Barney Frank Introduces New Online Gambling Legislation

House Financial Services Committee Chairman Barney Frank (D – Mass.) introduced legislation Wednesday that would legalize and regulate online gambling in the United States.  H.R. 2267, the Internet Gambling Regulation, Consumer Protection, and Enforcement Act of 2009 (IGRCPEA) is very similar to Frank’s Internet Gambling Regulation and Enforcement Act of 2007, but as one can see from the names of the bills, has a an additional emphasis on “consumer protection.”  Optimists feel that this emphasis may sway some past opponents of internet gambling, people who typically cite concerns for children and problem gamblers when explaining their viewpoints.   

The bill requires that any business that wishes to offer online gambling services to United States residents must go through a licensing process with the Department of the Treasury.  In order to get a license, applicants will be subject to criminal background checks and reviews of their financial condition, corporate structure, experiences, and general suitability to operate an online gambling enterprise.  It will be illegal for anyone without a license to accept wagers from U.S. residents.  The licenses will be good for five years and can be renewed. 

Licensees will be required to be sure certain safeguards are in place, including: 

• Prevention of underage gambling
• Ensure that customers are playing from permissible locations
• Collection of applicable taxes when proceeds from gambling are paid to the customer
• Payment of applicable taxes to the federal government, as well as proper record keeping
• Combat fraud, money laundering, and terrorist financing
• Combat problem or “compulsive” gambling
• Protect customer privacy 

Additionally, licensees will be required to adhere to a Problem Gambling, Responsible Gambling, and Self-Exclusion Program, the standards of which will be developed by the Treasury and the States. 

Also of interest to many online poker players is the following clause: 

“ELECTRONIC CHEATING DEVICES PROHIBITED -- No person initiating, receiving, or otherwise making a bet or wager with a licensee, or sending, receiving, or inviting information assisting with a bet or wager with a licensee, knowingly shall use, or assist another in the use of, an electronic, electrical, or mechanical device which is designed, constructed, or programmed specifically for use in obtaining an advantage in any game authorized under this subchapter, where such advantage is prohibited or otherwise violates the rules of play established by the licensee.” 

Some people originally read this and thought that it meant that poker analysis software such as PokerTracker, Hold’em Manager, or Poker Office would actually be made illegal, but this is not the case.  As long as the software is permitted by the poker room, it is allowed.  What this clause does is make cheating programs such as bots illegal, punishable by a fine and/or a prison sentence of up to five years. 

Perhaps the most controversial part of the bill is the state opt-out section.  While this bill would legalize online gambling nationwide, each individual state would have the opportunity to disallow internet gaming within its borders.  Many poker players are afraid, and rightly so, that those states which disallow internet gambling currently will simply opt-out, making this bill no better for poker playing residents of those states than the status quo.  Unfortunately, this opt-out clause may be necessary in order for Frank to get the support he needs to go forward with the legislation.  

There is no sports league opt-out clause like there has been in similar bills.  Instead, sports betting is deemed strictly illegal.  Like the state opt-out clause, this one was almost certainly added to gain the favor of the professional and amateur sports leagues and their powerful lobbies.  The National Football League is a notable and vocal opponent of online gambling because it feels that sports betting has the potential to damage the integrity of the game.  The NFL recently hired a full-time lobbyist to push its agenda on Capitol Hill. 

At the same time that Rep. Frank unveiled H.R. 2267, he also introduced the short H.R. 2266, the Reasonable Prudence in Regulation Act, which calls for the implementation of the regulations for the UIGEA to be delayed for one year, pushing them back to December 1, 2010.