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New Bill Gives Online Gambling Another Chance

By Javad Heydary E-Commerce Times ECT News Network
Mar 30, 2011 5:00 AM PT

The issue of whether online gambling should be legalized is once again being taken up in the U.S. Congress. The Internet Gambling Regulation, Consumer Protection, and Enforcement Act has been introduced by Rep. John Campbell, R-Calif., with Rep. Barney Frank, D-Mass., as a leading cosponsor. Rep. Ed Perlmutter, D-Colo., and Rep. Peter King, R-N.Y., are also leading cosponsors. This bill is nearly identical to the anti-UIGEA (the Unlawful Internet Gambling Enforcement Act) bill introduced in the 111th Congress last year.

New Bill Gives Online Gambling Another Chance

The new bill is designed to significantly overhaul the UIGEA, passed by the U.S. Congress in 2006. The UIGEA makes it illegal for U.S. financial institutions to transfer money to offshore gambling websites or to the online payment services those websites use. As a result of the UIGEA, many non-U.S. Internet gambling websites halted their provision of services to U.S. residents.

Regulation of Internet Gambling Operators

The new anti-UIGEA bill, like the previous version, would set up a regulatory framework and create safeguards for online gaming in the U.S. Internet gambling operators would be required to obtain federal licenses from the Department of Treasury in order to accept wagers over the Internet from individuals located in the U.S.

To obtain a license, an operator would be required to have a substantial U.S. presence, and at least 50 percent of its employees would have to be U.S. residents or citizens. Operators that previously accepted wagers from individuals located in the U.S. in violation of federal or state law would be prohibited from obtaining a license. After obtaining a license, operators would be required to

  • take appropriate safeguards to prevent fraud, money laundering, underage and compulsive gambling;
  • prohibit online advertising targeting underage or compulsive gamblers;
  • prohibit the use of credit cards to gamble online;
  • prohibit sports betting;
  • require players to set financial loss limits; and
  • prohibit operators from accepting wagers from persons on a self-exclusion list.

The bill applies to both foreign and domestic operators.

Sponsors Are Confident

Campbell believes that this new anti-UIGEA bill should be passed because the UIGEA has not been able to prevent Americans from gambling online.

"Clearly, Americans want to gamble on the Internet, and policymakers need to provide both the freedom to do so, as well as ensure that appropriate consumer protections are in place," he said.

Proponents of the new bill contend that regulating online gaming will protect Americans from an online gambling industry that is largely unregulated in the United States, as well as contribute to the economic growth of the U.S. by generating additional revenue.

Impact at the State Level?

If the new anti-UIGEA bill is passed, it would likely eliminate or reduce the number of state-level online gaming bills that have been proposed in recent months.

Until recently, New Jersey was set to become the first state to offer online gambling. Both the State Senate and the New Jersey Regulatory Oversight and Gaming Committee had approved an Internet gaming bill. The bill failed, however, as New Jersey Governor Chris Christie vetoed it, relying on the grounds that the New Jersey constitution requires the measure to be approved in a state referendum.

In the meantime, other states such as Iowa, Florida, Nevada and California are considering similar bills. Notably, of the aforementioned states, California's proposed bill is the only one that would permit forms of intrastate online gaming besides Internet poker.

Challenges Ahead

The new anti-UIGEA will be met with fierce opposition from the House Financial Services Committee. The chairman of the committee, Rep. Spencer Bachus, R-Ala., is strongly opposed to the legalization of online gambling. Moreover, the likelihood of the passage of any of the proposed intrastate bills is difficult to predict. Perhaps Nevada, with its more progressive approach to gambling, may adopt the proposed legislation.

Regardless, the one thing that almost everyone can agree on is the need to overhaul the current legislative structure in the U.S. when it comes to online gaming. The only questions are those of timing -- whether changes will come this year or the next -- and whether Congress will take the lead in legislative reform or leave it to state legislatures to fill the void through a patchwork of local laws.


Javad Heydary, a columnist for the E-Commerce Times, is chairman and managing director of Heydary Hamilton. His business law practice focuses on commercial transactions, e-commerce and franchising law. Heydary is also managing editor of Laws of .Com, a biweekly publication covering legal developments in e-commerce.


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