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In 1965, Wilson Pickett and legendary bluesman Steve Cropper collaborated on the modern blues standard, “In the Midnight Hour.” (Cropper also cowrote “Dock of the Bay” with Otis Redding.)

I’m gonna wait til the midnight hour
That’s when no one else is around

Back in 1965, that might have been an apt way to describe a poker pro’s working conditions. In 44 years, poker emerged from its murky back rooms into the blinding lights of television and the ever-present eye of the internet. Ironically, the regulators of poker have moved to the hazy darkness of the midnight hour.

In those days of yore, poker games took place in secret locations. Players dealt their own cards. No one policed the games, unless they were looking for a bribe or shake-down. The less notice a player attracted, the better.

Doyle Brunson, the living embodiment of those days, long ago wrote that some former classmates would walk on the opposite side of the street if they saw him coming. Despite the respect accorded him within his profession, he did what he could to keep his only son from following in his footsteps.

And now? Doyle’s written two best-sellers about poker and operates a web site with his name on it. He regularly posts aphorisms about poker and life on Facebook.com. His daughter Pamela plays in some big tournaments.

Everybody else has followed – though in some cases Doyle had to catch up with the likes of Phil Hellmuth and Howard Lederer. Poker players have agents and publicists. They seek out television and lend their images and endorsements to books, DVDs, video games, and energy drinks. At the final table of the WSOP Main Event, it was standard business for top players to show up and WATCH, to get their names and logos on television.

That’s why it’s so weird that legislation that could wreck a multibillion dollar global business is coming from dirty, largely unseen hands, working in the dead of night.

The Unlawful Internet Gambling Enforcement Act (UIGEA) was passed at midnight on the last day of Congress before the 2006 elections, stuck at the last moment into a homeland security measure that would have been political suicide to oppose or hold up.

Two of the architects of that strategy – Representative James Leach and Senator William Frist – self-immolated shortly thereafter. (Leach was voted out by his district and, though he spent 30 years as a Rumsfeld Republican, has been reborn as a campaigner for Barrack Ombama. Frist left the Senate to contemplate a run at the White House, which died at conception.) Nevertheless, waiting until “the midnight hour when no one else is around” has remained part of the anti-gambling playbook.

This is apparently how a powerful special interest group flouted ethics rules and the express pronouncements of the Bush Administration to shove a horrible set of regulations into law at the last possible moment before George W. Bush leaves office:

1. The UIGEA needs regulations to be enforced. The Treasury has the job of writing them because the law says so; the UIGEA is mostly a regulation of banks, prohibiting them from processing the proceeds of “unlawful internet gambling.”

2. Those regulations have bogged down over the last two years for several reasons. First, it’s not a very high priority for the people enforcing it. Second, it’s a super-low priority to the subjects of the regulation. I mean, take a look at the state of the U.S. banking system. It’s in shambles, the subject of a trillion dollar bailout, the source of a possible long-term global depression. It’s simply not very important in the total scheme of things to figure out how to punish banks for allowing wire transfers to offshore third parties who forward them to other offshore sports books and the like. It’s like convening hearings on violent-sounding song lyrics in the wake of September 11.

In addition, the regulatory process has revealed how truly awful this law really is. I don’t say that as a partisan, especially to readers who are almost entirely fellow partisans. If I despised internet gambling – sports betting or online poker or whatever you want to insert there – I would be incensed that this is how they chose to implement my will, my passion.

The law doesn’t make any activity illegal. It merely punishes banks if they process transactions for “unlawful internet gambling”. If I thought online sports betting was the devil, I’d want the law to state that online sports betting is illegal. If I thought online poker was the plague, I’d want the law to make online poker illegal. The law doesn’t do any of that. And it doesn’t define “unlawful internet gambling.”

This is a bad for a law, and a nightmare for regulators, nothing less than an abdication of the legislative and regulatory function. (By the way, online poker players probably, on balance, BENEFIT from this messed-up operation, because sites like Full Tilt and others, with no clear signal that their operations are unlawful and carefully researched and reasoned legal opinions to the contrary, are continuing to operate, which has got to be better than someone who hated online poker actually having their shit together and saying, as they could have, “you’re out of business.”) Imagine criminal liability for doctors in a similar situation.

