Internet Gambling – Globalising Regulation After Black Friday
This article was first published in the August 2011 edition of the World Online Gambling Law Report. It is re-published with the authorisation of the editors
Jeremy D. Frey Partner, Pepper Hamilton LLP (Philadelphia, USA)
frey@pepperlaw.com

The suspension of the licenses of Full Tilt Poker by Alderney’ Gambling Control Commission and France’ regulator, the ARJEL, in connection with the US Black Friday indictment (1) has raised questions about whether and when internet gaming regulatory organizations should take cognizance of wholly extraterritorial conduct without a substantial ‘nexus’ to the licensing jurisdiction. These questions in turn raise broader issues about the nature and role of internet gaming regulatory organizations around the world.
Certainly, in suspending Full Tilt, neither Alderney nor France was presented with wholly extraterritorial conduct, since the asset seizures by the US Government (2) apparently resulted in Full Tilt’ inability to re-pay UK and French players. Still, the Black Friday indictment is about the internet poker operators allegedly violating US gambling laws in the US and mainly engaging in alleged bank fraud in the State of Utah. It’ not about Full Tilt’ conduct in London or Paris.
No one seriously contends that the Black Friday charges can or should be pre-tried in Alderney or Paris. 

The 2009 events at the SunFirst Bank in St. George, Utah, a remote western US town of 72,000 souls, are an unlikely subject for fact finding by internet gaming regulatory organizations in advance of a US jury’ determination. Neither would be it persuasive to claim that any impact, no matter how slight, of alleged improper foreign conduct on the licensing jurisdiction should be sufficient grounds for adverse licensing action. After all, alleged misconduct by a licensed operator occurring anywhere in the world is likely to have at least some plausible connection to or impact on the licensing jurisdiction.
Equally difficult is the proposition that any self-respecting state-sponsored internet gaming regulator can play the necessary idiot to such events as the Black Friday indictment without responding, on grounds that the conduct was extraterritorial. The effect of Black Friday on the European internet gaming market, and on European players, was structural and profound. This was not like the passing of a big storm at sea. At the very least, the indictment’ allegations bear on whether Full Tilt and the defendants are, for example, ‘fit and proper’ to use Alderney’s own terms. 

It would be fine for the world’ internet gaming regulators to look the other way on events such as Black Friday as long as they purport to be only like local toll collectors, instead of bodies that regulate, supervise and discipline non-compliant industry participants in order to protect players within their embrace.
As the events involving Alderney regulator and the French ARJEL indicate, there is certainly no consensus on how the internet gaming regulatory organizations can or should Internet gambling: globalizing regulation after Black Friday react to extraterritorial events such as Black Friday. As if to the prove the point, in contrast to Alderney and France, for example, no action has been taken by Italy’ AAMS, and the Kahnawake Gaming Commission just renewed Full Tilt’ license. That being said, it is easy to imagine the factors to be applied in determining when a regulatory body should consider alleged foreign misconduct as grounds for disciplinary action. 

These would include prudential deference to determinations by a regulatory authority in the location where the alleged misconduct occurred, and the strong preference to forbear from serious regulatory discipline (such as license revocation) in the absence of reliable and adversarial fact finding. Considerations such as whether the conduct at issue is alleged to be institutional and persistent, or unauthorized and aberrant, and whether it implicates the licensee’ business integrity would also be among the relevant factors. US jurisprudence, for one, is legion with such factors analyses.
The business of determining and applying such factors and more generally of bringing greater order to the internet gaming industry, however, is a non-starter given the world’ current patchwork of local regulatory ‘organizations’ (3). It is instead ultimately either the business of the industry itself though the creation of self-regulatory organizations, or the stuff of international protocols, both of which are very distant prospects indeed. For its part, the US, still bizarrely rooted in internet gaming prohibition, is contributing nothing to the development of the industry in vision or leadership, and is instead preoccupied with seeking punishment of a handful of grey marketers. 

The ARJEL and AAMS, by contrast, recently signed the 28 June Rome Cooperation Agreement in what looks to be a small but still first step toward possible European harmonization in internet gambling regulation (4). Regardless of how the decisions of Alderney and ARJEL against Full Tilt are assessed, it is time to get more serious about creating a more comprehensive regulatory regime for internet gaming. 

1. United States v Scheinberg, et al., 10-cr-336 (LAK) (S.D.N.Y.).
2. The actual seizures of assets and domains were followed by the US
Government’ civil forfeiture complaint in United States v Pokerstars, et al.,
11-cv-2564 (LBS) (S.D.N.Y.).
3. Depending on how they are counted, there are approximately 30
internet gaming regulatory jurisdictions, including among others Alderney,
Antigua, Costa Rica, Curacao, Gibraltar, Isle of Man, Jersey, Kahnawake
and Malta.
4. Richard, A. & Gautier, C., ‘ARJEL and AAMS: First Step towards EU
Harmonisation?’ Volume 10, Issue 07 (July 2011), World Online Gambling
Law Report.