December 2, 2008 (InfoPowa News) — The Washington Post print stories and the 60 Minutes” television coverage of the UltimateBet and Absolute Poker cheating
scandals published on Sunday 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-emphasized 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 U.S. legislators to protect U.S. 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 organizations, and issued the following ‘clarification’:
 
“The
Kahnawáke 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
[the] 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.