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Federal

Poker Freedom Act Details

Jul.12, 2013 1:42:AM
Barton

Representative Joe Barton (R-TX) introduced the Poker Freedom Act.  The 102-page bill would regulate online poker at the federal level.  It does not ban or regulate online casino games.  This action would still be left up to the state.  Several forms of existing legalized online gambling would be exempted:

  • Horseracing through Interstate Horseracing Act of 1978
  • Intrastate games approved by State or tribe on or before enactment of PFA
  • Intrastate lotteries
  • Intra-tribal transactions

The Poker Freedom Act also exempts personal computers from being considered a gambling device, a mistake Florida may have made with their sweepstakes ban.  Fantasy sports are not mentioned as specifically banned or existed.

Definitions

There are two interesting definitions. 

Qualified Card Room – ‘‘qualified card room’’ means a facility that has been licensed by a State or federally recognized Indian tribe to provide at least 175 tables in one physical facility for bets or wagers on poker.

This does not mean that a poker has to have 175 tables as no poker room would qualify there.  It does mean that it must hold a license to offer that many.  That will cause issues in some states.  For example, South Dakota does not allow more than 30 gambling devices in any Deadwood establishment, though a licensed casino operator may connect multiple establishments, none will hold such a license.  Montana does not consider poker to be gambling and does not regulate it at all.  These are examples of states that will have issues complying with this definition.

Qualified Card Room is also used to describe a company that would be an operator.  This prevents companies like Yahoo or Zynga from being operators.  It also prevents current online poker companies from being operators.

Significant Vendor – This section describes a contractor that controls bets, manages games, operates software or hardware games are hosted.  It would also cover a company that owns trademarks, brands, and sells player databases created while offering unlicensed online gambling.  It covers virtually anyone that is not a payment processor that gets a percentage of the rake.  Significant vendors will only need a certificate of suitability and would not need a license unless a regulatory body suspected this section was being used a backdoor to bypass licensing requirement.

Prohibition on Unlicensed Poker

It would be illegal to operate online poker in the U.S. without a license.  The bill goes out of its way to exclude companies outside US that do not accept US players, as if that was an issue.

Office of Internet Poker Oversight

Office of Internet Poker Oversight would be established through the Department of Commerce.  Online poker could be regulated by state gaming commissions, tribal gaming commissions or Office of Internet Poker Oversight.

States have 60 days to establish, repeal or amend their online gambling laws.  States would have to opt out or they would be automatically included.  State prohibition would not apply to tribal lands if the tribe would be allowed to accept similar bets without the internet as long as the player is on tribal land.  A state that allows tribes to offer brick and mortar poker would be required to allow tribes to offer online poker if the state opts in.  No new gaming compact would be required.

Any company that applies for a license will not be eligible if a qualified regulatory body determines that the company, any person in control of the company or significant vendor is found to be unsuitable.  Felons, tax evaders and those guilty of gambling related crimes would be among those that could be found unsuitable. 

Bad Actor Clause

There is a benign bad actor clause.  It only covers those convicted of illegal online poker in the past five years.  This would prevent any person that pleaded guilty to Black Friday charges from entering the regulated U.S. market.  Any assets purchased from a convicted individual or company for the sole purpose of bypassing this law would also be excluded. 

Other Vendors

Other vendors are companies that promote or partner with the licensee.  These include affiliates, skins, trademark owners and brand owners.  Other Vendors may be required to meet suitability requirements if the vendor may be attempting to backdoor the suitability process.

Internet Poker Facilities

Internet poker facilities must provide proper safeguards to players and follow laws and licensing guidelines.  These include:

  • Excluding players under 21 years of age
  • Excluding players in unapproved jurisdictions
  • Filing proper tax forms on player winnings
  • Proper security to prevent fraud, money laundering and terrorism financing
  • Player privacy protection
  • Prevent collusion and cheating devices, including bots

Licensing Fees

Licensing fees are to be deposited into the Internet Poker Oversight Fund.  This fund will be used by the Office of Internet Poker Oversight to cover expenses.  Licenses are valid for five years. 

Licensee Requirements

Licensees must own a qualifying card room within 10 days of the enactment of the law and have five years experience operating a qualified card room.  Terms may be relaxed after two years to include more qualifying companies.

Licensees must locate their servers in the United States.  A license is required to locate them within a State or tribal land.

Qualifying Games

Each state and tribe may determine what games qualify as Internet poker.  The definition may be challenged by a licensee.  Games banked by the house cannot be considered a qualifying game.

Unlicensed Online Poker

A company that is required to receive an Internet poker license but does not is subject to civil penalties.  Unlicensed companies found to be violating the law would be required to pay a fine equal to all wagers accepted during the period where a license was required, or $1 million, whichever is greater.  This is in addition to any criminal penalties.

Problem Gambling

Problem gambling issues are addressed.  Online poker websites would be required to offer players the ability to self-exclude each time they login.  Players must also have the ability to restrict or cap their deposits, playing time, bet limits, check cashing and direct mailing of offers by the operator. 

Players could also restrict their access to credit.  This is unusual all other state and federal bills specifically ban the extension of credit to all players as a problem gambling feature.  The fact that credit extension is only a problem gambling feature is unusual.

Regulatory bodies are required to establish and maintain a list of players that have self-excluded.  This list is to be shared among all other regulatory bodies and licensees. 

Other Excluded Players

Regulatory bodies may also exclude players for other reasons, including cheating at online poker, failure to pay child support, or the presence of a person on a brick and mortar exclusion list.

Any player that deposits or plays online poker while being excluded will forfeit their funds.  These funds are to be deposited into the U.S. Treasury or as otherwise determined by state or tribal regulators.

Credit Card Deposits Not Allowed

Credit card deposits would not be allowed under this bill.  This may cause a hardship for ewallets like Paypal where players have used a credit card in the past.  It is also interesting because the bill implies that players could have credit extended by the operator but not through a credit card company. 

Internet Poker Cafes Banned

Internet poker parlors would be banned.  This addresses the issue some states are facing with slot parlors masquerading as internet cafes.

Regulations Applying to Cheating

Cheating is addressed in the regulations.  This includes the use of bots in play.  The bill also could cover some HUDs as it states:

No person initiating, receiving, or otherwise making a bet or wager with a licensee, or sending, receiving, or inviting information assisting with a bet or wager with a licensee shall knowingly use, possess, or assist another in the use of, an electronic, electrical, or mechanical device or software or other program or tool which is designed, constructed, or programmed specifically for use in obtaining an advantage in any game authorized under this title, where such advantage is prohibited or otherwise violates the rules of play established by the licensee.

Any player convicted of cheating may lose their privilege to play online poker.

State Lotteries

Lotteries opposed the Reid/Kyl bill due to restrictions placed on them by it.  The Poker Freedom Act specifically states lotteries are not affected at all by it.  They may offer any online gambling game allowed under federal or state law.

Indian Gaming Regulatory Act

Unlike Rep. King’s bill, The Indian Gaming Regulatory Act is not affected by this bill. 

Enactment

If passed, the bill would become law 30 days after being signed or not vetoed by the President.  Online poker could go live 270 days after passage.

Strengthening of Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA)

The UIGEA would be altered to exclude online poker under this act and to create additional enforcement.  A list of unlicensed gambling enterprises would be created.  This includes financial institutions that knowingly process payments.

Poker Freedom Act full text