As Senators Harry Reid (D – Nev.) and Jon Kyl (R – Ariz.) continue to work towards getting their online poker bill passed, a former Solicitor General of the United States has warned against its possible unconstitutionality. Paul D. Clement, Solicitor General under President George W. Bush from 2004 to 2008, penned a letter to Sen. Kyl at the end of October to express his concerns about certain aspects of the bill, the Internet Gambling Prohibition, Poker Consumer Protection, and Strengthening UIGEA Act of 2012.
The letter was prepared on behalf of the Poker Players Alliance in an effort to improve the poker bill. The primary subject of Clement’s criticism is the “bad actor” clause of the legislation, which states that any company which knowingly offered online gambling services to United States residents after December 31, 2006 must wait five years after the enactment of the 2012 bill before applying for an online poker license. Additionally, no company that would otherwise be eligible immediately may use any trademark, name, or even the software of one of the “bad actor” companies. If a company that would be considered a “bad actor” wants to be granted a license without waiting five years, it will have to prove it didn’t violate any laws.
The first issue Clement has with the bill is that it amounts to a regulatory “taking” against the restricted online poker firms. A “taking” is essentially government regulation of a property that is so extreme that is basically destroys the company’s (or individual’s) ability to use it. The government effectively exercises eminent domain power without actually removing property from the owner’s possession. Clement wrote of the original poker act of 2010:
…those market-exclusion and property restriction provisions would have severely damaged the economic value of much of the former Internet poker providers’ assets in a manner that would likely prompt a court to find that the 2010 Act accomplished an unconstitutional taking.
He adds that the 2012 bill is worse because it extends the waiting period from 540 days to five years, thus magnifying the financial impact on the gambling firms.
The second big problem Clement has with the 2012 bill is that “…while the 2010 Act’s market-exclusion and property-restriction provisions raised serious concerns that they amounted to an unconstitutional bill of attainder…the 2012 Act’s embodiment of those provisions makes matters worse.”
A “bill of attainder” is a law which both deems someone (or in this case, a company) guilty of a crime and punishes them without granting them a trial. In Clement’s words:
The 2012 Act effectively creates a rebuttable presumption that prior providers operated in violation of state and federal laws and, as a result, denies them the opportunity to obtain a license and participate in the new regulated market unless they can overcome the statutory presumption of guilt.
Bills of attainder are forbidden because they violate the concept of separation of powers, effectively granting the legislative branch of government the powers of the judicial branch. They also violate a person’s right to due process.
The 2012 bill, according to Clement, says a company is guilty of an illegal act simply for offering online poker games after December 31, 2006 (a date which he also criticized for being completely arbitrary) and simultaneously hands down the punishment of a five year waiting period, all without the realistic opportunity for a company to refute the decision.
And speaking of due process, Clement states:
The Due Process Clause does not permit the government to treat a class of assets as presumptively forfeited because of their alleged use in criminal activity and then place the burden on the individual to demonstrate that he operated in conformity with state and federal law.
In the letter, Clement appears perturbed that a company that was not convicted of any crime can, in essence, be considered guilty of a past crime and then have to prove that it was not.
Paul Clement’s entire letter to Sen. Kyl can be read at http://www.jdsupra.com/legalnews/ppa-memorandum-to-sen-jon-kyl-the-cons-29774/.
