Bad Actor Clauses and Online Gambling


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Bad Actor Clauses and Online GamblingIn the US several states have proposed eliminating "bad actors" from their online gaming industry and market. The issue has been controversial. Some in the online gaming industry have questioned the legality of a blanket bad actor clause. Several players have voiced their objections about the possibility that PokerStars may be excluded because of bad actor clauses in state regulations.

Many players are not familiar with the term. What exactly is a "bad actors"? In the US a bad actor is a person or gaming company that has a checkered past making it undesirable to legislators. The objections are usually because the 'bad actor's' participation in the US gaming market. A gaming company that accepted bets from the US after December 31, 2006 is considered a bad actor in most internet gaming bills. The date is important because it was the date that the Unlawful Internet Gambling Enforcement Act (UIGEA) became law on October 13, 2006. Some gaming experts say that UIGEA did not make anything new illegal so the legislation should not be considered when developing internet gaming laws. The cutoff date of December 31, 2006 is used in Nevada and in some bills introduced in California. New Jersey's gaming laws do not have any bad actor clauses.

A bad actor clause usually instructs state regulators that an internet gaming company operating in the US without an appropriate license after a certain date must be excluded as a bad actor. The decision to approve gaming companies is the responsibility of regulators who must conduct background checks and investigations of all key employees if there is no bad actor clause. Usually companies and individuals that have had past legal troubles will be excluded. Those with gambling related convictions would not be allowed to obtain an interactive gaming license in the US.

Some in the interactive gaming industry say that land based casinos have lobbied for bad actor clauses. The casinos believe that this will prevent offshore competitors from entering the US gaming market. For example the American Gaming Association opposed an interactive gaming license for PokerStars. Eric Hollreiser, Head of Corporate Communications for Poker Stars remarked: "These are matters for expert regulators to determine, not self-interested partisans picking a public fight." A survey showed that 22.5% of players believe that bad actor clauses are there to protect players. A majority said they were "protectionist politics" and "to keep the good operators out"

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