Unlawful Internet Gambling Enforcement Act

Sorry if this is a repost

from http://netfreedomforever.com/vote.php

Bush Administration Moving to Block Second Life and Other Online "Games of Skill"
In 2006, Congress passed the "Unlawful Internet Gambling Enforcement Act." The bill was vaguely written and voted on months before the '06 election.


The bill's political purpose failed-- Republicans lost control of Congress, and the bill's primary House author, Rep. Jim Leach, was defeated in his reelection bid. Unfortunately, the law lives on.

This month, the regulations that will implement the 2006 act are nearing completion at the Federal Reserve and the U.S. Department of Treasury. The rules will significantly expand the reach of U.S. government oversight, bringing new scrutiny and enforcement activity to a wide range of online activities.

Broadly speaking, there are two areas of internet activity which the government intends to regulate. The first is online sports betting-- wagering on the outcome of sports events-- which is relatively easy to identify and control. Indeed, it is already very difficult to transfer funds to an online sports betting web site.

The second area targeted by the new regulations are "games of skill"-- such as online bridge or backgammon, some types of fantasy sports, predictive markets such as InTrade, and communities involving transactional activity like Second Life. This area is far more diverse and difficult to define, identify, and control. As the Federal Reserve itself noted in April testimony, “The activities that are permissible under the various Federal and State gambling laws are not well-settled and can be subject to varying interpretations,” and that both the new law and proposed regulations "did not specify what constitutes unlawful Internet gambling."

Because it is nearly impossible to ban actual web sites, which can be easily moved around the internet, the law targets the payment processing systems (bank credit cards, PayPal, etc) that make the internet economy work. The law makes banks evaluate your personal charges and block transactions which involve activity in these two areas. As Congressman Ron Paul testified in April,

"The regulations and underlying bill also force financial institutions to act as law enforcement officers. This is another pernicious trend that has accelerated in the aftermath of the Patriot Act, the deputization of private businesses to perform intrusive enforcement and surveillance functions that the federal government is unwilling to perform on its own."
To be clear, banks to not want this new burden. They bear liability under this new regime, and as a result will be very conservative when it comes to determining what types of web sites should be blocked under the regulations. Already, the U.S. Attorney's office has extracted tens of millions of dollars in fines through online gaming and related enforcement activities. For example, when eBay acquired PayPal in 2003, the company had to pay a $10 million fine to settle online gambling charges. And that was before the passage of the 2006 act substantially raised the stakes for the banking industry.

With the new rules under final consideration by the Bush Administration, the potential penalties will now expand to a broader category of internet activity, stifling innovation and economic growth online. The financial service providers will be even more risk-adverse and will implement blanket bans rather than take the risk of a case-by-case approach. The new federal rules will result in bans on processing for many activities such as low-stakes poker online, even though those activities are legal in most states.

Ground-breaking sites like Second Life will likely fall victim to this expanded reach. Second Life has a successful in-world economy that involves, in part, trading and developing real estate with other community members. The Second Life economic system has hundreds of thousands of users trading 5.3 billion "Linden dollars" which are freely convertible to U.S. dollars.

Liden Research has already moved to ban games of chance within Second Life, but the new regulations pose a threat to the fundamental economy of the site.

Given the new risks and burdens the proposed regulations places on the U.S. banking system, there is little difference between trading real estate in Second Life and other “games of skill” that the regulations target.

The new rules will clearly stifle innovation and the creation of new forms of online interaction. It will be impossible to distinguish new forms of collaborative economic activity from the wagering “games of skill” targeted by the law. For the payment processors, it won't be worth the legal risk to even try.

Further, these skill-based online activities will not only be banned for consenting U.S. adults, but for users accessing U.S. sites from anywhere in the world. Again, it does not matter if the “game of skill” is legal or not in the user's local jurisdiction. Federal law, as implemented by these new regulations, will make it illegal, and the feds are empowering your bank to analyze and block any offending transactions.

The new regulations also mean it will be more difficult for U.S. technology companies to operate on a global basis. It is a recipe for moving more technology companies offshore. Already one of the most innovative predictive futures markets covering U.S. elections, InTrade.com, operates in Ireland.

