Congress Considers Enforcement and Compliance Review of the Unlawful Internet Gambling Enforcement Act

Brownstein Hyatt Farber Schreck

Brownstein Hyatt Farber Schreck

The latest effort in Washington aimed at undermining the burgeoning online gaming industry was recently introduced in the form of S. 3322. The bill, entitled the “Prevention of Deceptive Child-Targeted Advertising in Violation of the Unlawful Internet Gambling Enforcement Act,” is sponsored by Sen. Tom Cotton (R-AR). Indeed, the bill purports to express the “sense” of Congress that:

(1) Congress enacted the Unlawful Internet Gambling Enforcement Act (UIGEA) because traditional law enforcement mechanisms proved often inadequate for enforcing gambling prohibitions or regulations on the internet.

(2) Congress intended UIGEA to generally prevent the use of financial instruments in the United States for online slot machines, lotteries, table games and similar offerings.

(3) The proliferation of smart devices has increased the number of casino and lottery websites offering online gambling websites and mobile applications that are designed to be attractive to children, including by featuring cartoon characters, themes based on children’s fairy tales and similar content, or by including gambling activities disguised as other content.

(4) The continued development and proliferation of online gambling websites and mobile applications in defiance of federal law prohibiting such activity necessitates that Congress understand the extent of such attempts to evade the law and the options available to improve enforcement.

Beyond this expression of Congress’ “sense,” the bill, if adopted, would actually do nothing more than require two reports. The bill would require the Secretary of the Treasury to opine on the gaming industry’s compliance with certain aspects of UIGEA. Specifically, Treasury would be required to provide: (1) a summary of offerings by online casinos and lotteries operating in the U.S., including a list of such offerings that feature content that may be targeted toward children; and (2) an assessment of both the means by which online casino and lottery websites or mobile apps receive funds from players in light of the prohibitions within UIGEA, and the effectiveness of efforts by Treasury to ensure compliance with UIGEA. Second, the bill would require the Federal Trade Commission (“FTC”) to report on “deceptive advertising related to unlawful internet gambling,” particularly as it relates to children, and a summary of the FTC’s efforts to prevent the same. Furthermore, the bill requires the FTC to report on how social games may be used to entice children to participate in unlawful internet gambling. Sec. 3(b)(1)(B)(i) requires a report “regarding deceptive advertising related to unlawful internet gambling, including an assessment of efforts by internet website and mobile application developers to deceptively present unlawful internet gambling opportunities, including online slot machines, lotteries, table games and similar offerings as part of non-gambling gameplay or application use within websites and mobile applications offered to users in the United States.” (Emphasis added; internal section numbers and punctuation omitted.)

S. 3322 was referred to the Senate Committee on Banking, Housing, and Urban Affairs, but may or may not receive a hearing, much less move through the legislative process toward successful passage. So, although not a serious threat to the future of online gaming, this bill does signal a continuing concern within Congress about unlawful internet gambling. Although the bill purports to be concerned with unlawful internet gambling, the report required of the Treasury Department is not confined to illegal operators.  See Sec. 3(a)(1). Also, Sec. 3(a)(2) requires an “assessment of the means” gaming websites receive funds “in light of” UIGEA. This assessment is not expressly confined to illegal sites or apps. Furthermore, because UIGEA does not define what is “unlawful internet gambling,” an arguably ambiguous area of the law could be made murkier by any attempt by the Treasury Department or FTC to define this heretofore undefined term.

In short, this bill signals a continuing concern by some in Congress with the various legal and social issues surrounding online gaming. The fate of this particular bill and potential others similarly aimed at the industry will be closely watched in weeks and months ahead.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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