Public Gaming Research Institute / Public Gaming Magazine

Public GamingMichael WaxmanExecutive Director, Safe & Secure Internet Gambling Initiative (www.safeandsecureig.org)Public Gaming: Please describe your missionand advocacy position.Michael Waxman: Our mission at the Safeand Secure Internet Gambling Initiative is toreverse the federal prohibition against Internetgambling. We believe that Americans should begiven the freedom to gamble online in a regulatedenvironment where operators are required to protectagainst fraud while preventing problem gamblingand underage gambling.There are some who would argue that federal lawdoesn’t explicitly prohibit Internet gambling. What’syour view?M. Waxman: While current law – UIGEA –does not expressly prohibit Americans from gamblingonline, since it requires the financial servicesector to block payments for unlawful gamblingactivity, the intention is quite clearly prohibition.The financial service sector has argued thatthis approach is burdensome and doomed to fail,which should encourage Congress to forge a newpath.In moving forward, Chairman Barney Frankhas drawn from the playbook used during the reversalof the prohibition of alcohol in the 1920s.In that case, the federal government removedthe federal prohibition and allowed the states todetermine how best to control and distribute theproduct, or if they choose, to prohibit it. ChairmanFrank’s approach is similar. He proposeshaving the federal government regulate Internetgambling activity and grant licenses to qualifiedoperators, while allowing the states to decide how,and even whether, Internet gambling would occur.States would also have the authority to imposeadditional fees or taxes on Internet gamblingas is allowed with other similar economic activities.You referred to the Frank bill. What are the differencesbetween the Frank and the Menendez bills?M. Waxman: They are more similar than different.Both want to expand the opportunity forAmericans to gamble online. And both requirelicensed operators to impose stringent safeguardsto protect consumers. The most significant differenceis that Chairman Frank’s legislation wouldallow for Americans to play a wider range ofgames including poker and casino games. TheMenendez bill would only allow for games of skill,which I would presume implies to be games likepoker, chess and bridge since it isn’t defined in thelegislation.The other significant difference is in the waythat fees on the activity and industry would becharged and allocated.To clarify, in the House, the Frank bill is morefocused on the non-financial regulatory requirements,only specifying that licensed operatorscollect and pay all applicable taxes. A companionpiece of legislation, introduced by Rep. JimMcDermott, lays out in more detail the fees thatwould need to be paid. This includes a two percentlicensing fee on all player deposits that wouldbe paid by the operators.In the Senate, Sen. Menendez wrapped allthe provisions into one bill. He proposes a flat10 percent license fee paid by the operators onall deposits, which would be evenly split betweenthe federal government and the states or Indianterritories where the online gambling activity istaking place.And the state government can apply additionaltaxes if they choose, correct?M. Waxman: This would be the case withapproval of the McDermott bill, which wouldgrant states the authority to regulate the activityand impose fees beyond what is mandated byfederal law. Sen. Menendez’s bill would not havethis flexibility. States would only be entitled to thefive percent fee on all deposits, as well as other applicabletaxes on business operations and incomegeneration, which is also going to be a hefty sum.With so many cash-strapped states, I’m shockedthere aren’t more elected officials at the state andlocal levels calling for the regulation of Internetgambling in order to protect consumers and collectsubstantial revenues otherwise lost to offshoreoperators who accept wagers in the US.To give you a sense as to the size of the undergroundmarketplace and opportunity to generatenew revenue, if this regulation is enacted, it’s estimatedthe federal government could receive upto $42 billion over the next ten years. This figuredoesn’t even factor in what could be collected atthe state level.Do you have an advocacy position that favors onebill over the other? The Frank bill versus the Menendezbill?M. Waxman: Passage of either of these billswill be better than what we have now. The firststep is just getting the door opened and expandingthe opportunity for Americans to wager online ina safe and secure environment.Do either of these bills allow for an evolutionaryprocess to occur without going through this burdensomeprocess of having things approved by Congress?M. Waxman: With the passage of either bill,Congress would determine how the industry isregulated and which activities would be permissible.However, any legislation passed to regulateInternet gambling can be improved over time. Forexample, in the future, we would hope that Congresswould consider permitting online wageringon sporting events.As previously stated, the key first step is gettinglegislation passed that creates a framework for expandingonline gambling activities while protectingconsumers.What is the likely timing for the passage of any ofthis legislation?M. Waxman: Momentum has clearly swungin our direction and we believe passage of legislationto regulate the industry is inevitable.One major factor working in our favor is thesupport of key leaders in Congress. Not only is ourmost ardent supporter – Barney Frank – chairmanof the Financial Services Committee, but amongthe growing number of co-sponsors are GeorgeMiller, John Larson, John Conyers and CharlesRangel – all key power brokers in the House.Another factor is Congress’ opportunity to collectbillions of dollars in new revenue throughInternet gambling regulation. These monies aredesperately needed for critical unfunded or underfundedprograms.It’s hard to predict when this is going to getdone. It could be accomplished this year or, mostlikely, sometime in the next couple of years.There is so much money on the table in the form oftax receipts. It seems such a shame for Congress to letwhat would appear to be a minimum of $15 billion intax receipts go out the window every year. And that’sactual tax receipts, not just taxable revenue. The statesneed that revenue desperately.M. Waxman: I agree with you that the incentiveis there for Congress to act quickly. However,Congress moves at its own speed and we will notbe able to get this done until more members comeon board. We have some great champions on ourside, and we need to support them. But, we alsoneed to continue to push to get this done. Aspreviously stated, I ultimately believe we will besuccessful, and am hopeful it will be sooner ratherthan later. uPublic Gaming International • January 2010 28