House Financial Services Committee Halts HR 5767

In an unexpected turn of events on Wednesday, HR 5767, a bill proposed by Congressmen Barney Frank (D-MA) and Ron Paul (R-TX) that would have stopped the U.S. Treasury and Federal Reserve from implementing the regulations of the Unlawful Internet Gambling Enforcement Act, was defeated in the House Financial Services Committee. A vote for an amendment by Congressman Peter King that would have required cooperation with the U.S. Department of Justice to identify what “illegal” and “legal” transactions were under the UIGEA ended in a dead heat largely along party lines. When the smoke cleared, the 32-32 vote meant that the amendment was defeated. The Committee then turned to a verbal vote for HR 5767, which was defeated when the “Nays” greatly outnumbered the “Yays.” The news came as a shock to many in the internet gambling industry.

Congressman Spencer Bachus (R-AL) led the charge against HR 5767 in the mark-up hearing held on Wednesday. He described how online gambling is deleterious: “The internet gambling sites have said that they were making billions of dollars off of this. [The Unlawful Internet Gambling Enforcement Act] has been one of the most successful pieces of legislation because it’s reduced gambling by youth by three-quarters All 50 states have said that they don’t want to have this go on; it’s illegal. The states have said to us, ‘don’t operate illegal gambling sites through the internet.’”

Bachus addressed the main argument for HR 5767, which is that banks and other financial institutions were unable to decipher what transactions were legal and which were not. At one of the more perilous moments in American economic history, companies like Bank of America and Wells Fargo would be forced to sort through thousands of transactions and become the policing agent against internet gambling. He argued, “The banks have decided that it’s a financial burden. We have decided that our children are worth protecting and that the cost of protecting them is worthwhile. What we’d be doing [by passing HR 5767] is stopping and starting all over. The Attorneys General have asked us to move forward. These protections are worthwhile.”

After addressing members of the audience who represented companies in the internet gambling industry as promoting a “criminal enterprise,” Bachus noted: “The FBI urged us to pass [the UIGEA] and has urged us to keep this ban. More and more teenagers were gambling until 2006. A University of Pennsylvania study said that the 2006 law has substantially reduced internet gambling. As a result, problem gambling has declined among male youths aged 18-22. Gambling rates are lower in young women this year. They are showing a decline in compulsive and problem gambling. The 2006 law has had its intended effect.”

Frank argued for the merits of the bill after Bachus claimed that the internet can be regulated. For example, child pornography is regulated online. Frank commented, “We don’t enforce the law against child pornography by saying that the banks are the enforcers. We don’t ask the banks to examine every check and see if it’s for child pornography. Nothing changes the effect that the UIGEA has had. What this changes is the banks being the enforcers.”

Co-Sponsor Paul discussed the reasons for the introduction of HR 5767: “I agree with everything about the dangers of gambling, but the issue to me is how we regulate moral behavior. When it comes to economic and moral behavior, we get into trouble. I feel very strongly that the privacy of the internet is worth protecting. The decision-making on internet gambling should fall on the individual and, if it’s a kid, the responsibility should fall on the parents.” Congressman Mel Watt (D-NC) explained his reasons for supporting the amendment: “At least this amendment gives the regulators an opportunity to go through a methodical process and, in the interim, removes the responsibility of being the cop.”

Split largely along party lines with several deflectors on each side, the amendment by Peter King was defeated after it failed to gain a majority. The roll call vote was tied 32-32, which prompted a chorus of “oos” from the audience on hand. Because the amendment did not reach a majority, it was defeated. HR 5767 was then voted on without the amendment and was defeated when the “Nays” outnumbered the “Yays.” A request for a roll call vote on HR 5767 was initially made, but did not occur.

The Internet Gambling Regulation and Enforcement Act, proposed by Frank, is one of the four pro-internet gambling bills currently in Congress. HR 2046 was discussed in Committee last June, but has been stagnant since. Former Senator Alfonse D’Amato, Chairman of the Poker Players Alliance, expresses his disappointment with Wednesday’s events: “It is disappointing to realize that opponents of this legislation still do not truly understand the intent of the bill. It was clear today that those who oppose this bill chose to focus on emotional and non-germane issues, such as the harmful impact of gambling on children, instead of on the merits of the bill itself.”