The passage of the UIGEA, codified at 31 USC §5361 et seq., was done in a manner in which most members of Congress did not know that the Security and Accountability for Every Port Act of 2006 (or "SAFE Port Act") even contained a section relating to Internet gambling. 

Currently there are multiple bills in Congress relating to Internet gambling and one relating to poker as a skill game. I will examine the proposed legislation, and then give my opinion as a former gaming regulator as to why Internet gambling should be regulated and what regulatory structure would work in the United States.

The first bill, and the one that has received most publicity, is H.R. 2046, introduced on April 26 by Rep. Barney Frank [Democrat-Massachusetts].  H.R. 2046, known as the Internet Gambling Regulation and Enforcement Act of 2007, would establish a federal licensing and enforcement structure to regulate and control Internet gambling.  It would require Internet gambling operators to obtain licenses that would authorize the licensees to accept wagers from players located in the United States as long as they were able to maintain effective player protections.  The bill would also enforce prohibitions on gambling imposed by states, Indian tribes and sports leagues.   The Frank bill is now before the House Financial Services Committee, which held a hearing on June 8.

On May 3, H.R. 2140, entitled the “Internet Gambling Study Act,” was introduced by Rep. Shelley Berkeley (Democrat-Nevada).  This bill is believed to have the support of the American Gaming Association and would provide a detailed examination of the issues of regulating Internet gambling as well as the impact of the UIGEA on Internet gambling in the United States.  The study would be conducted by the National Research Council of the National Academy of Sciences, which would have 12 months to complete the study.

H.R. 2607, introduced on June 7, by Rep. James McDermott (Democrat-Washington), would amend the Internal Revenue Code of 1986 to provide a taxing method for Internet gambling under H.R. 2046. The tax would be 2 percent on all funds deposited with or on behalf of the licensee by anyone for the purpose of placing a bet during the preceding 30- day period.

The “Skill Game Protection Act,” H.R. 2610, was introduced on June 7, by Rep. Robert Wexler (Democrat-Florida).  This bill would amend the Wire Act by adding a new subsection that would exclude games such as poker, chess, bridge, mahjong or other games in which success is predominantly determined by a player’s skill. This would be applicable only to competition between and among between individual participants and not against someone operating the game.

The chances for passage of any of the aforementioned bills are, in my opinion, minimal. On the positive side, the mere introduction of these bills has finally opened the door for discussion of the legalization and regulation of Internet gambling in the United States. On the other hand, the establishment of a federal bureaucracy to regulate Internet gambling – as proposed by H.R. 2046 -- is contrary to the long-accepted premise that gambling is a matter left to the states’ discretion. Ten states have already passed some form of legislation prohibiting Internet gambling, which is their right.

However, the converse should also be true -- states that desire to legalize and regulate Internet gambling should have that right as well.  Put another way, a state could decide to prohibit Internet gambling, it could decide to legalize and regulate Internet gambling, or it could decide to take no action with regard to Internet gambling.  This is similar to the current status of interactive wagering on horseracing.

States which choose to enact Internet gambling regulations could do so in the same manner as land-based casinos. The operators would have to demonstrate that they have the good character, honesty and integrity to be licensed, and that the games being offered were fair and honest and conformed to a payout percentage approved by that state.  The operators would also be required to provide player protections for the prevention of underage players, protections and assistance for those with a gambling addiction and protections from fraud and money laundering. Licensed operators would only be allowed to accept play from those states in which Internet gambling was permitted or those in which no law concerning Internet gambling existed.  Again, this would be similar to the manner in which interactive horserace wagering is conducted at the present time.

Taxes could be based upon profits on a state-by-state basis. The same manner in which winners of over a certain amount in land-based casinos receive an IRS Form W-2G, winners over the same amount would receive a W-2G from the licensed Internet operator. Operators would be responsible for taxes on their own profits, just as the land-based gaming industry.

The gaming industry in the United States has been well-regulated since the mid- 1970s by states such as New Jersey and Nevada. American gaming regulators are respected for the job they do, not only in the United States but worldwide.  By contrast, the federal government has no experience in this industry, and is noted for creating bureaucratic monsters in which efficiency is absent and cost overruns the norm.  If the Department of Justice had not taken what most legal observers believe to be the incorrect position that the Wire Act prohibits all forms of Internet gambling, jurisdictions such as Nevada, New Jersey, North Dakota and the United States Virgin Islands would probably already have licensing procedures in place for Internet gambling operators, and would be reaping the benefits of a flourishing industry.   As it stands now, those benefits simply flow offshore, never to return.