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Poker News | Gambling and the Law

Frank Holds Hearing for Two Online Gaming Bills

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After months of Rep. Barney Frank’s two online gaming related bills put on the back burner in lieu of America’s financial crisis and pending health care reform, a hearing was finally scheduled to bring the pieces of legislation up for serious discussion once again. The date was Thursday, December 3, and the primary focus would be on H.R. 2267, better known as the Internet Gambling Regulation, Consumer Protection & Enforcement Act of 2009.

H.R. 2267 was originally introduced in May of 2009 to officially legalize and regulate the online gaming industry through a licensing process. At the same time, Frank introduced H.R. 2266, the Reasonable Prudence in Regulation Act, to delay the required compliance date of the UIGEA until December 1, 2010. The latter bill was handled by other means, as a formal request to Secretary of the Treasury Timothy Geithner and Chairman of the Federal Reserve System Ben Bernanke was approved on November 27 to extend the December 1, 2009 deadline by six months. But it was H.R. 2267 that required a hearing in order to inch closer to a Congressional debate and subsequent vote.

Frank organized a hearing on Capitol Hill on December 3 to initiate discussions on the issue of online gaming, which will be followed by a committee vote in the coming weeks, most likely as soon as Congress returns from its holiday recess. The House Committee on Financial Services hosted a panel of speakers that included Mike Brodsky of, Professor Malcolm Sparrow of Harvard University, and Keith Whyte of the National Council on Problem Gambling. Other organizations represented by speakers included the Morongo Band of Mission Indians, WireSafety, the Dowling Advisory Group, and the First State Bank on behalf of the Independent Community Bankers of America. Testimonies ranged from the benefits of regulating financial transactions to protections that a legalized industry could offer consumers, such as identifying compulsive gamblers and minors.

Regarding protecting consumers in a regulated industry, Parry Aftab of WiredSafety noted, “The status quo offers no meaningful assurances that consumers will be protected. There are a number of technologies routinely used in other industries that were easily adaptable to online gambling sites. They are real, proven and in use today. They are also improving by the minute.”

Professor Sparrow of Harvard University’s John F. Kennedy School of Government also discussed consumer benefits from Frank’s proposed legislation, specifically in the form of the release of a Harvard study, commissioned by WiredSafety, entitled “Can Internet Gambling Be Effectively Regulated? Managing the Risks.” The academic study showed ways that millions of U.S. consumers would be protected, most importantly by regulation at the hands of the American government versus offshore sites that offer no legal protections. Conversely, says the study, prohibition of online gambling ignores consumers, especially minors and problem gamblers. In addition, the study demonstrated that regulatory tools that have been used in other technologies can be easily applied to the online gaming industry and successfully reduce money laundering, fraud, privacy and security concerns, as well as underage and compulsive gambling. Sparrow commented, “The establishment of a well-regulated industry under U.S. jurisdiction would offer far better protection against online gambling’s potential social harms than outright prohibition. Combining a thoughtful regulatory scheme with education, technology tools, and support appears to be the most effective means of handling the realities and risks of online gambling in the United States.”

Whyte also addressed consumer issues as a representative of the National Council on Problem Gambling. He noted, “The graphical and interactive structure of the internet provides an opportunity to create informed consumers with access to a variety of information designed to encourage safe choices and discourage unsafe behavior. The amount of online information and possible interventions are essentially unlimited.”

The hours of testimony made solid points, mostly in favor of online gaming regulation, but the hearing was sparsely attended despite a push by lobbying organizations to members of the House Financial Services Committee to attend or send representatives from their offices. Nevertheless, the hearing transcripts will be on record and distributed.

The members of the House in attendance were the aforementioned Frank, Spencer Bachus, Peter King, Christopher Lee, Dennis Moore, and Brad Sherman. The majority of the opposition to online gambling came from Bachus, who stated, “I believe that internet gambling is and has been and will continue to be a substantial threat to our youth, and that any economic benefit from taxing internet gambling would be more than offset by the harm it causes our young people.” He spoke of the “waves” of young people addicted to internet gambling, and such additions lead to crime and bankruptcy. Noting that Frank’s alliance with the Federal Reserve and Treasury allowed the UIGEA implementation to be delayed another six months but representatives from those agencies were not invited to the hearing, which drew an argument to the contrary from Frank. On the whole, though Bachus’ arguments, such as the fact that offshore gaming companies collect more than $6 billion per year in internet gambling profits from U.S. customers, could easily be used in favor - not against - regulation of the industry within the U.S.

Bachus also presented a letter from Shawn Henry, Assistant Director of the Cyber Division of the FBI, to support his case that there is the potential for criminal activity through online poker. However, that information was countered by Rep. King, who is also a member of Committee on Homeland Security, who said there is no basis to believe money laundering or terrorism financing is taking place via internet gambling. In addition, King said, any such concerns, were they even legitimate, would be more of an argument for regulation and oversight as proposed by Frank’s bill.

According to Michael Waxman of the Safe and Secure Internet Gambling Initiative, a lobbying organization that was represented at the hearing but did not testify, “Today’s hearing and the testimony presented showcased the opportunity to effectively regulate internet gambling, further laying the groundwork for a vote on Chairman Frank’s regulatory bill. For too long, Congress has allowed internet gambling to thrive [in] an underground marketplace, since UIGEA and attempts to prohibit the activity have failed. We hope Congress doesn’t allow much more time to pass before acting to protect consumers and collect billions in much-needed new revenue through adoption of Chairman Frank’s bill.”

Another organization representing the poker community that was supportive of Frank’s hearing was the Poker Players Alliance, which urges poker players and supporters to contact their members of Congress, especially those on the Financial Services Committee, all of whom will be eligible to vote when Frank calls for it. PPA executive director John Pappas urged action: “I think we have 60,000 to 100,000 members who reside in the Financial Services Committee districts. We need to make sure those voters continue telling their lawmakers to attend meetings and support their right to play.”

To get more information about H.R. 2267 or to easily contact members of Congress, visit the Safe and Secure Internet Gambling Initiative or the Poker Players Alliance websites.

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