House Committee approved Barney's Bill

There's still a long road ahead, but the first hurdle has been cleared

Wednesday's delayed vote on Barney Frank's HR2267 bill seeking to legalise online gambling in the United States proved to be worth the wait, with members of the House Financial Services Committee voting it forward by 41 to 22 in a bipartisan approach. The vote was taken after a number of amendments were accepted.

“My primary goal is Americans ought to be free to do what they wish without this kind of intrusion,” said Frank, referring to the UIGEA which was implemented on June 1 2010 to disrupt financial transactions with online gambling companies. “The intrusive regulation is a problem for the financial institutions," he added.

A separate measure authored by Rep. Jim McDermott that depends on the full House approval of Frank’s plan would impose taxes on online poker and other Internet gambling, bringing the federal government as much as $42 billion over 10 years, according to an independent congressional analysis.

McDermott’s proposal would require Internet gambling operators to pay a 2 percent tax to the federal government on betting deposits and a 6 percent tax to states. The federal treasury also would collect taxes on gaming-company profits, and bettors would pay taxes on winnings.

Opponents of HR2267 included - as usual - Representative Spencer Bachus of Alabama, the top Republican on the Financial Services Committee, who claimed that legalising online gambling would harm society and that Congress has more pressing issues to tackle.

In a rather exaggerated statement that takes little cognisance of extensive measures against underage and problem gambling, Bachus alleged: “With this bill, in one broad stroke, we will allow every child in America to gamble on their home computer or in their dorm room.”

Before passing the bill, the committee insisted on amendments that prohibit operators that have violated U.S. laws from getting licenses (suggested by Rep. Bachus); a statistical record proposal; and one to ensure that online betting on sports such as football isn’t allowed.

The panel also approved amendments to help prevent minors from gambling online and prohibit marketing that targets youth.

Using credit cards to bet will not be allowed, although debit cards are acceptable.

Another addition was a provision that those behind on child support payments will be blocked from regulated online gambling sites by the operators.

At one point the sensitive issue of tribal gambling interests was raised, with Rep. Gary Peters of Michigan suggesting an amendment to exempt state and tribal lotteries from having to be licensed by the Federal government. This was passed on the grounds that these entities are already licensed by individual states.

One California Democrat, Brad Sherman, said: “I have opposed this bill for years, but I am slowly changing. The best reason for this bill is the prospect for revenue.”

HR2267 had already attracted some 69 bi-partisan co-sponsors prior to Wednesday's vote.

John Pappas, executive director of the Poker Players Alliance, a pressure group with over a million US members, said that the bipartisan nature of Wednesday's vote adds momentum to the legislation. The focus now shifts to the legislation to tax the betting, which is before the House Ways and Means Committee, he said.

Pappas noted that in addition to Frank's wider proposal in the House of Representatives, a bill focusing on internet poker had been launched by Senator Robert Menendez in the Senate, and this could be useful should the Senate find Frank's bill too broad to accept.

Bloombergs business news service reports that the U.S. Internet gambling market is expected to climb to $5.7 billion in 2010 from $5.4 billion last year, according to U.K.-based H2 Gambling Capital. If the U.S. legalises online gambling, the market could grow to $24 billion in five years, according to H2. That excludes most sports betting, which wouldn’t be allowed under Frank's proposals to the House.

The global market now is about $30 billion, H2 estimates.

The passage out of committee of HR 2267 has already excited wide mainstream media coverage, especially the amendment that seeks to prohibit the issue of US licenses to offshore companies that continued to operate in the United States after the passage of the UIGEA in 2006.

Industry observers and analysts point specifically to very large online poker entities like Full Tilt Poker and Pokerstars as possible victims of this clause. Many large groups exited the US market in the wake of UIGEA, and others have negotiated their positions with the US Justice Department.

HR2267 places heavy emphasis on operator measures to prevent underage, problem or criminally influenced gambling, along with assurances that the autonomy of individual states will be respected and internet betting in states that prohibit it will be blocked.

The chairman of the PPA, former Senator Alphonse D'Amato said in a statement after the Frank Bill was approved: “The fact is, online poker is not going away. Congress has a choice – it can license and regulate it to provide government oversight and consumer protections, or our lawmakers can stick their heads in the sand, ignore it, and leave consumers to play on non-U.S. regulated websites in all 50 states.

“I’m glad the Financial Services Committee today overwhelmingly chose to act and protect Americans as well as preserve the fundamental freedoms of adults and the Internet. This is a great day not only for poker players, but for proponents of Internet freedom and individual liberty.

“We thank Chairman Frank for his leadership on this bill, and look forward to working with him to bring this bill through the legislative process.”

Key provisions of HR 2267 include:

* Thorough vetting of potential licensees and the creation of an OFAC-style list of illegal operators;

* Mandatory implementation of technologies to protect against underage gambling using the commercial and government databases used for online banking to verify age and identity

* Requirements for operators to set daily, weekly or monthly limits on deposits and losses to monitor and detect individuals with excessive gaming habits;

* High standards to thwart fraud, abuse and cheating to ensure fair games for customers;

* Regulation to prevent money laundering; and,

* Processes to prevent tax avoidance.

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