Inside Asian Gaming

35 36 B arney Frank brings a bill to the US House of Representatives to pave the way for the legalization of Internet gambling in the United States and shares of the leading over- seas operators respond on the London Stock Exchange in a curious fashion — they dive. So does the City have some kind of line on the future of decision-making inWashing- ton? Hardly. What happened was, everyone read the bill. It’s widely known by now that the Inter- net Gambling Regulation and Enforcement Act (H.R. 2046), introduced by the Massa- The Frank Truth Legalization of online gaming in the US is a long way off, explains International Gaming and Wagering Business (IGWB) magazine International Editor James Rutherford chusetts Democrat at the end of April, and promptly stowed in the Committee on Finan- cial Services which Frank now chairs since the Democrats took control of the House in January, sets conditions on licensing, regula- tion, probity and social responsibility — and by implication tax — that few offshore op- erators, if any, would accept. Which is understandable. After all, why did they go offshore in the first place? In a press release on the occasion of its introduction, Frank explained the motivation behind H.R. 2046: “The existing legislation is an inappropriate interference on the person- al freedom of Americans,” he declared, “and this interference should be undone.” He was referring of course to the Un- lawful Internet Gambling Enforcement Act, which was tucked inside a seaports security bill and passed at the end of the last Con- gress and signed into law by President Bush in October. It makes it illegal in the United States for banks and financial services pro- viders to process gambling transactions over the WorldWide Web. The industry was buoyed considerably when the Democrats were returned to power in last November’s elections. They took heart when Frank went on to refer to UIGEA as “one of the stupidest laws ever passed.”Their hopes were quickly deflated, however, once they realized how he proposes to undo it. H.R. 2046 doesn’t repeal UIGEA but seeks to amend a title of the US Code governing money crimes. It would give exclusive au- thority to license and regulate Internet gam- bling to the Financial Crimes Enforcement Network,an arm of the US Department of the Treasury whose mandate is“to safeguard the financial system from the abuses of financial crime, including terrorist financing, money laundering, and other illicit activity.” The good news is that this would take the Justice Department out of the picture, the agency responsible for disrupting the sleep and the travel plans of operators and suppliers worldwide. But on closer inspec- tion — leaving aside the fact that the Trea- sury Department, specifically the US Internal Revenue Service, is one of the reasons ex- BetonSports boss David Carruthers, a British national, has been under house arrest in Mis- souri since last summer — the news is not so good. Based on the official summary of the leg- islation, here’s what operators would have to do to qualify for FinCEN licensing: • They would, first of all, have to “agree to be subject to US jurisdiction.” • This includes a requirement that licens- ees “comply with anti-money laundering, anti-fraud, anti-terrorism and such other regulations, requirements and limitations as may be prescribed.” • Operators would have to submit to “re- view of their financial condition and cor- porate structure, business experience and criminal background checks.” • Licensing would depend on their ability to “maintain effective protections against underage gambling” and “compulsive gambling.” • They would not be able to accept any bet “initiated or terminated in a state or tribal land that prohibits that type of Internet gambling.” • Off limits to them also would be “any sports league that opted out of authoriz- ing online gambling activities.” The bill is vague on the matter of tax, but not so vague that it doesn’t state at the out- set: “Licensing and regulating Internet gam- bling in the United States would provide ad- ditional tax revenues, and would reduce tax avoidance.” Among potential liabilities — and this will almost certainly include a federal levy on revenues and possibly state exactions as well — operators at the least would have to ensure that players are induced to report their winnings to federal and state tax collec- tors by supplying them with the appropriate forms. And they might have to do more.“No person shall receive or retain a license,” the bill says, “unless the person implements and maintains… appropriate mechanisms to en- sure that all taxes relating to Internet gam- bling due to Federal and State governments and to Indian tribes from persons engaged in Internet gambling are collected at the time of any payment of any proceeds of Internet gambling.” It’s been reported that the Remote Gam- bling Association declined Frank’s invitation to get behind H.R. 2046. No surprise there. The UK-based trade group — whose mem- bers include Party Gaming, 888, Gala Coral, Betfair, Sportingbet, Ladbrokes, William Hill, Find out how GSA can help breathe new life into your operations. www.gamingstandards.com Visit us in Stand #394 at G2E Asia Don , t Flatline. Protect Your Bottom Line.

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