Congress Again Considers Legalizing Online Gambling

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Movement is building in Congress once again to allow Internet gambling, although history so far has been on the side of those who would ban Web-based wagering. But the April federal indictments of Internet poker executives and payment processors working with them galvanized Internet-gambling proponents, who say that Americans want to wager on the Web and the law needs to accommodate that desire.

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U.S. Rep. Joe Barton, R-Texas, is drafting legislation that would legalize Internet poker, a spokesperson tells Digital Transactions News. “This is a poker-only bill,” the spokesperson says. “He [Barton] looks at poker as a game of skill, not a game of chance, and that’s why it should be made legal.”

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Last week, U.S. Rep. Jim McDermott, D-Wash., introduced the Internet Gambling Regulation and Tax Enforcement Act of 2011, H.R. 2230, which would set up procedures to collect taxes from legal online wagering. McDermott’s two cosponsors are U.S. Reps. John Campbell, R-Calif., and Barney Frank, D-Mass., who in March introduced their

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Internet Gambling, Regulation, Consumer Protection, and Enforcement Act. That bill, H.R. 1174, would legalize online gambling except sports betting and have the U.S. Treasury Department regulate it. H.R. 1174 is identical to a measure the two offered in the last session of Congress that failed, according to a spokesperson for the Safe and Secure Internet Gambling Initiative, a pro-wagering lobbying group.

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“I think this momentum has been building for a couple years now,” the lobby group’s spokesperson says. “I’m just looking to see when it crescendos and Congress moves something forward.”

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Some Capitol Hill publications speculated that Barton would introduce his bill as early as this week, but that won’t happen, his spokesperson says. Barton is still lining up co-sponsors and working on the language.

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The planned bill would allow states to approve interstate licenses that would permit their residents to play online poker. If a state doesn’t license an operation, its residents couldn’t play. According to TheHill.com, an online news service that follows Congress, online poker sites would need to be registered in states where gambling already is legal, which would make them subject to state regulations. (Exactly which states would license operations was not immediately clear. While Nevada and New Jersey permit full-blown casino gambling, more than 45 states have some form of legal gambling.) A federal authority also would regulate the activity.

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Barton’s spokesperson says the draft would enable processors to legally handle payments from U.S. citizens, an activity specifically banned by the Unlawful Internet Gambling Enforcement Act (UIGEA). The U.S. attorney in Manhattan cited alleged UIGEA violations in the April crackdown against 11 poker-site executives and individuals who allegedly helped arrange processing services for them so that the sites, which are based offshore, could accept bets from Americans. The indictments also cited alleged wire and bank fraud.

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Online-gambling partisans now call April 15 “Black Friday,” and some see the indictments as adding to the momentum to legalize Internet wagering and regulate it so that cash-strapped states and cities could collect new taxes. The Safe and Secure Internet Gambling Initiative spokesperson notes that the House Financial Services Committee, with Frank as its chairman at the time, passed the earlier online-gambling measure last year on a bipartisan vote, and that various hearings have reviewed what needs to be done to protect consumers from dishonest providers. “It’s shocking to me that Congress hasn’t yet acted to address this issue,” he says.

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Opponents worry that easy availability of online betting could lead to gambling addiction and damage household finances, and also enable minors to play. Proponents say the problems could be minimized with effective regulation, and they cite the potential tax windfall. One estimate put the annual revenues from online U.S. poker players in the vicinity of $5 billion, according to data cited in a story about the controversy in the June edition of Digital Transactions magazine.