US online gambling bill gets mixed reaction 04/06/2009
BARNEY FRANK'S proposal to regulate online gaming in the US was a boost to industry morale, but other issues will play key roles on the US regulatory landscape.The long-awaited bill to legalise online gambling in the US published by Congressman Barney Frank (left) on 6 May (more) was viewed in a mainly positive light by egaming businesses, but was met with reservation from seasoned Congress-watchers.
While clearly drafted to assuage the industry’s foes – measures to prevent minors and problem gamblers from gambling are stressed throughout, as is the importance of preventing money laundering and fraud – the bill has a long way to go before it becomes law.
On the one hand, America’s Puritanical roots mean that many Americans oppose gambling per se on religious grounds, seeing it as a vice. On the other, many of the country’s wealthy, and politically influential, land-based operators oppose anything that could threaten their businesses – in particular given the travails they are currently experiencing as a result of the economic downturn. America’s powerful Christian lobby allied to a major business lobby is an opponent that is hard to beat, arm it with emotive phrases like ‘protecting children’ and ‘in your home’ and it is tougher still.
Egaming’s optimists have a powerful argument in their favour, however: cash. With America in a downturn and its government spending billions propping up wobbly banks, bailing out car makers and providing fiscal stimulus as its tax base simultaneously crumbles, lawmakers are more receptive than usual to any idea that allows them to raise big revenue at little cost. Just ask Californians.
Congressman Frank’s bill is also presented in a political climate quite different to that under which the Unlawful Internet Gambling Enforcement Act (UIGEA) outlawing online gambling was passed in 2006. UIGEA was introduced by George Bush, a Republican president who came to power with support from the Christian right, when Republicans dominated both chambers of Congress. Bush has since been replaced by Barack Obama, a Democrat, and the Democrats have seized control of Congress, providing a potentially more receptive audience to online gaming while diminishing the power of the Christian lobby.
To focus solely on the White House and Congress is a mistake, however. Even if Congress were to pass legislation legalising egaming, its remit extends only to inter-state issues, and states that are opposed to online gambling could still pass their own laws on online gambling regardless of a Congressional decision.
Minnesota, for instance, is shortly to battle in court with the Interactive Media Entertainment and Gaming (iMEGA) lobby group to determine whether it had the right to tell internet service providers to block state residents’ access to a black list of 200 gambling websites (more); while California, by contrast, is proposing to legalise intra-state gambling (more).
Largely overlooked as a result of the focus on Frank’s bill to legalise online gambling, however, was Frank’s other bill published that day. His Reasonable Prudence in Regulation Act is a more modest proposal for a year’s delay on UIGEA’s full-compliance deadline of 1 December 2009; in order to allow banks and other providers of financial services to US online gamblers to better prepare for the new regime.
Simon Holliday, director of gambling consultancy H2 Gambling Capital, describes the second bill as a “curve ball” and says he has revised forecasts for US-facing sites such as Full Tilt and PokerStars. “Before today we had lowered our estimates of their profits for next year because we thought life would become more difficult for them under UIGEA,” he says. “That’s now changed.”
To further confuse matters, on the same day as Frank introduced his two bills, Congressman Jim McDermott introduced his own Internet Gambling Regulation and Tax Enforcement Act, a companion bill that calls for 2% of online gambling deposits to be extracted as government revenue. But as the prohibition experience taught America, you can only tax a vice when it’s legal.
This article first appeared in the June edition of eGaming Review.
Posted: 04/06/2009
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