Democrat proposes lifting federal ban on Net gambling

A prominent House member says it's time to legalize--and regulate--the burgeoning industry.
Written by Declan McCullagh, Contributor
Just six months after President Bush signed a law outlawing online gambling, a key Democratic politician has proposed lifting the ban.

Rep. Barney Frank, a Democrat from Massachusetts and chairman of the House Financial Services Committee, on Thursday introduced a bill that would replace the current broad prohibition with strict regulations, including criminal background checks and financial disclosure, imposed on companies that seek to offer legal Internet gambling.

"The existing legislation is an inappropriate interference on the personal freedom of Americans and this interference should be undone," Frank said. His bill is called the Internet Gambling Regulation and Enforcement Act (PDF).

Barney Frank
Rep. Barney Frank

Last year's legislation tried to eliminate many forms of online gambling by targeting Internet service providers and financial intermediaries, namely banks and credit card companies that process payments to offshore Web sites.

Those sites included ones like BetBug of Toronto; BetWWTS.com of Antigua; Bodog Sportsbook, Casino and Poker of Costa Rica; and Betfair, which has offices in London. Estimates typically put Internet gambling revenue at more than $12 billion a year.

The bill never received a formal up-or-down vote in the entire Congress. Instead, Republican congressional leaders have been criticized for gluing it onto an unrelated port security bill. The Senate unanimously approved the port security measure and it cleared the House of Representatives with only two dissenting votes.

Frank argues that because nearly all states already permit some form of traditional gambling--including lotteries, betting on horse and greyhound racing, and sports wagering--the federal government should legalize and regulate the online equivalents. Instead of a blanket legalization, his legislation would require the Treasury Department to police the industry and ensure that it takes adequate steps to identify minors and compulsive gamblers.

The World Trade Organization ruled in March, for a second time, that the U.S. ban on gambling violates international trade rules and sided with the Caribbean nation of Antigua and Barbuda. But the tiny nation has little leverage to force any changes to federal law.

There are signs that the 2006 Net gambling ban has had an impact on the industry. In November, the British site BetOnSports agreed to cease signing up U.S. customers. BetOnSports' founder, Gary Stephen Kaplan, was arrested earlier this month in the Dominican Republic and faces criminal charges in the United States. In addition, payment processor Neteller in February said it would cut about 250 jobs as a response to the gambling crackdown.

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