U.S. Law Roundup - May 2008

27 May 2008

Staying on top of interactive gambling bills as they move through the United States' federal and state legislatures no longer entails hours of research, thanks to this monthly update on United States state and federal legislation.

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State Legislation

California: AB2026

Summary - AB2026 would direct the California Gambling Control Commission, in conjunction with the State Department of Justice, to conduct a study into the feasibility of a state-run online poker scheme within the confines of the Unlawful Internet Gambling Enforcement Act of 2006 and state law.

Status - The bill, introduced on Feb. 15, 2008 by State Assemblyman Lloyd E. Levine, received bi-partisan approval on April 17 from the Assembly Governmental Organization Committee, which oversees all new gaming legislation in California.

Outlook - Mr. Levine told Interactive Gaming News that with committee approval he may be able to bypass the study altogether and begin writing a bill for intrastate poker, which could see an offering launched by late 2009.

New York: A3434

Summary - A3434 would amend sections 225.00 & 225.15 of the New York penal law and add SS225.45 & 225.50 as it relates to possession of electronic or computerized gambling records and computerized gambling. The bill aims to prohibit the use of computer systems or storage media, including the Internet, in furtherance of illegal gambling or possession of gambling records.

Status - The measure was introduced on Jan. 27, 2007 by Representative Sam Hoyt and referred to the Committee on Codes, but had seen no movement since until Jan. 9, 2008 when it was again referred to the same committee.

Outlook - This bill is similar to S66, which is also currently in Codes. An industry legal expert suggested that once a bill is referred to Codes, it has a good chance of passing.

New York: S66

Summary - S66 would amend section 225.00 of the New York penal law as it relates to gambling over the Internet within provisions of law relating to gambling offenses. The amended sections would include "Advance gambling activity," which covers persons that aid in the advancement of an illegal gambling activity, including Internet gambling.

Status - The measure was pre-filed in the Senate on Jan. 3, 2007 by State Senators Frank Padavan, Mary Lou Rath and Dale M. Volker. By Jan. 23 it had passed the Senate and was delivered to the Assembly where it was referred to the Committee on Codes, often the most powerful committee in any state legislature. However, S66 died in the Assembly on Jan. 9, 2008 and was returned to the Senate where it has been referred to the Senate Committee on Codes.

Outlook - The Committee on Codes is chaired by Mr. Volker, whose presence gives the measure a good chance of passing. On the other hand, the bill died once in session.

New Jersey: A995

Summary - A995 would authorize licensed land-based casinos in New Jersey to offer their games via the Internet.

Status - Sponsored by Assemblymen Vincent Prieto and Neil M. Cohen, A995 is the latest version of a bill that has appeared in the state's last three legislative sessions. A995 was introduced on Jan. 10, 2006 and referred to the Assembly Tourism and Gaming Committee. It has not moved since.

Outlook - Unlike a similar I-gaming bill that passed Nevada's legislature in 2001, this bill, in its three previous manifestations in New Jersey, has failed to garner much support among legislators and casino operators. Furthermore, the New Jersey legislative session ends in four months. It is likely A995 will die in session.

New Jersey: S746

Summary - Senate Bill 746, authored by Senator Richard J. Codey, is identical to Senate Bill 1106 of the 2006-2007 legislative session, 1013 of the 2004-2005 session and 2376 from the 2002-2003 session, which Mr. Codey also authored. The bill broadens the definition of illegal gambling to include Internet gambling and voids credit card debt incurred through illegal gambling. The bill also includes a clause establishing that only the state may sue to recover gambling losses.

Status - The bill was introduced and referred to the Senate Wagering, Tourism & Historic Preservation Committee on Jan. 8, 2008 and has not moved since.

Outlook - Mr. Codey became president of the Senate at the beginning of the 2005-2006 session, so it would seem that any bill with his name on it ought to be taken somewhat seriously. Nonetheless, this is the fourth incarnation of his bill and the first three failed to make it out of committee.

Federal Legislation


Summary - H.R. 5767 aims to prevent the regulations as prescribed by the Unlawful Internet Gambling Enforcement Act from being written, implemented or enforced.

Status - The bill, introduced jointly on April 10, 2008 by Representatives Barney Frank and Ron Paul, a Democrat and a Republican, respectively, was written in response to an April 2 hearing on the regulations, during which Federal Reserve and Treasury officials acknowledged the act's intended objective was unclear, making the rule-writing process difficult. Mr. Frank and Mr. Paul followed the bill with letters to the Fed and Treasury urging them to delay the rules. In response to the Frank-Paul push, Representative Spencer T. Bachus, Republican of Alabama, and Senator Jon Kyl, Republican of Arizona, sent a jointly-written letter to members of Congress urging opposition to a rollback of the act. The bill has gained 10 co-sponsors since its introduction.

