The Smart Money: Internet gambling bill takes a step - Philadelphia Inquirer - 30th July 2010

Efforts to regulate online gambling, which may mean exclusively Internet poker for now, reached a high-water mark Wednesday when a key bill was passed in the House Committee on Financial Services.

The bill - called the Internet Gambling Regulation, Consumer Protection and Enforcement Act - establishes guidelines for how broader Internet gambling would work in the United States.

It's significant that committee passage was by a substantial margin, 41-22, with some bipartisan support. But the reality is that it will still be a while, if ever, before Americans can wager on their computers or mobile devices without impediment on something other than horse racing and fantasy sports.

The current online gambling picture is colored by a federal law passed in 2006, the Unlawful Internet Gambling Enforcement Act (UIGEA), which does not criminalize online gambling for individual players but, among other things, requires financial institutions to block money transfers between players and gambling websites.

What UIGEA has done is turn the screws on out-of-country Internet gambling operators and the payment processors who facilitate the exchange of cash between those businesses and U.S. customers. Players are still gambling online and getting their money in and out of gaming websites, but it keeps getting tougher.

The proposed law, which was cosponsored by Financial Services Committee chairman Barney Frank (D., Mass.) and nearly 70 House members, received markup on Wednesday before passage, including the elimination of sports wagering and putting in place safeguards to deal with problem gambling.

According to sources close to the efforts to regulate online gaming, the next likely step is markup and a vote in another House committee of a related bill that sets up a subsequent key element - how Internet gambling will be taxed.

Internet gambling proponents, including Rep. Jim McDermott (D., Wash.), who sponsored the Internet gambling tax bill, cite government studies that project that a regulated Internet gambling industry would raise as much as $42 billion in tax revenues over the first 10 years. That assumes that no states opt out of Internet gambling, but even if the figure is an optimal projection, it's clear there's a lot of money at stake.

With both bills in place, the full House would need to pass a comprehensive Internet gambling package and then the U.S. Senate gets its crack at the issue, where New Jersey Democrat Robert Menendez has authored a bill that addresses Internet gambling, focusing on games of skill.

But here is where all this gets tricky: The issue is time.

The House is about to recess for August and comes back for a short session in September, so the Internet tax bill wouldn't even get acted on until then, with the November election looming.

Even if the full House passes the so-called Frank bill, there is still an issue of reconciling that bill (which includes not only online poker but also casino games such as slots and blackjack) with the Senate bill (which looks to green-light games of skill, generally interpreted to mean poker).

So what's the bottom line?

At least one scenario revolves around a so-called lame-duck strategy in which Congress, after the elections, cobbles together Internet gambling legislation that regulates and taxes the industry, with Nevada Democrat Sen. Harry Reid steering the effort.

If nothing is done by the end of the current Congress, it's back to square one with a reshuffled congressional deck. Then, despite the progress that Internet gambling advocates have made so far, all bets are off. (Credit: Philadelphia Inquirer)

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