TELLING IT LIKE IT IS

26 October 2007

An online gambling CEO writes about the UIGEA


Joe Saumarez-Smith, the CEO of the UK based management consulting firm Sports Gaming and owner of a number of online gambling interests came out with guns blazing on the Unlawful Internet Gambling Enforcement Act this week in an op-ed piece on the Bloombergs news website.

Under the title "Internet Gambling Act Should Be Scrapped" JSS is sharply critical of the UIGEA, which seeks to bring about the ruin of the online gambling pastime in America by disrupting financial transactions with online gambling companies.

Yet twelve months later, there are just as many people gambling online, if not more, he points out. And many bettors don't even know the law was changed, partly because it was tacked on as an amendment to a measure aimed at increasing port security.

In Saumarez-Smith's view the biggest difference nowadays is that the companies offering online gambling are privately held and operate out of countries where it is impossible to know who controls them; and in the case of a big win, the risk of not being paid is probably much higher, opines.

The major public companies that used to offer online betting to Americans, such as PartyGaming plc, 888 Holdings plc and Sportingbet plc, all quit the U.S. market last October at a cost of several billion dollars to their shareholders.

And the dilatory manner in which US officialdom has introduced the supporting regulations for UIGEA - well over the deadline set by Congress - remains in progress, allowing online poker rooms, sports bookies and casinos to continue to get money from and send money to their customers, albeit not as easily as a year ago.

Saumarez also hits out at the notorious carve-outs in American legislation which permit Americans to place online bets on lotteries and horse racing, and he draws attention to the large number of legal casinos, poker rooms, racetracks or Off Track Betting centers, and state lotteries feeding the overall gambling industry.

"The situation is, in short, a mess," he opines. "As America learned during Prohibition, some bans are unrealistic. The online gambling law shows that legislators weren't paying enough attention in history class.

"At least Prohibition aimed to prevent the consumption of alcohol across the U.S. without exceptions. Banning some types of online gambling while allowing exemptions for lotteries and horse racing is protectionism of the worst kind," he adds.

Following the lead of most legal experts, Saumarez also emphasises that UIGEA seeks to criminalise those it describes as being "in the business of betting'' making it illegal to handle money for the purpose of online gambling.

"That means individuals still aren't breaching any federal law by placing bets," he stresses, revealing that the daily number of poker players online worldwide was about 34 000 in September, down less than half a percentage point from a year earlier, according to Dennis Boyko at PokerPulse.com in Vancouver. Poker players online in the U.S. have dropped only slightly, said Boyko, who has monitored the number of online players since January 2003.

The sensitive subject of problem gambling is also addressed by Saumarez, who says that UIGEA supporters argued that banning online gambling would lower levels of gambling addiction.

But he goes on to counter this claim by quoting Kevin Whyte, executive director of the National Council on Problem Gambling in Washington, who is on record as saying: "We do not see any decrease in the number of online gamblers seeking help", and "As with alcohol and drugs, prohibition of online gambling is one of the most ineffective ways of addressing a public health problem.''

But JSS concedes that the law may have made it harder for children to gamble online, for balance quoting Dan Romer, research director of the Adolescent Risk Communication Institute of the Annenberg Public Policy Center, who said its annual survey shows a reduction in underage gamblers on the Internet.

The strengthening World Trade Organisation storm which the US faces over its discriminatory online gambling practices and consequent unprecedented withdrawal of treaty agreements is also considered by Saumarez.

"If legislators were brave, they would use the WTO ruling as an excuse to reverse the Unlawful Internet Gambling Enforcement Act and instead legalize and tax the online gambling industry," he suggests. "That would allow the U.S. government to know who was offering its citizens the chance to gamble, and to impose rules and restrictions that would prevent children and vulnerable groups from placing bets. It would also generate vast tax revenues."

Saumarez ends his article with a plea to legalise and regulate online gambling in the United States. Despite the opposition to this by the major sports leagues in the US, the fact is that in pretty much every town across the U.S. you can place a bet at a local bar or barber shop and that the people who suffer financially when a game is fixed are the bookmakers, who have to pay out the winnings, he opines.

"Almost all the point-shaving scandals of recent years have been uncovered because Las Vegas bookies noticed unusual betting patterns and pointed them out to the relevant authorities. If all betting could be done through legal channels, then these markets would be easier to police."

The inescapable conclusion is that laws that are either widely disobeyed or unworkable are bad laws. A year after its passing, the Unlawful Internet Gambling Enforcement Act is both disobeyed and unworkable, Saumarez concludes.

"The sooner it's scrapped, the better."

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