Canada Targets Kahnawake Online Poker Sites and More for UIGEA Ban

Canada's federal government in Ottawa has long considered the 400 online poker and online gambling sites in the Kahnawake Mohawk Territory (Canada's First Nations) to be illegal, but it is now looking at enforcing their view by blocking financial transactions to the sites in a move similar to the Unlawful Internet Gambling Enforcement Act (UIGEA) passed late 2006 by the United States.

"Following recent concerns surrounding Internet gambling in Canada, the Minister of Justice [Rob Nicholson] has asked his officials to examine whether the enforcement of the Criminal Code provisions could be assisted with other measures," Genevieve Breton, Mr. Nicholson's director of communications was quoted as saying in an article yesterday in Canada's National Post.

The "other measures" are understood to be forbidding banks and credit card companies from handling financial transactions with Internet operators considered to be illegal in Kahnawake, namely the 400 online gambling licenses which represent about 60% of the world's online gaming business.

The Mohawks of Kahnawake say Canada's laws do not apply to them since they are a sovereign nation.

They also cite section 35 of the Constitution, which was inserted to protect native culture. The Mohawks say that gaming has been central to their culture as a means of settling disputes through competition, not violence.

Other native groups, such as the Alexander First Nation in Alberta, have said they plan to emulate Kahnawake.

The legality of Kahnawake issuing online gambling licenses has never been contested in a courtroom.

MONEY AT THE HEART OF THE MATTER

At the heart of the matter may be that other gambling entities, like horse racing, pay taxes while Kahnawake contributes nothing.

Owners of horse-racing tracks, such as Great Canadian Gaming Corp., pay $1-billion in tax receipts every year to various levels of governments and incur huge expenses putting on the races, points out the National Post article.

"These offshore operations just poach horse-racing and no one can do anything about it. They're parasites on the butt of Canada," said Ross McLeod, chief executive of Great Canadian Gaming, which owns four tracks in Canada.

While the Mohawks do not recognize Canadian government's jurisdiction over them, contributing to the state in exchange for continuing to license online gaming operators is being raised again.

Chuck Barnett, a member of the board of supervisors for Mohawk Internet Technologies, a utility company that provides connectivity services for the site owners at Kahnawake, suggested instead of blocking transactions, the Canadian government should consider legislation that "could serve as the catalyst for a potential source of economic development, employment and revenue through taxation."

The government in Ottawa has come under increasing pressure from the horse racing industry to clamp down on the online gambling activities of the Mohawks. The industry complains that it pays CAD$1 billion in tax receipts to the government each year while online gaming operators in Kahnawake pay nothing.

Michael Lipton, a Toronto lawyer who specializes in gaming law remarked that the horse-racing industry has had a monopoly on gambling in Canada for years, with Woodbine Entertainment currently holding a lock on government-sanctioned online horse betting.

"I guess if I had a monopoly, I wouldn't want anyone to compete against me either," Mr. Lipton said.

DON'T EMULATE UIGEA THAT CANNOT BE ENFORCED: INSTEAD REGULATE

But he pointed out that the US is having troubles defining regulations to block financial transactions to enact their protectionist policies.

So rather than enacting ineffective prohibition, Mr. Lipton suggests that the government bring the Kahnawake sites into the system and regulate them.

By doing so he stressed the vulnerable could be protected, guards against money laundering could be installed, and tax revenues brought in, and a competitive edge gained in the gaming software market in terms of international trade.

"I think [Ottawa] should embrace this and recognize that people don't want to be in a position where the government tells them what they can or can't do in the peace of their own home," he said.

For Original Article by John Ivison published by the National Post, click here.

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