REACTIONS TO SIXTY MINUTES POKER COVERAGE (Update)

5 December 2008

Industry bodies issue statements on television and print coverage of Tokwiro poker cheating scandals

 

The Washington Post print stories and the 60 Minutes television coverage of the UltimateBet and Absolute Poker cheating scandals published on Sunday (see previous InfoPowa reports) continued to evoke wide comment and exchanges of opinion on industry message boards and in the media this week.

Among the widespread assessment of the material were official statements from the Poker Players Alliance, the Safe and Secure Internet Gambling Initiative and the Kahnawake Gaming Commission.

The million member PPA took the line that the publicity re-emphasised the need for regulation in the United States.

"The recent cheating scandals underscore the need for U.S. licensing and regulation of online poker to help protect consumers," the PPA statement asserted. "While even the most highly regulated industries are susceptible to fraud and abuse, regulation does provide assurances that when consumers are harmed they have recourse, and that the offenders will be sanctioned. The continued pursuit of poker prohibition, on the other hand, will only drive this industry underground. As the Washington Post pointed out, prohibition represents a widening disconnect between 21st-century technology and 20th-century laws.

"Regulation of Internet poker does not imply an expansion of gambling in this country. Like it or not, the phenomenon of internet poker cannot be wished away. The American market has spoken. There is strong demand for Internet poker and no reasonable government can or should stand in the way of adults competing in games of skill on the Internet. To the contrary, the government should step up and exercise regulatory oversight on this multi-billion dollar interstate commerce, and collect the revenue—especially during this country's economic crisis.

"Federal government cannot continue to abdicate this basic responsibility to the millions of its citizens who choose to play poker on the Internet. The attempt to enforce an outright prohibition of online poker is deeply flawed and unworkable, and it invades upon the personal freedoms of law-abiding adults who wish to engage in a game of skill. And as 60 Minutes and the Washington Post stories reported it also exposes American consumers to the rare, unscrupulous bad apple operator who will take advantage of the lack of a U.S. regulated marketplace.

"Now more than ever the U.S. Congress needs to step up and enact real public policy as it relates to Internet gaming. We look forward to working with the new Administration and the new Congress to advance sensible regulatory solutions such as those introduced in the 110th Congress by Representatives Barney Frank (H.R. 2046) and Robert Wexler (H.R. 2610) and Senator Robert Menendez (S.3616)."

The submission from the Safe and Secure Internet Gambling Initiative followed a similar route, urging US legislators to protect US consumers by regulating rather than prohibiting the online gambling industry.

Under the headline "Current prohibition leaves Americans unprotected," spokesman Jeffrey Sandman, said that the Washington Post and 60 Minutes publicity highlighted the dangers Americans face when they gamble online.

“The 60 Minutes and Washington Post stories demonstrate unambiguously that the existing government prohibition on Internet gambling is a failure and a mistake," says Sandman. "The millions of Americans who continue to gamble online are vulnerable to being defrauded by offshore operators who exploit U.S. prohibition policies, leaving U.S. consumers without legal protections when they make a bet or play poker online. It is clear that a different approach is necessary to protect consumers, as well as to recapture the billions of tax dollars currently lost to offshore gambling operators and out of the U.S. economy. Now more than ever, Congress should understand why it should step in and regulate the industry to protect the public. We are hopeful that increased attention in the media about the issue will lead to increased movement in Congress.

Sandman pointed out that the publicity had neglected to mention the specific benefits achieved through regulation, and used the opportunity to remind lawmakers of a bill proposed by the chairman of the House Financial Services Committee, Congressman Barney Frank.

"Legislation introduced last year by Rep. Barney Frank, the Internet Gambling Regulation and Enforcement Act of 2007, would establish an enforcement framework for licensed gambling operators to accept bets and wagers from individuals in the U.S," Sandman says. "It includes a number of built-in consumer protections, including safeguards against all of the types of improper activity identified in the recent news coverage.

"These safeguards include protections to combat compulsive and underage gambling, money laundering, fraud and identity theft. Moreover, as the coverage reveals, the structure of the Internet allows for greater protections since there is a complete audit trail of all Internet gambling activity and transactions. A companion piece of legislation would ensure the collection of taxes on regulated Internet gambling activities. Revenues from regulated Internet gambling are estimated to be between $8.7 billion and $42.8 billion over 10 years, according to a tax revenue analysis prepared by PricewaterhouseCoopers.”

The Kahnawake Gaming Commission, regulator of the UltimateBet and Absolute Poker websites involved in the major cheating scandals covered by the Washington Post and 60 Minutes publicity, was critical of some elements ommitted from the reports by the two news organisations, and issued the following 'clarification':

"The Kahnawá:ke Gaming Commission (“KGC”) and its agents, having viewed the CBS News item entitled, “The Cheaters” extends the following clarification and information which, although provided to the show’s producers, had been left out of the storyline.

"1. The Ultimate Bet (“UB”) cheating was initiated while UB was owned and operated by Excapsa (a public company whose Board of Directors included several high-profile Canadians). Pursuant to a settlement agreement finalized in November, 2008, Excapsa agreed to pay Tokwiro ENRG US$15M.

"2. All players that were adversely affected by cheating (both AP and UB) were fully reimbursed. In the case of UB, these refunds amounted to over US$20M. The reimbursement of UB players was affected within days after the Excapsa settlement. The KGC played a key role in facilitating and monitoring reimbursements.

"3. The KGC and its agents have reviewed AP/UB operations and systems and have confirmed that all necessary steps have been implemented to prevent against cheating in future. Migration to the CEREUS software platform was approved and closely monitored by KGC.

"4. Contrary to claims made in the 60 Minutes story, in addition to significant penalties levied under its Regulations (eg. fines totaling US$2M), the KGC has initiated a criminal complaint against at least one cheater (Russ Hamilton) and is cooperating with law enforcement authorities. Other such complaints may follow."

Point 4 of the Kahawake clarification will be well received by the player community, which has expressed outrage at the apparent immunity from prosecution implied by Tokwiro group statements that it had not pursued the cheaters in return for cooperation in finding and plugging the software flaws and identifying prejudiced players.