Rep. Darrell Issa (R-CA): If you go into a place and there’s a crime actively being committed, let’s say there’s a bookie joint, and there’s tens of thousands of illegal transactions going on every minute. And you know that. And you have proof of that. You don’t question your ability to go in and to harvest the fruit of all the activities in there, is that correct?

Robert Mueller (FBI Director): That’s correct.

Links
CNet: Transcript of FBI Director on internet surveillance
CNet: FBI’s Net Surveillance proposal raises privacy, legal concerns

Good morning, Mr. Chairman.  Thank you for the opportunity to present this testimony.  My name is Edward Leyden and I am the president of the Interactive Media Entertainment & Gaming Association, which we generally refer to by the acronym, “iMEGA.”

iMEGA is a trade association representing entities and individuals invested in the continued growth of the Internet and of the interactive media. We view the Internet as an indispensable engine for economic prosperity and social justice. Furthermore, we adhere to the proposition that the inalienable rights that each of us holds under the Constitution to freedom of privacy, speech, expression, and conduct are not lessened in any way when we are using the Internet.

These “Digital Civil Rights” do, in our view, serve as the cornerstone for sustaining freedom and building wealth in a globalized economy.In pursuit of these guiding principles, iMEGA, on June 6, 2007, brought a case in the United States District Court for the District of New Jersey, iMEGA v. Gonzales, 3:07-cv-02625-MLC-TJB. This civil rights lawsuit challenges, among other things, the constitutionality of the Unlawful Internet Gambling Enforcement Act (UIGEA) and, by extension, the validity of any regulations promulgated pursuant to it.

On March 6, 2008, the presiding U.S. District Court judge issued a ruling establishing with crystal clarity iMEGA’s prudential and associational standing to be the champion of the interactive gaming industry against the UIGEA in the courts of this nation.  In view of the fact that questioning iMEGA’s standing was the primary basis for the Justice Department’s challenge to our lawsuit, this recognition by the federal courts is a genuine and important victory for our Association.

However, at the same time, the District Court declined to rule on the groundbreaking questions we presented and, instead, simply affirmed that Congress had the right to pass the law in a constitutional manner - a point that iMEGA never challenged.  As a result, the trial court is in essence standing aside and reserving these issues to be decided by a “higher authority,” the United States Court of Appeals for the Third Circuit and, potentially, the United States Supreme Court.

Of overwhelming relevance to the work of this subcommittee, today, is the fact that a federal court of competent and plenary jurisdiction has not only acknowledged the failings of the UIGEA but, in Footnote 12 on Page 27 of its decision, stated categorically that the “criminal penalties” provided for under the UIGEA do not apply to “financial businesses,” such as “financial transaction providers” –meaning banks, credit card companies and payment processors—which, according to the Court, are subject only to “regulatory enforcement.”  As a result,  the stated purpose of the UIGEA to “starve” the Internet gaming industry by criminally punishing the financial institutions that provide services to it has now been judicially invalidated.

Nevertheless, we continue to lodge the strongest possible objections to both the principles and details of the proposed UIGEA regulations.  Even in proposed form, these rules exert a harshly chilling effect on innovation surrounding the Internet.

What is more, by imposing unprecedented burdens on the intricate system of financial transactions and payment system instrumentalities–which has up until now been universally recognized as being inherently content-neutral–these proposed regulations run the grave risk of sharply stifling the growth of electronic commerce.

iMEGA recognizes that immense political and ideological pressures were brought to bear upon the responsible agencies during the process of drafting these proposed regulations. We are, nonetheless, profoundly troubled by the Agencies’ failure to define just what an “unlawful gambling transaction” is and to, instead, delegate this determination to be made on an ad hoc basis by an entity or person having a “customer relationship” with an Internet gaming concern.

Given the still harsh sanctions facing any market participant falling afoul of these proposed rules, the natural course of action for a financial intermediary–particularly a smaller entity without a corporate legal department or sophisticated outside counsel to guide it–will be to deem every transaction submitted by an Internet gaming concern to be an “unlawful” one.

Thus, as a direct and proximate consequence, the proposed regulations will have accomplished by de facto means a blanket prohibition on Internet gaming for which no political consensus exists-or has ever existed.  Far worse, however, is the deep chill that such action places upon technological innovation and the principles of financial transparency.

