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Breaking News: Trade Association Initiates Lawsuit Against the U.S. Government...By Hartley Henderson

The Interactive Media Entertainment and Gaming Association (iMEGA has initiated a lawsuit against the U.S. government on behalf of its members citing constitutional infractions. The 501(c)(6) nonprofit trade association argues in its lawsuit that if the UIGEA is implemented, "some iMEGA members face imminent financial ruin, closure, forfeiture and termination of their employees." iMEGSA cited seven grounds which makes the UIGEA unconstitutional. These include:

1- Interference with the right to association
2- Interference with the right to privacy
3- Interference with the right to free speech
4- Ultra vires acts by the Executive Branch regarding the WTO
5- Violation of WTO Order
6- Ex Post Facto Law Enforcement
7- Violation of the Tenth amendment to the constitution

Count 2 deals with the individual's right for an adult to engage in an activity in the privacy of their home that is not harming others. Count 3 deals with the right to advertise a legal product and to inform U.S. individuals that the said product exists. Counts 4 and 5 relate to the United States dispute with Antigua whereby the U.S. government is disobeying a WTO ruling which requires them to accept gambling services provided by Antigua as per its GATS agreement. Count 6 relates to the fact that the United States is trying to apply a law that was passed only last October retroactively and count 7 argues that the U.S. is trying to pass a federal statute on an activity that is the domain of the individual states (gambling is a state issue, not a federal one).

While all grounds are important to the case, the trade association is hanging its hat predominantly on count 1, the right to association. The case argues that each of iMEGA's members acted legally in the jurisdiction where they were operating and were offering services that were legal in many U.S. states as well. Thus to discriminate against an operation simply based on where it is set up is unconstitutional. To wit, if gambling is legal in (say) Gibraltar and the laws of Gibraltar allow a company to take bets from the United States, and if gambling is also legal in California, then it is unconstitutional to brand the person from Gibraltar as a criminal simply because their operation is not based in California. iMEGA further argues that not all of the services of its members related to banned forms of gambling, yet the nature of the UIGEA implicates them nonetheless. For example, many members may offer fantasy sports, horse racing or skill games which are exempted under the act, yet by proxy all the activities of said company are treated the same under the UIGEA since Americans can't send money to offshore operations to use for the those games which are exempted. As well, the UIGEA has put an unrealistic burden on financial institutions in the United States to ensure that no money sent to them is derived from offshore online betting and consequently the banks have generally just cut off any transfers from organizations that have any ties to betting even if some or all of the funds were not from that activity. To make matters worse, many U.S. banks have cut off accepting transfers from whole countries which once again is unethical and unconstitutional under first amendment rules

iMEGA was started up by Joe Brennan, an internet consultant and marketing representative, shortly after the UIGEA passed. Mr. Brennan said he was stunned when the law passed and was in disbelief that the United States government was going down that route. As well, Joe felt that the whole process was underhanded and was devised solely because of the November elections. As Mr. Brennan quoted to me, "the UIGEA was a cynically crafted law devised to provide red meat for social conservatives for the 2006 mid term elections." He further added "the law is completely unjust and has to be overturned."

Joe was also eager to point out that they are not just concerned about internet gambling companies, but about all online entertainment. That is the reason the organization specifies media and entertainment in its title. While gambling may have been the impetus for the movement, it was not the sole reason. iMEGA is concerned that if the United States is able to get away with banning gambling, then it can go after other vices too under the same "morals" grounds. For example, if the government can get away with this initiative then what is stopping it from trying to block sites like Facebook or MySpace because it is concerned with offensive language or pictures on those sites? What is stopping the government from trying to block player vs. player interactive games because it considers them too violent? What is stopping the government from going after online pornography or even religious sites whose ideas it doesn't approve of? Freedom of religion, of course, is covered under the U.S. constitution, but if the government can get away with violating constitutional rights in the area of gambling, then certainly it does set a very dangerous precedent and the slippery slope argument may be valid.

Edward Leyden, the president of iMega was also quick to point out that another crucial problem with the UIGEA is that it shows that the U.S. government knows little about the intricacies of technology and if they are allowed to have their way they will curtail internet expansion, which in turn will harm all countries which are relying on the internet to help build their economies, not just in gambling but in other areas as well.

"The Internet is not going away," Mr. Leyden said, "but is rather the future of industry and the engine for prosperity around the globe. The UIGEA, however, has the very real potential of placing the United States and, especially, our extraordinarily efficient financial markets, in an uncompetitive and, ultimately, untenable position, which, in turn, will unquestionably stifle economic growth throughout the rest of the world. "

The lawsuit was filed on Tuesday in the U.S. district court of New Jersey and the attorney for iMEGA is Eric Bernstein. The suit specifically names as defendants U.S. attorney general Alberto Gonzalez, as well as the FTC and the Federal Reserve System. The company is hoping for a short term injunction preventing the U.S. government from instituting the UIGEA and writing the regulations which they are required to complete by early July. In the long term, however, they are hoping the U.S. government will come to its senses and realize that this direction is not in the best interest of the country. Mr. Leyden acknowledged that it could end up in higher courts before the U.S. is willing to sit down and think of a new plan.

iMEGA will be sending written testimony to be read at Friday's hearing on having the UIGEA repealed and the association has a lobby in Washington.

Does a small private initiative have a chance of getting the DOJ to change its ways? As Joe Brennan stated, "even Ralph Nader started with the Corvair and the Poker's Player Alliance had to start somewhere. The association welcomes any companies or individuals that are affected by the UIGEA to join the movement." will keep readers informed on all the developments regarding this suit and any other new developments that arise with regards to the UIGEA.

Hartley Henderson

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