American gaming industry split on online gaming bill

[The Judge]

EGamingReview

America's gambling industry is split on issue of legalising online gambling, with the American Gambling Association (AGA) saying it had no view on Barney Frank's online gambling bill "due to the divergent views of its members.”

The Internet Gambling Regulation Consumer Protection & Enforcement Act, published today, proposes legalising onling gambling in the US, reversing the Unlawful Internet Gambling Enforcement Act (UIGEA) passed in 2006, which outlawed online gambling in America.

In a statement issued today, the AGA said it was "neutral on the issue of online gambling... due to the divergent views of its members."

The statement continued that the AGA “will continue its policy of putting any legislative proposal through three tests”.

The tests are that the legislation must not create competitive advantages between casinos, state lotteries and pari-mutuel operations; that no form of gaming that currently is legal should be made illegal; and that the legislation must deal with fundamental states’ rights “in an appropriate manner.”

Simon Holliday, director of gambling consultancy H2, said: “Some of the big hitters aren’t there. Frank is well connected, but the AGA needs to be on side as a group, as well as the state lotteries, who could be key players and will want to get a piece of this if it’s legalised.

“This bill has got a long way to go and the odds are still against it. We get very excited about the bill over here in Europe but if you talk to many Americans they are more sceptical.”

Holliday described Frank’s pledge to introduce separate legislation to delay implementation of the UIGEA as a “curve ball” that had positively impacted H2’s forecasts for Full Tilt and PokerStars, which continued to take US bets after the UIGEA and that H2 had anticipated to suffer when the UIGEA was implemented fully on 1 December.

[The Judge]

EGamingReview

Legislation aimed at legalising online gaming in the US was published today.

The Internet Gambling Regulation Consumer Protection & Enforcement Act regulation, published by Barney Frank, chairman of the US Financial Services Committee, seeks to overturn the Unlawful Internet Gambling Enforcement Act (UIGEA) passed in 2006, which outlawed online gambling in America.

The bill proposes issuing licenses to operators who are ‘‘in good financial and legal standing and of good character, honesty and integrity” and “whose prior activities, reputation, habits and associations do not pose a threat to the public interest or to the effective regulation and control of of the licensed activities.”

Operators will have to demonstrate that they have sufficient expertise in online gambling and sufficient financing to take bets, and that they have the systems and technology in place to combat money laundering and fraud, enforce relevant federal, state and Indian tribal laws including tax collection on bets, and to protect children and problem gamblers.

The proposed licenses would last for five years. Anyone would be able to apply for a license provided they meet the conditions above and that they provide their financial statements, and the criminal and credit histories of directors.

The document proposes that the exact procedures for running background checks will be decided by the Secretary of the Treasury later. The Secretary will be charged with approving and monitoring licensees, and may call on the Attorney General to compel compliance.

The bill would provide Treasury the authority to terminate the licenses of operators who fail to comply with the bill’s provisions, as well as to imprison them for up to five years.

Frank said he intends to move the bill before the House's August break.

Frank also announced today that he is introducing separate legislation to delay the implementation of regulations in the UIGEA, which are due to go into effect on 1 December, until Congress has had a chance to decide national policy.

The UIGEA was passed in late 2006 and requires US financial institutions to block payments from US citizens to internet gambling companies. It came into effect on 19 January this year, but banks and other financial institutions have until 1 December to comply. Frank's delaying legislation would push the compliance date back to 1 December 2010.

Frank's legislation is likely to be opposed by many Republicans, who dominated the House of Representatives when the UIGEA was passed in 2006 under Bush. However Democrats are currently in control in both the House of Representatives and the Senate, although Obama has not yet indicated how he will handle the issue.

While companies like Sportingbet and 888 withdrew from America after the UIGEA was passed, many still face possible US criminal prosecution for their activities there before 2006. PartyGaming recently settled with US authorities for $105m, clearing the way for an M&A push.

Shares in PartyGaming and 888 rose today on hopes that Frank will succeed. 888 shares rose 7% to 104.75p; PartyGaming shares rose 6% to 276p.