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Best of Vin Narayanan

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What's next for Frank's Internet gambling bill?

29 July 2010

Now that Rep. Barney Frank's bill to license and regulate online gambling in the U.S. has been passed by the committee he chairs, the House Financial Services Committees, all sorts of questions are swirling around about what's actually in the bill, and what the future holds for the bill. Here's a look at various questions, FAQ-style.

Frank's HR 2267 was amended several times before it was passed. What's actually in the bill?

Here are the key provisions:
  • The Treasury Department will be in charge of licensing and regulating online gambling sites
  • Both states and Native American tribes will have parallel licensing and regulating authority
  • Sports betting on the Internet will be illegal.
  • "Bad actors" will be denied online gambling licenses. Congress has defined bad actors as companies, and the managers of those companies, that have knowingly violated or evaded U.S. Internet gambling laws — especially since the passage of the UIGEA. It's a provision that clearly has Full Tilt Poker and PokerStars in mind.
  • Credit cards will not be allowed to fund player accounts. Debit cards and pre-paid cards, however, are permissible.
  • Loss limits will be put in place for players.
  • Advertising targeting minors will be illegal.
  • Self-exclusion lists for problem gamblers will be required.
  • The facilities used by online gamblers in the U.S (servers, payment processors, etc.) have to be located in the United States, as do the majority of the employees working for the online gambling site.
If this bill becomes law, will Full Tilt and PokerStars get licenses?

PokerStars and Full Tilt might be in a bit of trouble here. But PokerStars — no shock here — disagrees. Here's part of their statement on the amended Frank bill.

"PokerStars supports the provisions in both amendments as neither would adversely affect the availability of a license for a respected operator such as PokerStars. As reflected in legal opinions provided to PokerStars, its activities in the US are and at all times have been lawful."

Full Tilt has always maintained they are acting lawfully in the U.S. as well. But that doesn't change the fact powerful forces are lining up against them.

There is a contingent in Congress that's unhappy that many gaming companies have chosen to continue offering services to Americans despite the passage of the UIGEA.

In a weak moment, I suspect you could get some of the UIGEA proponents to admit that the UIGEA is a weak banking law that did nothing to change the legality of online gambling in the U.S. But that doesn't change the fact that the message they were trying to send with the law is "online gambling is illegal." And they feel that message has been ignored by the likes of PokerStars and Full Tilt, among others.

That means while online gambling opponents might concede that they've lost the fight to prohibit online gambling in the United States, they'll be damned if companies who ignored them are allowed to profit from a new licensing scheme.

Joining the prohibitionists in attempting to stop the "bad actors" from coming to America are the gambling monopolists. This group doesn't want to share gambling revenue with any overseas interests. And then you have the overseas interests who pulled out of the U.S., like PartyPoker, when the UIGEA passed. It's in their interest to see the "bad actors" denied licenses, so they'll be lobbying for that as well. And PartyPoker already has a somewhat friendly relationship with the U.S. Treasury after voluntarily paid a $105 million fine as part of a nonprosecution agreement last year.

With all of these forces lined up against PokerStars and Full Tilt, it's hard to see how they would get a license. I hope I'm wrong, but I just don't see it.

What happens to Full Tilt and PokerStars if they don't get a U.S. license?

They'll likely be bought out by one of the big Vegas casino companies. Buying Full Tilt or PokerStars is a quick way for companies like Harrah's or MGM to assume a dominant position in the American market quickly.

Can the Frank bill pass before they figure out how to tax online gambling?

It's hard to see the full House voting to license and regulate online gambling before the taxation part is settled.

The political argument being advanced by many of the people supporting this bill is that in a time of enormous deficits and tough economic times, ignoring a tax stream like online gambling is irresponsible. And when you combine the tax revenue with protecting consumers, licensing online gambling is a no-brainer.

This is a powerful political argument. But it's an argument that only works if the tax part of this equation is figured out. Until Rep. Jim McDermott's Internet Gambling Regulation and Tax Enforcement act is ready, it will be hard for the House to authorize the licensing of online gambling.

Does that mean the Frank bill won't pass the House this year?

That's the most likely scenario. The two biggest factors working against passage are the tax bill and the calendar. The House is set to go on its August recess shortly. And they won't return to Washington until the beginning of September. When they return, they'll be session for just one month before heading out on the campaign trail for the November elections. With so much on the legislative calendar, it's hard to see how this bill will be squeezed in. And the House typically doesn't vote on contentious legislation during lame duck sessions, so this 30-day window is the only realistic time frame the bill has for a vote.

Who's ultimately in charge of scheduling a vote on the Frank bill?

House Speaker Nancy Pelosi. Her position on online gambling isn't known. When the House Financial Services Committee passed legislation in 2008 that delayed UIGEA enforcement (except for sports betting), it was never brought up for a full vote. But if she was completely against online gambling, she would not have let Frank pursue this legislation for the last few years.

In California, the Native American tribes have been one of the biggest stumbling blocks to passing online gambling legislation. Will this pose a problem on the federal level?

It's not likely to pose a problem. When Lynn Malerba, chairwoman of the Mohegan Tribe in Connecticut, testified in front of the House Financial Services Committee last week, she indicated that if Frank's bill was amended to ensure Indian tribes could offer Internet gaming on the same competitive playing field as everyone else, and without affecting their current compacts with states, Native American gaming interests would support the legislation.

Frank's bill does give Native American tribes the authority to license online gambling. And he indicated he would support measures on the full House floor that would amend a pair of laws (that didn't fall under the jurisdiction of Frank's committee) that would allow tribes to offer online gambling without affecting their state compacts.

Let's say the Frank bill passes the House. What happens next?

Nothing is the most likely answer. The Senate won't have the time to take up a similar measure unless Senate Majority Leader Harry Reid decides to ram something through. House rules generally prevent non-germane bills from being attached to "must-pass" bills, so we won't see a situation like we did in 2006 where the Senate attached the UIGEA to a port security bill.

If nothing happens this year, what's next?

If the Democrats still control the House after this year's elections, Frank will have to start the process all over again in the new Congress. And then he'll have to look for a partner in the Senate to do the same. Until both pieces are in place, online gambling legislation won't change any time soon.
What's next for Frank's Internet gambling bill? is republished from iGamingAffiliatePrograms.com.
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Best of Vin Narayanan
Vin Narayanan

Vin Narayanan is the managing editor at Casino City. When he's not writing or editing stories, he likes to play Chinese Poker, Badugi, Razz and any other "non-traditional" poker game. He also thinks blackjack is his best game and loves game theory.

Before joining Casino City, Vin covered (not all at the same time) sports, politics and elections, wars, technology, celebrities and the Census for USATODAY.com, USA WEEKEND and CNN.

A proud graduate of Michigan State University, Vin can be found on most nights and weekends trying to find a way to watch the Spartans play football or basketball.

Vin Narayanan
Vin Narayanan is the managing editor at Casino City. When he's not writing or editing stories, he likes to play Chinese Poker, Badugi, Razz and any other "non-traditional" poker game. He also thinks blackjack is his best game and loves game theory.

Before joining Casino City, Vin covered (not all at the same time) sports, politics and elections, wars, technology, celebrities and the Census for USATODAY.com, USA WEEKEND and CNN.

A proud graduate of Michigan State University, Vin can be found on most nights and weekends trying to find a way to watch the Spartans play football or basketball.