How would it look if Congress stripped the Food & Drug Administration of its power to allow/prohibit drugs and substituted a similar regulatory scheme? Doctors would be criminally liable for prescribing “unsafe drugs.” And they don’t define “unsafe drugs.”

You couldn’t blame doctors for being angry and confused to suddenly have that burden. So banks, whether you love ‘em or hate ‘em, understandably don’t like the idea that they have to figure out what constitutes “unlawful internet gambling” and refuse to process financial transactions to and/or from such entities or face criminal prosecution.

For these reasons, it has looked like the Bush Administration would expire before any regulations became law.

3. The regulatory process contains a series of rules and deadlines, and lame-duck administrations are legendary for pushing the envelope on them.

The Bush Administration acknowledged this and said it would not participate in such political activity. In fact the White House said it would not issue final regulatoins after November 1, 2008 except in “extraordinary circumstances.”

The rules and deadlines for the regulatory process are very specific. The Office of Management and Budgeting (OMB) has to recieve the final regulations a certain amount of time before publishing them.  After the OMB publishes them, they become operational after 60 days. Therefore, because the last day of the Bush Administration is January 19, 2009, the last possible day for publication of the rules in the Bush Administration was November 19.

Despite prior pronouncements by the Bush White House to the contrary, the Treasury Department and Federal Reserve Board adopted the final rules on November 12, during the final week of the Administration’s authority over rule-making.

4. The “quarterback” of this play has dirty hands. It appears a major role behind these regulations was played by William Wichterman in the White House Office of Public Liaison. Wichterman used to be with Covington & Burling, long-time counsel to the National Football League, and Wichterman was a lobbyist for the NFL as recently as March of this year.

The NFL has been a major force behind the UIGEA. The NFL has gotten a special exemption in the law for fantasy football leagues. According to a story in the Washington Post, those fantasy leagues pay substantial royalty fees in exchange for the NFL providing statistics, logos, and player information.

So the NFL makes out from this form of internet gambling and they have gotten it legalized. If other forms of internet gambling – especially online sports betting - were put out of business, the NFL would have a legal monopoly over online NFL football betting by virtue of its profit-making relationship with fantasy football leagues.

Amazingly, the Bush White House has claimed there were no ethics violations in connection with what seems like an extremely obvious conflict of interest. Representative Stephen Cohen (D-Tenn.) wrote to the White House out of concern that the “imeptus of the rule may have been a particular White House employee who has a clear and obvious conflict of interest.” Cohen also said he had been told that Wichterman “has been a source of considerable political pressure to speed this regulation through to finalization.”

5. Maybe President Obama (and Eric Clapton) will have something to say about this. We can’t predict what Obama will do but it’s pretty likely his administration will look very closely at all last-minute policy-making by the Bush administration. Although poker isn’t necessarily high on Obama’s priorities, the blatant political nature of this process, after the Bush administration promised no new regulations except in “extraordinary circumstances”, cries out for attention.

While Wilson Pickett was the poet Laureate of the Midnight Hour, Clapton – the song was actually written by J.J. Cale – is the doctor of After Midnight.

After midnight, we’re gonna let it all hang down
After midnight, we’re gonna chug-a-lug and shout
We’re gonna stimulate some action
We’re gonna get some satisfaction
We’re gonna find out what it’s all about
After midnight, we’re gonna let it all hang down

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One Response to “#618 – ADVENTURES IN THE LAW, Part of a Continuing Series – UIGEA In the Midnight Hour”

1. iahawkeye53 Says:
   December 5th, 2008 at 12:23 am

   Michael,

   It’s ridiculous for you to call out former Congressman Leach as a Rumsfeld Republican for 30 years while being our Representative. Because of UIGEA you have managed to form a very strong opinion of person you don’t know very well. In 2003, Leach nearly committed political suicide by not only breaking party lines but having his “patriotism” called into question by voting against the 2003 Resolution to authorize the use of force in Iraq. He’s also received an A rating from NARAL, a pro-choice activist group. In the 2006 election, the NRCC thought Leach might be in jeopardy of defeat before the election in a liberal district, and offered to send out anti-gay marriage mailings on his behalf, and Leach threatened to leave the party if they followed through.

   I feel that you writing this and linking him in any way to Donald Rumsfeld is incredibly disingenuous.

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