairly stout, average Joe won the World Series of Poker and netted $2.5 million after winning a seat from Poker Stars. Many people looked at his success and realized it wasn't beyond their means. Naturally, the average person couldn't truly compete in and expect to win an Olympic event, but anyone can play poker. In the next few years, poker rooms boomed online and poker tournaments became regular programming on TV. In fact, the "World Poker Tour" was among the top rated shows. And sites like Prima Poker, Paradise Poker, World Poker Exchange and others saw their membership grow exponentially. As well, publicly traded companies Party Gaming (who ran Party Poker software for themselves and various sportsbooks) along with Cryptologic who provided the software for William Hill, Betfair and a couple of smaller places saw their stock skyrocket. Consequently, the market value of the industry grew to over $12 billion in 2005.

So in 2003, realizing there was a lot of money out there, Senator James Leach took up Kyl's fight and introduced a bill of his own to ban the use of "bank instruments" for the purpose of funding online gambling. Hence, the U.S. government couldn't go after the bettors or the gambling companies since the wire act wasn't going to stand up in court, so it took a new approach: make it impossible for gamblers to fund their accounts. Senator Goodlatte added his name to the bill, also. The threat worked wonders and Mastercard withdrew their services and Visa greatly limited use of their credit cards for betting. As well, Western Union withdrew the quick collect option. Plus, all gambling transactions on a credit card had to be labelled as such and banks had the right to deny those transactions from going through. Third party financial processors sites like Neteller and PayPal boomed, but Paypal withdrew the gambling option when they were bought out by eBay. But where there's a will, there's a way, and new methods for depositing continued to expand and the gambling industry continued to flourish. Leach, Goodlatte and Kyl attempted to get more bills passed and were constantly shot down by the House of Representatives who really seemed to have no interest in telling Americans how to spend their money. As well, it was a hot potato since gamblers vote too.

Things changed, however, in October 2006 when Senator Bill Frist, the Senate Majority Leader, attached the online gambling bill to the Safe Port Act. This legislation had unanimous support throughout the Senate and House and while many had a real problem with banning online gambling financial transactions, they felt they had no choice but to vote for the ban if it meant that was the only way of passing the Port bill. By attaching the ban to the Safe Port Act, it curtailed any discussion of the topic which would have brought out all the arguments which, in the past, had caused the House to deny passage of Kyl and Leach's original measure. But now, as a law rather than just a bill, it forced all public companies to immediately withdraw from the United States and also effectively put the onus on banks to ensure none of their transactions were for the purpose of online gambling. Obviously, with this onus placed upon them, banks immediately denied any transactions on credit cards for the purpose of online gambling and they will attempt toforce out 3rd party financial processors in the future.

The passage of the bill came as a shock to the gambling industry. Everyone knew about Kyl, Leach and Goodlatte, but Frist's name had never come up before. So who exactly is Bill Frist and why did he support this bill? Well, to say he is a right wing, evangelical, ultra religious crusader would be an understatement. His biography lists him as a Presbyterian senator who started his career in 1995 and will resign in 2007 in order to run for President of the United States. Without doubt, he will be someone George Bush endorses to continue the U.S.'s stance against almost everything the rest of the world endorses. Frist has made it clear he is anti abortion, opposes same sex marriage, gay adoption and supports George Bush in his fight against expanding stem cell research. Frist was also instrumental in the Terri Schiavo case where he accused Schiavo's doctor of incompetence by declaring her brain dead. He also accused the husband of Terry Schiavo of acting only out of personal concern for wanting Terri's feeding tube disconnected. Terri's husband stated that he and his wife both agreed prior to the accident that left her in a vegetative state that if something happened to either one of them they didn't want artificial measures to keep them alive. Frist stated "I question it (the doctor's diagnosis) based on a review of the video footage which I spent an hour or so looking at last night in my office." The Washington Post reported that Frist was criticized by a medical ethicist at Northwestern University for making a diagnosis without personally examining the patient, and for questioning the diagnosis when he was not qualified to do so. After Schiavo's death, the autopsy showed that she was indeed brain dead and any movement she showed was random. Frist defended his actions after the autopsy. Various complaints were filed with medical oversight organizations but they had no authority to take action. As well, Frist was investigated for conflict of interest allegations related to stock he sold in HCA (Hospital Corporation of America). As a senator Frist was not allowed to own stock so he put it all in a blind trust. Without going into great detail, Frist sold all his stock in September 2005, 2 weeks before the company reported that earnings would not meet expectations which caused a huge stock price drop. In that month, Citizens for Responsibility and Ethics in Washington named Frist as one of the 13 most corrupt members of Congress. The case is still ongoing.

