Frank Bill Regulating Online Gambling is Here

The Frank proposal establishes terms for Internet casinos and poker rooms to qualify for licensing, and conditions that must be met to maintain a license.

This morning, Barney Frank introduced his new bill creating a licensing and regulatory structure for online gambling sites to Congress. The Frank proposal establishes terms for Internet casinos and poker rooms to qualify for licensing, and conditions that must be met to maintain a license.

Perhaps the most unforeseen part of the bill is a provision allowing states and tribal authorities to opt out of the federal legalization of Internet gaming. For states such as Utah and Hawaii, which have no legal gambling, the bill allows "each State and Indian tribe having the ability to limit Internet gambling operators from offering Internet gambling to persons located within its territory by opting out of the provisions of this Act."

Also, potential licensees are ordered to ensure that each state be provided with Internet gambling only in the forms that the state has chosen to make legal within its borders. OCA analyst Sherman Bradley says this means if a state has chosen not to legalize blackjack, then online casinos operating in that state must respect the law and not offer blackjack in that state.

Regulatory authority in the bill is given to the Department of the Treasury. The Treasury would review applicants, including checking business structure, criminal and credit checks, and experience in operating online gambling games.

Applicants are expected to provide measures to adequately verify age and identity, as well as carry programs for responsible gaming, problem gambling prevention, and self-exclusion programs.

Another interesting twist is the requirement of licensees to assess taxes on gaming winnings before paying players. Third listed among required safeguards of licensees, after age verification and location legality verification, is "COLLECTION OF CUSTOMER TAXES.—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."

Reaction and analysis of Frank's bill will continue throughout the day on OCA.