House committee passes bill to legalize -- and tax -- online casinos

With casinos sprouting like kudzu across the U.S., many states are looking to gaming taxes to help fill the hole poked in their budgets by the recession. Now, the federal government has raised the stakes by taking the first step toward legalizing online gambling.

According to Bloomberg Businessweek, the House Financial Services Committee has approved a bill that would allow Internet gaming to be offered by companies licensed by the Treasury Department. The companies will be required to operate from U.S. soil.

Another measure, yet to be passed by the House Ways & Means Committee, would tax online gambling, which could bring in as much as $42 billion in revenue over the next decade. The money would be split between the federal (25%) and state governments (75%).The answer to the question "is internet gambling illegal today in the U.S." is unclear, depending on interpretation of legislation passed in 1961 to stop telephone gambling. Four years ago, a law was passed that forbade credit card companies from processing payments to gambling websites. According to chairman Barney Frank, this has put an untoward burden on the banking industry.

Opponents of the bill voiced concern that this would make gambling too easy and enticing for minors and habitual gamblers.

The bill came out of committee with several amendments, including a restriction on sports gambling, measures to prevent minors from participating, to cut off compulsive gamblers, and prohibiting the use of credit cards. Debit cards are still OK.

Another clause would allow states to opt to retain control of internet gambling much in the same way as they now control casinos. Those states that have experience with legal gambling might consider opting out with the expectation that they could bring in more than the 6% tax that the federal scheme would provide them.

It is still early days for both bills, so you can bet there will be more debate about the issue.
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