iMEGA Chief: Abolishing UIGEA Could Take Years

Written by:
Jenny Woo
Published on:
Jun/18/2009
Online Gambling

Gambling911.com's Jenny Woo continues her interview with iMEGA.org founder, Joe Brennan, Jr., where he discusses the likelihood of a long drawn out process to ultimately abolish the Unlawful Internet Gaming Enforcement Act (UIGEA), assuming of course it ever gets abolished.   Brennan, Jr. also discusses the recent freeze of online poker funds, now totaling over $40 million. 

JENNY:  If the Appeals Court is to find in favor of keeping the UIGEA policy enforcement as is, do you have other options?  And likewise, should they find in iMEGA's favor, does the US Government drag this out further?

JOE:  They could.  I mean both parties could appeal to the United States Supreme Court.  That option is open to us.

JENNY:  Well how long do you see this dragging out?

JOE:  Too long.  (haha)  Too long.  That's the thing with the nature of the federal court's process and while it's difficult and people may look at it and say, "God, that takes forever."  In a lot of ways it's no slower and no faster than the legislative approach.  All you have to do is look at the flip side of the coin here and how many years the opponents of online gambling worked in order to get a bill and then passed to clamp down on Internet gambling.  It took over 7-8 years.  And now, how many years has Congressman Frank and others been working in Congress to try and get that bill passed?  Years.  It's a shame that something that is the product of essentially a political, mechanical deal between a handful of (we'll say) political self interested parties that had such a long lasting affect but unless people work like this - both in the courts and lobbying Congress - these things don't get changed.  They're not going to happen on their own. 

JENNY:  When we look at the overall picture, there tends to be a lot of confusion.  Let's just say in theory, iMEGA wins its federal appeal and the U.S. Government backs off (decides not to appeal that decision).  

Are we not back to the grey area we were at prior to the UIGEA being passed in October 2006?   

JOE:  Yes.  All the court case does - now remember - the court is not the place where legislation is created.  It's where it's reviewed.  So if the court were to overturn and void the "Unlawful Internet and Gambling Enforcement Act" - okay the ball is back in the court of the U.S. Congress and that's where Congressman Frank now has a different hand to play than the one he has right now.  Right now he's working to get a bill passed that the vast majority of members of Congress (whether they realized it or not) voted in favor of.  Now he is trying to press forward with a law that would overturn a law that many members of Congress just 3 years ago voted in favor of.  And perhaps the greatest political sin in American politics is flip-flopping.  I think Al D'Amato has spoken on a number of occasions and he should know about the challenge that this presents those members of Congress who might otherwise support it; knowing that if they did, that when they go home to their district or to their state - they're going to be greeted with attack ads from the other side or from primary challengers that said, "Senator or Congressman so and so voted against internet gambling and now he wants to vote for internet gambling."  And that is an affective political tool right now.  So if the law is voided and that's all that happens here- judges decide whether the law is void or not.  They void it because it's unconstitutional.  That's it.  Then what is done after that - is up to the discretion of the legislature. 

JENNY: Does the positive decision in favor of iMEGA prevent future actions by the Justice Dept against our industry?

JOE:  No, because there are other laws that the Justice Department still has at their disposal besides the Unlawful - remember no one has been prosecuted under the "Unlawful Internet and Gambling Enforcement Act" yet.  As a matter of fact I saw a couple of statements online this morning where people were saying like, "Oh, this is about the Wire Act and this is about the Illegal Gambling Business Act.  This isn't about UIGEA."  (And some how are name always gets thrown into it.)  "And if iMEGA says different then they're wrong."  The fact of the matter is, no one knows what this is about.  No one knows except the U.S. attorney of New York because I talked with the PPA's chief counsel yesterday. 

Since this thing broke last week, I've been in contact with those guys because we want to cooperate and work together and get to the bottom of what's going on here.  Everyday I bug them; do they have any more information?  And they said, "No, the affidavit that the U.S. attorney used to get those warrants have been sealed by the court."  Is this the Justice Dept going after Internet poker or is this simply a case of the Justice Dept going after the payment processors?"  Which is one thing that I've not seen anybody really talking about is - is this really a matter of - it's not necessarily the nature of or the source of the money but rather the operations of the payment processors.  We don't know. 

JENNY:  Do you think that's why the US Justice Dept is being so relentless when it comes to going after this industry - the payment process?  Or the actual industry as a whole?  I mean we witnessed something similar with online porn a few years back but never to this extent.  What exactly is the threat?

JOE:  I think sometimes people need to take a step back and look at this from the potential point of view of the U.S. attorney's office for the southern district of New York.  That office is really the world's center for prosecuting financial crime - financial crime of any kind.  Whether it's securities fraud, bank fraud, all that stuff.  Okay?  And they aren't necessarily campaigning on something.  What they are - they're out there and in a sense they're entrepreneurial; they're looking for areas of opportunity where financial crime may be occurring.  So it may simply be a case of - you may have a payment processor here but there could be something wrong more with the payment processing company rather than the money that they're processing or whom they're processing it for.  I don't know.  Again, the fact is that no one knows.  So all we're left with right now in the absence is an opportunity for unbridled speculation and everybody has seemed to have taken advantage of that (haha).  Anything that I would say otherwise is pure conjecture on my part or on anybody's part. 

