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HR 2366 Internet Gambling Prohibition, Poker Consumer Protection, and Strengthening UIGEA Act of 2011

The bill, H.R. 2366, is titled the Internet Gambling Prohibition, Poker Consumer Protection, and Strengthening UIGEA Act of 2011. It was introduced on June 24th, 2011. This bill was an earlier attempt by Texas representative Joe Barton to legalize online poker on the federal level. It died in 2013, the same year he introduced a new bill sharing the same goal (Internet Poker Freedom Act of 2013).

Although the bill is dead, we thought it would be interesting to provide cliff notes so that you could see how it would’ve affected online gambling if it had passed.

The beginning of the bill starts off like most – it acknowledges that there are laws already in place prohibiting illegal gambling, but that they’ve only been ‘partially successful.’

The bill goes on to mention that by legalizing online poker in the states, residents would be protected from scam poker sites. As it stands now the US cannot doing anything because these operations are offshore. So residents are at risk to be cheated and stolen from.

More tax revenue and jobs would be generated from this bill, too. Both were (and still are) much needed in the USA.

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H.R. 2366 – Cliff Notes

Below are cliff notes for the sections of the bill that would impact operators and players the most.

Section 102 – Prohibition on Unlicensed Internet Gambling

This section states that it would be illegal for any person or company to operate an online gambling website without a license in good standing, and that the license would need to be issued by a qualified person or agency.

This doesn’t include operations outside the US.

Violations will be fined under Title 18 and/or be imprisoned for up to 5 years.

Section 103 – Department of Commerce Qualifications and Oversight of State Agencies

This section discusses state agencies, their qualifications and roles, and describes the Office of Internet Poker Oversight. (If you ask me, that sounds like something from a comic book.)

Anyway, state agencies will have the task of reviewing and issuing licenses to operators. They need to ensure that operators are capable of complying with and enforcing the rules, investigating issues with operators and players, and taking the appropriate actions when necessary.

The Office of Internet Poker Oversight is a Secretary appointed office that will designate and oversee state agencies. To qualify, state agencies will need to have a sufficient office, staff, experience in the gaming industry and the willingness to work with federal authorities.

Section 104 – Licensing by Qualified State Agencies

This section describes the licensing guidelines. The idea is simple, though; operators or Indian tribes will need to be licensed to operate in a specific state or area. Otherwise they cannot offer / accept bets without consequence.

The one exception is vendors (to operators). They aren’t required to have a license.

Section 104 also states that Indians tribes can opt-out of the bill. They’re allowed to do and set the rules as they wish within their territory too, which operators will have to abide by.

In order for operators to be licensed, they will need to go through an application process. This process includes providing:

  • Financial information. This is to prove they have the cash flow and responsibility necessary to run an online poker operation.
  • Documentation about their organization, related businesses and affiliates.
  • Criminal history of owners, directors and any one else that state agencies consider appropriate. Criminal activities need to be free of habits or prior crimes that could be deemed a risk to online gambling, running a business, risk to players’ funds, etc.
  • A plan for how the operator expects to comply with the requirements and regulations under the bill.
  • Disclosing all other applications, licenses, etc, whether they’ve been approved or not.

Background checks will be given too.

Operators will also need to ensure that (to the best of their ability):

  • Players are 21 years or older.
  • Bets / wagers are placed in territories that have deem activities legal.
  • That taxes are collected and/or reported per law.
  • That fraud, money laundering, terrorist funding, etc are being prevented.
  • That users information is protected.
  • That cheating is prevented.
  • Equipment is kept within the boundaries of the USA.

One thing I noticed is that fees were not established in the bill. That would be left up to the agency to decide.

Section 105 – Enforcement

This section of the bill describes how the guidelines will be enforced, and punishments, which include license revoking and fines.

The biggest takeaways are that:

  • If an operator’s license is revoked, they have 30 days to return customer’s funds.
  • If an operator’s license is under review (to be revoked), then the court may or may not allow them to continue accepting bets until a decision is made.
  • If operators (continue to) take bets without a license, they will be fined $1 million per day or the total of bets taken, each day they don’t have a license.

Section 106 – Compulsive Gaming, Responsible Gaming, And Self Exclusion Program Requirements

State agencies will be required to create, implement and enforce programs that provide solutions and resources to problem gamblers. This includes (text based) information, and options for self-exclusions, daily and deposit limits.

Lists of self excluded players will also need to be kept and updated regularly by state agencies and the Secretary.

Operators will not be at risk or held liable for players that continue to play while self excluded. In fact, players won’t be able to collect winnings or recover losses if they play while self excluded. These funds will be forfeited to the Treasury of the US.

Players that owe child support will be put on a list too, which will prevent them from playing until they’re caught up.

Section 107 – Prohibitions and Restrictions

This section prohibits:

  • The bill from being misconstrued to allow sportsbetting or other forms of gambling.
  • Credit cards from being used for deposits.
  • Poker parlors or cafes. People that run these sort of operations will face penalties listed under Title 18 and/or no more than 5 years imprisonment.

Section 110 – Cheating and Other Fraud

Section 110 discusses cheating and fraud.

Specific devices, with the exception of bots, aren’t clearly defined. The statute states that nothing can be used during play, which sounds like that eliminates HUDs and odds calculators. Any device or software that is allowed will first need to be registered or licensed with the Secretary.

In regards to cheating this is obvious – players will not be allowed to collude, chip dump, use bots, etc. Operators will need to do their best to prevent this from happening.

Players that are caught and prosecuted for cheating face fines, penalties under Title 18 and/or imprisonment of 3 years or less.

Section 112 – Construction and Relation to Other Law

This bill will not affect other laws, including the Wire Act and Indian Gaming Regulatory Act.

Section 201 – Financial Transaction Providers

Financial providers will not be held liable for completing transactions if they fall under this act or the Interstate Horseracing Act of 1978.

There is no liability for blocking or refusing to honor certain transactions.

Sources

https://www.govtrack.us/congress/bills/112/hr2366

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