US Online Gambling on Knife Edge

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The future of legalization of online gambling in the United States is poised on a knife edge. No one can predict which way it will go. Neither the proponents of online gambling nor the opponents are giving an inch.

The most likely route to legalization of online gambling will be through Barney Frank's bill. This bill seeks to legalize online gambling and put in place a regulatory mechanism. If this bill is passed the UIGEA will automatically be repealed. However the bill has a long way to go and time is running out. The bill is presently in the House Financial Services Committee. It first requires the assent of the Committee, it has then to be passed by the House, it has later to be passed by the Senate and finally it has to be signed by the President before it becomes law. All this has to be done before June 1, 2010, when the UIGEA rules will become applicable. Given the fact that the bill has been lying with the Committee since May 2009, it seems next to impossible that all the required steps will be completed before June 2010.

Therefore the question that is becoming more and more important is whether the Treasury and the Department of Justice (DoJ) will allow a second extension to the implementation of the UIGEA rules. If they do not do so, then the UIGEA rules will be implemented and this will be an immediate major setback to online gambling in the United States. No doubt the fight to legalize online gambling will continue, but it will become that much more an uphill task.

It is unlikely that the authorities will grant a second extension to the implementation of the UIGEA rules. Granting an extension the first time around in December 2009 was seen as an act of fairness. But granting a second extension could convey a message of weakness and mental preparedness of accepting that online gambling should be legalized. Therefore the second extension will be hard to come by. The minimum that the proponents of online gambling will have to ensure before asking for an extension will be the passage of the bill from the House Committee to the House. If Barney Frank and the rest can ensure that and can also ensure that the bill is voted favorably in the House, then getting an extension should be fairly easy. If that happens then one can honestly say legalization of online gambling in the United States is a matter of when and not if.

Meanwhile organizations whose future is linked to online gambling have begun to make preparations in a manner they deem favorable. Harrah's is the largest land casino group in the United States. It is possible that when online gambling is legalized there would be a shift in clientele from land gambling to online gambling. Harrah's is ready for that. It's online casino and poker operations went live a few months back and its online bingo operations went live this month. There have been quite a few online gambling operators and service providers that faced criminal prosecution in the United States. Despite being told that the United States government was not on firm ground, these operators have paid hefty fines and cleaned their slates. The idea is that when online gambling becomes legal in the United States they would not be barred from participating because of pending prosecutions. The case of PartyGaming is the most well known in this context.

On the other hand the Department of Justice is acting on the assumption that the UIGEA rules will be implemented in June 2010. There are reports that it has prepared cases against online poker rooms that will be activated in the first week of June.

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