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March-20-2007,
Barney Frank as Online Gambling's Knight in Shining Armor? Probably Not...By Jay Graziani

The online gambling community was buoyed last week by news implying that U.S. Representative Barney Frank (D-MA) was considering introducing legislation to repeal the hastily passed Unlawful Internet Gambling Enforcement Act (UIEGA). The Act, attached to the SAFE Port Act, was signed into law in October 2006 and was just one of many "bad beats" for online gambling last year. The statement from Frank's office induced optimism in a jaded community of online gamblers, but it is far too early to think that Rep. Frank may actually swoop in to fight off the UIEGA.

Clearly the financial sector is not overly optimistic. When news broke last Wednesday of Rep. Frank's statement, the major public offshore players budged slightly higher (with industry leader Party Gaming up 10%), but had settled down by Friday to closer to 6% (for Party Gaming and SportingBet) and 2% (888.com) gains over the 3-day period. That leaves Party Gaming and SportingBet still a whopping 60% below their October highs.

While any news is good news for the online gambling industry, let's not become too excited just yet. Reuters reported that a spokesman said, "Chairman Frank is considering legislation." Legislators quite often "consider" controversial issues, paying them brief lip service before abandoning them for more politically feasible positions. Even if legislation is introduced, that does not mean it will be advanced within any reasonable timeframe. Senator Jon Kyl (R-AZ) had been peddling around various versions of the UIEGA for over a decade before finally back-dooring it through under the Safe Port Act last year. Even if Franks does follow through and introduce legislation, it may be a very long road before we see any meaningful effects on the online gaming industry.

Also, the legislation that Rep. Frank is "considering" is not anything particularly novel. Rep. John Conyers (D-MI) has been open to the internet gambling issue for as long as Kyl has been fighting to ban it. In 1993, Conyers introduced the Internet Gambling Regulation Study Commission Bill to "examine the feasibility of strictly licensing and regulating the online gaming industry", at a time when the internet was still below the radar of most of America. Conyers is no stranger to controversy, or political power. He has been in office continuously since 1965, making him the second-longest serving member in the House, and he appeared as #13 on President Richard Nixon's infamous "enemies list". For almost 15 years he has opposed an outright ban on internet gambling, to no avail.

More recently, Rep. Jon Porter (R-NV) sponsored legislation (H.R. 5474) in May 2006 providing for an 18-month federal study of internet gambling that attracted 50 cosponsors in the House. Porter made mention of his bill when he criticized the inclusion of the UIEGA during the Conference Report on the SAFE Port Act. Unfortunately, with the UIEGA now signed into law, the legislation he sponsored is as good as dead.

Do we have more support now, enough to actually repeal a ban? Clearly the composition of Congress has changed. Ironically, many of the major supporters of online gambling legal reform are now in positions of power. Two of the most outspoken members, Frank and Conyers, now hold influential positions as chairmen of the Financial Services and Judiciary Committees, respectively. Online gambling issues for the most part fall under the jurisdiction of these committees. Yet online gambling has seemingly fallen by the legislative wayside, at least for many of its former supporters. Perusing Conyers' website, for example, one finds no mention of online gambling legislation, though "Jazz" and "Toxic Mold" are included on the list of "Major Issues". I guess it is safe to say the gambling issue has fallen by the wayside.

Legislatively we have always been a lot closer to an outright ban than we sometimes like to remember. The Internet Gambling Prohibition Act of 1999 may very well have passed if not due to some timely intervention by the scandalous tag team of lobbyist Jack Abramoff and Tom DeLay (R-TX). That bill only failed the House of Representatives by 25 votes, needing a two-thirds majority (245 in favor, 159 against). The bill was temporarily stalled, while Abramoff was sentenced to 5 years for corruption related to lobbying for gambling interests. Similar legislation introduced by Rep. James Leach (R-IA) passed the House of Representatives 317-93 in 2006 despite not being acted on by the Senate. Whereas the composition of Congress has changed, it has not changed so significantly in the last election to reverse a 317-93 opinion. There are too many uninformed congressman sitting on the fence to overcome any legalization hurdles.

And while we still have a long way to go in Congress, we haven't exactly won over the general public, either. Harris Interactive conducted a poll in January 2006 to gauge public attitudes about online gambling. Interestingly, over 90% of the population at the time had not gambled online, and over 90% did not plan to gamble online over the following 6 month period. More than half (53%) of the respondents somewhat or strongly agreed that online gambling should "remain illegal". Ultimately, it comes down to an issue of regulation - 64% of adults did not think online gambling could even be regulated effectively. Whereas many "non-scientific" polls have suggested stronger support for online gambling among the American public, more rigorous studies have not necessarily backed that claim. In any case, the plight of abandoned internet gamblers has not captivated the interest of the general public, as demonstrated by the exceedingly thin coverage of the internet gambling issue by mainstream media outlets.

Without broad support from politicians, or the public, it seems as if any "repeal" legislation is doomed to failure. Of course, that discounts the possibility that Rep. Frank can get the political wheels turning and make this an issue that finally receives serious debate. That, however, would be a monumental task. The WTO is due to release its final report on the Antigua vs. U.S. case any day now. A decisive ruling might provide the spark that gives online gaming legalization some momentum.

03-20-07
Jay Graziani
MajorWager.com
graziani@majorwager.com



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