The American Gaming Association (AGA) is an organization that represents land-based casinos, and is headed up by president and CEO Frank J. Fahrenkopf Jr. The CEO is charged with being a national advocate whose job is to address regulatory, political, and educational issues affecting the industry.
Who better to lead the AGA than a former chairman of the Republican Party, whose experience includes 17 years of practice as a gaming attorney in Nevada, followed by being a partner in the Washington, DC, office of Hogan & Hartson, where Fahrenkopf specialized inregulatory, legislative, and corporate matters for multinational, foreign, and domestic clients.
Fahrenkopf's accolades include being a founder of both the National Endowment for Democracy and the International Republican Institute (IRI), both nonprofit, nonpartisan organizations dedicated to advancing freedom and democracy worldwide. If I were to inform readers of a small part of Fahrenkopf's impressive background, there would be no space left to write this column. Suffice it to say, his life and successes are an inspiration.
The Current Legal Landscape
It was, therefore, my pleasure to pick Frank's brain about his perception of the current legal landscape of online gaming. In his opinion, there is an odd marriage between those Democrats and Republicans who support a prohibition of online gaming.
Fahrenkopf explained: "In the Republican Party, the religious right think it's a sin to gamble, and they feel an obligation to stop everyone from sinning. Some very liberal Democrats don't think people are smart enough to protect themselves, so the government has to parent its citizens. It's an odd marriage."
Fahrenkopf thinks that in order to understand the landscape of online gambing, one must start with the 1961 Wire Act, whereby Congressen acted a law that had to do with using the telephone to place sports bets. Although the Bush and Clinton administration's have both taken the unique position that the Wire Act is broad enough to cover all forms of online betting, the courts disagree. The 5th Circuit ruled that the Wire Act deals only with sports betting. Fahrenkopf thinks that the case was never taken to the Supreme Court because it is clear that the high courtwould rule the same.
Behind Closed Doors
Fahrenkopf described a past experience: "About 11 years ago, I was invited to speak to the National Association of States Attorney Generals. I got there early and there was a session dedicated to Internet gambling, in which they were talking about the fact that there was no state authorization and no taxation or regulation of online gaming.
"They concluded that they couldn't do anything about it. So, they gave the issue to Senator Jon Kyl (R-Ariz.), who wrote a bill 11 years ago that made it a felony to place bets online! The Senate Judiciary said no way. We're not going to make it a crime when a guy comes home from work, puts his feet up on his couch, and bets 20 bucks on a game."
Some History
"About five years ago, Kyl introduced an anti-gaming bill to the Senate that required the ISPs to police the industry. The Indians wanted to be excluded, and horse racing wanted that, as well. When the bill went to the House, David Drier was against it because it was bad for ISPs, and it died in committee. Then the committee chairman changed, and Mike Oxley was the new Chairman of the House Committeeon Financial Services."
What Happens While Playing Golf?
"Oxley is a former FBI agent and a longtime friend. One day while we were playing golf, Oxley said that he realized that if the Kyl bill had passed, nothing would change because the online gaming sites are offshore. Oxley said he started thinking about the credit-card issue. Oxley was the guy who introduced it into the house five years ago. Mastercard and Visa fought it, but got cut to pieces. Discover and American Express didn't fight it. At the same time, eBay bought PayPal. Elliot Spitser went after eBay and got them to agree not to accept gaming transactions. PayPal agreed to pay big fees for having processed online gaming funds. As a result, in the last five years, almost no one uses credit cards for online wagering; they use companies such as NETELLER."
I commented that I recently wrote the same thing and was criticized by people in the industry who believe credit-card use is still going strong. Fahrenkopf responded that the smaller banks might still process online gaming transactions, but all of the big boys have been out of business for five or six yrs.
Kyl Calls Fahrenkopf
Fahrenkopf continued: "In February of last year, Kyl called me and said: 'I have crafted a bill that says people can't use credit cards for illegal Internet gaming; but I am not going to decide or define illegal Internet gaming. I am not going to decide whether the attorney generalor the courts are correct in their interpretation.' I told Kyl that the AGA board would not take a position."
Goodlatte's Feelings Were Hurt
"Kyl gave the bill to Rep. Jim Leach, who introduced it in the House. The problem was that Leach hadn't spoken to Goodlatte, a member of the House who tried to shepherd the online gaming issue. Goodlatte is one of the most conservative and Leach one of most liberal Republicans. Goodlatte was mad that Leach introduced the bill, so he quickly introduced his own bill." That explains why there were two similar bills in the House.
Combine the Bills!
"Both bills passed out of committee, but the House leadership said the bills had to be combined. Most of the harsh Goodlatte language was taken out of the bill that passed the House. Senator Kyl then picked it up, but there wasn't a lot of time left."
Kyl tried to hot-line the bill, which means sending it out in an e-mail to a number of senators, saying he wanted to take it to floor without debate. Six senators objected, but since the record is private, the public doesn't get to know who objected."
Some Really Good Gossip
Now things start getting interesting. Fahrenkopf has many contacts, and explained: "Senator Frist goes to Iowa, where he meets up with Leach. Frist wants to run for the presidency. There is talk that a secret deal was made, whereby Leach would help Frist run for president and Frist would get the bill passed, because, of course, the Iowa caucus is very important and he needs that state."
Frist came back to Congress with an agenda: get the bill passed one way or another, and he did just that."
So Much for Backdoor Deals
However, as
Card Player readers know, Leach was not re-elected in Iowa, and in the exit polls, a majority of Frist's constituents said they would not support him for the presidency, so eventually he announced that he was going back to the practice of medicine; so much for backdoor deals.Fahrenkopf thinks that the new bill doesn't really do anything because credit cards already are not primarily used. He also believes that the bill doesn't make any form of gaming legal or illegal, but merely addresses ways to get money to an online site.
His best guess is that the federal government will prepare a letter that tells financial institutions not to deal with such companies as NETELLER. E-wallets will be harmed. But he thinks that if one company goes out of business, a new business will pop up and replace it.
Congress Miserably Failed to Achieve its Goal!
"If you listen to the rhetoric of those supporting a ban on online gaming, they say that they have to protect the people from the bad guys. But, the publicly held companies were the good guys. They pulled out and now we're left with offshore websites that are not publicly held, with less assurance that they will treat the customer fairly. So, the new law will have the opposite effect."
When I asked what the AGA was going to do about it, he told me: "We want an independent study done by the National Academy of Science, to examine software and answer the question of whether online gaming can be properly regulated. If it can be regulated, under the 10th Amendment, states should be given that right.
Everyone Wants an Independent Study
When I asked how the AGA could help facilitate a study, Frank reminded me: "Congressman John Porter and Congresswoman Shelley Berkley of Nevada asked for such a study. There were about 50 bipartisan supporters, but it was too late in the session. My gut tells me thereis a lot of support for it." Fahrenkopf concluded by telling me that when Congress authors such a bill, the AGA will make sure it is worded properly and then will support it. There's still hope for the online gambler!
