Research and Statistics

Bill allowing online gambling passes House test


Online gambling may make a comeback: A law that would permit it passed a House panel, but credit cards are still barred from the poker table

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A bill that would license, regulate and essentially condone Internet gambling — and, in an unexpected development, ban credit cards in placing online bets — passed its first congressional test Wednesday.

The House Financial Services Committee voted 41-22 to approve the Internet Gambling Regulation, Consumer Protection and Enforcement Act (H.R. 2267), which  moves the bill closer to consideration by the full House of Representatives.

In something of a surprise, the panel also voted in favor of an amendment that prohibits the use of credit cards for making Internet bets.

Rep. Barney Frank, D-Mass., the committee’s chairman, the bill’s main sponsor and a leading supporter of online gambling, said the provision protects gamblers from getting in way over their heads — and adding to the already

We’re saying you cannot make these bets with a credit card. I think that’s a reasonable way to ensure that people won’t get carried away with this.

—  U.S. Rep. Barney Frank
Chairman, House Financial Services Committee

substantial problem of unpaid credit card debts.

“We’re saying you cannot make these bets with a credit card,” Frank said. “You can do it with a debit card or prepaid arrangements.

“I think that’s a reasonable way to ensure that people won’t get carried away with this,” he said

The committee also approved several other amendments, including one that would explicitly prohibit online betting on sporting events, aside from pari-mutuel racing.

An online gambling framework

Frank’s bill establishes a federal framework for licensing and regulating businesses that accept online bets from residents of the United States, an industry that historically has operated in the shadows — and, in recent years, has been chased overseas by previous federal laws.

“What we’re doing is allowing Americans to make their own choices,” Frank said. “It’s a fundamental principle of freedom.”

Even before the credit card amendment was approved, the bill would have relieved U.S.-based credit card companies of the restrictions they have been facing since passage in 2006 of the much criticized Unlawful Internet Gambling Enforcement Act.

That earlier bill generally prohibited the transfer of money from U.S. financial institutions to gambling sites, requiring credit card networks and banks to navigate a dense jungle of conflicting definitions and rules. Enforcement of those regulations was delayed until June 1, 2010, but well in advance of that date, their mere prospect pushed virtually the entire online gambling industry overseas — beyond any semblance of U.S. control or taxation.

The bottom line: To many gamblers and even many staid credit card executives and bankers, the 2006 bill seemed like overkill. And so, for all intents and purposes, the measure that was debated Wednesday would overturn the law passed four years ago. “The fact that America has not already regulated Internet poker but has actually tried to prohibit it by deputizing U.S. banks to play the morality police is bizarre,” Alfonse D’Amato, chairman of the Poker Players Alliance and a former Republican senator

After all the flak last year about shutting down the casinos on Wall Street, why would we take steps today to open up casinos in every home, every bedroom, every dormitory room, every iPod, every iPad, every computer in America?”

— U.S. Rep. Spencer Bachus
Ranking member, House Financial Services Committee

from New York, wrote in an article published last week on the Politico website.

He and other supporters of online gambling frame the issue as one of personal freedom.

“The committee and this Congress should not tolerate laws that seek to prevent responsible adults from playing a game we find stimulating, challenging and entertaining …,” Annie Duke, a professional poker player, said during testimony before the committee. “However you might feel about gambling on the Internet, I would suggest that gambling with freedom is far more risky.”

Opponents of online gambling frame the issue as one of morality.

Rep. Spencer Bachus, R-Ala., called online gambling “a highly addictive” activity that would prove irresistible to many young people.

“After all the flak last year about shutting down the casinos on Wall Street, why would we take steps today to open up casinos in every home, every bedroom, every dormitory room, every iPod, every iPad, every computer in America?” Bachus asked his committee colleagues.

“With this bill, in one stroke, we will allow all children to gamble from their homes,” he said. “This legislation will expose our children to an intense and dangerous hazard.”

One aspect of the issue is incontrovertible: Quite a lot of money is at stake. Internet gambling remains a $10 billion-$12 billion per year industry in the United States, according to Congressional testimony and various industry experts.

Gambling bill details
Under Frank’s bill:

  • The Department of the Treasury would have exclusive authority to license Internet gambling operators and establish regulations for the operation of such businesses.
  • Applicants would be subject to review of their financial condition and corporate structure, business experience, and suitability. They also would be subject to criminal background checks, and would have to agree to be subject to federal laws.
  • Licensed online gambling operations would be prohibited from accepting any bet that is initiated or terminated in a state or tribal land that bans that type of Internet gambling.
  • Any Internet gambling operator receiving a license would be required to ensure that everyone placing a bet is of legal age as defined by the law of the state or tribal area in which the individual is located. The operator also must protect the privacy and security of anyone who places an online bet.
  • The Department of the Treasury could revoke or terminate the license of any operator who fails to comply with the bill’s provisions. Violators could be fined or imprisoned for up to five years — or both.


Earlier stories: Bankers, poker players oppose Feds’ online gaming rules, Rep. Frank introduces bill to allow online gambling, Europe to U.S.: Back off online gambling enforcement, Enforcement delayed on Internet gambling ban

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