Internet Gambling Debate Lingers

Efforts to formulate regulations for the Unlawful Internet Gambling Enforcement Act of 2006 continue to be shadowed by a conflict between the United States and other countries over a trade dispute.

The United States government is devising the regulations for the Internet gambling law, which prohibits the use of credit for illegal gambling. The pari-mutuel horseracing industry is protected under the previously adopted Interstate Horseracing Act, which authorizes interstate simulcasts and account wagering.

During a Dec. 5 presentation during the University of Arizona Symposium on Racing & Gaming in Tucson, the World Trade Organization ruling tied to the U.S. government leaving out gambling in international trade pacts was discussed, as well as the status of regulations for the Internet gambling ban.

Joe Baressi, financial services project leader for the U.S. Federal Reserve Board of Governors, said the board and the U.S. Department of Treasury will accept comments on the proposed regulations through Dec. 12. The regulations could be finalized by July 2008, about a year late, he said.

Some of the comments received thus far, Baressi said, criticize the Internet gambling ban. The objective, however, is to devise regulations, not slam the law.

“Basically, Congress is God to an agency,” Baressi said. “The regulations cannot say anything inconsistent with what the act says. We have to make sure the thoughts go to the regulations as opposed to what Congress did. This topic is not done.”

The horseracing industry, through the National Thoroughbred Racing Association and the American Horse Council, has weighed in on the regulations. Officials have indicated they’ve seen nothing that would hinder account wagering, which relies on use of credit and is widely viewed as racing’s growth mechanism.

Bruce Zagaris, an attorney for Berlinger Corcoran & Rowe who has worked with international gaming companies and small governments involved with international trade, said there could be ramifications for pari-mutuel horse racing in the battle that began with the small country of Antigua and has spread to countries in the European Union.

Zagaris, who also spoke during the symposium panel, said the U.S., by admitting it was an oversight to leave gambling off the trade table, allowed other countries to demand compensation. The EU alone, he said, has assessed damages at about $100 billion a year.

Zagaris said if the foreign countries see the Internet gambling law language that protects horse racing--the IHA provision--as a problem, they could target the industry.

“I think that is a good possibly,” Zagaris said. “I would think a potential option that would do less harm is if the U.S. does legalize (Internet gambling) and gains revenue. (The racing industry) would have competition, but more opportunities to do new products and services.”

The horseracing industry at large doesn’t agree. It has touted the fact horserace betting is the only legal form of Internet wagering in the U.S., and hopes to use that to its advantage as it seeks out new markets.

On Dec. 5, Peggy Hendershot, senior vice president of legislative and corporate planning for the NTRA, said the organization’s attorneys haven’t mentioned foreign retaliation against racing as a threat. She said the trade issue is between the U.S. and other countries, not the racing industry and other countries.

Congress continues to deal with the Internet gambling issue. Bills calls for a study commission as well as legalization of Internet gambling so it can be taxed.

 

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