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Internet Action

Despite politics in full swing, movement on online gambling legislation is possible

Internet Action

Here in Washington, and in a number of states with early primaries, we are in the midst of an extremely long 2008 election cycle that has overshadowed virtually all other activity on the political landscape. Control of the White House and Congress is on the line, and jockeying for political advantage in Washington will be the order of the day from now until the first Tuesday in Nov. next year. This greatly elevates the odds against bipartisanship in Congress, where, in fact, inter-party cooperation has been in short supply for years.

    Despite this apparent stalemate, there is one issue on the Hill that affects our industry that surprisingly has members of both political parties talking to each other—internet gambling. As most readers of Global Gaming Business know, the Unlawful internet Gambling Enforcement Act (UIGEA) was enacted in 2006, and requires banks and credit card companies to block electronic transactions to illegal internet gambling businesses, and prohibits the use of checks to fund internet gambling accounts.

    Just a few weeks ago, the U.S. Treasury and Federal Reserve issued proposed regulations to implement UIGEA, with comments due on December 12. Initial reviews of these regulations reveal that various loopholes appear to exist, opened by granting exemptions to domestic institutions for transactions with online bill paying, check collection and wire transfer systems, unless these institutions have a direct customer relationship with an illegal online gambling site. Since it is expected that only foreign financial institutions would have customer relationships with the illegal Internet gambling business, UIGEA would not apply to domestic financial institutions for many of the relevant transactions. Given this situation, it will be interesting to see how the comment process plays out.

    In Congress, the passage of the UIGEA has attracted attention from a number of lawmakers on both sides of the aisle who would like to see changes in the law. Among them is Rep. Barney Frank (D-Massachusetts), who introduced the Internet Gambling Regulation and Enforcement Act earlier this year. This proposal would, at the federal level, license, legalize and regulate most forms of internet gambling in the United States. It does not repeal UIGEA, but would create a regulatory structure around the existing laws governing internet gambling. A companion bill introduced by Rep. Jim McDermott (D-Washington) calls for a federal tax of legalized gambling in the U.S. States or tribal lands where online gambling is illegal—or where state laws are passed to make it illegal—could opt out of the legislation.

    Rep. Frank has said he will not move forward with his bill until it has 50 co-sponsors—there are 38 now—and he is relying on interest groups like the Poker Players Alliance to get co-sponsors. The American Gaming Association (AGA) has not taken a formal position on this bill, but the legislation is not without its complications since it would introduce a federal presence into the U.S. gambling industry. Individual states have zealously opposed this in the past—considering any federal profile an intrusion on the sovereign right of each state to make decisions related to permitting and regulating gambling.

    A third bill was introduced by Robert Wexler (D-Florida) and is a carve-out from UIGEA and the Wire Act for poker, which he describes as a game of skill, not chance. The bill, strongly supported by the Poker Players Alliance, has 16 co-sponsors and was referred to committee, but no action has been taken.

    Finally, there is the Internet Gambling Study Act introduced by Representatives Shelly Berkley and Jon Porter from Nevada, and supported by the AGA. This bill calls for a comprehensive study of the issue to be conducted by the National Academy of Sciences to help determine the best way for the U.S. to deal with the growth of internet gambling.

    This study could evaluate whether legalization, regulation and taxation—on a state-option basis—may be a more viable option than a complete ban on internet gambling, and would result in recommendations to Congress on the best way to handle the issue. Currently, this bill has 64 co-sponsors.

    If I were a betting man, I would put my money on the internet study proposal introduced by Representatives Berkley and Porter to be the only one of the four to pass. At press time, hearings had been scheduled on the bill, but passage likely won’t happen before later next year.

    The wild card in this situation is the recent WTO decision that the existence of the Interstate Horse Racing Act puts the United States in violation of the General Agreement on Tariffs and Trade (GATT). This decision stemmed from a trade dispute between the United States and Antigua and Barbuda.

    Antigua and Barbuda have leveled a $3.4 billion claim against the United States for damages. The European Union, India, Japan, Australia, Canada, Costa Rica, Macao and CARICOM—representing 15 Caribbean nations—are also seeking compensation. This conflict is still playing out, and the stakes continue to rise. There is the potential that this situation, more than any other, could force some form of congressional action on the internet gambling issue.

    Internet gambling will be front and center at the Global Gaming Expo (G2E) 2007, which is just around the corner on November 13-15 in Las Vegas. Wednesday’s spotlight keynote event will bring together Shelley Berkley; former Senator Alfonse D’Amato, chairman of the Poker Players Alliance; Terry Lanni, chairman and CEO of MGM Mirage; Gary Loveman, chairman, CEO and president of Harrah’s Entertainment; and Andre Wilsenach, CEO of Alderney Gambling Control Commission to share their perspectives on current legislative and regulatory approaches and what the future may hold for online gambling.

          G2E has always been the place to come for unparalleled insight into the issues most important to our industry, and our attention to internet gambling this year is indicative of the interest it has generated across all the segments of our industry. There are and will most surely continue to be competing views on this issue throughout our industry, on Capitol Hill and around the world. Here’s hoping this G2E panel—and the other events to come—help shed light on this intriguing aspect of the future of gaming.

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