High Stakes Showdown: Internet Gambling Debate Rages on Capitol Hill

If Rep. Frank's effort to legalize online gambling gains any traction, it might be because the federal government needs more tax revenues, not because lawmakers want to protect individuals' rights to entertain themselves.

A separate, companion bill to Rep. Frank's proposed legislation has been introduced in the House by Rep. Jim McDermott, D-Washington. His Internet Gambling Regulation and Tax Enforcement Act is specifically aimed at capturing the potentially-sizable amounts of tax revenue that the government could collect if online gambling became a legal, regulated industry.

A report by the Joint Committee on Taxation analyzed a few scenarios and deduced that it is possible for around $42 billion in tax revenues to be generated over ten years, though this estimate assumes that most states and sovereign tribes opt in to the federal framework for legalized online gambling, when many could actually decied to opt out.

Regardless of the potential windfall to federal coffers, "the American government does not need to become addicted to gambling revenue, because that will only lead to more gambling and hurt more people," Rep. Bachus said.

The PPA's Pappas and D'Amato both agree that the desire to boost federal coffers from gambling revenue should not drive the debate.

Safeguarding Against Schemes

"Having a safe, well-regulated industry that safeguards against things like cheating scams and underage gambling should be the focus here, not some tax revenue push," Pappas said.

While proponents of online poker, such as D'Amato, support the efforts of Rep. Frank and Rep. McDermott and are hopeful about their passage, they also recognize that other pressing issues, such as Wall Street reform and possibly immigration reform, will surely dominate the remainder of the session.

Meanwhile, the Justice Department and other law enforcement officials have made their position known: online gambling in all of its many forms is illegal.

In a Nov. 13, 2009 letter sent to Rep. Bachus by Shawn Henry, assistant director of the Federal Bureau of Investigation's Cyber Division, on behalf of F.B.I. director Robert Mueller, Henry spelled out concerns over the use of online poker sites by parties engaged in money laundering activities, setting up what amount to private "shell games" with cohorts serving as "mules."

In written testimony submitted this week to the House Ways and Means Committee, Michael Fagan, former federal prosecutor for the Eastern District of Missouri, argued vigorously against Rep. Frank's proposal.

"Having familiarity with the polar extremes … of attitudes on this issue, and having inside and lengthy experience with Internet gambling as it been practiced in the U.S. and elsewhere for the past approximately 15 years … I am absolutely convinced that any action, however well-intentioned, by this Committee or by Congress, which would enable the expansion of Internet gambling in the U.S. will prove far more costly than maintaining the status quo," Fagan wrote. "It would be irresponsible to take any steps toward expanding the availability of Internet gambling."

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