Frist's compromise is Goodlatte's disappointment

Business Week reports that Congressman Bob Goodlatte, the Virginia Republican who pushed through the initial anti-online-gambling bill in the House, will be pleased to see some of his proposals pass into law on the President's signature, but concedes that the final compromise "Frist version" is not the ultimate blow to online gaming he had hoped for.

"It is not everything the House passed earlier this year, but it does include the enforcement prohibition to cut off funds going to the illegal online sites," says Goodlatte. He adds that the bill should prevent some of the annual estimated $6 billion in online bets made by U.S. residents from "getting sucked out of our economy."

Others point out that by regulation and taxation, that $6 billion could be not only retained within US borders, but a healthy portion of it find its way into state or federal coffers through taxation.

Goodlatte is not done yet, however, and claims he intends to continue pushing for a separate piece of legislation that would change the wording of the 1961 Wire Act (dropped from the Frist compromise) and clarify once and for all that various forms of online gambling are illegal. "We need to modernise the Wire Act, which is 45 years old, and does not apply to all forms of gambling," says Goodlatte, adding, "It clearly applies to sports betting."

His view would seem to be at odds with that oft-expressed by Department of Justice officials, who have consistently maintained that all Internet gambling violates the Wire Act. Despite these claims it has only prosecuted cases involving online sports betting to date.

Eugene Christensen, CEO of gaming-analysis firm Christensen Capital Advisors, takes a more negative view. He says that although the law may not explicitly outlaw all online gambling, it is clear that the U.S. plans to aggressively attack foreign Internet gambling sites. "It is, long term, a very substantial negative for the U.K.-based Internet gambling companies," says Christensen. "They have lost the U.S. market, and I think they have lost it for good."

Other analysts disagree. If the bill becomes law, they say that U.S. gamblers will still bet on these sites. But rather than using credit cards, they'll employ other e-wallet payment services based outside the U.S., such as NetTeller and FirePay.

Frank Catania, former director of gaming enforcement in New Jersey and president of Catania Consulting Group, calls the law "a sham" that won't stop online betting in the U.S. "There are so many alternate means of payment that it is not going to stop what is happening here," says Catania. "We are going to be spending a lot of money for enforcement, and it is going to be worthless." Enforcing the act will cost about $2 million between 2007 and 2011, according to a May 26 Congressional Budget Office report.

U.S. casinos are also hoping their online ambitions won't be dampened by the bill. Some foreign governments have already accused the U.S. of having protectionist motivations, rather than prohibitionist ones. In August, 2005, representatives from Antigua and Barbuda brought a case against the U.S. to the World Trade Organization, complaining that efforts by the U.S. to stamp out online gambling unfairly keep foreign companies from competing with U.S. gambling companies. They cited exceptions for horseracing and lotteries as evidence that the U.S. was not antigambling per se, but against foreign governments taking betting dollars through online sites. The WTO initially ruled against the U.S. However, in April, 2006, the U.S. said it had addressed the concerns, prompting Antigua and Barbuda to appeal to the World Trade Organization about the U.S.'s lack of appropriate redress.

Statements such as those made by U.S. Senate Majority Leader Bill Frist, however, suggest that the government has no plans to make carve-outs for its own institutions. "Although we can't monitor every online gambler or regulate offshore gambling, we can police the financial institutions that disregard our laws," says Frist. "For me as majority leader, the bottom line is simple: Internet gambling is illegal."