On Tuesday, September 16th, the House Financial Services Committee will hold an emergency mark-up of legislation that attempts to address this urgent matter. The bill is a compromise that will make online sports betting illegal, but delay the implementation of rules governing "games of skill." Instead, the bill would require formal rulemaking so that the impact of the new regulations on communities like Second Life can be fully understood.

*stunned*

Wow....the implications there are...mind blowing!

Meh.

Big meh.

It still all comes down to whether the Linden has value or not. And it does.

And real world gambling laws are still real world gambling laws.

/me returns briefly to dealing with real world gambling issues in my real life job ...

Ditto Cherry

Did you read the article all the way through? This isn't just about gambling.

Seems a bit paranoid to me. We sell online goods and services here. Legitimately.

If Second Life goes down just because someone could get around the rules and 'do bad things' - well in that case, World of Warcraft and a number of others are going down too.

Along with ebay and Apple itunes and Amazon, and just about anyone else that sells online. Google Adwords - seriously now folks, that's bigger than SL ever will be, and it can be gamed like whack-a-mole at a kiddie birthday.

There are plenty of other companies that have the equivalent of $L or similar - consider everyone from blue chip stamps to Starbucks gift certificates, to Ford and GM with their online internet pricing. For that matter, credit card companies *themselves* are bigger agents of casual fraud than the grid will ever be. They don't investigate in most cases, they simply fold in the fraud losses into costs we all bear. Forget about $L, it's your Visa or MC balance that is more likely to be 'gamed' by a criminal in the near future.

Most of all, look at what enforcement is, and isn't funded. I checked up on this once (before the gambling ban) and most internet fraud is stupid stuff like ebay fraud - item purchased but never delivered - or ponzi schemes.

It was only last year or so that there was significant funding put toward online gambling investigations, beyond the most ridiculously blatant cases the FBI simply could not ignore. And that was only something like ten million dollars federally, nationwide, for laws that have been on the books forever.

I suspect this article is one man's opinion, and not an entirely balanced view.

Yep Honey - lol, I was reacting to my bit really.

"Games of Skill" sets me off anyway, in our terminology a game of skill is something such as Blackjack where player choice has an influence on the outcome, with fixed odds games (like slots) being Games of Chance. In the online gambling world at least they are both decided by a random number generator.

***edit*** in essence, what Desmond says

ALSO ... this sort of brings the US in line with some of the stuff already happening in the UK. Every day we find people can't easily make deposits with our site as the bank has put blocks on their transactions ...

OK, good enough for me. I tend to be a bit reactionary these days *sigh*

/me gives Honey a hug

so if the lindens made a lottery ticket system that they "sold" to the public to use would this cercinvent that law i ask becouse it appers to work for states when they do it

LL can clim it's for educational perposes as well i would supose

This is actually from the SAFE Port Act

Title VIII of the Act is also known as the Unlawful Internet Gambling Enforcement Act of 2006 (or UIGEA). This title prohibits the transfer of funds from a financial institution to an Internet gambling site.

The article I posted in the OP seems to imply that upon considering the many ambiguities of the new law it would lead one to believe banks may be less likely to process transactions for worlds like Second Life since their financial liability would be greater.

Do banks trust LL enough to risk millions in fines?

Your key word there is "may".

That article is more Election Seasone Pandering than anything else. For a less hysterical view:
http://www.pocketfives.com/online-poker-scene/frank-introduces-hr-6870-will-be-marked-up-tuesday-3293542

Not that I would ever admit to playing any online poker...but if I did, I would be able to tell you that pocketfives is a very well respected site as is twoplustwo, which has an entire forum dedicated to poker/gaming legislation, and the Poker Players Alliance has some excellenmt information on this subject as well.

I really disagree with the author on the issue of the effect this will have on Second Life. Buying and selling property in Second Life has no element of random chance - there is no random number generator that determines the price of land. There is an element of chance, obviously, since you can only try to predict what will happen to the market, without any certainty that it will actually happen. However, it is no more gambling than putting your money into an eTrade account, buying investments and hoping that they appreciate. Lots of people this week are regretting those gambles.

