AGA softens position on Internet betting

May 2, 2006 3:49 AM

In an apparent softening of its position toward online gambling, the American Gaming Association last week called for the creation of a federal commission to "evaluate the impacts" of online gaming and whether legalization is feasible.

"The AGA board thinks a comprehensive study commission should take into account policy issues ranging from how best to protect children and problem gamblers to whether Internet gambling can be effectively legalized and regulated in the United States," said AGA President and CEO Frank J. Fahrenkopf, Jr.

Fahrenkopf added that millions of Americans currently gamble online, most of whom "fend for themselves on illegal, unregulated offshore sites."

Fahrenkopf emphasized that the AGA — the lobbying arm of the commercial casino industry — was by no means endorsing Internet gambling. "It remains neutral on all pending legislation on the issue, including bills advocated by Reps. Jim Leach (R-Iowa) and Bob Goodlatte (R-Virginia), and Sen. Jon Kyl (R-Arizona)," he said.

Those bills seek outright bans of Internet betting. In its proposal, the AGA wants to know whether other options are available.

"Such a commission would evaluate whether legalization, regulation and taxation — on a state option basis — may be a more viable option than a complete ban on Internet gambling," Fahrenkopf said.

Fahrenkopf added that a Congressional commission could also evaluate recent World Trade Organization (WTO) rulings that the United States’ stance against Internet gambling may be in violation of international trade obligations.

"Many nations, including Great Britain, are in the process of legalizing, regulating and taxing online gambling," Fahrenkopf said.

Supporters of a federal ban on Internet gambling were not receptive to the AGA’s proposal.

"We don’t need another study to demonstrate what is already known to be fact," said Sen. Mark Pryor, a supporter of Kyl’s bill. "Instead, we need to enforce the laws already on the books that prohibit online gambling."

Supporters, however, of online gaming, especially in the international market, applauded the AGA’s call for a federal study.

This is a massive shift," said Nigel Payne, chief executive of UK-based Sportingbet, whose stock skyrocketed 10 points on news of the AGA proposal.

The news also boosted shares of Britain’s other major online players, with PartyGaming up 6¾ and 888 Holdings up 7 points.

"We are now even more confident that the current prohibitive bills, and any future bills, will fail," said Simon French, an analyst with Numis Securities.

Closer to home, online industry advocates are hopeful the federal study could be the first step toward legalization.

"The Internet gambling industry will be delighted AGA has called for an objective study because this will show (online gaming) can be regulated," said Joseph Kelly, a law professor in New York who has authored regulations for online gambling sites in Antigua.