A national framework for the legalization and regulation of Internet gambling in the United States—the holy grail of the commercial casino industry, of grassroots advocacy groups such as the Poker Players Alliance and of several of the largest and best-known global operators—is the substance of three bills currently lodged with various committees of the Republican-controlled House of Representatives.
While none of these stand much of a chance of coming to a vote in the House before national elections in November 2012, the most viable of the three is a poker-only measure introduced in June 2011 by Texas Republican Joe Barton, a Capitol Hill veteran now serving his 14th term. This is H.R. 2366, the “Internet Gambling Prohibition, Poker Consumer Protection, and Strengthening UIGEA Act”.
en Republicans and 20 Democrats have signed on as co-sponsors of H.R. 2366, giving it the most bipartisan support of the three. It is under consideration in three committees: Energy and Commerce, chaired by Frederick Upton of Michigan; Judiciary, chaired by Lamar Smith of Texas; and Financial Services, chaired by Spencer Bacchus of Alabama, who as ranking Republican opposed Barney Frank on Web gambling regulation when Frank chaired the committee in the previous Democratic-controlled Congress.
The main provisions H.R. 2366:
• An “Office of Internet Poker Oversight” would be established within the U.S. Department of Commerce to craft regulatory guidelines under which states and federally recognized Indian tribes could issue licenses to operators to run poker games online for players 21 and older, who are located within the United States, and determine the suitability of vendors to do business with them.
• Qualified applicants include owners and operators of casinos with at least 500 slot machines, racetracks and licensed card rooms. The bill prohibits the licensing of Internet cafes or other establishments “in which computer terminals or similar access devices are made available to be used principally for the purpose of accessing Internet gambling facilities.”
• Within these guidelines, states would be the final licensing authority. Any decision to deny or revoke a license could not be appealed to the federal government. Fines and penalties likewise would be determined by state law.
• Licenses would be for an initial term of five years.
• Licensees would be required to maintain their equipment within the territory of the United States. States could also require applicants to locate that equipment within the state or on tribal land.
• Licensees could not accept bets from residents of any state or Indian tribe that has notified the secretary of Commerce of their decision to opt out. However, any state ban would not apply on the lands of any tribe that chooses to participate.
• Players may not place bets using a credit card.
• States would be responsible for ensuring operators maintain an array of player protections, as determined by the states, including self-exclusion.
H.R. 1174, the “Internet Gambling Regulation, Consumer Protection and Enforcement Act,” introduced in March 2011 by four-term California Republican John Campbell, is more ambitious, empowering the secretary of the Treasury to license and regulate all forms of gambling on the Web (except sports betting), with states and Indian tribes retaining the right to opt out.
The bill goes considerably further than H.R. 2366 in other respects too.
Among its salient provisions:
• Applicants for licenses must establish a corporate or separate business entity in the United States, a majority of whose officers and board members are U.S. citizens or residents.
• A majority of employees of the applicant or licensee and any affiliated business entities must be residents or citizens of the United States.
• An applicant “may not be determined to be suitable for licensing” if they “knowingly participated in, or should have known they were participating in, any illegal Internet gambling activity” after the enactment of 2006 Unlawful Internet Gambling Enforcement Act. This includes having “knowingly been owned, operated, managed, or employed by … any person who was knowingly participating in, or should have known they were participating in, any illegal Internet gambling activity.”
• Applicants would be required to certify in writing, under penalty of perjury, that neither they nor any of affiliated business entities ever “committed an intentional felony violation of federal or state gambling laws”; and that they “used diligence to prevent any United States person from placing a bet on an Internet site in violation of federal or state gambling laws.”
• Operators would be required to maintain a broad system of player protections and safeguards against money laundering and fraud, similar to H.R. 2366.
• Similarly, betting by credit card would be prohibited.
H.R. 1174 is in the same three committees considering H.R. 2366. It has less bipartisan support than the Barton bill, however, with only five Republicans among its 29 co-sponsors, and the odds on passage are longer as well, not surprisingly, given the broad authority it assigns to the federal government and the fact that it would permit casino-style games.
Neither bill addresses the all-important issue of taxation. This is taken up by a bill introduced in 2010 in the previous Democratic-controlled House and reintroduced last June by the same veteran congressman, 12-term Democrat James McDermott of Washington.
H.R. 2230, the “Internet Gambling Regulation and Tax Enforcement Act,” imposes on licensees a federal tax of 2 percent of all funds deposited by customers during the preceding month and authorizes states and tribes to collect a tax of 6 percent of all funds deposited by players located within their borders or subject to their jurisdiction.
Of the proceeds from the federal tax, 25 percent would be allocated to a “Transitional Assistance Trust Fund” established by the Treasury Department and distributed to the states to pay for educational and job training programs. A smaller portion (0.5 percent) would be allocated to an “American Heritage Block Grant Fund” and distributed to the states to support various community arts and historical preservation programs.
H.R. 2230 has only six co-sponsors, only one Republican among them. It has been referred to the Ways and Means Committee, chaired by David Camp of Michigan, and the Education and Workforce Committee, chaired by John Kline of Minnesota.