This isn't a big "meh" overall. It is for Second Life, but the bigger picture is that this is a serious erosion of our privacy and of our abilities to live as we please free from the interruption of government. I completely agree that shifting the burden of enforcement to the banks is reprehensible. Making private entities enforce the law? Don't I pay an arm and a leg each year in taxes? If this is so important to the government, that they want to come into my private home and tell me how I can and can't spend my entertainment budget and where I can and can't go on the internet, then let the damned government enforce it. When I choose where I bank, their police powers are not something I want to have to take into account.

Well said, Trout.

I'm as concerned about terrorism as anyone else...but in my view, the Patriot Act and the other steps that have been taken, ostensibly for our "protection", are a serious erosion of our freedoms.

We may wind up building a big raft, anchoring it well offshore, inviting a few close friends to join us, and declaring the Independent Duchy of...well, "Caledon" is taken. I'll come up with something.

Trout for President!

http://en.wikipedia.org/wiki/Online_skill-based_game

Online skill-based games are online games that allow users to compete for money. These games differ from gambling in that the games are based on skill rather than chance. These games are usually browser-based games.


_____

Ok, wikipedia is not a official source of the government.In fact if I really understood, the problem is that there is no such official definition for Skilled game.So, if the congress create a definition thats cover the SL concept.That's the end.

However SL concept is not new ! In my vision....

Money in SL selling things: is about sell digital contents.Ok...Close the SL ! Also close the iTunes, templatemonster.com, amazon.com (some departments such as TV show).Paid e-books also must be closed.Does it make sense, right ? ah, sure...lets close Microsoft web sales, symantec and all over abou 95% of copanies thats delivery paid products by download ! All is digital content !

money in SL trough real estate: What exactly a sim is ? Basically is a dedicated server thats run a 3D server software.This 3D software can host contents.You pay 1000 L$ to buy a sim and 295 US$ a monthly fee, right ?
So, what is the difference of this and a dedicated host running apache or IIS ? Own a sim is like pay a setup fee to install a dedicated server and pay a monthly fee to keep this server.Each land can be considered a web site.In my vision thats the way it is.All is this vision is about sell , resel and rent hosting services of some how.So, why not close GoDaddy also ? LOL

Money in providing services: There is dozens of services at www where the woman get naked and you pay to see it.Sometimes not 100% naked, obvisoully.Is it illegal ? Ok, close SL and also close this thousands of Web Site !


Thats my opinion folks..

Good Lord.

We're doomed if that happens.

We're doomed anyway. We might as well go out laughing and having a party.

/me scurries off to order up campaign buttons and bumper stickers.

Er....depends on who you're buying from!

Taken broadly, you can interpret it as also applying to ebay or online auctions. I don't think that is the point of this legislation. Second Life is really a trading platform like ebay rather than poker or whatever....

I suspect this will legitimize the SL economy rather than threaten it.

Why so determinedly republican? All hail Queen Trout, I say!

Inc

"Given the new risks and burdens the proposed regulations places on the U.S. banking system, there is little difference between trading real estate in Second Life and other “games of skill” that the regulations target. "

That is a REAL streach, and I seriously doubt any sane judge would agree with that straw man.

This article is hype, plain and simple.

There are probably enough people in positions of power who secretly belong to SL or other online worlds or games to ensure its survival for at least as long as the US still has an economy!

I'd agree with you if I thought that lawmakers had any understanding of SL's economy, but we know that's not the case. People really have a hard time grasping the market for virtual goods because they can't get past the "virtual" aspect, so they can't see it as anything but buying and selling something wholly imaginary - which makes it all a game (of chance, or skill, or whatever). If they looked at the SL land market as being a market for speculating on a real commodity, like server space for building websites, or bandwidth, or crop futures, or some other tangible commodity that they could wrap their heads around, it would be highly unlikely to be regarded as a game, and by extension, a form of gambling. Since they seem unable to see the parallels, I wouldn't be too quick to dismiss this.

I've long thought it was a mistake for LL to make land into a tradeable commodity, but that's another story.