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S. 3616 / Internet Skill Game Licensing and Control Act

S. 3616, better known as the Internet Skill Game Licensing and Control Act of 2008, was introduced on September 26th, 2008 by Senator Robert Menendez. Although the bill died in 2009, we thought it would be interesting to revisit and summarize it for you.

The objective of the bill was to provide licensing of internet skill game facilities or web sites, with the primary focus being poker. However, it also included any game under their definition of skill, which was that “that uses simulated cards, dice, or tiles in which success is predominantly determined by the skill of the players, including poker, bridge and mahjong.”

The PPA was consulted in the drafting of this bill. The bill was started so late in 2008 that it wasn’t expected to pass, but to instead serve as a placeholder going into the beginning of the new presidential term.

As a result of the PPA being involved, this bill was poker player friendly. Here are the primary concerns that the parties had at that time. They wanted:

  • Thorough vetting of potential licensees.
  • Mandatory implementation of technologies to protect against underage gambling and to monitor and detect individuals with excessive gaming habits.
  • High standards to thwart fraud and abuse of customers.
  • Regulation to prevent money laundering and
  • Processes to prevent tax avoidance.

Players would also be free to transfer money to and from licensed sites (and banks would be free to help). Knowing the concerns that lawmakers have, this is a noble, but laughable clause.

The bill would also open the doors for other skill based opportunities, including investing and stock trading.

And once the first license was issued, there would be a 6-month grace period for all other skill game licensees to acquire licenses or become targets for prosecution.

So, the bill was poker friendly indeed, in terms of both giving them what they needed to have a good time online, as well as to protect them. In fact, the bill clearly states that sportsbetting would still be illegal. And the wording was so strong that either the language in the bill would have to be changed, or outfits like Harrah’s would to find a workaround if they wanted to participate (due to having a B&M sportsbook).

That’s the premise of the bill. The rest of this page will highlight and provide cliff notes for the most important statutes.

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Sec. 5382 – Establishment and Administration of Licensing Program – This section mentions that a license will be required to operate an online skill game facility or website. One the first license is issued all others wishing to participate will have 6 months to acquire their licenses, cease operations or become targets for legal action.

Operators are required to apply for a license. In doing so they would have to share financial details, information about their corporate structure, the people involved directly / indirectly with the business and a certificate stating that they agree to all laws relating to skill games.

During the application process, operators would be judged based on their honesty, integrity, business probity and relevant experience, financial condition and capabilities, and their previous compliance of laws and requirements related to skill games in other (foreign) jurisdictions.

Operators would also need to be able to ensure that:

  • Players are 18 years or older.
  • That players are located in jurisdictions that allow skill game facilities.
  • That taxes are collected when players withdrawal.
  • Safeguards in place to prevent fraud and money laundering.
  • Safeguards to protect players from social related problems.
  • Players’ privacy and security are protected.

Once approved licenses would be good for 1 year.

Sec. 5383 Financial Institutions  – This section mentions that investment banking is ok (with a licensee) so long as the activities fall in line with the provisions set forth in that bill, subchapter, the Sarbanes-Oxley Act of 2002, the Securities Act of 1933 and the Securities Exchange Act of 1934.

It also states that a financial institution will not be held liable for engaging in financial activities and transactions involving licensees, so long as they’ve performed within the guidelines of the subchapter and federal, state and foreign banking laws. In other words, if an operator lied about being an operator or being licensed, the bank wouldn’t be held liable if they didn’t know and followed the guidelines in the act.

Sec. 5384 – Prohibition and Limitation of Licenses in States and On Indian Lands – This discusses the state’s and tribe’s right to opt out of the bill.

In doing so the licensees (operators) would not be able to accept wagers or bets from players in that state, tribe or region (that has opted out), so long as they told the Secretary of their stance before the end of the 90 day period. That 90 days would begin on the day of the enactment of the act.

This statute also allows states / tribes to establish their own laws on skill / gambling games.

Sec. 5383 – Sporting Events or Contests – This states that the subchapter cannot be interpreted to mean that betting on sporting events is allowed.

Sec. 5387 – Criminal Penalties – Any person that violates the laws will be fined under title 18 and/or imprisoned for no more than 5 years. Conviction can lead to permanently not being allowed to operate an online gambling site in the future.

Sec. 5388 – Rules of Construction – This states that this bill does not alter or limit other federal, state or tribal-state compacts. They list the IHRA of 1978, the GDTA and IGRA.

That covers it. Even though the bill died 4 years ago, it’s still interesting to see what lawmakers were trying to pass then compared to what they’re trying to pass now, especially when you consider the events that have happened along the way aka Black Friday.