Sports betting is a hot topic in state legislatures, and the federal government wants in on the discussion.
As reported by ESPN, outgoing Sen. Orrin Hatch (R-UT) has begun circulating a federal sports betting discussion draft. The so-called Hatch Amendment would have wide-ranging ramifications for the nascent US industry — some good and some not so good.
Suitability clauses — often known as “bad actor” and “tainted asset” clauses — have derailed legislation in California for several years running. They’re also an integral reason for the absence of PokerStars in the struggling Nevada online poker market.
Legislative suitability clauses have mostly gone out of fashion outside of those two states. Hatch’s proposed federal legislation, however, takes a hardline approach to the issue.
Two of the draft’s 37 pages deal with the topic of operator suitability:
With respect to the suitability standards under in subparagraph (B)(1), provide that a prospective sports wagering operator shall not be determined to be suitable for licensing as a sports wagering operator if the prospective sports wagering operator—
The document briefly lists rational reasons for exclusion, such as:
The bulk of the section, however, concerns itself with bad actors and tainted assets.
Hatch’s proposal would deny licensure to any company that was involved in the following while it was illegal in the US:
(I) has knowingly participated in, or should have known the prospective sports wagering operator was participating in, an illegal internet gambling activity, including—
(aa) taking an illegal internet wager;
(bb) payment of winnings on an illegal internet wager;
(cc) promotion through advertising of an illegal internet gambling website or service; or
(dd) collection of any payment on behalf of an entity operating an illegal internet gambling website; or
The document presents a clear, bright-line date of Oct. 13, 2006, to coincide with the passage date of the Unlawful Internet Gambling Enforcement Act (UIGEA).
In addition to the mention of advertising above, a second paragraph from this section seems to expand the scope of the bad actor clause to include affiliates and any party that has assisted in facilitating an illegal wager:
… provided any assistance, financial or otherwise, to a person who has, before the date of enactment of this Act, knowingly accepted bets or wagers from any other person who is physically present in the United States in violation of Federal or State law;
The document also covers the acquisition of these tainted assets, such as the sale of PokerStars to Amaya (now the Stars Group). That transaction helped wipe away its previous transgressions in the US, paving its path to licensure in New Jersey and beyond.
Hatch’s proposal makes no provisions for such a cleansing of the slate:
with respect to any other entity that has accepted a bet or wager from any individual in violation of United States law, has purchased or otherwise obtained—
(I) such entity;
(II) a list of the customers of such entity;
(III) any other part of the equipment or operations of such entity; or
Effectively, this would prevent a company that acquires an online gambling website which served US customers after the UIGEA date from using branding, software, customer databases or any other tainted asset.
With Hatch’s retirement pending, his proposed legislation is on a tight timeline. Strange things happen in lame-duck sessions, but the possibility appears to be more remote under the urging of a lame-duck senator.
Furthermore, with Democrats taking control of the House of Representatives in January, expect Republicans to push big-ticket policy items up the priority list. Neither online gambling nor sports betting fall into that category.
And finally, as Online Poker Report has noted in the past, meaningful federal action on this issue seems unlikely at any point — let alone before Hatch leaves office.
You can take a deeper dive into the other aspects of the draft legislation here.
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