House Takes Baby Steps on Internet Gambling Reform

Washington, D.C., July 30, 2010This week the House Financial Services Committee passed H.R. 2267, the Internet Gambling Regulation, Consumer Protection, and Enforcement Act, originally introduced by Chairman Barney Frank (D-MA). Analysts at the Competitive Enterprise Institute cautiously praised the action as a step in the right direction.

“Four years after Congress passed Unlawful Internet Gambling Enforcement Act – a confusing and ineffective banking regulation – we’re glad that members of the House Financial Services Committee have recognized the need to bring Internet gambling out of the underground,” said Policy Analyst Michelle Minton.

Unfortunately, the limited scope of activities that would be legalized if the bill becomes a law and the cumbersome list of demands added to the bill make it likely that very few operations will be able to obtain and maintain a license to operate.

“Allowing Internet gambling in this limited fashion will not solve the problems that the bill sought to resolve. Americans will continue to gamble online on sports, an activity banned in this bill, and will not have the protection of U.S. laws if they become the victims of a crime,” said Minton.

Several amendments were approved prior to the vote, including one by Rep. John Campbell (R-CA) requiring online casinos to maintain facilities within the United States in order to qualify for a license. Rep. Brad Sherman (D-CA) added an amendment which denies licenses to operations that broke U.S. gambling laws in the past, which will most likely prevent the largest and most popular sites, such as PokerStars and Full Tilt Poker, from receiving licenses. The use of credit cards was also prohibited to fund online gambling, though debit and account transfers are permitted.

“The best way to protect Americans who gamble online is to make sure that the greatest number of sites can operate within the law,” said Minton. “The hurdles set up by this bill will prevent most of the current operators from obtaining licenses and mean that underground betting will continue.”

CEI is a non-profit, non-partisan public interest group that studies the intersection of regulation, risk, and markets.