The webinar was titled “US I-Gaming Outlook Analysis and Expectations” and it focused on the US online gambling regulatory environments at both the State and Federal levels, including consideration of the key pieces of draft legislation currently on the table and their chances of successful passage into law in the near term.

Set out below are some of the key points (I thought anyway) coming out of the presentation.  They provide a nice broad picture of where things are at, as well as some more context around Barney Frank’s much talked about draft bill H.R. 2267 which was debated by the House Financial Services Committee last week.

Unlawful Interactive Gambling Enforcement Act

Any discussion of America’s online gambling regulatory landscape should start with the currently operative on-point legislation – UIGEA. Passed in 2006 as an attachment to the Port Securities Bill and implemented 1 June 2010, it makes it illegal for payment processors (banks, credit card companies, etc) to facilitate payments relating to ‘illegal online gambling’ between US residents and online gambling providers.

Crucially, UIGEA doesn’t define what ‘illegal online gambling’ is and also places the onus of identifying related transactions on banks/payment processors.  This ambiguity has made effective implementation difficult and the legislation’s success in blocking online gambling activity is often questioned – particularly as the amount American’s gamble online now is similar to the figure in 2006, pre-UIGEA.

It has also proven a headache for local wagering (horse race betting) operations since banks’ shot-gun approach to blocking online gambling transactions is catching their customers’ payments in the net as well.

With UIGEA in place many offshore casinos and sportsbooks have continued to accept US players, but the large, big brand, European based operators remain unavailable to Americans.

New laws proposed

We hear a lot about Barney Frank’s proposed new law.  But the fact is, even at a Federal level there are quite a few proposed bills related to online gambling.  At a State level the list gets considerably longer.

Mark Balestra’s slide summarizing what’s on the table (legislation-wise that is) does a much better job than I could do…just click on the below image for the complete matrix.

Summary of draft legislation proposed - click for full matrix

So with all these proposed laws floating around Washington, why does H.R. 2267 get all the attention?

Quite simply it currently has far more support and stands a better chance of becoming law than any of the others.  With a very influential sponsor (Barney Frank), 69 co-sponsors  and the lion’s share (36.5%) of all online gambling lobbying spend  (supporters include PPA, IGC, Harrah’s, UC Group) behind it, it’s the one draft bill that has a realistic (if not probable) chance of success.

For this reason, it’s worth following a little closer than the others.

H.R. 2267

The Internet Gambling Regulation, Consumer Protection, and Enforcement Act will provide a framework for legal online gambling for Americans provided by US-licensed operators.

What it seeks to do

One of the big misconceptions about HR2267 is that it seeks to repeal UIGEA.  Not so.

UIGEA will continue to operate if HR2267 becomes law however with  HR2267 in place legal online gambling will be unambiguously defined (pretty much all except sports betting) and provision will be made for the issue of US online gambling licenses to successful applicants.

States not wanting to jump on the I-gaming regulation bandwagon are able to so choose and will have 90 days to do so from the time it becomes law under an included opt-out provision.

In simple terms (and from a US players perspective) what this means is that you will be able to play poker or blackjack online with companies (for example, and assuming successful license application) like London Stock Exchange listed Ladbrokes or PartyGaming, rather than your current choice…www.some-unknown-costa-rican-casino.com

Where it’s at

HR 2267 has existed in draft form and has been floating around Washington slowly gathering co-sponsor support since the start of 2010.  Just last week its merits were debated by the House Financial Services Full Committee.  On Wednesday (28 July) a HFSC sub-committee hearing was scheduled to discuss the bill’s markup.

Markup is the process by which congressional committees and subcommittees debate, amend, and rewrite proposed legislation before presentation to the House of Reps for consideration.

Where it needs to go

Following markup, the draft will need to be passed by the House Financial Services Committee and put on the agenda for consideration the House of Representatives and then, if passed, go before the Senate where a 2/3 majority vote will be needed before it becomes law.

So there are still quite  few hurdles the bill needs to get over and in betting parlance, each of the hurdles is far from a sure thing.

Likelihood of near term success

Barney Frank has repeatedly said that he wants his new law up and running this year.  But according to Balestra the odds of this happening are pretty long.  Whether he has the level of support to get the bill into the House is questionable.  And if even if the bill is successfully marked up and passed by the Committee, it will get no favors making its way onto the House of Representatives agenda since speaker Nancy Pelosi is not a supporter.

