The Internet Gambling Regulation and Enforcement Act

In the aftermath of the UIGEA, which was passed into law by Congress in December 2006 as part of the SAFE Port Act, work immediately began to put together some counter legislation, which was initially spearheaded by Rep. Barney Frank of Massachusetts.

While Rep. Frank got almost all of the press on this, he was joined by several other congressmen in sponsoring this bill. Rep. Ron Paul also played a lead role. It was called the Internet Gambling Regulation and Enforcement Act of 2007.

Barney Frank already had a reputation for being one of the most liberal representatives in Congress, and Ron Paul, as a libertarian, was an even bigger champion of personal liberty. This bill though not only looked to expand personal liberty, it also addressed concerns about players being protected, and this actually requires regulation, and there was none at the time.

Instead, the government sought to use the law to prohibit rather than regulate, or at least they believed that the law prohibited internet gambling, in spite of at least some of these beliefs being for the most part unfounded. Using prohibition though just drives things underground, in an unregulated state, where the government lacks any form of real control over it.

With regulation though, governments can prescribe conditions where something can be permitted, and this framework provides an alternative to the unregulated market, where the regulated market can be put in a position to capture at least a significant market share, if not the entire market. This would permit operations in a manner more in keeping with the government’s wishes, which may include such things as limiting access, providing tax revenues, and protecting players to certain degrees.

This also allows governments to target specific things that it finds undesirable about a certain activity, for instance they may want to participate in ensuring the games are conducted fairly, or that known criminal elements be excluded from the licensing process, rather than just target the entire process and simply give it all over to unlicensed activity.

So there is a practical component behind all this, this is not just about giving people the freedom to gamble online as it may be felt they should be able to do. Particularly in the case of internet gambling, people are going to do plenty of it with our without regulation, and that’s certainly been the case all along, so if it is regulated this will further the government’s interests by allowing it to have its say and influence.

The Federal Government Looks To Have A Real Say In All This

At the time, many thought that this bill, and the similar bills that followed, one in 2009 and one in 2013, sought to make online gambling or online poker legal, although it is not up to Congress to decide such things by themselves, they cannot make these things legal, they can only choose to not stand in the way so much or at all.

This was just one misconception that the media had, and to some degree, even legislators often didn’t have a proper appreciation of the scope of either this bill nor the UIGEA for that matter. The UIGEA, rather than representing a big change, didn’t really add much to the discussion, other than making processing financial transactions related to illegal online gambling illegal.

So this new bill was seen by many as a response, even an antidote, to the UIGEA but the UIGEA was never really the problem, it instead addressed a lack of will on the part of the federal government to participate in the regulatory process. So in other words it sought to move from an prohibitory attitude to a regulatory one, not permitting it per se but standing aside in its efforts to prohibit it provided certain conditions were met.

So the bill began by referencing the $13 billion a year worth of online gambling in the U.S. at the time, all of it was beyond the reach of either federal or state governments. Given that all this is going on, the federal government should be seeking to exercise some control over this rather than just standing idly by watching.

Given that all of this online gambling originated from offshore sites, beyond the reach of United States law, and especially that it had been decided that these sites could operate without breaking international law, there wasn’t any real legal recourse available, although in later years the Department of Justice did use strong arm tactics in seizing funds and such, but nonetheless, offshore gambling still thrives today.

So the plan was to allow for licensing of these sites, in a similar manner to what several other countries have done, and in these countries, regulated gambling has managed to at least capture a significant market share, half of the market or more. Other conditions would be imposed as well, as is customary for regulated gambling.

Making All This Work

The main problem with all this, aside from failing to gather enough support in Congress to get something like this passed, is that gambling is regulated at the state and not the federal level. All land based gambling is, the internet does muddy this up somewhat but the federal government is limited to regulating and controlling interstate commerce only.

In other countries that have regulated online gambling, laws related to gambling are decided at the federal level, so in order to put such a scheme together, the federal government retains full control.

However, in the United States, whether gambling is legal or not is entirely a state matter, which does tend to complicate things somewhat, although it would be possible in theory at least to confine the federal regulation to only those states who opt in. The legislation did not make it anywhere near this far, but these concerns would have to be worked out if a bill like this is ever to be put into effect.

The biggest challenge though is to get enough people in Congress to agree to pass such a bill, and thus far this has proven far too difficult. The 2009 version had a fair number of supporters, but far less than needed, and other bills since have had even less support.

Several states have picked up the ball since though and we now have regulated internet gambling in three states, with more expected to follow eventually. It may be quite some time before enough broad based support can be achieved in Congress to ever see a federal regulatory scheme, and lawmakers will certainly have to approach this from a more practical viewpoint than most are prepared to take if this is to ever happen.