Internet gambling again in play
Sunday, February 7, 2010
Poker lobbyists are ramping up an aggressive push backed by millions of dollars to legalize Internet gambling in the United States this year, hoping to overcome passionate objections from social conservatives, sports leagues and other longtime opponents.
Partly bankrolled by offshore gambling companies, the campaign has already persuaded the Obama administration to delay enforcement of a 2006 law cracking down on Internet wagers.
Rep. Barney Frank (Mass.) and other Democrats are using the six-month reprieve to push ahead with legislation that would legalize and regulate poker, mah-jongg and other online betting games -- pastimes that have exploded in popularity in a country that accounts for more than half of the $16 billion global Internet gambling market. The federal government, which rarely prosecutes online gambling, would net billions of dollars in tax and licensing revenue if it were legalized, proponents say.
The legalization push has alarmed the National Football League, Focus on the Family and other Internet gambling opponents, who say that online betting would encourage criminal activity, threaten children and dramatically increase gambling addiction. Sen. Jon Kyl (R-Ariz.) has placed a hold on six Treasury Department nominees to retaliate for the delay in the anti-gambling law, legislative aides said.
But those in favor are hoping with Congress in the hands of Democrats, who have historically been less opposed to gambling than Republicans, along with the growing popularity of recreational poker, that will work to their advantage. The list of backers includes Frank, a New England liberal who says the government should not bother gamblers, and former Republican senator Alfonse M. D'Amato (N.Y.), chairman of the Poker Players Alliance, which is leading the Capitol Hill push. With 1.2 million members, the alliance is funded largely by the Interactive Gaming Council, a Canada-based trade group for offshore gambling firms. Together, the groups have spent more than $4 million on Washington lobbying over the past year, and the alliance says its members have recently sent more than 300,000 mailings and e-mails to members of Congress.
"I think there's a growing realization in Washington that prohibition probably isn't going to work, just like prohibitions throughout history have not worked," said John Pappas, the poker group's executive director. "There needs to be a more common-sense approach, because it's not going away."
Among the backers is former House majority leader Richard A. Gephardt (D-Mo.), a lobbyist for PokerStars, a major Internet gambling firm based on the Isle of Man. Gephardt registered to represent the firm on Aug. 4 and earned $300,000 through December, disclosure forms show. His firm declined to comment on its work for PokerStars.
Those opposed to legalized gaming include all four major U.S. sports leagues and numerous religious groups. Major casinos are divided on whether online gambling is a threat or an opportunity.
Chad Hills, a gambling research analyst for Focus on the Family Action, said opponents "are just trying to fortify the vaults" against the legislation, which they think would dramatically expand gambling in the United States. "This would go outside the walls of a brick-and-mortar casino, outside the walls of a convenience store lottery, and into the living rooms and homes of all Americans," he said.
The outlook on Capitol Hill, however, is uncertain given a slate of unfinished business on health-care reform, cap-and-trade legislation and financial market regulations, not to mention nervousness among Democrats about November midterm challenges. Gambling opponents say Democrats are unlikely to muster support during such a contentious year, but proponents say that changing mores and the prospect of new tax revenue give the effort a better chance than at any other time in recent memory.
The Justice Department views all online gambling as illegal under a 1961 law aimed at mob bookies using telephone lines, but it has prosecuted only a handful of Internet betting operations. The market is run by firms operating from Antigua, Malta and other foreign sanctuaries.
Any ambiguity was meant to be eliminated by the Unlawful Internet Gambling Enforcement Act of 2006, which bars U.S. banks from accepting payments from credit cards, checks or wire transfers to settle online wagers. Approved by the then-GOP-controlled Congress and signed into law by President George W. Bush, the measure was scheduled to take effect Dec. 1.
But as the enactment deadline approached, gambling interests joined by banks and other financial institutions urged a delay, saying that the statute was vague and unenforceable. Thoroughbred racing organizations also joined the fray after some credit card companies refused to process online parimutuel wagers, which were supposed to be exempt from the new restrictions.
The Treasury Department and Federal Reserve granted a six-month delay in December, citing efforts by Frank and others to draft new legislation. The Obama administration is officially neutral on the issue.
Key to the legalization effort is Frank, chairman of the House Financial Services Committee. He has become one of the top congressional recipients of gambling interests' money, collecting nearly $100,000 from the gambling and casino sector since 2007, according to contribution data.
Frank has become an unlikely hero to the politically conservative poker community. Last summer, Frank issued the ceremonial "shuffle up and deal" command at the World Series of Poker in Las Vegas, then took in more than $50,000 at a fundraiser hosted by the poker alliance.
"It was fun for me as a politician because I was there talking to and being cheered on by a lot of people who are probably on the conservative side politically," Frank said in an interview. "I think the Republicans are misreading the politics on this. People who are not ordinarily active in politics get very active in this."
Rich Muny, 41, an engineer from Union, Ky., is an avid online poker player and a state director for the poker alliance. He is also a die-hard Republican conservative who blogs about politics and disagrees with GOP leaders on Internet gambling.
"There's a part of the party that always believes this isn't something people should do," Muny said in an interview. "But I think it behooves the party to be a little more broad-minded on this issue."
Frank's proposed bill, which is set for committee markup in coming weeks, would establish federal oversight of online gambling firms in exchange for five-year licenses and would include protections aimed at weeding out underage players, compulsive gamblers and criminal activity. Online sports betting would remain illegal.
A companion bill sponsored by Rep. Jim McDermott (D-Wash.) would levy a 2 percent tax on gambling deposits, which supporters say could bring in $42 billion in tax revenue over 10 years. Similar Senate legislation would legalize betting on online poker and other "games of skill."
Opponents remain unconvinced, saying that safeguards will not stop abuses. Rep. Spencer Bachus (R-Ala.), the ranking member on Frank's committee, vowed in a statement to oppose the efforts, saying, "Internet gambling is a threat to the youth of our country. . . . Young people are particularly at risk because if you put a computer in their bedroom or dorm room, it's a temptation that many cannot resist."