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Casinos Seek Deal on Web Gaming Bill

Countless negotiating hours and millions of lobbying and political contribution dollars later, segments of the gaming industry are close to getting their way with Congress over the controversial issue of online gambling.

Sen. Jon Kyl (R-Ariz.) has been working for years to limit gambling over the Internet and thinks choking off the lifeblood of illegal virtual casinos — money — is the way to do it.

Banning online gambling outright proved too problematic in years past. So the Unlawful Internet Gambling Funding Prohibition Act would bar financial institutions from processing illegal Internet gambling transactions. It also defines what types of Internet gambling are legal.

And that’s where the haggling begins. Kyl’s biggest obstacle is the American Gaming Association, which represents commercial casinos, and its Capitol Hill allies.

The group wrote to Kyl last month to express its displeasure with the version of his bill that the Senate Banking, Housing and Urban Affairs Committee reported out right before the August recess.

As it stands, Kyl’s bill gives some gaming interests an advantage and hinders others, according to AGA President Frank Fahrenkopf Jr. He fears the bills may create “competitive advantages” for state lotteries and horse and dog racing operations at the expense of commercial casinos.

“We’re working on language we can live with,” Fahrenkopf said in an interview. “I’m hopeful. If we reach an agreement, there could be movement this year, [but] we’re not done yet.”

Kyl believes negotiations are going well, but he also cautioned that there is no formal agreement.

“Nothing’s been finalized yet,” Kyl said, though he believes the legislation could hit the Senate floor by the end of the year.

While negotiations continue, AGA’s complaint got the attention of pro-casino lawmakers.

If tracks or lotteries or Indian casinos can do something that commercial casinos cannot, “that’s a problem,” said Sen. John Ensign (R-Nev.), a former casino manager.

Rep. Shelley Berkley (D-Nev.) added that the legislation should treat all interests equally. “If [you] make an exception for one, it should be for all,” Berkley said.

That is the National Indian Gaming Association’s position too. “If Congress is going to do a full prohibition, we’re fine with that, but every time Congress has acted there have been exemptions, [though] not for us,” said John Harte, the group’s counsel.

Going back to the 105th Congress, when Kyl made his first attempt to ban Internet gambling, “We were ignored,” Harte said.

This time, the group won more concessions from the Senate Banking panel than they did from the House, which passed legislation similar to Kyl’s bill. However, the House bill exempted race tracks, state lotteries, Nevada-style casinos and other state-licensed gaming business, but not Indian tribes, from its reach, Harte said.

As it stands, Kyl’s bill would allow intertribal betting, which the Senate panel believes is already legal under the Indian Gaming Regulatory Act.

While American Indian tribes, casinos and race-track operators jockey for the best exemptions from whatever final legislation Congress may pass, some social conservatives decry the legislation’s “loopholes” and warn that Congress could wind up legalizing new forms of Internet gambling and barring none.

The Coalition Against Gambling Expansion — a socially conservative Louisiana-based group — is taking out ads in Capitol Hill newspapers (including Roll Call) this week in hopes of gaining support for a stronger prohibition.

“Sometimes legislation is proposed to alleviate one thing and actually will do the opposite; this is one of those bills that will actually make things worse instead of better,” said Rhett Davis, the group’s president.

Kyl dismissed such concerns. “I just don’t think it will happen that way,” he said. “Whatever is legal today will be legal tomorrow; there should be neither more or less gambling” under a new law.

To win support for their legislation, those wishing to curb Internet gambling had to make exceptions for horse and dog tracks almost from the beginning, Davis said.

Lawmakers like Sen. Jim Bunning (R-Ky.), who is very protective of the Kentucky Derby, have made no bones about their efforts to protect dog and horse racing in their states.

“I would especially like to applaud Senator Kyl for working with me to ensure his legislation would not harm states’ rights in relation to the parimutuel gaming industry,” Bunning told the Senate Banking panel in March.

Rep. Jim Leach (R-Iowa), author of the House bill that passed earlier this year, agreed that deals had to be cut to win passage.

“I would be all for a bill with no exemptions,” he said, but conceded that a strict ban “wouldn’t move.”

Rep. Bob Goodlatte (R-Va.), who has introduced similar bills to bar online gaming, said state laws that legalize some forms of gambling must be respected.

“I would ban all gambling if I could … but it wouldn’t pass the Congress,” he said.

A lobbyist working the issue said players have so much to lose — the Congressional Research Service estimates that $4.2 billion passes through the roughly 1,800 mostly offshore Internet gambling sites annually — that Congress will inevitably approve carve-outs that effectively pick winners and losers.

“This isn’t about losing your house — it’s about to whom you should lose your house,” the lobbyist said.

The Justice Department weighed in after the House approved Leach’s bill by saying key provisions were so ambiguous that if the bill became law, it could actually expand gambling and make legal some gaming that is now illegal.

Kyl rewrote his bill to avoid that pitfall, only to remove a states’ rights provision that was key to winning the American Gaming Association’s support.

Now, even if Kyl can satisfy AGA, he may still have problems on the Senate floor.

For example, Bunning issued a stern warning in his March testimony that his support is conditional.

“I know there are some out there who might entertain altering this bill for their constituents or gaming interests,” Bunning said. “I will be watching this bill very carefully, and reserve all of my rights … to ensure that what is legal under a state’s authority regarding parimutuel betting is not harmed by legislation before the Senate.”

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