So given Frist's staunch opposition to anything that is not "Christian", it is not surprising he would hone in on the gambling bill. After all, if the Church opposes it, it must be bad for Americans. It's also quite possible that Frist attached the bill to the Safe Port Act to appease his close friend Jon Kyl. The two senators have similar views on political issues and it was reported that Frist's wife had a fundraiser for Kyl's senatorial campaign. Thus, if Frist does win the Republican nomination, perhaps Kyl will step up to bat for him. It's the old "I'll scratch your back if you scratch mine" mindset.

Anyway, back to poker. The decision to attach the online gambling bill may have had a huge impact on Frist's Presidential aspirations. Recent polls indicate that millions of poker players are very upset about the gambling ban and hold the Republicans responsible, especially Jon Kyl and Bill Frist. An article by the AP stated that even long time Republican supporters plan to vote for the Democratic nominee this year strictly as a result of the online gambling ban. Confronted by this article, Frist responded by saying the government was just putting into law something that was already illegal because of the wire act, which of course is not necessarily true. The Poker Player's Alliance (PPA) is a non profit membership organization that was set up to defend the rights of Americans to play poker. The organization has over 120,000 members and is expected to grow. As well, other countries have similar organizations who want to help in the fight. While the organization really only cares about poker and would like to have poker given an exemption in the law like horseracing and lotteries, providing an exemption for poker would only open a Pandora's Box. After all, if poker is declared a game of skill like fantasy sports (and therefore is excluded), then clearly sports bettors can argue that picking games takes just as much skill. Adding any exemptions to the law will make it watered down and fairly useless. PPA has asked their members to vote for Jim Pederson to defeat Kyl in the November 7th Senatorial race in Arizona. The Democrat challenger seemed to have no chance to defeat Kyl only a short while ago, but all of a sudden his campaign is gaining steam, thanks partly to PPA. And while Kyl is still favored, it is not impossible that Pederson can win or at least make a strong showing. If this indeed happens, it will certainly make the Republicans nervous and perhaps ponder whether it wasn't such a great move to pass a bill in a backhanded way without any discussion on the issue, particularly a bill that will affect so many Americans personally. As well, it could prove that the PPA has a large following and could create a great opportunity to introduce a democrat that is willing to allow for numerous amendments to the law. After all, just a mention by the PPA that Kyl was largely responsible for the ban on poker caused the big outrage and initiated some donations for Pederson.

How much in donations could a full campaign raise for a presidential candidate who is willing to amend the law to make it useless, particularly if the democrats win control of the House and Senate? The presdential election is in 2008 and the campaign can be simple: ask all members of PPA to donate some money to a general fund sponsored by the PPA. Sportsbooks and casinos could add to that fund, also. If every player donated money to the cause, if a percentage of all rake was donated to the cause and if poker sites, sportsbooks etc., also donated privately there could potentially be upwards of $100 million in a fund that would be given to a candidate who would agree to at least look at the law and see if it is in the best interest of a democratic USA. It may not work, but there is always hope. Oh, and by the way, did I mention that Bill Frist was named among the 13 most corrupt members of Congress? Americans should think about that when they vote on November 7th.

Hartley Henderson
MajorWager.com



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