World Sport Congress

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I do not understand where the UIGEA came from.

I get that it is supposed to curb illegal youth gaming (because World of Warcraft is so much better for a 17 year old than poker is.) I get that it is supposed to curb money laundering (because there is obviously nothing illegal going on with the Oil, Coffee and Corn Markets.) I even get that it was supposed to help other gaming industries (because if you play poker online than you obviously would never go to Vegas again.)

But for the life of me, I don’t get where it came from.

It seems too stupid to be true – too transparently skewed to be a real piece of legislation. After all, we’re still arguing about just what the UIGEA covers: poker is bad, but inexplicably, horse racing and fantasy sports are fine. And I’m far from the first person to be interested in the origins of the UIGEA. In fact, journalist Ed Brayton requested formal transcripts of a number of the meetings that led up to the writing of the UIGEA, but he was turned down by the US Government because, and I quote:

Please be advised that the document you seek is being withheld in full pursuant to 5 U.S.C. § 552(b)(1), which pertains to information that is properly classified in the interest of national security pursuant to Executive Order 12958.

So we can’t hear the official version of the UIGEA’s birth because it is a matter of national security.

Instead, why don’t we take a look at the two major exceptions to the UIGEA – horse racing and fantasy sports – let’s take a look at those that the UIGEA accepts.

Horse Racing:

A lot has been written on the connection between the UIGEA and the horse racing industry, so I’ll be brief – horse racing is OK because the industry bought off a number of politicians. This is a quote from the lobbyist group American Horse Council, itself:

“The provisions protecting horseracing were included in the [UIGEA] package through the support of Senators Mitch McConnell (R-KY), Jim Bunning (R-KY), John Kyl (R-AZ) and Representatives Bob Goodlatte (R-VA), Mike Oxley (R-OH) and Jim Leach (R-IA),”

That support came on the heels of more than $3 million in donations made to politicians on Capitol Hill.

So it’s far from a mystery as to why horse racing was protected. But the next exception is a little less, shall we say, epistemological in nature.

Fantasy Sports

For people who don’t play fantasy sports, here is how it works. Players draft athletes (NFL players, NBA players, etc, etc.) and go up against other players in their league. The games are decided by counting up the chosen statistics for each team (Touchdowns, receptions, points scored, batting average, etc., etc.) So the more positive statistics each athlete gains in their real game, the more positive statistics the fantasy sports player gains in their fantasy game. Players put money in at the beginning of the season, then, at the end of the season, the winners of each league collect the brunt that money pool as their prize (you have to pay league fees and whatnot, so no one collects all of the money put into the pool by players.) Remember, this is not gambling according to the UIGEA/ US Government.

To give you an idea of how big fantasy sports have become, here are some numbers.

In 2005, the year before the UIGEA came out, 12.6 million people played at least one full season of fantasy sports in the US.

Of those 12.6 million, 92% were male (leaving a healthy one million female players) and 77% were married.

91% of players were Caucasian and 86% owned their own home.

59% made more than $50,000 annually and each player spent an average of $493.60 on Fantasy Sports that year to represent a $4 Billion Industry.

And maybe the most important number, 85% of Fantasy Sports players played fantasy football.

So people who play fantasy sports are generally white, generally wealthy and generally into football.

Ah, the NFL – the biggest sports league in America. From the unquantifiable monetary influx that the Super Bowl represents every year to the only year round single-sport show on ESPN (NFL Live) the NFL is king in the USA – and fantasy sports is no exception.

When it comes to fantasy sports, the NFL occupies an even more lucrative position than the other major sports leagues (MLB, NBA, NHL, PGA and NASCAR.) While just about every fantasy sports league is owned operated by an independent third party, the NFL has its own fantasy league.

In fact, the NFL even collects royalties to the tune of more than $200 million in 2005 from those same independent companies for using NFL players’ names. No other league has this deal and the only reason that the NFL does is due to its notoriously weak Players’ Union which has relegated almost all control of players’ playing careers (and likenesses) to the NFL front office. At any rate, the NFL makes a lot of real money on fantasy football, not to mention the invisible benefits of attracting additional viewership of games by fantasy football players (thereby increasing ratings, thereby increasing ad prices, thereby increasing revenues.)

Enter Bill Frist. In 2006, Senator Bill Frist was the Senate Majority Leader and the major reason that the UIGEA got pushed through Congress while other less important bills (like health care reform) remained on the old Congressional back burner. But the UIGEA almost did not make it through so easily: that was accomplished under the guidance of NFL Commissioner Roger Goodell and former Commissioner Paul Tagliabue.

Frist’s first plan to get the UIGEA through was to attach it to a bi-partisan troop funding bill designed to up the equipment levels of deployed US soldiers in Iraq and Afghanistan. What does making the processing of bets made in online gaming rooms illegal (which is what the UIGEA does) have to do with funding troops? Nothing, and respected Virginian Republican and Senate Armed Services Committee Chairman John Warner voiced his “strong objection” to the inclusion of such a bill to both Frist himself and the Senate as a whole.

Meanwhile, the NFL had caught wind of the possible regulations and had hired Marty Gold (former counsel to none other than Bill Frist himself) to lobby Congress on their behalf. As an interesting side note, ever wonder why the NFL isn’t under the same type of scrutiny on the steroids issue as Major League Baseball is? After all, the top defensive player in the NFL (Shawn Merriman) was fined and suspended for steroid use while the major MLB culprit (Barry Bonds) has never been found guilty of taking anything. Not to mention the fact that NFL players are OBVIOUSLY on steroids (people don’t get that size and stay that strong and that fast naturally, it is just not in God’s plan.) I wonder if the $700,000 bill that Gold sent to the NFL for “services rendered on Capitol Hill in 2005″ had anything to do with it?

Anyways, Gold (who has disavowed all knowledge of this) allegedly reported the situation to Goodell. Goodell then wrote a letter to Warner (a former Navy man and Marine himself) urging him to include the “achievement” that was the UIGEA in the aforementioned soldier funding bill. Warner refused again, but what we are interested in is Goodell’s “unsolicited” letter concerning internet gambling regulations. As it turns out, some time in between Warner’s two refusals, an interesting addendum was made to the UIGEA. That addition was the exclusion of fantasy sports as a form of “illegal internet gambling.”

Eventually, the UIGEA found its way to the back end of the Safe Port Act, which was designed to create a division of the Homeland Security Office to watch after sea ports. The UIGEA made it onto this bill without a vote by any negotiators at the very end of a long Congressional session. While the Bill’s author, House Homeland Security Chairman Rep. Pete King (R-NY) was not a proponent of the UIGEA, he needed the votes of Sen. Frist and the other Senators he would bring with him to pass through the piece of Homeland Security legislation. King said of the UIGEA:
“I’m not going to stop a bill because of Internet gambling… That was their final offer of the day.”

While I still don’t get why it was so important for Frist and friends to stop Internet gambling (maybe it really is a moral objection) it is pretty apparent how it got passed through Congress. And it is exceptionally apparent why horseracing and Fantasy Sports were declared exceptions to the law. As a rule, whenever you want to unearth cause on Capitol Hill, all you have to do is follow the money trail.