Analyst Doubts Frank's Repeal Effort

27 March 2007

An independent report released on Monday by the Stanford Group, part of the privately held Stanford Financial Group, shows little confidence in the efforts to overturn last year's prohibitive anti-Internet gambling legislation.

The report, authored by analyst Jaret Seiberg, gave Rep. Barney Frank's, D- Mass., repeal of the U.S. Unlawful Internet Gambling Enforcement Act (UIGEA) a 10 percent chance of success.

"We do not believe there is the political will to overturn last year's legislation or to carve out poker from the prohibition."
- Jaret Seiberg, Analyst, The Stanford Group

"We do not believe there is the political will to overturn last year's legislation or to carve out poker from the prohibition," Seiberg said.

Seiberg said that a more likely scenario would be legislation authorizing the National Institute of Science or a similar nonpartisan think tank to study whether Internet gambling could be effectively regulated and taxed, which was first proposed last year by Rep. Shelley Berkley, D-Nev., and Jon Porter, R-Nev. The two lawmakers are now preparing to reintroduce the legislation within a few weeks.

Frank, who is also House Financial Services Chairman, announced two weeks ago that he is drafting a bill to void last year's legislation, which he called one of the "stupidest laws" ever passed.

Seiberg said the odds are overwhelmingly against enactment of this legislation, listing among the problems asking Democrats to change their votes less than a year after the passage of the UIGEA, opening them up to charges of being in bed with Internet gamblers. The report suggested that Democrats who turn their back on the UIGEA would be committing political suicide.

"For it [a repeal] to happen, lawmakers would need to hide it in another bill and hope that the president opts not to veto it," Sieberg said. "All of that seems very unlikely to us."

Seiberg said he also foresees problems with Republicans accusing Democrats of tampering with criminal investigations of Internet gamblers by trying to change the law in the midst of numerous investigations.

Sieberg also said he expects to see legislation from the Judiciary Committee defining poker as a game of skill rather than as a game of chance, thus exempting online poker from the ban, but does not think it has much chance of success.

"We believe the odds are against this for many of the same reasons that Congress will not overturn the broader prohibition," Seiberg said. "It leaves Democrats accused of interfering with criminal investigations and it would force them to figure out a way to overcome the ability of Sen. Kyl to stymie legislation in the Senate. At best, we put the odds at 20 percent. The only reason our odds are so high is that we see it as easier to slip a poker carveout into must-pass legislation than it is to attach a repeal bill."

"Barney Frank is no shrinking violet, and has been known to stand on principle."
- Larry Walters, Weston, Garrou, De Witt and Walters

A source familiar with the I-gaming industry said he agrees with the Stanford Group's assessment, but added that it wouldn't be fair to assume anything until the legislation is introduced.

On the other hand, Larry Walters, a First Amendment lawyer with the firm, applauds Frank's efforts.

"I am encouraged by the fact that any lawmaker would take this issue on, and seek to repeal this asinine legislation," said Larry Walters. "It is tough for any politician to get behind gambling, but Barney Frank is no shrinking violet, and has been known to stand on principle. Regardless of how one feels about gambling, this law is certain to put the United States far outside the mainstream when it comes to global treatment of online gambling. The issue deserves more considered evaluation, beyond the backroom-deal-in-the-middle-of-the-night treatment it got when the Republicans passed the law shortly before they lost control of Congress. It is far too early to evaluate the chances of success, at this point, but now that a different party controls the Agenda in Congress, a different dynamic may develop on gambling issues. It is always more difficult to repeal laws as opposed to pass them, so this is certainly an uphill battle. We will certainly monitor this situation closely and be thankful for any effort to undo some of the worst legislation the 2006 session delivered."

Emily Swoboda is the senior staff writer at IGamingNews. She lives in St. Louis, Mo.