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Poker News | Gambling and the Law

Committee Hearing Held for McDermott Gaming Regulation Bill

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When Rep. Jim McDermott (D-WA) introduced a new piece of online poker legislation in late March 2010, many people in the industry didn’t give it much attention because it was one in a number of bills that had been written but not pursued. However, that all changed on Wednesday, May 19, when H.R. 4976, the Internet Gambling Regulation and Tax Enforcement Act of 2010, actually found itself the subject of a hearing in the influential House Ways and Means Committee.

H.R. 4976 was a retooling of his original tax bill that he introduced in 2009 that sought to partner with Rep. Barney Frank’s 2009 bill that called for the regulation of online gaming. McDermott’s newest effort was an effort to wrap all of the legalization, regulation, consumer protection, and taxation provisions into one bill that could pass without any companion legislation. He also added language that would allow all state and tribal governments to receive a percentage of the profits, as would foster care programs in the United States. He included estimates from the Congressional Joint Committee on Taxation showing that tens of billions of dollars could be garnered from online gaming over the next ten years for all beneficiaries.

Then the bill progressed. It was announced in mid-May that the May 19th hearing was set, and McDermott went so far as to predict that Congress would vote on the issue of internet gambling in 2010. “I felt the same way about health care,” he said. “I didn’t know how we were going to pass it; I just knew it was going to pass.” And in response to Republican opposition on the bill, he added, “They don’t have the votes.”

However, it was noted by the Safe and Secure Internet Gambling Initiative, a lobbying organization supportive of McDermott’s efforts, that Rep. Shelley Berkley of Las Vegas, a supporter of Frank’s bill, actually opposes McDermott’s taxation bill. She released a statement saying, “We do not need to pair the regulation of internet gaming with any taxation.”

Another staunch opponent was Rep. Spencer Bachus (R-AL), who opposes all legalized internet gambling. interviewed him about the issue, and he said that he would be doing everything in his power to stop any such legislation to legalize it. “Internet poker is the crack cocaine of gambling,” he said. “Young people are particularly vulnerable - we don’t want to put a casino in every dorm room in the country. Compulsive gambling, by many accounts, is a very serious, growing problem.”

On the other hand, Frank is one of the supporters of McDermott’s bill. And bringing the legislation before the Ways and Means Committee, which oversees all tax legislation and is one of the most influential committees in Congress, was a positive step.

When the hearing finally came to pass, it consisted of several hours of testimony. Frank was one of the first speakers and discussed the sneaky passage of the UIGEA and the tremendous burden placed on financial institutions, after which he discussed the positives of McDermott’s bill, such as the freedoms for Americans to do what they wish with their own money. Frank also mentioned some of the supporters on the issue, including Ron Paul.

McDermott then spoke, focusing on the reasons that gambling prohibition not only fails to work, but it keeps there from being consumer protections in place for the millions of people who continue to gamble online and it stands in the way of the government collecting revenue on it. He went on to focus on the $42 billion in revenue that could be garnered for the federal government and the 32,000 jobs that regulation would create in the first five years.

Others took the opportunity to speak. Rep. Bob Goodlatte, a known anti-gambling Congressman, questioned the crimes involved and insisted that sports leagues and law enforcement oppose online gaming. But Rep. Charles Rangel questioned many of Goodlatte’s points. Berkley also spoke, reiterating her support for regulation but questioning the necessity of taxing the industry. But she made a point to ask the panelists if there were tools available to enforce the legislation, and they responded affirmatively. All in all, most sides of the issue and topics pertaining to it were addressed.

After the hearing, the Safe and Secure Internet Gambling Initiative released a statement from spokesperson Michael Waxman. “Today’s witnesses clearly articulated why Congress should give fair consideration to regulating online gambling activity as a way to protect Americans, stimulate the economy by creating tens of thousands of new jobs and profit from the collection of tens of billions of otherwise lost revenue. Upon hearing today’s testimony and acknowledgment that current attempts to prohibit online gambling have failed, it simply makes sense for Congress to address this issue and take control of the thriving underground marketplace.”

The Poker Players Alliance (PPA) also released a statement from Executive Director John Pappas. “Today’s hearing underscores the increasing Congressional interest in a licensed and regulated online gaming environment. While the robust consumer protections provided by regulation are the biggest selling point, in the current economic environment, additional tax revenue derived from a licensed industry is certainly appealing as well.”

Pappas went on to address a particular issue pertaining to taxes. “It is important to note that this bill would not levy a new tax on poker players. Rather, it requires each licensed internet gambling operator to pay a licensing fee - nothing would be deducted from a player’s deposit. Individuals would be required to pay annual income taxes on their net winnings, just like players who collect winnings in land-based casinos do today. The PPA is working to remove language from the bill that would fine players who play on unlicensed sites as we firmly believe the unlicensed sites should bear the full consequences of not obtaining a license in the U.S.”

From this point, McDermott’s bill is scheduled for mark-up and potentially seeing the light of day in another hearing in the House Financial Services Committee, which is chaired by Frank, in the month of July.

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