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Congress rethinks its ban on Internet gambling

Online GamblingOnline Gambling: Congress rethinks its ban on Internet gambling

WASHINGTON, D.C. — With pressure mounting on the federal government to find new revenues, Congress is considering legalizing, and taxing, an activity it banned just four years ago: Internet gambling.

On Wednesday, the House Financial Services Committee approved a bill that would effectively legalize online poker and other nonsports betting, overturning a 2006 federal ban that critics say merely drove Web-based casinos offshore.

The bill would direct the Treasury Department to license and regulate Internet gambling operations, while a companion measure, pending before another committee, would allow the Internal Revenue Service to tax such businesses. Winnings by individuals would also be taxed, as regular gambling winnings are now. The taxes could yield as much as $42 billion for the government over 10 years, supporters said.

The two measures — which are backed by banks and credit unions but have divided casinos and American Indian tribes — are far from becoming law. A bill to legalize online poker sponsored by Senator Robert Menendez, Democrat of New Jersey, has not yet had a hearing. The Congressional timetable has little spare room before the midterm elections, and the Obama administration has not taken a position.

But the vote suggests a willingness by Congress to look for unconventional ways of plugging holes in the budget and comes as struggling states have also been looking to extract revenue from the gambling industry, which took a hit as consumers cut back on travel and entertainment during the recession but continues to reap billions of dollars in annual profits. The committee vote Wednesday was 41 to 22, with seven Republicans joining most Democrats on the panel in favor of the measure.

Last year, Colorado expanded casino hours, raised maximum-bet limits and permitted roulette and craps, while Missouri eliminated a $500 loss limit at riverboat casinos. Delaware and Pennsylvania have weighed proposals to allow the conversion of slots parlors into full-service casinos, making further inroads into the eroding Atlantic City gambling industry.

Opponents, who only four years ago, when Congress was controlled by the Republicans, secured a law that banned the use of credit and debit cards to pay online casinos, said they were aghast. "People sometimes resort to drastic things when they are strapped for cash," said Representative Robert W. Goodlatte, Republican of Virginia, who called the new proposals "unfathomable."

Representative Barney Frank, the Massachusetts Democrat who leads the Financial Services Committee, has been the legislation's champion.

"Some adults will spend their money foolishly, but it is not the purpose of the federal government to prevent them legally from doing it," Mr. Frank said.

The committee's top Republican, Representative Spencer Bachus of Alabama, noting the passage of far-reaching changes in financial regulation this month, said that "after all the talk last year about shutting down casinos on Wall Street," he was incredulous that members would vote to "open casinos in every home and every bedroom and every dorm room, and on every iPhone, every BlackBerry, every laptop."

Mr. Bachus said lobbyists had spent "tens of millions" to overturn the 2006 law. "They've had quite a bit of success in turning votes," he said.

Supporters of legalization said fiscal considerations played a role in their thinking. "I was looking for the money," Representative Jim McDermott, Democrat of Washington, said in an interview. He sponsored the companion measure to allow taxation of Internet gambling; he wants to dedicate the money to education.

Representative Brad Sherman, Democrat of California, said in an interview that the money was an attractive source of financing for other programs. "We will not pass an Internet gaming bill," Mr. Sherman predicted. "We will pass a bill to do something very important, funded by Internet gaming."

He added, "Forty-two billion dollars over 10 years has an effect."

The legal status of online gambling has long been murky. The Justice Department asserts that the Wire Act of 1961 prohibits it, but prosecutors have largely left individual gamblers alone.

To crack down on the activity, a 2006 law — inserted at the last minute into an unrelated bill in one of Congress's last actions before Democrats took control — banned financial institutions from transmitting payments to and from gambling operators.

In the same year, the authorities arrested David Carruthers, a British online-gambling executive, as he changed flights at a Texas airport. He was sentenced to 33 months in prison for racketeering. Last year, the authorities ordered four banks to freeze the accounts of online payment processors that owed money to some 27,000 people who had used offshore poker sites.

But the enforcement actions have barely put a dent in the industry, experts say. Gamblers have used online payment processors, phone-based deposits and prepaid credit cards to circumvent the ban. By some estimates, American online gambling exceeds $6 billion a year.

"Today, any American with a broadband connection and a checking account can engage in any form of Internet gambling from any state," Annie Duke, a professional poker player, testified in May on behalf of the Poker Players Alliance, which hired a former Republican senator from New York, Alfonse M. D'Amato, to lobby for the bill.

Michael Brodsky, executive chairman of YouBet.com, an online site for parimutuel horse racing, said, "As with Prohibition, illegal online gambling is thriving as an underground economy."

Banks and credit unions said the 2006 law was poorly drafted — so much so that the Obama administration delayed, to June 1 of this year, the deadline for banks to comply with the law, to address concerns about its enforceability.

In 1999, the National Gambling Impact Study Commission urged the prohibition of Internet gambling. Attorney General Eric H. Holder Jr. has said he would not support efforts to legalize online gambling, a view shared by most state attorneys general.

"Because Internet gambling is essentially borderless activity, from a money-laundering and terrorism-financing perspective, it creates a regulatory and enforcement quagmire," said James F. Dowling, a former special agent with the Internal Revenue Service.

And Mr. Bachus released a November letter from the F.B.I. in which Shawn Henry, the assistant director of the cyber division, said it would be difficult for companies to verify the age and location of their customers.

