888, PartyGaming, Unibet, William Hill back in the US?

In October 2006, when the Bush administration passed the Unlawful Internet Gambling Enforcement Act (UIGEA), all the European based online gambling powerhouses beat a very hasty retreat from the US market.

Their share prices tumbled and US facing operations once value in the hundreds of millions of dollars became worthless.

Shortly after the bill passed, Sportingbet.com unloaded its US business in a $1 peppercorn deal. And according to John Shepherd, from PartyGaming, “When the act was signed into law, we stopped taking wagers from the US and effectively gave up 75 per cent of our business in one go.”

Ever since then, the likes of PartyGaming, 888.com, William Hill, Ladbrokes and other I-gaming majors, have kept a close eye on regulatory developments in the US in the hopes that one day they can return.

And that day may be coming.

On Wednesday, two of Congress’ biggest online gambling proponents, Reps. Barney Frank and Jim McDermott stated the case for a UIGEA repeal before a hearing of the House Ways and Means Committee.  The hearing is one further step in the path to getting draft bills proposed by Frank and McDermott introduced and eventually passed by Congress.

The proposed bills would repeal UIGEA and replace it with an online gambling regulatory regime, allowing for locally licensed online casinos and poker rooms to operate in the US for the first time ever.

Frank and McDermott’s testimony reiterated the messages they have been spruiking for months now:  UIGEA’s failure – the prohibition has not worked; libertarianism – American adults should have the right to choose what they do with their own money in the privacy of their own homes; practicality – banks will struggle and probably fail in the payment blocking burden UIGEA imposes on them once it kicks in after the June 1 implementation date.

They’re compelling arguments and backed up by strong evidence.  According to research firm H2 Gambling Capital, US residents will wager around $6bn online in 2010 – just as much as was spent in 2006 before UIGEA was passed.  The only difference is that now the bets are being placed with lesser known smaller operators willing to risk the wrath of the US Justice Department rather than the large, publicly listed operators.

As Jim McDermott testified Wednesday, “We are sending a multi-billion dollar industry offshore and underground.”

But beyond libertarianism, practicality and UIGEA’s failure, the most compelling argument and the one that may just see the ban overturned is the simple fact that a regulatory regime will raise money for the government.  Lots of it…$42 billion over the next decade according to a joint congressional tax committee.

But every bit as strong as the arguments in favour of regulation are the voices opposing it.  One Senator has called online poker the crack cocaine of gambling.  And Congress also has a full plate for the rest of the year making consideration of Frank and McDermott’s bills in the immediate future administratively unlikely.  According to an aide to the Ways and Means Committee there were no immediate plans to move forward with McDermott’s bill.

But legislative process in the US can be a very unpredictable animal – UIGEA’s surprise passing attached to a port securities bill back in October 2006 is testament enough to this. So you just never know.  It may well be that you guys in the US will soon be able to play the live games at 888.com, PartyCasino, Ladbrokes,  William Hill or Unibet.