There are obstacles in the Senate too – notably influential Senator Jon Kyl whose stance toward online gambling hasn’t moderated since his persistent efforts to have it outlawed during the last decade – remember all those Kyl bills?

It is also worth noting that this is a contentious piece of legislation and it will always take a back seat to matters considered more important – and America certainly has its fair share of these right now!

HR2267 becoming law in 2010 is very unlikely.

However the final point worth making is that while momentum in Washington is currently slow, history tells us that this can change very quickly.  After all – UIGEA took everyone by complete surprise back in 2006.

The legislation in question was Barney Frank’s H.R. 2267 (Internet Gambling Regulation, Consumer Protection, and Enforcement Act)

If this piece of draft legislation, which has been floating around Washington for some time now, ever becomes law it will replace UIGEA’s prohibitive stance toward online gambling with a regulatory framework and licensing regime.  Coupled with Rep. Jim McDermott’s proposed H.R. 4976, the new laws will also raise a lot of money for the US Treasury in the form of gaming taxes.

The success or failure of HR2267 is quite significant for the online gambling industry so this hearing would have attracted plenty of interest.  It is also a controversial piece of legislation that has polarized opinions;  those of the members of the Committee as well as various other interested parties.

Hearing webcast

For those interested a link to the recorded video webcast of the hearing can be found here at the Committee website.

It’s quite long and full of all the old arguments for and against legal/regulated online gambling in America, which in a nutshell are:

• For:
  - liberty/freedom of choice,
  - much needed government revenue raised,
  - current prohibition ineffective.
• Against:
  - endorsement of online gambling will encourage problem gamblers.

Whether HR2267 is any closer to actually becoming law I honestly cannot say.  But the debate was vigorous and reasonably well informed so it seems the law is getting a thorough review.

And most reassuring of all, Hank Johnson is neither a member of the Committee, nor was he called on to testify in any capacity!

The EU consists of almost 30 Member States, all wanting to apply laws consistent with their own cultural and political agendas and understandably protect local operators in the national interest.   Then you have the the European Commission (EC), set the impossible task of trying to enforce adherence by all members to overarching EU law, and uphold the single market approach to trade and discourage protectionist practices.

So I guess a clear and undisputed path to a unified approach to online gambling regulation is a bit much to ask for.  And the reality is something altogether different from this.

There is a real divide between the ideals of the EC and preferred approaches many of its members want to take with respect to online gambling regulation.  The EC, and no doubt most operators and their member associations like the European Betting and Gambling Association (EGBA) and the Remote Gambling Association (RGA) want national restrictive or protectionist laws removed in the online gambling space.   They trumpet Article 49 of the EU Treaty and the ECJ’s Gambelli ruling that freedom of service provisions apply to online gambling services as they do to all others.

On the other side of the divide sit a long list of influential EU members stubbornly wanting to frame laws protecting local monopoly gambling operators and restricting foreign operators from accessing their markets.

The EC issues reasoned opinions and threatens ECJ action against infringing states, but this doesn’t seem to have them jumping to change their laws.  And to complicate matters further, every now and then a major ECJ decision on the interpretation of EU law in this area seems to shake things up even further.

First there was Gambelli, the landmark case that held that freedom of service provision laws applied to online gambling as they did all others…operators rejoiced and it looked like the path to open internet gambling markets had been paved.  Then, just last September the ECJ ruled (Santa Casa case) that laws protecting state monopoly gambling operators were legal, provided where those laws were in the public interest…operators thought the sky had fallen in and the door had opened to ECJ sanctioned protectionist laws across Europe.

Just yesterday, the EU Advocate General, ruling on a German online gambling dispute opined that national laws inconsistent with the EU freedom to provide services as interpreted in the Gambelli case are illegal, and further there is no exception to the direct application of the Treaty to the gaming and betting sector.  He went on to say that it was not in the interest of consumers to maintain non EU compliant legislation that does not offer consistent and systematic protection.  Here he was referring to the German authority’s justification for restrictive laws as being problem gambling prevention – while sanctioning a monopoly gambling operation.

His comments suggest that monopoly protection is not of itself a ‘public interest’ referred to in the Santa Casa case.

Again operators and the EGBA have rejoiced and hailed the decision as one paving the way for open future markets.  That is until the next case I guess.