After much hype and a couple of reported introductory dates that passed without action, Barney Frank finally got around to business and introduced the bill that was hailed in advance as a potential lifeline for U.S.-based online poker players. The bill is, in essence, a repeal of the UIGEA, but it also a whole lot more. Titled the Internet Gambling Regulation and Enforcement Act of 2007, it is designed to be the tool wherein online companies become licensed and regulated by the United States... and therein might lie the bill's downfall.
But we'll get to that part of it in a bit. Let's start by going over what's in the bill that Congressman Frank (D-CT) did introduce this morning. Remember one thing: Frank is not a friend of you, the online poker player, as you exist today. To the extent that you and I serve his purposes, that's fine, but Frank's made quite clear that he couldn't really give a damn about online poker in particular. This is a little bit aboout civil liberties in general (good) and a little bit about Frank's own business interests. That second part isn't so good, because it neatly cleaves the online poker world in two, between those who are the big players today and those who would like to be that in the future.
Now on to the 26-page bill, which we've also posted for you here so you can enjoy it for yourself.
Frank's proposed Internet Gambling Regulation and Enforcement Act of 2007 begins by making noise about how big online gambling has become. According to the bill, Congress has found that online gambling represented a $13 billion dollar business globally in 2005, about a 5% slice of a total worldwide gambling market estimated at $258 billion for the same year. The current U.S. market (as of 2005) was just under half of that total.
The bill calls for the creation of an Internet Gambling Licensing Program, to be headed up by the Director of the Financial Crimes Enforcement Network, a division of the Treasury Department that already exists. The bill would call for all online gambling entities to be licensed and regulated before being approved for U.S. commerce.
This sounds great, but it is in fact, a major stumbling point. Last year the UK passed a bill with similar nonemclature, then watched as Budget Minister Gordon Brown gutted the bill by unilaterally imposing a draconian schedule of levies; at five times the going rate (in percentage terms) for similar licensure from island nations, the move ensured that no online gambling firms would pack up their bags and move to the UK. In fact, the move hastened the departure of SportingBet PLC from the UK, and they stated that they could not give up such a huge margin in taxes on gross revenues and remain competitive against firms located elsewhere.
It is expected that in the event Frank's bill became law --- a long, uphill battle at best --- a similar hefty levy would be enacted against existing online firms, required to pay big dollars to the U.S. despite being housed elsewhere. That's why the stocks of major online firms such as PartyGaming PLC took a dive today, when one would have expected the introduction of the Frank bill to be good news. Today is not a great day for the Party Pokers and Poker Stars of the world, who will still likely have to look toward the WTO and the European Court for redress and relief.
The licenses called for by the Frank legislation are rolling, single-year deals... nothing unusual there. But one aspect of the requirements fpr the application is the willingness of the online concern to subjugate itself to U.S. law, and that's another stumbling point. The bill calls for the online site to have measures in place to combat all the overhyped 'ills,' including problem and underage gambling, money laundering, unreported income and the like. That's all good.
The bill also indemnifies the entire banking sector from the problems of the gambling industry itself. This is one of the biggest flaws of the UIGEA, forcing banks to become watchdogs for American society, when this business block is wholly unsuited for the task. Frank's measure says that banks and officials cannot be held responsible for wrongdoing in processing gambling transactions if the processing was done in good faith, meaning with a U.S.-licensed and regulated gambling site.
You can bet that this was Frank protecting his own interests, too. Frank is the chairman of the powerful House Finance Committee, and it's long been known that the banking sector wants no part of the uncompensated overhead involved with tracking certain forms of gambling transactions.
But here's where the bill gets fun. Frank's proposed measure includes several forms of 'opt-outs,' one for states, another for Indian gaming, and still another for pro sports leagues, all of which received special consideration under the UIGEA. The sports-league opt-out language is especially cute, reqiuring that these leagues can request that their sports and specific games not be listed by licensed/regulated gambling services.
Ideally, it'll force entities such as the NFL and MLB to put their money where their mouth is. They won't be able to claim that online gambling is abhorrent and threatens the integrity of the game while at the same time taking full advantage of the practice through oblique references and rules changes designed to focus the narrowest competitive edge... and give that beaten team a last chance. Can you really name any other reason why the clock stops in the last five minutes of an NFL half on certain plays when it doesn't stop during the rest of the game?
Thou shalt not expose hypocrisy. As a result, look for the NFL and MLB to be adamantly opposed to this bill. And of course, the bible-thumpers of the far right were quick to decry the new legislation, including our old fave Bob Goodlatte (R-VA), who has already come out as being strongly against the legislation.
With the antis so clearly identified, and those including offshore sites who might not be offered anything worthy by the bill, the question becomes, who is it for? We've already noted the importnace of banking-industry interests in this one, and the other big player here is likely the U.S. land-based casino industry. Right now they're all but shut out of the online biz, and if this bill were to become law, the U.S. would essentially become their private playground.
That's why I don't find it surprising that the PPA issued an enthusiastic endorsement of the bill as the Frank press conference was taking place. It's not that the PPA is against online poker --- far from it --- it's that the PPA has still bever been wholly forthright about what major entities pull its strings. A casual examination of the PPA's financial statements showed that at one point only about 30% (and that's a very approximate number) of their reported donations could be traced to individual donations.
Who supplied the greater share? To my knowledge that's never been specified, but it seems to have come from a mix of the following: online sites with a major U.S. presence, land-based casinos who would like a slice of the U.S online-gambling market, and perhaps Card Player Magazine, given its close ties to the PPA. None are for certain, but all are the likeliest candidates.
It seems that in the PPA's endorsement of Frank's bill, the online sites such as Stars and Full Tilt might get short shrift. If the Frank bill were to somehow become law, then sites such as this would become buyout candidates for the big U.S. casino operations, the Harrah's and Bally's of the world, but they'd be unable to compete as well on their own.
That's a lot to read into the first glance at a bill that's not likely to make it into law anyway. Still, that's what the bill seems to be.