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HR 2267: the online gambling industry faces tough measures if it wants to deal to US citizens


Friday, April 16, 2010

HR 2267: the online gambling industry faces tough measures if it wants to deal to US citizens


Barney Frank's proposed HR 2267 Internet Gambling Regulation Act was universally welcomed within the online gambling industry, as its passage into law would pave the way for online gambling regulation in the USA and a subsequent reopening of that lucrative market.


However, I wonder how closely the entire industry has studied the proposition?

I've been looking at it more closely since it was due to be discussed in congress today (subsequently postponed), and it isn't necessarily the passage to untold riches at the expense of the American public that the industry might have been expecting.



5383. B. 1. LICENSING REQUIRED FOR CERTAIN INTERNET GAMBLING

No person may operate an internet gambling facility that knowingly accepts bets or wagers from persons located in the United States without a license issued by the Secretary in accordance with this subchapter.



C. 2. E.

...the applicant agrees to submit to United States jurisdiction and all applicable United States laws relating to acceptance by the applicant of bets or wagers over the Internet from persons located in the United States and all associated activities.



These clauses require that any US-facing operator have a US licence to deal to the American public, and fully comply with the legislation. As such, casinos in the lax and operator-friendly offshore jurisdictions of Costa Rica, Antigua & Barbuda, Curacao etc would all have to obtain US licences to legally do business with the USA.

However, many of the casinos in these lax jurisdictions already deal to US customers. These operations will no longer be able so to do under the proposals, and failure to obtain a licence and submit to the subsequent rigorous procedures would be a breach of US law.

The US government's affection and zeal for the extradition of foreign criminals is well documented, so offshore operators in lax jurisdictions that continued to offer unlicensed online gambling would not sleep easy.


In order to obtain a licence, one of the requirements is to avail to the licence committee...



...the criminal and credit history of the applicant, any senior executive and director of the applicant, and any person deemed to be in control of the applicant.



I suspect this alone might be a problem for some. There are many other requirements. Here's one such that made me laugh:



...is a person of good character, honesty, and integrity.



I'm sure that wouldn't any problem for anyone operating in the squeaky-clean world of the online gambling business.


Here are some more:



5383. G.

1. LEGAL AGE - Appropriate safeguards to ensure that the individual placing a bet or wager is of legal age as defined by the law of the State or tribal area in which the individual is located at the time the bet or wager is placed.

2. Appropriate safeguards to ensure that the individual placing a bet or wager is physically located in a jurisdiction that permits Internet gambling at the time the bet or wager is placed.



Age verification checks would be required before, or at the latest at the point of, bets being placed. Clearly a good idea, but not something the industry has shown much affection for to date, with age verification usually only occuring at the time of withdrawal.



3. Appropriate mechanisms to ensure that all taxes relating to internet gambling from persons engaged in internet gambling are collected at the time of any payment of any proceeds of internet gambling.



This appears to require that the operator take a hand in collecting taxes on winnings. If I'm reading this correctly, it's certainly a new and stringent concept.


These requirements are all on "pain of death" for the licensee, as failure to adhere to them results in forfeiture of the licence:



G. Safeguards Required of Licensee - No person shall receive or retain a license under this section unless the person maintains or requires mechanisms so that the following requirements, and the standards established under section 5384, are met with respect to any internet bet or wager:

LEGAL AGE...

PERMISSIBLE LOCATION...

COLLECTION OF CUSTOMER TAXES

SAFEGUARDS AGAINST COMPULSIVE GAMBLING...

(etc etc)



Clearly Barney Frank had in mind to produce a bill which erred on the cautious side, in order to take as much firepower as possible away from the likes of Spencer Bachus and his prohibitionist cohorts. Well, he succeeded - if this bill became law, it would not result in any kind of a free ride for casinos licensed to deal to the USA, and those who failed to obtain a licence but continued to offer services to Americans would face the long arm of US law.


All told, it's a pretty fair bill and deserves consideration.



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