In November, the Interactive Media Entertainment and Gaming Association (iMEGA) filed its response brief in a legal challenge to declare the Unlawful Internet Gambling Enforcement Act (UIGEA) unconstitutional. On Thursday, the organization announced that it had been contacted by the Third Circuit Court of Appeals about its availability in April.
The case stems from the 2006 passage of the UIGEA, which was ushered through Congress by former Senate Majority Leader Bill Frist (R-TN). Attached to the SAFE Port Act, an unrelated port security measure, the UIGEA cleared the Senate by unanimous consent and was signed into law by outgoing U.S. President George W. Bush in October of that year. The law did not prescribe what was “unlawful.” Instead, it deferred to existing state and federal laws, claiming that the transfer of money to any “unlawful” enterprise was illegal.
Its vagueness turned the industry upside down, as the largest online poker room at the time, PartyPoker, vacated the U.S. market. Following the Party Gaming owned room were others, including Paradise Poker and Pacific Poker. Payment processors including NETELLER and Citadel Commerce also departed the United States. iMEGA has since been granted standing to sue to declare the UIGEA unconstitutional. Its “void for vagueness” argument may now head to the Third Circuit Court of Appeals as soon as April. The Court contacted both iMEGA and the Federal Government seeking the parties’ availability during the month.
The case, which is appeal number 08-1981, lists former U.S. Attorney General Peter Keisler, the Federal Trade Commission, and the Federal Reserve as its defendants. On its main argument, iMEGA claims in its response brief, “The void for vagueness doctrine requires that a policy or statute defines an offense with sufficient definitiveness so that ordinary people can understand what conduct is prohibited.” According to Congressman Barney Frank (D-MA), Chairman of the House Financial Services Committee, the legality of online wagering on horse racing, for example, “depended on which department you asked,” according to a statement made in 2008.
iMEGA Chairman Joe Brennan commented in a press release distributed on Thursday, “We’re very happy the Court is moving forward to schedule oral arguments. We’re confident we have a strong suit and it will be difficult for the Department of Justice to defend UIGEA because it is so fatally flawed.” The UIGEA charges the financial services industry with determining what is and is not permissible. According to iMEGA, this is grounds for the law being unconstitutional. The press release read, “Congress cannot delegate that necessary determination as to what is ‘lawful’ or ‘unlawful’ to U.S. banks and credit card companies.”
In March, Judge Mary L. Cooper of the New Jersey U.S. District Court granted the organization standing to sue. However, in her judgment, she also disagreed with many of its main arguments. Consequently, iMEGA appealed, but ultimately had standing. In September, it officially filed its brief with the Third Circuit Court of Appeals. In its legal case, iMEGA noted that officials from the U.S. Treasury and Federal Reserve testified before Congress that they would not be able to enforce the UIGEA, as a strict definition of what is legal and illegal was never given. Nevertheless, the regulations of the law were passed by the Bush Administration as part of its “midnight rulemaking” and will be enacted on January 19th (next Monday), one day before President-elect Barack Obama is sworn in. Compliance by the financial services industry is required by December 1st.
iMEGA’s legal team is also one of the main parties involved in the ongoing legal battle in Kentucky involving the seizure and potential forfeiture of 141 internet gambling domain names, including those belonging to some of the world’s largest online poker sites. The state’s Court of Appeals heard arguments during a one hour session in December and the industry now awaits the ruling of the three judge panel, which is expected by the end of the month (although no official timeline has been given). The Interactive Gaming Council (IGC) as well as an attorney who represents several of the sites in jeopardy have both flanked iMEGA in the Bluegrass State battle.
iMEGA was founded in 2007 and almost immediately found itself immersed in the internet gambling industry. Brennan is a former online marketing and strategic analyst whose past clients include Sirius Satellite Radio, CNN, People Magazine, CBS News, and the National Football League. The organization is based in Washington, D.C. and its main counsel in the UIGEA challenge is Eric Bernstein.
