Legalization, Regulation of Internet Gambling Imminent

Published December 28, 2009

Rep. Barney Frank (D-MA) appears closer than ever to legalizing gambling on the Internet.

From his perch as chairman of the House Financial Services Committee, Frank is working on a bill to allow U.S. residents to gamble as easily on their computers as they do at casinos in Nevada, New Jersey, Indian reservations, and riverboats floating on the shore of cities across the nation.

Backdoor Ban
The Unlawful Internet Gaming Enforcement Act, signed by President Bush in 2006, is a de facto ban on Internet wagering because it forbids credit card companies from processing transactions from online gambling sites. In effect it is a backdoor ban on Internet gambling.

The Treasury Department was supposed to start enforcing the law on December 1, 2009, but it agreed to Frank’s last-minute request to delay enforcement until June 1, 2010.

¬†“This will give us a chance to act in an unhurried manner on my legislation to undo this regulatory excess by the Bush administration and to undo this ill-advised law,” Frank said.

Frank’s Internet Gambling Regulation, Consumer Protection, and Enforcement Act of 2009 would eliminate that prohibition, allowing online gambling to be regulated and taxed. Frank held a hearing on his bill on December 3.

Opposing Research Cited
Rep. Spencer Bachus (R-AL) has been a steadfast opponent of Internet gambling on the grounds it would attract underage players and would not protect unsuspecting participants from collusion and other malpractices that could go undetected online.

Opponents of legalized online gambling also point to research by Professor Robert J. Williams of the Alberta Gaming Research Institute and Robert T. Wood at the University of University of Lethbridge in Alberta, Canada.

Their November 2009 study, “Internet Gambling: Prevalence, Patterns, Problems and Policy Options,” concluded problem gambling on the Internet is disproportionately higher than with terrestrial gambling.

“The purpose of the law is not to conform to people’s behavior but to codify its values,” Williams wrote in the study. “While Internet gambling is hard to control, so is child pornography on the Internet.

“Legalized Internet gambling is a slippery path which whets the appetite for less restricted and more addictive games.”

Frank Rebuts Critics
Frank responded to those concerns at his December 3 hearing, emphasizing what he characterized as hypocrisy among ban advocates.

“I am struck by frankly what seems to be a inconsistency on the part of some of my conservative colleagues who bemoan the nanny state, who talk about limited government, who urge the government to stay out of people’s lives, who also argue that the Internet ought to be a free of restrictions, but who then single out the Internet for restrictions on personal choices to be made by individuals,” Frank said.

Michael Brodsky, executive chairman of Burbank, California-based Youbet.com, testified at the December 3 hearing that technology used by his company provides a choice of interactive tools to keep track of players’ activities and send alerts if they detect problems in customers’ gambling behavior.

“Congress today faces a stark, either/or public policy choice,” he said. “As a country, we can either legalize, regulate, and tax online gambling or allow it to continue to flourish in an offshore black market that allows easy access for anyone with a computer and Internet connection.

“The best solution is for the federal government to legalize and regulate online gambling, working with already-existing technology that combats underage and problem gambling and properly accounts for much-needed federal and state revenues,” Brodsky said.

Regulatory Wager
William Eadington, professor of economics and director of the Institute for the Study of Gambling and Commercial Gaming at the University of Nevada, Reno, said it’s better to legalize and regulate gambling than fight a losing battle against it.

“Technology can keep a record of gambling activity, restrict the hours and expenditures, and block access to offshore sites,” Eadington said, adding, “problem gambling is low and has been declining” worldwide.

“Legalized gambling will encourage the growth of trustworthy and branded sites, with controls on problem gambling, which customers will prefer to unregulated sites,” said Michael Waxman of the Safe and Secure Internet Gambling Initiative.

Kishore Jethanandani ([email protected]) writes from San Francisco.