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Rep. Jim McDermott (D-Washington)

Congressmen Looking to Repeal UIGEA Enforcement scheduled to go into effect on June 1

Rep. Jim McDermott (D-Washington)

May 30 (2009) Health Care Rally

Two congressmen who have sponsored bills to legalize, regulate and tax online gaming are back in action, this time looking to repeal the Unlawful Internet Gambling Enforcement Act, which is set to go into effect June 1.

The implementation of UIGEA has already been delayed by six months to give Congress the chance to act on legalization bills, but with time running out, Reps. Barney Frank (D-Massachusetts) and Jim McDermott (D-Washington) are looking to repeal it and then pass legislation to approve internet wagering.

“We have an activity going on illegally in this country and we’re pretending it doesn’t exist,” McDermott said. “People have told us, ‘We want to be legal and we’re certainly willing to pay taxes,’ and we need the money. On every count, this is a net positive.”

The tax element of McDermott’s bill would be a windfall for the states and the federal government, he says. The bill sets aside 6 percent of all deposits for the states and Native American tribes involved, and another 2 percent for the federal government. Congress’ Joint Committee on Taxation estimated the bill would generate $30 billion for state and tribal governments and $42 billion for the federal government over the next 10 years.

“This is a huge boon to the state governments,” McDermott said. “If you look across the country you’re seeing programs cut. In Arizona, they just cut out a program for children’s health for 40,000 kids. Here’s a source of money to keep that going.”

Frank believes that it’s an individual right to decide when and where to gamble.

“American adults want to be able to do what they want with their own money without the government interfering,” he says.

Opponents of the bill are ramping up, as well.

“This basically creates a national casino, and there’s no time they won’t be operating,” said Chad Hills, of the Christian group Focus on the Family. “We already have between 15 million and 20 million people in the U.S. with a pathological gambling problem.”

Frank believes the House will pass the bill, although there is no companion bill in the U.S. Senate. However, Senator Robert Menendez (D-New Jersey) has introduced a bill to legalize online poker.

The American Gaming Association recently changed its neutral policy to favor internet gaming. AGA President and CEO Frank J. Fahrenkopf says it’s time to level the playing field.

“If there was going to be cannibalization, it’s already taking place,” he told Medill News Service. “Ten years ago, if we took a look at the financial statement of MGM Mirage, for example, 65 percent to 70 percent of its bottom line would have come from gaming revenue. Three years ago, it was 45 percent.”

The banking industry is hoping that UIGEA is repealed as well, since the enforcement is in the hands of the banks. They are concerned with the time
necessary to develop procedures given the sophisticated nature of online transactions.

Steve Kenneally, a spokesman for the American Bankers Association, says that people can write checks or make wire transfers to online gaming sites and there’s nothing the banks can do. And credit card transactions can only be blocked if it’s clear the recipient is an online casino.

“We’re just telling all of our bankers to be prepared on June 1,” Kenneally said.

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