Since passage of the Unlawful Internet Gambling Enforcement Act (“UIGEA”) in 2006, which made it illegal for a person “in the business of betting or wagering” to receive money in connection with unlawful internet gambling, a number of legislative initiatives have been introduced that propose an alternative regulatory framework for online gambling, including licensing, taxing, and regulating different forms of online gambling. Until recently, the United States’ largest casino operations largely opposed these proposals due to concerns that legalized online gaming could erode in-person casino attendance. However, in the spring of 2010, the American Gaming Association, the trade association that represents many of the major casinos, issued a statement acknowledging “that a properly regulated legal framework for Internet gambling is the best way to protect consumers.”4

In July 2010, the House Financial Services Committee approved H.R. 2267, the Internet Gambling Regulation, Consumer Protection, and Enforcement Act, which was introduced by Representative Barney Frank (D-MA). The bill would create a licensing and enforcement regime overseen by the Secretary of the Treasury for all types of Internet gambling except sports wagering, and sets forth stringent suitability criteria for licensees.

Treasury would collect a user fee from licensees. A companion bill, S. 1597 Internet Poker and Game of Skill Regulation, Consumer Protection, and Enforcement Act, would establish a 5% federal tax on gambling deposits. Under the Frank bill, banks would also be provided with a safe harbor for engaging in financial activities and transactions on behalf of a licensee, as long as those activities comply with federal and state law. Given the limited time remaining in 2010, it is not likely that any major legislation on online gaming will pass Congress this session. Instead, these recent developments will further the policy debate for 2011.