Outlook - The bill is expected to encounter stiff resistance from professional sports leagues and religious conservatives, though support from the banks -- the act's intended enforcement mechanism -- could lend needed support to the bill.

H.R. 2046 - The Internet Gambling Regulation and Enforcement Act

Summary - H.R. 2046, authored by Representative Barney Frank, Democrat of Massachusetts, proposes not to repeal the Unlawful Internet Gambling and Enforcement Act, but to defend companies against it. The act would remain in place, in that banks and credit card companies would still be prevented from doing business with illegal online gaming operators, but H.R. 2046 proposes a federal licensing and regulation regime for offshore Internet gambling companies that would be overseen by the Financial Crimes Enforcement Network.

Status - The bill, introduced on April 26, 2007, was referred to the House Financial Services Committee, of which Frank is the chair, and the House Energy and Commerce Committee. The bill has 48 co-sponsors.

Outlook - H.R. 2046 has received a good deal of attention from groups opposed to I-gaming regulation. Two coalitions, one faith-based and one made up of American sports leagues, have written letters to the members of Congress, asking them to oppose the bill and any other similar legislation. By contrast, the bill has received support from Peter Mandelson, trade commissioner of the European Union, who visited Washington, D.C., in November to discuss the United States I-gaming ban.

H.R. 2140 - The Internet Gaming Study Act

Summary - H.R. 2140, introduced by Representative Shelley Berkley, Democrat of Nevada, proposes a one-year study on Internet gambling to be conducted by the National Research Council, a branch of the National Academy of Sciences.

Status - Ms. Berkley submitted H.R. 2140 on May 3, 2007 and it was referred to the Committees on the Judiciary, House Financial Services, and Ways and Means. On June 4, 2007 it was referred to the Subcommittee on Crime, Terrorism and Homeland Security. H.R. 2140 has 72 co-sponsors.

Outlook - H.R. 2140 is backed by the American Gaming Association, which has long called for such a study. One industry expert said that Ms. Berkley's proposal could go a long way in getting Congress to take Representative Barney Frank's bill seriously. Ahead of the 2008 presidential election, Democratic candidates offered their views on Internet gambling while campaigning in Las Vegas in January. Senator Hillary Rodham Clinton, Democrat of New York, supports the idea of studying Internet gambling, in an effort to determine whether it can be fairly regulated. Senator Barack Obama, Democrat of Illinois, supports a study. Moreover, Mr. Obama said he supports regulation because he worries that the Internet is a "Wild West of illegal activity," according to the Las Vegas Sun.

H.R. 5523 - The Internet Gambling Regulation and Tax Enforcement Act of 2008

Summary - Introduced by Representative Jim McDermott of Washington, H.R. 5523 is an updated version of H.R. 2607, proposed in 2007. It is the tax counterpart to H.R. 2046 and would create a 2 percent tax on Internet gambling deposits, with half earmarked to the federal government and half earmarked to state governments. H.R. 5523 also includes an enhanced reporting mechanism under which licensed gambling operators are required to provide each customer an annual statement of winnings and losses.

Status - H.R. 5523 was introduced on March 4, 2008 and referred to the House Committee on Ways and Means. The bill has no cosponsors at this time.

Outlook - In its previous form, H.R. 5523 faced opposition from religious and family groups who have asked Members of Congress to vote against any Internet gambling related legislation. On the other hand, a recent study by PricewaterhouseCoopers found that between 2008 and 2017, if the United States were with certain conditions to enact both bills, estimated revenue derived from individual income taxes, wagering tax, licensing fees and corporate income tax could total between $8.7 billion and $17.6 billion.

H.R. 2610 - The Skill Games Protection Act

Summary - H.R. 2610 would exempt skill games like poker, mahjong, bridge and backgammon from the Unlawful Internet Gambling Enforcement Act.

Status - H.R. 2610, introduced by Representative Robert I. Wexler of Florida, was introduced on June 7 and referred to the Committee on Financial Services and the Committees on the Judiciary, and Energy and Commerce. On July 16, the bill was referred to the Judiciary Subcommittee on Crime, Terrorism, and Homeland Security. The bill has 22 co-sponsors.

Outlook - Such an exemption would theoretically allow for the return of online poker providers, exiled after prohibitive legislation was enacted in October 2006, to the United States marketplace. The Skill Games Protection Act, according to Josh Rogin, deputy chief of staff for Mr. Wexler, "allows Americans to play poker online as they should have every right to do."

The IGN staff continually troll the wires, foreign papers, corporate news alert services and other dark, dusty corners of the Web to bring you the very latest industry news.