Rep. Frank introduces bill to allow online gambling

Measure would gut prohibition passed in '06

By Martin Merzer

Don't bet on it quite yet, but you soon might be able to legally use your credit card to place online wagers without giving your card numbers to -- and funneling your money through -- a foreign company.

Rep. Barney Frank, D-Mass., introduced legislation Wednesday that would permit U.S.-based companies to accept online bets from Americans -- and relieve United States-based credit card companies of the many gambling-related regulatory burdens they now face.

"The government should not interfere with people's liberty unless there is a very good reason," said Frank, chairman of the House Financial Services Committee and a longtime supporter of online gambling, during a news conference.

"This is, I believe, the single biggest example of an intrusion into the principle that people should be free to do things on the Internet," he said.

Gambling interests delighted
The move won instant praise from a variety of gambling interests, including casino operator Harrah's Entertainment, online wagering site Youbet.com, and the nonprofit Poker Players Alliance.

"Online poker is a legal, thriving industry, and poker players deserve the consumer protections and the freedom to play that are provided for in this legislation," said Alfonse D'Amato, chairman of the Poker Players Alliance and a former Republican senator from New York.

"We are grateful for Chairman Frank's leadership and will be activating our grassroots army made up of over 1 million members to help him drive legislation."

Called the Internet Gambling Regulation, Consumer Protection and Enforcement Act, the proposed legislation would establish a federal framework under which Internet gambling operators could obtain licenses to accept bets from U.S. residents.

The bill mandates thorough investigations of potential licensees and it requires technological barriers to deter underage gambling, fraud, money laundering and tax avoidance. The U.S. Department of the Treasury would be in charge of establishing the regulations; violators could be fined and/or imprisoned for up to five years.

Amounts to a repeal of UIGEA
In essence, the bill would repeal the widely criticized Unlawful Internet Gambling Enforcement Act, passed in 2006. The UIGEA regulations went into effect  on Jan.19, 2009, but  financial institutions were given until December of 2009 to become completely compliant. That measure basically banned U.S.-based firms from conducting online gambling operations. Critics called the UIGEA impossibly vague, and said it produced serious compliance issues for credit card issuers and others in the banking industry, which somehow ended up on the front line of enforcing the ban.

"It's not a good thing for banks," Steve Kenneally, vice president of the American Bankers Association, which represents credit card issuers and other elements of the banking industry, told CreditCards.com in January.

He said the  rules associated with the bill -- and finally announced just last December as the Bush administration was ceding power -- weren't quite as burdensome as the industry feared, but that was only modest consolation.

"Instead of getting hit on the head with a telephone pole, we're getting hit with a baseball bat," Kenneally said. "It still hurts."

Among the problems: No one in Congress or anywhere else defined the "illegal" part of "illegal Internet gambling," requiring attorneys for banks and credit card networks to navigate a thicket of ambiguous, varying and often contradictory state laws and even Native American tribal rules.

And the 2006 bill, passed in the dead of night, didn't come close to achieving its objective -- Americans simply pointed their Web browsers to overseas gambling sites.

How many Americans gamble online?
About 2 percent of Americans report they gamble online, according to a November 2008 survey by the Annenberg Public Policy Center. The number fell off sharply after the passage of the 2006 Unlawful Internet Gambling Enforcement Act.

To this day, Internet gambling remains a $10 billion to $12 billion per year industry in the United States, according to Congressional testimony and various industry experts.

Now, amid the economic meltdown, Frank and others want to recapture some of that bounty and redirect it to the U.S. Treasury. Co-sponsors of the bill include Peter King, R-N.Y., and Shelley Berkley, D-Nev.

"Chairman Frank's bill is a welcome and realistic approach to U.S. internet gambling," Michael Brodsky, chief executive of Youbet.com, said in a written statement Wednesday.

"Illegal U.S. online gambling is a growing multi-billion dollar industry," Brodsky said. "Chairman Frank's bill recognizes those realities and would bring this underground activity into the light ... providing much needed revenue in these difficult economic times."

Also on Wednesday, Frank said he would introduce separate legislation to delay implementation of the rules associated with UIGEA. "The legislation will stop federal regulators from enforcing the UIGEA until Congress has had a chance to decide national policy," according to a written statement from Frank's committee.

Frank said he hopes to have his panel act on the legislation before the August recess of Congress, but passage is by no means assured. Last year, a similar measure failed to win congressional approval.

And this latest attempt ran into immediate opposition Wednesday.

Said Rep. Spencer Bachus, R-Ala.: "Illegal offshore Internet gambling sites are a criminal enterprise and allowing them to operate unfettered in the United States would present a clear danger to our youth, who are subject to becoming addicted to gambling at an early age."

Published: May 6, 2009

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