High Stakes Showdown: Internet Gambling Debate Rages on Capitol Hill

Law aimed at curbing Internet gambling to take effect amidst legalization push.

ByABC News
May 18, 2010, 5:35 PM

May 19, 2010— -- With just two weeks to go before a federal law aimed at quashing Internet gambling takes effect, a handful of House Democrats, including Rep. Barney Frank, D-Massachusetts, are going all in, pushing for the legalization of some of the most popular forms of online gambling. The lobbying is intense, and the stakes are high – by some estimates the Internet gaming industry generates as much as $6 billion a year in profits – and no one on either side of the debate appears ready to fold.

Meanwhile, in an exclusive interview with ABCNews.com on Tuesday, Rep. Spencer Bachus, R-Alabama, the Ranking Member of the House Financial Services Committee, said he would do everything in his power to stop the legalization of Internet gambling, specifically singling out online poker.

"Internet gambling is the crack cocaine of gambling," Bachus told ABCNews.com. "Young people are particularly vulnerable – we don't want to put a casino in every dorm room in the country. Compulsive gambling, by many accounts, is a very serious, growing problem."

Among the many recent developments in this ongoing battle royale:

Implementation of the law has been subject to numerous delays, including a six-month postponement granted in November by the Fed and Treasury, partially at the behest of Rep. Frank and Sen. Harry Reid, D-Nevada.

Defenders of online poker, specifically the PPA, argue that everyday citizens should have the right to enjoy a simple American pasttime, regardless of whether they are in the backroom of a barbershop, or in cyberspace.

"Why is it OK for a group of friends to sit around the kitchen table and play a friendly game of poker, but not OK for people to play over their computers?" asked former New York State Republican Senator Alfonse D'Amato, now the chairman of the PPA.

D'Amato, an avid poker player who held weekly games in the Senate, sometimes while waiting for bills to come to the floor, said peer-to-peer gambling, as opposed to sports betting, does not violate any existing federal laws prohibiting forms of wagering. For example, he said, the Interstate Wire Act of 1961 is expressly aimed at outlawing bets on sporting events.

Sports betting operations and online poker sites have been able to operate in offshore locales such as Costa Rica or the Isle of Man, a U.K. territory. The latter is home to PokerStars.net, which, according to Forbes magazine, earns an estimated $500 million in profits annually. Also among the most popular online poker sites are Full Tilt, Absolute Poker and Doyle's Room. Fuelled by the explosion in popularity of Texas Hold 'Em and televised events such as the "World Series of Poker," online poker has become a booming industry over the past decade.

By some estimates anywhere from 3 million to 15 million Americans play poker online for money

The new law about take effect June 1 should effectively cripple the online poker industry by making it exceedingly difficult for individuals to use their credit cards to participate in these games, Rep. Bachus said.

But PPA director John Pappas insisted that the official June 1 compliance date, known in some circles of the online poker world as "D-Day," will have little impact on the industry, regardless of whether online poker gets the exemption the PPA is seeking.

That's because many financial institutions have already begun to block online poker transactions before the law formally takes effect, in turn prompting many players to get credit cards from overseas. In other words, gaming enthusiasts have already figured out how to game the restrictions.

Moreover, the new law doesn't specifically ban banks from transacting with online poker sites; rather, it merely requires the banks to take proper steps to make sure that they do not facilitate any illegal gambling transactions.

"There is what amounts to a safe harbor already embedded in the law, so that any bank that does want to transact with an online poker business simply needs a reasoned legal opinion that it their client is not involved in restricted transactions," Pappas said.