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In the high-stakes poker game of politics, online-gambling lobbyists lost a monster hand late last month after Congress passed legislation prohibiting financial institutions from making payments to online-gambling sites. The long-standing issue came to a head after presidential hopeful Senate Majority Leader Bill Frist (R-Tenn.) became the torchbearer for conservative groups lobbying to ban Internet gambling. Despite repeated attempts by gaming groups such as the Poker Players Alliance and the International Interactive Alliance to stymie the debate, Frist’s maneuvering proved too difficult to overcome. After unsuccessfully tacking the bill onto the defense authorization measure earlier in the week, Frist and House Speaker Dennis Hastert (R-Ill.) were able to persuade the Republican leadership to add the measure to the Port Safety Act. Passed in the wee hours of Saturday, Sept. 30, before Congress went into recess, the “Internet Gaming Prohibition and Enforcement Act” prohibits banks and financial institutions from processing payments for online-gambling companies. Congress exempted state lotteries, fantasy sports leagues, horse-race betting, and Indian gaming from the legislation. “The politics of the moment got the bill passed,” says Frank Fahrenkopf Jr., head of the American Gaming Association. The AGA, which had long been against regulating online gambling, did an about-face in April, advocating for the first time that Congress look at whether the technology exists to regulate online sites. “While we were neutral [in the debate], we really thought the better way to go was a study commission,” says Fahrenkopf. The bill, eight years in the making, was a huge victory for social conservative groups and professional sporting leagues. They persuaded lawmakers to ante up and overcome any lingering Abramoff mystique. Former lobbyist Jack Abramoff, who represented eLottery Inc., was credited as one of the largest contributors to the defeat of a similar ban on online gambling in the House in 2001. In the past five legislative sessions, bills banning online gaming have passed the Senate twice and the House once, just never at the same time. Advocates including Reps. Jim Leach (R-Iowa) and Bob Goodlatte (R-Va.) and Sen. Jon Kyl (R-Ariz.) have historically tried different legislative stratagems to pass the bill. But this time, Leach got Frist to promise to bring to the floor an online-gambling ban while Frist attended a field hearing in July in Iowa, site of the first presidential caucus in 2008. Currently, it is illegal for online-gambling companies to operate in the United States or for U.S. residents to place bets on the Internet, with the exception of parimutuel horse racing, which enjoys an exemption from the law. Frist’s former aide Martin Gold of Covington & Burling led the charge for the National Football League, assisted by National Basketball Association lobbyist Frank Donatelli of McGuireWoods. While they pushed for the overall ban, Gold and Donatelli made the case to lawmakers that fantasy sports leagues should be left untouched. “It’s been 10-plus years that the NFL has been supporting legislation,” says Joe Browne, an NFL executive vice president. “We don’t believe that gambling of any sort is healthy for our league�that it goes to the integrity of the NFL and, perhaps just as important, the perception of the integrity of our games.” MONEY LEFT ON THE TABLE With more than 7.8 million Americans logging onto Internet gaming sites annually, foreign gambling companies saw their stocks plummet as access to the U.S. marketplace was shut down. Last year online-gambling companies pocketed almost $12 billion in revenue. U.K.-based Sportingbet reports that more than 60 percent of its revenue comes from the United States, and Party Gaming, the largest poker Web site, attributes four-fifths of its sales to America. Gambling lobbyists say they faced tough opposition, as both leaders of Congress made the ban a top priority and a committee report about disgraced lobbyist Abramoff came out the same week. “In the last hour they put it on the conference report, and once it was out of conference, then it was going to be very difficult to stop,” says Michael Bolcerek, president of the Poker Players Alliance. “It’s hard for people to vote against protecting our ports and saving lives. We thought as controversial an issue as a ban on poker that it would at least have a hearing in the Senate.” Despite the loss, gambling lobbyists insist they still have a seat at the table pushing for future carve-outs and to potentially overturn the legislation. That’s because it remains unclear whether the measure will achieve what its supporters hope. Although gaming interests and their lobbyists are sweating out the regulations that are expected to be drawn up by the Justice and Treasury departments, the bill may not have much of an effect. Despite current efforts by credit-card companies to block Internet-gaming transactions, a large percentage of online casinos report that they still accept Visa, MasterCard, and PayPal. So the legislation’s result may be to force foreign companies out of the domestic marketplace, but privately held offshore online-gambling casinos may remain untouched. Financial services companies didn’t take a position on the gambling legislation, but lobbyists did meet with congressional staff to explain current operations and reduce the liability the measure puts on credit-card companies if they fail to stop online-gambling payments. Oliver Ireland, a partner at Morrison & Foerster and outside counsel to Visa, says companies were hoping to have a uniform national system for enforcement. He adds that the rules related to a provision that requires financial services companies to distinguish between legal and illegal transactions could force companies to put additional systems in place. Meanwhile, the Poker Players Alliance acknowledges it was late to the table. Formed less than a year ago, the group says it will lobby for a poker exemption for its 120,000 members. Bolcerek says he spent the past three weeks in Washington meeting with more than 25 Senate offices, in an effort to make the case that regulating online poker instead would generate $3 billion in tax revenue. How involved the industry stays in Washington remains to be seen. So far, Sportingbet and the Poker Players Alliance are continuing an anti-ban push. But Daniel Walsh of Greenberg Traurig, a longtime International Gaming Council and International Interactive Alliance lobbyist, declined to discuss the future of his gambling clients in Washington. “I think there will continue to be a lobbying presence, but I don’t know what that’s going to be,” says Walsh.
Anna Palmer can be contacted at [email protected].

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