(February 9, 2010) In expectation that legislation regulating online gambling in the U.S. will pass, the United Kingdom-based payments-processing company UC Group Ltd. has opened a U.S. subsidiary, SecureTrading Inc., headed by three former MasterCard Inc. senior executives. UC Group, a provider of online payment-processing services, is an advocate for regulated Internet gambling in the U.S.

Chris Thom, former chief risk officer at MasterCard, is chairman of SecureTrading, while Ted Friedman, former MasterCard global head of credit products and senior vice president of change management, is chief operating officer. T.J. Sharkey, former MasterCard group head of global merchants and acquirers, is head of customer sales and support.

SecureTrading says its services will enable licensed gambling operators to quickly comply with proposed Internet gambling regulation now before Congress. Company services include player registration, verification, and validation to ensure that the player is not under age and is in a location where online gambling is legal.

The company also provides payment processing, anti-money laundering and fraud tools, tax computation and collection, and settlement and reporting. In addition, SecureTrading provides so-called responsible-gambling tools designed to help players exclude themselves from online gambling activity or elect online to seek help in real time for problem gambling.

“Momentum for regulating Internet gambling in the U.S. has been building for some time,” Thom said in a prepared statement. “As Congress prepares to take the final step, SecureTrading Inc.’s turnkey system is primed to enable our customers to go live the moment Internet gambling is regulated.”

H.R. 2267, the Internet Gambling Regulation, Consumer Protection & Enforcement Act of 2009, is pending in the U.S. House of Representatives’ subcommittee on Crime, Terrorism and Homeland Security. The bill—introduced in May by Rep. Barney Frank, D-Mass., financial services committee chairman (Digital Transaction News, May 7)—would establish a federal regulatory and enforcement framework under which gambling operators could obtain licenses to accept online bets and wagers from U.S. residents.

To be licensed, Internet casinos and other gambling operators would have to maintain effective protections against under-age gambling, compulsive gambling, money laundering, and fraud, and enforce prohibitions or restrictions on types of gambling prohibited by states and Indian tribes.

The bill gives the U.S. Treasury Department exclusive authority to establish regulations and license Internet gambling operators. License applicants would be subject to criminal background checks and a review of their financial condition, corporate structure, business experience, and suitability. They also would have to agree to be subject to U.S. jurisdiction.

Applicants also would be prohibited from accepting any type of bet or wager that is initiated or terminated in a state or tribal land that prohibits that type of Internet gambling, or any sports gambling or wagering prohibited under the Professional and Amateur Sports Protection Act.

The Treasury Department would have the authority to revoke or terminate the license of any operator that fails to comply with the bill. Violators could be fined and/or imprisoned for up to five years.

Frank is expected to bring the bill before his committee in “the coming weeks,” says Michael Waxman, executive director of Safe and Secure Internet Gambling Initiative, an industry trade group. “We’ll have to see from there how quickly Congress decides to move on it but certainly, given the significant amount of revenue that would be generated, this is going to get serious consideration and the expectation is it will be passed, it’s just a question of when.” The bill is designed to replace the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA), which bans gaming sites from accepting money transfers of any kind for bets deemed to be unlawful gambling. Banks, processors, the Federal Reserve, and the Treasury Department have said UIGEA regulations are ambiguous and unworkable and will hurt the financial industry while having little impact on illegal gambling online.