JENNY:  You're getting the support from New Jersey's Governor, Jon Corzine - Correct?

JOE:  He's going to move to join as a co-plaintiff in our suit.

JENNY:  Well what's the significance of him joining in the suit?

JOE:  Ah, gosh it would be nice if you could use - you know that Goldman Sachs wealth that he noted over the years to kind of help us with our legal bills.  Ah - but that's not going to happen.  No, it's more important in the sense that the help is up in these standing issues that we may have with the courts.  It also helps strengthen our arguments regarding the 10th and 11th amendment arguments because in the end for New Jersey the question is with the state.  Does New Jersey have the right under the Constitution to be able to raise revenue as they deem fit?  And when New Jersey looks out and they see that there are four states that have the right to run legal sports gambling and then tax the proceeds of that - New Jersey wants to have the same right.  Even though this law was passed, the law shouldn't have been passed.  It's unconstitutional. 

Again, you don't have to take my word for it that it's unconstitutional - you can look at the words of the U.S. Justice Dept. at the time the law was being enacted - 1991.  The attorney general's office during George Bush the first administration, a republican administration, had sent a letter to the chairman of the Senate Judiciary, which at the time was then Senator Joe Biden, and to the ranking republican, which was Dennis DeConcini expressing their opposition to the law.  And that the reason being (and I'm paraphrasing), "This law represented a violation of federalism and that it intruded on the states right to raise revenue as they saw fit."  Now, some people may say like, "Well if that's the case then why did they pass the law?"  And I think we can all know from experience now that often times that bad laws are passed because they need some sort of expedient political need - not necessarily because it was an opportunity to pass a good law.  I think that's what happened because this was in the wake of Arizona State's point shaving scandals and the NCAA had made this huge rush to try and reduce gambling on sports on college campuses. 

But here you have the Justice Dept taking a stand that the law was (essentially) unconstitutional.  Now - that law has been the law of the land for 10 years or over 10 years - it's been 17 years.  That doesn't mean any less or more constitutional as time passed and so what we're essentially doing is we are repeating the Justice Department's own argument in opposition against this law back to them.  I would really like to know how they intend on answering that.  The fact that there may be people who's overall concern is the integrity of the game or gambling addicts or the expansion of legal gambling - all potentially legitimate concerns of which I have.  When people feel that and they believe that, I respect their opinion.  But in the matter of law - that law is unconstitutional and has essentially taken the right out of the hands of the states of where it belongs and make those determinations and have those debates where it should occur. 

JENNY:  Didn't New Jersey Governor, Jon Corzine make it definitely clear that his state will need to legalize sports betting following Delaware's decision to do so as he fears Delaware's move as a "serious threat" to New Jersey's economy.  

JOE:  Yes.  There's an economic imperative for New Jersey because New Jersey's - well let's be clear - Atlantic City has been a major economic engine for a couple of decades for New Jersey.  However, New Jersey has seen their exclusivity for legal gaming eroded over time with introduction of casino gambling and slot parlors in casinos in the surrounding states since then.  Just last month they had Las Vegas Sand Corp open the Sands Bethlehem in old Bethlehem, Pennsylvania.  It's about where my parents live.  (Haha)  They were actually quite upset that I wasn't able to get them a seat at one of Emeril Lagasse's tables.

JENNY:  Ah, come on Joe they're your parents for crying out loud.  (Haha)

JOE:  They're my parents and there was nothing I could do. 

JENNY:  What kind of son are you?

JOE:  Apparently, one with no suction with the brick and mortar casino companies. 

Anyway, here you have a brand new casino opening up about an hour north of Philadelphia and about an hour and forty-five minutes west of New York City.  Within three years you'll have two casinos that will open up in the Philadelphia city limits.  You have Dover Downs (Delaware) now poised potentially becoming the biggest gaming destination on the east coast; now they'll be able to offer full sports gambling.  So you may have people from Philadelphia - instead of crossing the Ben Franklin bridge you going to make the right hand turn on I95 this football season and head south to Dover Downs so they can place bets on the Eagles.  And you may see people from New York waving at the exit for Atlantic City as they drive down the New Jersey turnpike for the same reason - to bet on football this fall.  That is simply not something that New Jersey can afford to do.  They are at a competitive disadvantage; and the reason why they're at a competitive disadvantage is that this law has essentially given some sort of special franchise to Delaware.  One that New Jersey wonders why it's not available to them.  And that's a legitimate question.  It violates the Commerce Clause of the Constitution. 

Jenny Woo, Gambling911.com Senior International Correspondent 

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