Bill Would Legalize Internet Gambling on Federal Level

6/4/09 - Baltimore Sun - View Source

By Jeff Barker

WASHINGTON - - A congressional bill lifting Internet gambling restrictions could help the ailing horse racing industry attract the new and younger bettors it craves, industry representatives say.

The legislation, introduced May 6 by Rep. Barney Frank, a Massachusetts Democrat, would legalize Internet gambling on the federal level and authorize the Treasury Department to regulate it. The legislation would not allow betting on professional sports games the way Las Vegas does.

Frank's bill has aligned conservative Christian organizations, the NFL and groups focusing on gambling addictions in opposition.

Supporters say millions of dollars are being wagered on sports - some of the money through unregulated, offshore sites - and that it's time to bring the practice into the open and allow it to be regulated and taxed.

The Justice Department says existing laws prohibit Internet wagers, including those on horse racing. Even so, online horse racing bets are an accepted practice in Maryland and many other states. The industry contends the expansion of Internet wagering is critical to racing's future. The Justice Department has not sought to prosecute individual players.

Frank's bill "brings Internet gambling out in the open and would provide for clear regulations and certainty for adults who choose to participate online," said Michael Brodsky, executive chairman of Youbet.com, the nation's largest provider of Internet racing content.

The legislation could aid horse racing by allowing sites to offer horse betting and poker together, Brodsky said.

Racing, which has struggled to compete with other gambling outlets, covets poker players, who are often younger than horse bettors.

"One of the growth areas for racing has been home activity," said Tom Chuckas, president of the Maryland Jockey Club, the Magna Entertainment Corp. subsidiary that owns and operates Pimlico Race Course and Laurel Park. "Anything to expand the horse racing product to the masses and to create a younger demographic is something that needs to be explored," said Chuckas, who had not yet analyzed the bill.

Youbet.com says it processed a record $4.6 million wagered May 16, Preakness Day. Magna, which owns the rights to the Preakness, filed for Chapter 11 bankruptcy protection in March.

The Belmont Stakes, the third leg of racing's Triple Crown, is Saturday.

Frank's bill has no Senate sponsor, and its immediate prospects are uncertain. Frank tried and failed in 2007 to legalize Internet gambling. Backers believe he might have a stronger case this time - at least in the long term - because Democrats have increased their numbers in Congress and because the bill is a revenue booster in tough economic times.

PricewaterhouseCoopers has estimated that nearly $50 billion could be raised over 10 years from the bill's proposed taxes on online wagers.

Maryland and many other states permit Internet wagers on horse races inside and outside their borders.

The state says Congress carved out an exception for interstate horse race betting in a 1978 measure passed to provide a structure for simulcasting, which has brought the industry millions of dollars.

"People can bet on horse races on their computer, provided they follow all the rules," said Maryland Senior Assistant Attorney General Bruce Spizler, legal counsel to the Maryland Racing Commission. "You have to open up an account at a racetrack in Maryland that offers the race and prove you're 18."

Like most states, Maryland does not allow betting on NFL or other games.

In addition to opposing Frank's bill, the NFL also opposes a Delaware law - recently upheld by the Delaware Supreme Court - permitting sports wagers. The NFL says such state-sponsored activity could create suspicions that games are tainted.

Frank's measure would largely undo a 2006 federal law requiring financial companies to block payments tied to illegal Internet bets. That legislation was attached by Republicans to a port security bill and implemented in the final days of the Bush administration.

The measure did not define "unlawful Internet gambling," leaving that to states and the incoming Obama administration to interpret.

Supporters of Frank's measure say it would end confusion caused by the Justice Department's interpretation of federal law.

"There is no scholarly support for the federal government's position. It makes absolutely no sense," said Joseph M. Kelly, a business law professor at the State University of New York at Buffalo who has been a consultant for Youbet.com.

The Christian Coalition has been pushing against the bill with e-mail and petitions.

"Any time gambling is too accessible, it hurts the family," coalition spokeswoman Michele Combs said.

The Justice Department declined to comment, referring a reporter to public statements by department officials reiterating the view that Internet betting - including on horse racing - is barred by existing statutes.