By Joe Zusman | October 1, 2008

The new bill, which intends to create a licensing framework for online games of skill –specifically excluding sports betting from this category, – comes at a good time as the UIGEA finds itself again under fire for its fundamental vagueness and inapplicability. S 3616 comes from a different source and has a different approach than Senator Barney Frank’s various bills aiming to limit the scope of the UIGEA; Senator Frank’s latest bill, HR 5767, has been approved by the House Financial Services Committee and is due a vote at the House of Representatives.

The Poker Players Alliance has commended Senator Menendez for his initiative of introducing S 3616, the Internet Skill Game Licensing and Control Act, which is in line with the PPA’s vision for online poker. PPA Chairman and Former Senator Alfonse D’Amato stated:

The PPA has long advocated for thoughtful and effective licensing and regulation of online poker as a means to protect vulnerable communities, such as children and compulsive gamblers, and provide appropriate controls to thwart consumer fraud and abuse. Senator Menendez legislation is the right vehicle to achieve those goals.

The licenses would be emitted for a year, subject to monitoring, renewal and revoking as appropriate. These are some elements from the bill as it appears on the Poker Players Alliance site:

Each application submitted under paragraph (1) shall include such information as the Secretary considers appropriate, including the following:
(A) Complete financial information about the applicant
(B) Documentation showing the corporate structure of the applicant and all related businesses and affiliates.
(C) The names of all persons directly or indirectly interested in the business of the applicant and the nature of such interest.
(D) A certification by the applicant, agreeing to be subject to United States jurisdiction and all applicable United States laws relating to Internet skill games or gambling activities.

This means that any company willing to apply for a license must be ready to submit its financial and operational information, as well as agree to submit to US jurisdiction and laws. This hopes to screen bogus companies and those with people known to be involved in cheating, as well as set a ground for any potential legal claims that may arise.

The factors to be evaluated by the Secretary under paragraph (1) shall include the following:
(A) The honesty and integrity of the applicant.
(B) The business probity and relevant experience of the applicant.
(C) The financial condition of the applicant.
(D) Whether the applicant has adequate financial capabilities from suitable sources.
(E) The applicant’s record of compliance with laws and requirements related to Internet skill gaming in foreign jurisdictions.

The licensing entity will use the info submitted to determine if the applicant is legitimate, ethical, in good financial shape, and also vet them for potential money laundering or terrorist connections by ensuring their finances come “from suitable sources” and that they have a good compliance record within their jurisdictions. They will also carry background checks to determine if the owners, presidents and senior managers of the applying company have criminal records.

Additionally, to apply for and retain a license a person or company must “implement and maintain the following safeguards and mechanisms with respect to any permitted bet or wager:”

• Reasonable safeguards to ensure that each individual placing a permitted bet or wager is 18 years of age or older.
  
• Reasonable safeguards to ensure that each individual placing a permitted bet or wager is physically located in a jurisdiction that permits the operation of an Internet skill game facility at the time the permitted bet or wager is placed. 
  
• Reasonable mechanisms to ensure that all taxes relating to Internet skill games payable to Federal and State governments and to Indian tribes from persons engaged in Internet skill games are collected at the time of any payment of any proceeds of Internet skill games.
  
• Reasonable safeguards to prevent fraud and money laundering as may be prescribed by regulations promulgated by the Secretary.
  
• Reasonable safeguards to prevent or mitigate social problems that some individuals may experience related to playing Internet skill games.
  
• Reasonable safeguards to protect the privacy and security of any individual participating in an Internet skill game.

We will keep you informed of the progress of this bill as soon as more information is available.

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