House Financial Services Committee Passes H.R. 2267

As you have surely heard by now, H.R. 2267, the Internet Gambling Regulation, Consumer Protection, and Enforcement Act, was voted on yesterday by the House Financial Services Committee and passed by a vote of 41 yea, 22 nay, and 1 present (i.e., an abstention). It is being described by some as a “bipartisan” vote, although only a few Democrats voted against it (four), and a handful of Republicans voted for it (seven).

The bill will now be considered by the entire House of Representatives. Before becoming law, it will have to receive a favorable vote from the House, then the Senate, then be signed by the President. There was some joking around on Twitter yesterday about how best to describe the situation with a poker analogy. Seems to me like what’s happened here is the equivalent of surviving Day 1 of the Main Event. Or maybe just surviving to the dinner break of Day 1. Such a long, long way to go.

As the high-frequency Twittering on H.R. 2267 indicated, there was a lot of buzz in the poker community regarding yesterday’s turn of events, with many -- including the Poker Players Alliance -- heralding the Committee vote as especially good for poker. “This is a great day not only for poker players, but for proponents of Internet freedom and individual liberty,” said former Senator and PPA Chairman Alphonse D’Amato.

Just to review, this was the bill first proposed by Rep. Barney Frank (D-NH) back in the spring of 2009, a version of an earlier bill Frank proposed during the previous Congress (the IGREA). Like Frank’s earlier bill, H.R. 2267 proposes a mechanism to license and regulate online gambling in the United States. If signed into law, it would put the Secretary of the Treasury in charge of issuing licenses to anyone wanting to run an online gambling site in the U.S.

The bill outlines a number of requirements of licensees, including having safeguards against fraud, money laundering, and “terrorist finance.” There’s other stuff in there about keeping kids from playing, watching out for compulsive or problem gamblers, and such. Licensees would also be required to collect taxes related to internet gambling.

Additionally, H.R. 2267 specifically shields the financial transaction providers from any liability when it comes to handling transactions for licensees. The bill also permits states and Indian tribal authorities to “opt out” and disallow online gambling in their jurisdictions, if they so desire.

Yesterday’s hearing including a “markup” of the bill during which Committee members proposed numerous amendments to H.R. 2267 and voted on them. Most of these amendments passed, while a few did not. Here is a quick summary of the 13 amendments that were agreed to by the committee:

1. The so-called “bad actors” amendment (No. 2) adds that those who have committed gambling-related felonies be specifically prohibited from obtaining licenses, as well as those entities which have failed to use "due diligence to prevent any U.S. person from placing a bet on an internet site in violation of Federal or State gambling laws."

In the online poker world, it appears this amendment could potentially have some consequence for those sites which have continued to accept U.S. bets post-UIGEA (e.g., PokerStars, Full Tilt, UB, etc.). Hard to say for sure, though. Of course, those sites would argue they have not violated any gambling laws -- including the poorly-worded UIGEA which fails to define "unlawful internet gambling." (Indeed, PokerStars already has said as much today.)

2. An amendment (No. 3) specifically excluding licensees from offering sports betting -- except for “pari-mutuel racing as permitted by law” (i.e., horse racing).

3. An amendment (No. 4) to prevent direct advertising of online gambling sites that targeted problem gamblers or minors.

4. An multi-part amendment (No. 8) that appears to be redundant to many provisions already in the bill or part of existing Federal and state gambling laws, though does include the licensees making available some sort of “loss limit” option for bettors. This one also includes a specific note about players being at least 21 years of age, which would be a significant change from most sites’ current minimum age requirement of 18.

5. An amendment (No. 9) modifying the “opt out” provision to give states and Indian tribal authorities more time to do so.

6. Another amendment (No. 10) barring licensees from targeting minors in their advertising.

7. An amendment (No. 11) that reiterates licensees would lose their license if it found they’re allowing minors to play on their sites. (Again, some of these amendments are essentially redundant either to the bill itself or to other amendments.)

8. An amendment (No. 12) specifically stating licensees cannot accept credit card payments.

9. An amendment (No. 13) disallowing those obtaining licenses to accept bets from customers who are behind on child support payments. (Thanks to PokerGrump for helping me read this one correctly.)

10. An amendment (No. 14) clarifying that state lotteries aren’t part of the scope of that which is covered by H.R. 2267.

11. An amendment (No. 15) that kind of builds further on the “bad actors” amendment by making very explicit the significance of sites having not prevented U.S. citizens from making online bets once the UIGEA was signed into law (on October 13, 2006). Again, this one seems mostly redundant to the earlier, first-agreed-to amendment, but does perhaps add a bit of extra attention to the distinction between sites that pulled out of the U.S. upon the UIGEA’s passage (e.g., PartyPoker) and those that did not.

12. An amendment (No. 16) clarifying that licensees show that they are “majority-controlled” by U.S. persons.

13. A “data collection” amendment (No. 17) requiring licensees to make public information about player behavior.

As I’ve said before here, I feel pretty much completely out of my element when trying to speculate about what could happen next when it comes to the legislative process. Kind of like getting involved in a game like Badugi where I am sort of familiar with the rules but to guess correctly about how things will proceed would probably require my getting lucky.

My gut feeling is this bill will be met with a lot of resistance from the entire House, and perhaps even more from the Senate (if it were to get that far). I’m also a little less enthusiastic than some about the prospects for online poker in the U.S. under such a licensing scheme. Of course, if we start to see banks and financial transaction providers comply with the UIGEA in greater numbers, I think a lot of U.S. players would swiftly welcome the introduction of licensed and regulated online poker as a way to play.

But like I say, I’m not even going to try to speculate further. All I know is I am an American who wants to continue to be able to play online poker. I also know I want to be continue to be able to write for sites who depend on online poker remaining healthy both in the U.S. and elsewhere.

But I also know that despite my being an adult and responsible with my decisions, I live in a time and place where others are deciding about my being able to do such things.