Frank Delivers New Bills

6 May 2009
Internet gambling's most powerful congressional ally on Wednesday introduced two bills that, respectively, would see I-gaming regulated in the United States and the UIGEA's compliance deadline pushed back.

Barney Frank, chairman of the House Financial Services Committee, unveiled both bills this morning at a press conference in Washington, D.C.

"My fundamental reasons for doing this are that the government should not interfere with people's liberty unless there's a good reason," Mr. Frank said at the conference.

The first bill, the Internet Gambling Regulation, Consumer Protection, and Enforcement Act, is a follow-up to Mr. Frank's April 2007 bill called the Internet Gambling Regulation Enforcement Act.

It would establish a regulatory regime in the United States, with the Secretary of the Treasury to act as licensing authority.

A lobbyist close to the process in Washington, who requested anonymity, told IGamingNews Wednesday the 2009 bill departs from the 2007 bill in that it prohibits any sports-wagering activity that violates the Professional and Amateur Sports Protection Act.

The sports protection act -- or PASPA, as the law is sometimes called -- was enacted in 1992 and effectively prohibits sports betting in all but four states.

"Congressmen Frank's new bill uses a PASPA standard -- it prohibits any wager that would violate PASPA -- but I believe the intent is that it would not allow licensees to accept Internet wagers on sports," the lobbyist said.

In IGamingNews' fourth-quarter report on federal lobbying spend, professional and amateur sports leagues -- long opponents of Internet gambling -- spent an estimated $75,500 lobbying Internet-gambling-related legislation.

Mr. Frank's new regulatory bill will also face opposition from social conservative groups like the Family Research Council, a Christian organization, and Focus on the Family.

"It's a sad day when a public servant like Representative Frank works so hard to willfully legislate harm to families under the pretense of freedom," Chad Hills, an analyst for Focus on the Family, told IGamingNews last year in response to one of Mr. Frank's previous bills.

In Congress, Republican resistance is expected to be stiff -- Mr. Frank's 2007 bill received just 48 co-sponsors, the majority of whom were Democrats. Republicans Peter T. King of New York and Ron Paul of Texas, however, will be supporting the bill.

Spencer T. Bachus, the ranking Republican member of the financial services committee, has already come out against the new regulatory bill.

"Illegal off-shore Internet gambling sites are a criminal enterprise and allowing them to operate unfettered in the United States would present a clear danger to our youth," Mr. Bachus, who was an author of the UIGEA, said in a prepared statement Wednesday.

Mr. Frank's regulatory bill is not without its supporters, however.

Michael Waxman, spokesman for the Safe and Secure Internet Gambling Initiative, a backer of Mr. Frank's legislation that doesn't lobby Congress, called Mr. Frank's decision to continue advocating for Internet gambling "encouraging."

In an e-mail to IGamingNews, Clive Hawkswood, chief executive of the United Kingdom's Remote Gambling Association, an industry trade group whose members include PartyGaming, commended Mr. Frank for "seeking to steer the ship in the right direction."

The Poker Player's Alliance, a player advocacy group that lobbies Congress, said in a prepared statement that it was "grateful for Chairman Frank's leadership," adding it would be activating its "grassroots army made up of over one million members to help him drive legislation."

But the American Gaming Association, the country's most powerful gambling lobby, told IGamingNews Wednesday it remains neutral on Internet gambling "because of the divergent views of its members."

The commercial gambling sector, as expected, was measured in responding to the new regulatory bill.

Brian H. Hadfield, chief executive of CryptoLogic Ltd., the Nasdaq-listed software developer, told IGamingNews Wednesday: "While it’s difficult to speculate on exactly how we would act until we see the legislation and any subsequent regulation, what I can say is that CryptoLogic has always advocated a regulated environment -- and so we welcome Barney Frank’s direction."

International Game Technology, the Nevada-based gambling technology supplier who owns WagerWorks, and 888 Holdings, a Gibraltar operator, did not return phone calls and e-mails by press time Wednesday. Betfair declined comment.

Legal experts, meanwhile, expect the bill, in some form, will pass the House, but that the Senate may be a tougher sell.

"The Senate majority leader from Nevada, Harry Reid, is powerful, and you've got to convince him," Joseph M. Kelley, a business law professor at State University of New York, Buffalo, told IGamingNews Wednesday. "Right now, he seems to have not come out in favor of regulation."

In the House, there are 256 Democrats, 178 Republicans and one vacancy, and in the Senate, there are 59 Democrats, 40 Republicans and one unresolved seat.

It is thought that a piece of legislation identical to Mr. Frank's regulatory bill will be introduced in the Senate, and Mr. Kelley speculated that Senator Robert Menendez, Democrat of New Jersey, could sponsor it. (Mr. Menendez, recall, introduced the Skill Games Licensing and Control Act in September 2008.)

The Washington lobbyist expects Mr. Frank's regulatory bill to "go through some permutations," but believes chances for Senate passage are good.

"We have a couple of other things on the agenda as you might've noticed, like regulating the financial structure of the country," Mr. Frank joked with respect to the ongoing financial crisis. "But it is my intention to move on this legislation before the break in August."


Mr. Frank's second bill, the Reasonable Prudence in Regulation Act, would delay the UIGEA compliance deadline by one year to December 2010.

Regulations for the UIGEA took effect in January 2009, but non-exempt participants in designated payment systems -- including automated clearinghouse systems -- were given until this December to comply with those regulations.

"I think Congressmen Frank believes that once his licensing bill is enacted, then the standard for UIGEA should be to block payments to people who aren't licensed," said the Washington lobbyist, when asked about Mr. Frank's motivations for introducing the bill. "So he wants to hold off on the compliance with the existing regulations until there's a chance to enact a licensing regime and make that the basis of enforcement."

The bill is understood to be supported by both Internet gambling and banking interests, though the American Bankers Association, a trade group that lobbies Congress, did not return a phone call by press time Wednesday.

Mr. Frank's most successful bill to date, the Payment Systems Protection Act, sought to clarify what the UIGEA intended by "unlawful Internet gambling." It was approved in a 30-to-19 vote by the financial services committee in September 2008 but died in session.

The Taxman Cometh

Representative James T. McDermott, Democrat of Illinois, on Wednesday introduced the Internet Gambling Regulation and Tax Enforcement Act of 2009, the tax companion to Mr. Frank's new regulatory bill.

The tax enforcement act is a follow-up to Mr. McDermott's 2007 bill by the same name and proposes a 2 percent tax on customer deposits to be paid monthly.

A recent analysis performed by PricewaterhouseCoopers for UC Group, a London payment processor that lobbies Congress, suggested Internet gambling could generate as much as $52 billion in tax revenue over the next decade.

“We are losing billions of dollars in federal and state taxes every year because a prior Administration and its supporters drove legitimate U.S. online gambling off-shore by passing an ill-conceived late-night amendment in Congress that has done nothing except make Americans more vulnerable to scams when they wager online and cost us billions in lost revenue,” Mr. McDermott said in a prepared statement Wednesday.

Bills for Download

IGamingNews wishes to note that its full analysis of Mr. Frank's regulatory bill, prepared by one of the United States leading Internet gambling experts, will be available imminently.

To view a copy of Mr. Frank's Internet Gambling Regulation, Consumer Protection, and Enforcement Act, click here.

To view a copy of Mr. Frank's Reasonable Prudence in Regulation Act, click here.

To view a copy of Mr. McDermott's Internet Gambling Regulation and Tax Enforcement Act, click here.

Chris Krafcik is the editor of IGamingNews. He lives in St. Louis, Mo.