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Frank Gets Delay in Law Restricting Net Casinos

12/14/09 - Boston Globe - View Source

By Jeremy Herb

WASHINGTON - Over the objections of gambling opponents in Congress, the Obama administration has granted a request by US Representative Barney Frank to delay a long-scheduled federal crackdown on illegal Internet poker and casino sites.

Frank sought the six-month reprieve so he could keep working on a pet issue: legalizing online gambling.

“I urged them to do it and I was very pleased,’’ the Newton Democrat said of the delay. “It gives us a chance.’’

You won’t find the chairman of the House Financial Services Committee at a poker table or roulette wheel, as Frank doesn’t gamble. But he said he does not want the government telling people what to do with their own money.

Frank has established himself as a friend of the online gambling industry by seeking to overturn a 2006 law that will make it illegal for US credit card companies to process charges from Internet gambling sites.

The law, intended to cut off the life blood of the $16-billion-a-year online gambling industry, was scheduled to take effect Dec. 1. But last week, the Federal Reserve and the Treasury Department pushed back the effective date until June to give Frank and other gambling supporters time to draft a bill to set up a system to regulate and collect taxes from legal online gaming.

The Obama administration is officially neutral on the issue of Internet gambling but said it granted the delay because of the “considerable interest in Congress in clarifying the laws.’’

While Frank has been too busy with financial reform to work on gambling this year, advocates are hoping they can ride the momentum from last week’s decision to argue that online gambling can become a moneymaker for federal coffers. A recent report from the Joint Committee on Taxation found the Internet gambling could generate up to $42 billion in tax revenue over the next decade.

“We love him,’’ said Martin Shadiro, a professional online poker player from Florida. “What Barney Frank is doing is wonderful.’’

Observers say Frank’s bid is a long shot, particularly since he may have difficulty winning support for a progambling measure in 2010, an election year.

Long shot or not, gambling opponents are frustrated the administration agreed to the delay. Senator John Kyl of Arizona and Representative Spencer Bachus of Alabama argue that legalizing online gambling is a threat to children and teenagers, who can easily log on and become addicted.

“Any economic benefit from taxing Internet gambling would be more than offset by the harm it causes our young people,’’ said Bachus, the ranking Republican on the Financial Services Committee. “What we have is a wave of young Americans who are addicted to gambling.’’

Frank has introduced three bills since 2007 that would nullify the Unlawful Internet Gaming Enforcement Act, which Republicans passed on the final day of the 2006 congressional session. Frank also sent a letter with 18 others in his committee that led to the delay.

Frank was brought in to Las Vegas at this year’s World Series of Poker to announce, “Shuffle up and deal’’ - poker’s version of “Start your engines.’’ Frank received a loud ovation, said John Pappas, executive director of the Poker Player’s Alliance.

“If anyone is a poker player, particularly an online poker player, they know the name Barney Frank,’’ Pappas said. “A lot of people would say, ‘I’m not sure I agree with Barney on everything, but he’s . . . right on this poker issue.’ ’’

Shadiro said he voted for President Bush in 2004 and always supported Republicans, but his allegiance, along with other conservative poker players, changed after Republicans passed UIGEA in 2006.

“It seems like what Barney Frank is saying is more along the lines of our personal beliefs,’’ Shadiro said.

Frank’s stance has helped his campaign war chest, too. Casino and gambling interests have contributed $56,400 in 2009, according to the Center for Responsive Politics.

Online gambling has operated in a legal gray area since it began in the 1990s. The Justice Department says that all bets placed online are illegal, citing a 48-year-old law called the Wire Act that bans bets over telephone lines, though a federal appeals court ruled in 2002 that online wagers didn’t apply under the Wire Act.

But the Justice Department has not prosecuted individual gamblers in the United States, and nearly all online gambling companies operate offshore, outside of US jurisdiction.

In September, a federal court in Philadelphia upheld the 2006 ban on credit card transactions against a Constitutional challenge that it violated privacy rights.

Frank’s push to legalize the business has made temporary allies out of Frank and the financial sector, at the same time that he is fighting to reform Wall Street. The financial sector has been critical of the 2006 rules because they have been asked to enforce an unclear law, said Floyd Stoner, a lobbyist at the American Bankers Association. His organization also asked the Federal Reserve and Treasury to delay UIGEA.

“We’re not for or against legal gambling on the Internet,’’ said Scott Talbott, head lobbyist at Financial Services Roundtable. “The problem is the bill asked banks to be cops. We should not be the enforcement arm of the US government.’’

The antigaming law granted some exceptions, including one on horse racing, to the ban on gambling-related credit-card transactions on the Internet. But the law also did not define how banks should differentiate between legal and illegal gambling. Subsequent compliance guidelines from the Federal Reserve and Treasury have not made a clear distinction.

Last month, MasterCard said it would block all online gambling transactions, including horse racing, which is legal online.

The Kentucky congressional delegation, four Republicans and two Democrats, then asked for the new rules to be delayed. MasterCard changed course and said it won’t block the transactions, and a spokeswoman said it is using the delay to determine what type of Internet gambling is legal.

Steve Verdier, director of congressional affairs with the Independent Community Bankers Association, said he wants Frank’s bill to pass. “Congress created this problem, and I think it’s up to Congress to fix it,’’ Verdier said.

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