House Panel Votes To Approve Bill Legalizing Online Gambling

Date : 07/28/2010 @ 5:56PM
Source : Dow Jones News

House Panel Votes To Approve Bill Legalizing Online Gambling

A House panel voted on Wednesday to approve a measure that would seek to regulate many forms of online gambling, in an effort to overturn an existing law that bans the increasingly popular Internet-based gambling.

Lawmakers on the House Financial Services Committee voted 41-22 to approve the legislation, meaning it could be brought to the floor by House Democratic leadership.

Democratic aides said the most likely path forward for the legislation would be its addition to a larger, must-pass bill later in the year, rather than bringing it to the House floor as a stand-alone measure.

The bill aims to bring many of the online gaming websites onto U.S. soil and regulate them, rather than banning them outright.

The main thrust of the legislation is aimed at legalizing online poker, which is rapidly growing, but other forms of gambling including bingo would also be allowed.

Placing bets online on professional sports leagues such as the National Football League and Major League Baseball still wouldn't be allowed under the bill.

Rep. Barney Frank (D., Mass.), chairman of the House panel, has championed the cause of legalizing online gambling. Frank has argued that while he's not a personal fan of gambling, he doesn't believe it's the role of the government to prevent adults from engaging in it.

The current law places the onus on credit card companies to determine whether a customer's transaction is with an online gambling firm. If it is, they are required to reject it.

The financial sector has strongly opposed it, saying it effectively requires credit-card companies to play sheriff.

Despite the ban being enacted into law nearly four years ago, the regulations implementing the ban only took effect on June 1.

Advocates for online gambling have said that since the rules were established, there has been little indication that the number of U.S. online poker players has decreased.

Frank's bill would require firms that want to offer online gambling services to American players to base much of their operations in the U.S. Those firms that have continued to illegally offer access to individuals in the U.S. since the ban went into effect would be barred from participating.

State governments would be allowed to opt out of the new regime.

While some casino companies remain opposed to Internet gambling, the casino industry as a whole--through its trade association the American Gaming Association--has recently shifted its stance.

The association said in March that after investigating the issue, it had determined that technology allowed for a sufficient regulatory structure of online gambling.

However, the association has not taken a stance on specific bills. In interviews with poker websites, the association's chief executive, Frank Fahrenkopf, has said that most of his members prefer that states regulate the industry rather than the federal government, as is the case for casinos.

The issue is of particular importance to gambling giant Harrah's Entertainment Inc. (HET), which operates casinos in Las Vegas, Atlantic City, and throughout the U.S.

While many of its Las Vegas-based competitors have seen massive growth in Asia amid a declining casino market in the U.S., Harrah's does not have a strong presence in Asia.

The company, therefore, is laying the groundwork for future growth based on the prospect of legalization of Internet gambling in the U.S.

In January, Harrah's began operating three gambling websites out of the U.K. that allow gambling for U.K. residents. The websites include two with the Caesars brand and one tied to the popular World Series of Poker, which Harrah's owns.

"We've been supportive of this bill, it addresses the reality of what is happening on the Internet," Jan Jones, senior vice president of government relations for Harrah's, said in an interview.

Some Republican members of the financial services panel remain strongly opposed to rescinding the ban. They have argued that legalizing the practice could lead to gambling by minors and that it could result in an increase in addictive behavior.

There is a separate measure, sponsored by Rep. Jim McDermott (D., Wash.), that would begin taxing the proceeds earned by online gambling companies.

That bill has yet to be approved by the House Ways & Means Committee, which controls tax policy.

According to an estimate by the Joint Tax Committee, legalizing and taxing online gambling could raise up to $42 billion in revenues over the next decade.

Opponents of the measure have decried this estimate, saying that several state governments would likely opt out, significantly lowering the tax revenues that could be generated.

-By Corey Boles, Dow Jones Newswires; 202-862-6601; corey.boles@dowjones.com

(Alexandra Berzon of the Wall Street Journal contributed to this article.)

 
 
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