House Panel Approves Legalizing Online Gambling

A House panel has approved a measure that would legalize online gambling and put the increasingly popular Internet-based activity under federal regulation, Dow Jones ($) reported Thursday.

The House Financial Services Committee voted 41-22 to approve the legislation, which now could be brought to the floor by the House Democratic leadership. Democrats could bring forth the measure as an addition to a larger bill later in the year rather than as a stand-alone one, aides said.

Online gaming Web sites could return to U.S. soil if the bill is passed. Currently, games such as online poker are banned, and though many Americans engage in it, the companies are stationed in other countries. PokerStars.com, the largest site, is based on the Isle of Man. The second-largest site, FullTiltPoker.com, is run out of the United Kingdom.

In 2006, Congress passed the Safe Port Act, which included a provision known as the Unlawful Internet Gambling Enforcement Act (UIGEA). It banned "unlawful internet gambling" and made it illegal for banks and credit-card firms to transfer funds to online-gambling companies. The financial sector says it effectively requires them to play police cyber transactions.

Since then, Rep. Barney Frank (D-Mass.), chairman of the House panel, has championed the legalization of online gambling. Frank has argued that he doesn't believe it's the role of the government to prevent adults from engaging in online gambling.

The bill would require firms that want to offer gambling to American users to base their operations in the U.S. Firms that were continuing to illegally offer gambling services even after the ban would be barred from participating.

Placing bets on professional sports such as the National Football League and Major League Baseball would still be prohibited online.

Some Republican remain strongly opposed to the bill. They argue that removing the ban would encourage gambling by minors contribute to addictive behavior.

There is also a separate push to tax online-gambling proceeds. The bill by Rep. Jim McDermott (D-Wash.) has not been approved by the House Ways and Means Committee.

Taxing online gambling proceeds could raise up to $42 billion over the next decade, according to an estimate by the Joint Tax Committee.