The choice was to go to the Michael Jackson Tribute or to attend the proceedings for iMEGA vs the US Attorney General on the legality of the Unlawful Internet Gaming Enforcement Act (UIGEA).

We should’ve gone to see the King of Pop off…

The Third U.S. Circuit Court of Appeals must be a difficult place to bring a case. Either Judges Dolores Korman Sloviter, a Carter appointee; Judge Thomas L. Ambro, a Clinton appointee; and Judge Kent A. Jordan, a George W. Bush appointee, are really that tough, or maybe they were just having a bad day.

iMEGA, as the appellant, was able to give their argument first. They were attempting prove that the UIGEA should be stricken down because it is vague. Stephen Saltzburg, spoke first and immediately took the time to ensure that three junior lawyers who came along for the ride had their names read into the record. The court was not pleased as Judge Sloviter announced that “We have associates here too. Should we announce them?”

Almost immediately, Judge Ambro, seated on the left, facing the gallery, asked to be reminded of the status of H.R. 2267, the current bill from Congressman Barney Frank. The counsel answered the question by offering his own opinion that H.R. 2267 may not even be addressed this session, due to other more urgent issues in front of the current Congress. Obviously, the judge knows what current laws are in the U.S. This question made it clear that he was setting the tone – this would be an uphill battle for iMEGA.

When Mr. Saltzburg was finally allowed to present iMEGA’s argument, he said that ‘vagueness’ in a law is when “reasonable people have to guess” if what they are doing is illegal. Judge Jordan, who was seated on the right, responded by stating that in order for a statute to be void for vagueness, it would have to be vague in ALL circumstances. Salzburg went on to say that the statue says ‘Unlawful Internet Gaming’ without actually stating what it is. In noting that the UIGEA does not supercede any state law, Judge Jordan said that maybe the iMEGA may have a beef “with the states, not with this statute (UIGEA)”.

I was starting to feel a little ill by now, watching iMEGA’s lawyer toss softballs to three judges holding a 36 ounce Louisville sluggers and watching them slap the ball into the outfield.

Saltzburg apparently felt it too and switched tactics, remarking that “a U.S. citizen could go to Costa Rica and place bets there, why could he not place wagers over the internet with the same company from his home?” He basically blew the dust off of the old argument that if the money is deposited in Costa Rica, and the clerk in Costa Rica is actually the one placing the bet, then the U.S. citizen is not really the one placing the wager. In the age of the Internet, the argument would be that the player’s computer is hooked up to a game in Costa Rica, thus the gambling is taking place in Costa Rica. Is a bet placed from where your computer is or where the site’s servers are?

This is an oldie but a goodie. In fact, it was one of the very first arguments I ever heard for why this is all ‘legal’. A sportsbook owner spun this same tale back in 1999. “This is why gambling off shore is legal, ’cause the bets are placed using money in a foreign account, on foreign soil by a representative from that country”. The reasoning being that gamblers in the U.S. are not placing bets, Costa Ricans are! Or, that you are not placing the bet in the computer on your house, but the computer in Costa Rica!

Again, the court refused to even head down this path, though they spent a good deal of time on the subject of where the bet is placed. Apparently, all three judges do not have any type of ‘virtual’ life. They argued again and again with Saltzburg that if you are “physically sitting in Delaware, then the bet is coming from Delaware”. Or put another way by Judge Jordan, ” . . .if you live in state X and state X has a law against gambling on the Internet . . . when you place a bet from state X, you are breaking the law.”

Game, Set, Match. NEXT!

Eric Bernstein then continued the fight for iMEGA and likewise got nowhere with the three judge panel. He said that iMEGA was not only bringing this motion in front of the court for its Members, but for customers of those members as well. The judges questioned whether he had the right to do that and Judge Sloviter rhetorically asked if the gamblers that iMEGA represents were there in court. Though I wanted to jump out of my seat, this court was clearly in no mood for any type of shenanigans. There was plenty of agreement from the judges that it was a bit of a stretch for the prosecution to assume that the customers of their Members would bring such a suit.

The judges also brought up a previous argument from iMEGA where they had said that this law was in violation of personal privacy, that someone has the right to do what they want on their computer in their own home. However, Judge Jordan did not give Bernstein much chance to answer, instead interjecting. “Do you say that you have the right to make a bet, in your own home, when it is in violation of the law?”

NEXT!

The defense was allowed to present its case, and clearly Nicholas J. Bagley, knew that his side was rolling downhill with these judges. So he said VERY little. He did mention previous cases that had been brought before lower courts, including the Utah case from 2007. He leaned on state law and was “somewhat dumbfounded” when asked if iMEGA could bring a suit as a third party for gamblers. With almost nothing from the three judge panel, Bagely sat back down. He was done so quickly, the ink had barely dried on his name in my ‘defense notes’ page, when it was time to flip to a clean page for the iMEGA rebuttal.

Surely iMEGA would fire a last salvo. Certainly, there was a silver bullet still in their gun. Regrettably, no. Instead, Mr. Saltzburgh wanted to say that gamblers couldn’t bring a suit on their own; after all they could suffer prosecution or become ensnared with civil claims. At this point Judge Ambro seemed like he had enough. “So you are saying that if I go and play at Ultimate Bet from my house” . . . I am not gambling here in the U.S.? Judge Jordan added “What’s vague about placing a bet from within your state?”

The Judges will eventually render a decision. It will take anywhere from one to three months. If they rule in favor of the U.S. attorney, iMEGA informed us that they will move up that judicial appeal tree or ask for another hearing in front of the full panel of 3rd Circuit Court justices.

The hearing, which lasted less than 30 minutes, was painful exercise in futility for our side. The iMEGA lawyers were hammered by the judges and their arguments fell on deaf ears. The judges were quite tough, but in all fairness, were equally tough in all of the cases that we sat through. This was a perfect chance to change current law and void the UIGEA. Unfortunately, it may have been a blown opportunity.

The case presented hinged on the vagueness of illegal Internet gambling yet left out several important aspects of what is easily seen as vague applications of the UIGEA. How can it be legal to bet horses or lotteries over the Internet when the Department of Justice themselves have said that ALL Internet gambling is illegal Internet gambling (House Judiciary Committee Hearing on Online Gambling, 2007)? When lotteries in Massachusetts and North Dakota have credit card sales blocked under the UIGEA, and these are supposedly ‘legal’ Internet gambling transactions, doesn’t that prove that this law is vague as to what is illegal and legal? How is a U.S. citizen supposed to know if they are breaking the UIGEA when their state may or may not explicitly prohibit Internet gambling?

After watching these proceedings first-hand it is clear that iMEGA or any group may find it easier to climb Mt. Everest that to have any court in the land void the UIGEA. This hearing was scheduled in Philadelphia, a ‘gaming friendly’ jurisdiction, and was heard by three judges, a majority of whom were democratic appointees. Still, even these favorable aspects were rendered moot. The court‘s immediate referral to Barney Frank’s latest bill makes it evident that for change to occur, it will have to come from the legislative branch of the U.S. government, not the judicial system.