Against this backdrop of confusion and uncertainty, the suggestion by some for the creation of a governmental “black list” of companies or concerns deemed to have engaged in an undefined “unlawful gambling transaction” should trouble all who cling tightly to the principles of fundamental fairness and substantive due process.

Thank you again, Mr. Chairman, for this opportunity to testify. We stand ready to answer any questions you may have.

Link
Gambling 911 - iMEGA files notice to appeal & open letter to i-gaming industry

First and foremost, the Court established, with crystal clarity, the standing (and associational standing) of iMEGA to challenge this law in court. This is no small thing. Judge Cooper herself spent 15 pages of her 29-page decision establishing iMEGA’s standing, in the process knocking down the US government’s primary challenge to our suit. iMEGA flat-out beat the government on that point.

Many legal commentators—both supporters and naysayers—from the beginning viewed the question of iMEGA’s standing as an insurmountable barrier to moving forward. Well, we’ve crossed over that barrier, and now the government has to contend with iMEGA as fully and unquestionably empowered by the Court to assert our rights in the courts of the United States. The fact that the Federal courts have now recognized iMEGA as the champion of Internet Gambling industry cannot be overstated.

However, at the same time, Judge Cooper essentially failed to rule on the groundbreaking questions we presented, namely, that those fundamental rights we all enjoy – of privacy, speech, expression, and conduct – should not be lessened in any way when we are using the Internet.

With her dismissal, Judge Cooper simply affirmed that Congress had the right to pass the law in a constitutional manner - a point iMEGA never challenged.  As a result, the Court is in essence standing aside and reserving these issues to be decided by a “higher authority,” the United States Court of Appeals for the Third Circuit and, potentially, the United States Supreme Court.

However, Judge Cooper’s opinion not only acknowledged the failings of the Unlawful Internet Gambling Enforcement Act (UIGEA) but, in Footnote 12 on Page 27 of her decision, stated categorically that the “criminal penalties” provided for under the UIGEA do not apply to “financial businesses,” such as “financial transaction providers” (i.e. banks, credit card companies an payment processors)—which are subject only to “regulatory enforcement.”

Given that UIGEA’s authors and supporters made it perfectly clear from the start that their driving purpose was to “starve” internet gambling by criminally punishing the financial institutions that provide services to it, the Court’s decision will have a monumental impact across the board, in the courts and in various legislative branches.

The next step for iMEGA is to take this battle to the Third Circuit Court of Appeals in Philadelphia, an appellate court that has been traditionally protective of the fundamental rights of speech and expression. One need only look to that Court’s striking down (multiple times) of the Child Online Protection Act (COPA) – another well intentioned but over-reaching Federal law – for an example of how favorable that Court can be to iMEGA’s challenge.

A positive result for iMEGA in the Third Circuit, affirming our “digital civil rights”, would represent a truly landmark victory with historic consequences.

In light of political pressures, we expect the Justice Department to bring all of its vast resources to this fight.  Indeed, it may be the government that first files an appeal with the Third Circuit, to overturn the standing granted to iMEGA and to put UIGEA’s criminal penalties for financial institutions back in place.

There are other fights iMEGA has been a part of, most notably its opposition to the proposed UIGEA regulations.  With the possible exception of the American Banking Association, no one has more precisely and effectively portrayed how faulty the proposed UIGEA regulations are, in the hope of preventing them from being promulgated or weakened to such an extent that they become meaningless.

While we were disappointed that Judge Cooper dismissed our lawsuit, this case is far from over. We always knew that this would be the first round in a serious fight, as most important legal battles are. Many legal challenges that lost their first round make up many of the rights Americans now take for granted:

Brown v. Board of Education (”Separate but Equal” school systems) - Originally lost in U.S. District Court for the District of Kansas

Miranda v. Arizona (Illegal Interrogations) - Originally lost in the Arizona Supreme Court

Gideon v. Wainwright (Right to Counsel) - Originally lost in the Florida Supreme Court and Fourteenth Judicial Circuit of Florida

Tinker v. Des Moines (Freedom of Speech) - Originally lost in U.S. District Court and the Eighth Circuit Court of Appeals

We can’t imagine how our rights would have been preserved had those challenges quit in the first round. At issue here are fundamental questions that, ultimately, have to be decided by the higher courts, and iMEGA has been recognized by the Court as the champion to fight this battle.

We value your support as we move forward.

Below is a transcript of Mr. Brennan’s testimony:
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