Legalizing Net gambling? There's a chance

Opponents are leaning on arguments from the alcohol and drug legalization movements to try to repeal a law aimed at wiping out online gambling.

Declan McCullagh Former Senior Writer
Declan McCullagh is the chief political correspondent for CNET. You can e-mail him or follow him on Twitter as declanm. Declan previously was a reporter for Time and the Washington bureau chief for Wired and wrote the Taking Liberties section and Other People's Money column for CBS News' Web site.
Declan McCullagh
3 min read
Opponents of a federal ban on Internet gambling said during a congressional hearing Friday that it would be wiser to legalize and regulate betting than prohibit it.

"In the end, adults ought to be able to decide for themselves how they spend the money they earn themselves," said Rep. Barney Frank, the Democratic chairman of the House Financial Services committee and primary backer of the legalization effort.

Friday's hearing included witnesses from companies that process online payments. In general, they echoed the arguments once used in favor of ending alcohol prohibition and that are now being invoked to decriminalize marijuana: It's better to legalize, tax and carefully regulate an industry than let it flourish with far less oversight in the black market.

Some countries already do just that. In the United Kingdom, for instance, Internet gambling is legal and strictly regulated. Some of the larger online casino operators are publicly traded on the London Stock Exchange.

"On the basis of my experience I can unequivocally state that Internet gambling can be regulated, and that abuses can be effectively regulated and controlled," said Jon Prideaux, a consultant who until last year was the head of Visa Europe's Internet arm.

A law that President Bush signed last year tried to eliminate many forms of online gambling by targeting Internet service providers and financial intermediaries, namely banks and credit card companies that process payments to offshore Web sites. The bill never received a formal vote in the entire Congress but instead was glued onto an unrelated port security bill that the Senate unanimously approved.

Now the pro-legalization forces are trying to marshal a counterattack. Frank introduced a bill in April that would replace the current broad prohibition with strict regulations--including criminal background checks and financial disclosure--imposed on companies that offer legal Internet gambling. (It's called the Internet Gambling Regulation and Enforcement Act.)

Texas Rep. Ron Paul, a 2008 Republican presidential contender who topped CNET News.com's technology scorecard last year, said adults should be allowed to make up their own minds about whether to gamble. He said he was a strong supporter of Frank's bill "to restore the rights of Americans to decide for themselves whether to gamble online."

Gerald Kitchen, the chief executive of U.K.-based SecureTrading Group, said his company is a payment service provider that processes a wide variety of financial transactions, including ones related to online gambling. He said SecureTrading's system has been reviewed by banks including Barclays, Lloyds and the Royal Bank of Scotland, and provides protections against money laundering, underage gambling and compulsive gambling.

"There are ways to protect against these exact harms and ills that the opponents of Internet gambling regularly cite as reasons to prohibit Internet gambling," Kitchen said.

But it's too early to say whether the bill will receive a favorable committee vote. For one thing, the top Republican on the panel, Rep. Spencer Bachus from Alabama, offered an impassioned defense of criminalization.

"Some people claim that illegal Internet gambling's a victimless crime," Bachus said. In reality, he warned, it's a "mushrooming epidemic leaving in its wake suicides, crime, family tragedies."