The bill contains measures intended to protect minors and combat compulsive addiction. It would allow states and Indian tribes to "opt out," so players from those states and reservations would not be able to make online bets. But those governments would have a potentially lucrative incentive to allow the activity since they could then collect taxes from Internet casinos.

Before voting, the committee approved amendments to delegate enforcement duties to states and tribes, continue a ban on betting on sporting events, ban marketing aimed at children, and prohibit companies that violated the 2006 ban from obtaining licenses.

New York Times

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9 comments. Last comment 7 years ago by TheOtherOne.
Page 1 of 1
JonnyBgood07's avatar - Patriots logo1.jpg
United States
Member #61623
May 29, 2008
20581 Posts
Posted: July 30, 2010, 6:43 pm - IP Logged

"""Some adults will spend their money foolishly, but it is not the purpose of the federal government to prevent them legally from doing it," Mr. Frank said."""

...that's all that should need to be said...no other argument should be necessary

"No matter how bad things may get, I'd like to thank my middle finger

for always sticking up for me.."


    United States
    Member #80929
    October 7, 2009
    94 Posts
    Posted: July 30, 2010, 6:57 pm - IP Logged

    Legalizing internet gambling would be a huge mistake.  It's too easy for the "casinos", really just programmers in their offices, to rig the "game."  There are so many ways to rig the "game", it's not even funny.  All they need do is simply write the code.  There have already been cases where online "casinos" have cheated players.  This is happening all the time even now.  We're not even hearing all the cases where it's happening  because they haven't been discovered.  Some cases will never be uncovered because the players never suspect.

    We already have gambling in the form of regular casinos and state lotteries.  That should be enough.

      Littleoldlady's avatar - basket
      United States
      Member #487
      July 15, 2002
      17638 Posts
      Posted: July 30, 2010, 7:56 pm - IP Logged

      They don't want to be "left out".  Why shouldn't we be able to wager a couple of dollars legally?  Answer to that is we should be able to!!

      If you know your number is going to hit, have patience and then KILL IT!

      You never know when you will get another hit.

        AceKicka's avatar - Lottery-057.jpg
        Triad, N Carolina
        United States
        Member #53117
        June 24, 2007
        6086 Posts
        Posted: July 30, 2010, 8:02 pm - IP Logged

        Hippy... Where do I begin? Hmmm.... "People sometimes resort to drastic things when they are strapped for cash,"  (I apply the same sentiments to Congress.)

        And $42 Billion over 10 years... what is that? We're now working with Trillions. How's THAT for inflation?

        Hell, they'll pass something next week to blow that much! LOL  When are we going to finally get leadership that understands basic math, budgets & logic??

        Pick3 & pick4 are the ONLY games that I've ever played online because at least the winners are based on legit states results.

        Finally ~ I hope they don't change the payouts. Naughty 

        "Game On.......'CAUSE ACE HAS YOUR NUMBER!!"

                                                                                  -- (AceKicka '07)

          Grovel's avatar - f800e6a39fbfea795d1dcbb09f2244
          Little Rock, AR
          United States
          Member #68365
          December 19, 2008
          242 Posts
          Posted: July 31, 2010, 12:38 am - IP Logged

          I know something they could legalize. At least Califorina has the right idea.

            maringoman's avatar - images q=tbn:ANd9GcTbRxpKQmOfcCoUqF2FyqIOAwDo7rg9G-lfJLAALPGWJWwiz19eRw
            United States
            Member #37433
            April 14, 2006
            2747 Posts
            Posted: July 31, 2010, 10:07 am - IP Logged

            The beauty of internet gambling as far as I'm concerned is being able to play the Texas Lotto, CA Superlotto, NY Lotto at the last minute from the comfort of my living room. I always see that Texas Lotto jackpot grow to over 50 mil!!! I cant wait

            That money's gone fo ever

              rdgrnr's avatar - walt
              Way back up in them dadgum hills, son!
              United States
              Member #73904
              April 28, 2009
              14903 Posts
              Posted: August 1, 2010, 2:17 am - IP Logged


              The federal law is only stopping the scaredy cats from playing online.

              They don't enforce that law any more than they enforce our immigration laws, it's a free-for-all baby.

              If it feels good, do it.







              "The only thing necessary for evil to triumph is for good men to do nothing"

                                                                                                          --Edmund Burke



                diamondpalace's avatar - Untitled 2.jpg
                Dallas, TX
                United States
                Member #60284
                April 12, 2008
                3856 Posts
                Posted: August 1, 2010, 3:13 am - IP Logged

                Once they legalize it I'm going to make a killing at pick 3 and pick 4 online.

                  TheOtherOne's avatar - Lottery-027.jpg
                  Nashville, TN
                  United States
                  Member #86739
                  February 9, 2010
                  483 Posts
                  Posted: August 2, 2010, 10:35 pm - IP Logged

                  I know something they could legalize. At least Califorina has the right idea.

                  I Thought the same thing.

                  Only been 4 yrs and they talk about how this underground empire is making 6 billion plus.

                  Hello?!! Start with another HUGE industry potential that is going up in smoke before your eyes!

                  Not that I care about either, really

                  My opinion is EvERY state should have at least one casino. At least we'd get cheated less than we would online.