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Frank’s Online Gambling Bill Passed By House Committee

Posted on July 31st, 2010

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On Wednesday, members of the House Financial Services Committee voted 41-22 to pass the bill sponsored by Democratic Representative Barney Frank from Massachusetts that aims to legalize some forms of Internet gambling. The bill can then move to the House floor. The bill seeks to repeal the present law known as the Unlawful Internet Gambling Enforcement Act (UIGEA) that prohibits online gambling, by allowing a number of the online gaming websites to operate in the U.S. and regulating them. The UIGEA became law in 2006, but has only been implemented last June 1. The law prohibits credit card companies and financial institutions to arrange monetary transfers of bets to online gambling companies, thus shifting the responsibility on the financial service companies to verify if a deal is illegal. The financial institutions find this task too burdensome.

A bill related to the online gambling measure has been introduced by Representative Jim McDermott (D-Wash.) that would tax the earnings of the Internet gambling operators. However, the House Ways and Means Committee which is in charge of tax measures has yet to tackle the bill. An estimate by the Joint Tax Committee showed revenue figures of up to $42 billion that could be generated in the next ten years by a legalized, regulated and taxed online gaming industry. Critics of the bill raised objections to the revenue estimate, saying that the figures could be much lower because the numbers were computed without taking into account the likelihood of some states not wanting to take part in the new system, since Frank’s bill would allow state governments to opt out.

Frank has strongly campaigned for his bill whose supporters have increasingly grown. He says that personally he has no fondness for gambling, but he believes that the government should not deny the activity to adults. Online gambling supporters say that the implementation of the ban has had little effect on the number of U.S. online poker players. Frank’s bill legalizes many forms of online gambling including bingo, but its focus is to legalize online poker, a game that is fast gaining popularity. Under the bill, gambling websites that want to offer their services to U.S. players should establish much of their business operations in the U.S. Online gambling companies that have continued to offer their websites to players in the U.S. even after the enforcement of the current ban would not be given licenses to operate.

The bill would not allow online betting on professional sports like the National Football League and Major League Baseball. Some Republican members of the House committee have opposed the online gambling bill citing the possible increase in gambling addiction cases and in gambling by minors. Rep. Spencer Bachus of Alabama, the top Republican on the House panel and a leading opponent of Frank’s bill claimed that the bill would destroy people’s lives. He also argued that there are more important issues that should be addressed by Congress. The casino industry in the United States, represented by the American Gaming Association, has recently changed its position on Internet gambling when it declared in March that the association had concluded that online gaming can be properly regulated through the use of technology. However, there are still some casino companies that are opposed to legalizing online gaming.

Frank Fahrenkopf, chief executive of the AGA has said that most casino companies would want the online gambling industry to be regulated by the states, and not the federal government, just like the casinos. Harrah’s Entertainment Inc., a casino company that has gambling facilities in Las Vegas, Atlantic City and other places in the U.S., has gone a different path than that taken by other U.S.- based casino operators which have ventured into the Asian market after seeing a downward trend in the U.S. gambling market.

Harrah’s, instead, has focused on operating three gambling websites based in the U.K. and offering services to U.K. residents starting in January. The gambling sites do not provide access to U.S. players, although the company’s move is in anticipation of the possibility of legalizing online gambling in the U.S. The company owns two websites with the Caesars brand and one linked to the World Series of Poker. Jan Jones, Harrah’s senior vice president of government relations said the company has been supportive of the online gambling bill.