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Frank Bill Would Repeal '06 Internet Gaming Crackdown

4/25/07 - The Hill - View Source

By Jonathan E. Kaplan and Jessica Holzer 

Rep. Barney Frank (D-Mass.) will introduce legislation today that seeks to reverse a controversial crackdown on Internet gambling, which the Republican-led Congress passed in 2006.

While passing the bill will be difficult, there is a big financial incentive for Democratic leaders to pass it.

The chairman of the Financial Services Committee is looking to raise tens of billions of dollars with his new bill, which could be used to pay for expensive tax, healthcare, or other domestic legislation Democrats want to move this year.

The introduction of the bill and its expected movement in the 110th Congress shows how much has changed in the nation’s capital since the November elections.

With Democrats in the majority, the power of social conservatives diminished and new pay-as-you-go rules, supporters of a repeal believe the time to strike is now.

Frank, a longtime critic of regulating Internet gambling, opposes the law on philosophical grounds.

“It’s a terrible idea and there are a large number of people who think it is a terrible idea,” Frank said yesterday. “I don’t know how it ends. The worst that happens is that enough anti-gambling busybodies will be less inclined to interfere in people’s lives.”

Gambling lobbying groups were more than pleased by Frank’s announcement.

“We’re incredibly excited. I’m very interested in what the final version will look like,” Michael Bolcerek, president of the Poker Players Alliance, said. “But from what we understand, it will do the right thing for poker players and at the same time protect the public interest.”

The group, led by former Sen. Al D’Amato (R-N.Y.), was formed to overturn the  gaming law.

Frank believes that the GOP is hypocritical in saying it wants to reduce government intrusion but then passes legislation that regulates certain personal freedoms.

In 2000, Frank said, “It is important that people be able to do what the Republican Party wants them to do on the Internet. If the Republican Party has no objection, then they can do it. But if the Republican Party thinks there are pictures they should not look at, or perhaps booze they should not buy, or bets they should not make, then freedom for the Internet goes away.”

Because the law significantly affects the financial services industry, Wall Street is closely monitoring the Frank bill.

Friedman Billings Ramsey, an investment firm, wrote in a strategy memo that the Frank bill could raise more than $20 billion over five years.

The bill is expected to call for the Internet gambling industry to be taxed through a structured system.

Frank’s proposal, however, could face an uphill battle in the House, which passed the stand-alone measure 317-93 last summer. A less stringent version of the bill was later folded into a port security measure that was signed by the president last fall.

One source said that leadership officials in the House are on board with Frank’s plan, though Frank said he did not seek clearance from them.

Several members of leadership voted for the House bill last July, including Speaker Nancy Pelosi (D-Calif.) and Majority Whip James Clyburn (D-S.C.). Meanwhile, Majority Leader Steny Hoyer (D-Md.) voted no, as did Ways and Means Chairman Charles Rangel (D-N.Y.).

Republicans, who spent six years attempting to pass the Internet bill, are mobilizing against Frank’s effort.

“We’re going to fight it,” said Rep. Bob Goodlatte (R-Va.), a leading proponent of the crackdown on Internet gambling. “I’d be surprised if the new leadership would want to bring back an issue that took six years, because of one Jack Abramoff, to resolve.”

In 2000, then GOP lobbyist Abramoff, now a convicted felon, marshaled his conservative allies in the House to defeat a bill that included a ban on Internet gambling.

The law prohibits Americans from using credit cards and checks to play on-line poker, place bets and engage in other forms of gambling.

The proposed legislation could benefit the offshore gambling sites that saw their U.S. customer base disappear when Congress stepped in last year. Hedge funds helped to drive down their stocks in anticipation of the curtailment of online gambling.

The share prices of PartyGaming LLC and 888 Holdings, two online gaming companies that are traded on the London stock exchange, have fallen more than 50 percent since last year.
The stocks have started to claw their way back in recent months, as hedge funds and other investors came to believe the government would falter at stamping out such a popular online activity. PartyGaming has seen its stock roughly double in the past three months.
Some U.S. companies also stand to gain from overturning the 2006 law, including Cryptologic, which provides software and services for internet gambling sites, said Andrew Parmentier, a senior analyst at Friedman Billings Ramsey.

Lobbyists for banks and credit card companies that would have shouldered much of the burden of enforcing the gaming crackdown, reacted favorably to Frank’s announcement.
“We’d be very pleased to see that law repealed simply because it would remove a potential burden on the financial system and especially on community bankers,” said Steve Verdier, the senior vice president for congressional affairs at the Independent Community Bankers of America.

“We also understand it will be a little bit of a road to get a repeal,” he added.

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