Frank, King introduce online gambling legislation

Reps. Barney Frank (D-Mass.) and Peter King (R-N.Y.) introduced legislation Wednesday that, if passed, would create regulatory framework for online gambling in the United States.

"Internet gambling in the United States should be controlled by a strict federal licensing and regulatory framework to protect underage and otherwise vulnerable individuals, to ensure the games are fair, to address the concerns of law enforcement, and to enforce any limitations on the activity established by the states and Indian tribes," the 48-page bill reads.

The bill, which calls on the Treasury Department to regulate the industry, is careful about making sure individual states and Native American tribes have the right to impose further restrictions on Internet gambling or outright ban it.

A licensing system must "adopt and implement systems to enforce any applicable federal, state, and Indian tribe limitations," reads one part of the bill.

Another section of the bill indicates that one of the minimum requirements for a licensed operator is "ensure that no customer who is located in a state or tribal land that opts out...can initiate or otherwise make a bet or wager prohibited by such opt-out."

In order for an operator to obtain a license in the U.S., they would have to they had demonstrate they had a plan to, among other things, "protect underage and problem gamblers, ensure games are being operated fairly and comply with and address the concerns of law enforcement."

All operators would have to pass a background check. And if granted the standard five-year license, they would have to make sure all players were of legal age and allowed to wager from their location, collect customer taxes, pay any of their own taxes, safeguard against financial crime, implement safeguards for problem gamblers, implement privacy safeguards and meet any other requirements the Treasury Department might ask for.

The legislation also clearly spells out that sports betting on the Internet is illegal.

"The bill was very impressive and thorough," said Buffalo State business law professor Joe Kelly. "I certainly think it establishes what an average Congressman is looking for (in terms potential operators) -- suitability, solvency and social responsibility."

Kelly also said the bill set very high standards for people seeking gaming licenses.

"The entity seeking the license has to show clear and convincing evidence (that they're suitable). That's a higher burden of proof than in many civil cases. It's also what New Jersey uses (to regulate their gaming industry), " he said.

Leaders within the online gambling industry joined Kelly in their praise of the bill.

"Online poker is a legal, thriving industry and poker players deserve the consumer protections and the freedom to play that are provided for in this legislation," said Poker Players Alliance Chairman and former Senator Alfonse D'Amato said. "We are grateful for Chairman Frank's leadership and will be activating our grassroots army made up of over one million members to help him drive legislation."

"As Americans continue to wager online more than $100 billion annually in a thriving underground marketplace, it is time for Congress to acknowledge that prohibition has been a failure and a new approach is needed," added Jeffrey Sandman, spokesperson for the Safe and Secure Internet Gambling Initiative.

"Banning Internet gambling has the same effect as the ban on alcohol had during Prohibition; it merely drives the activity underground, forgoes massive tax revenues and makes criminals out of otherwise law-abiding citizens," said Youbet.com CEO Michael Brodsky.

Rep. Jim McDermott (D-WA) introduced a companion bill to the King and Frank legislation Wednesday that calls for any operator licensed under the Frank bill to pay a 2% fee to the government on all deposits.

"We are losing billions of dollars in federal and state taxes every year because a prior Administration and its supporters drove legitimate U.S. online gambling off-shore by passing an ill-conceived late-night amendment in Congress that has done nothing except make Americans more vulnerable to scams when they wager online and cost us billions in lost revenue," Rep. McDermott said.