Internet Gambling: Stanford Group Gives Repeal a 10% Shot

A Stanford Bank Regulator Report has advised that a curb on Internet gambling is likely to continue and attempts at repealing this new law will probably not succeed.

The report goes on to say: "We do not believe there is the political will to overturn this legislation or to carve out poker from the prohibition.  More likely would be legislation authorizing the National Institute of Science or a similar nonpartisan think tank to study whether Internet gambling could be effectively regulated and taxed.  We also expect the Federal Reserve to release shortly the rules governing how banks should stem the flow of financing the Internet gambling websites."

"In our view the Internet gambling ban benefited from a perfect storm of political forces.  Those who want to repeal the ban will not enjoy those favorable political wins.  As a result, we expect the ban to remain and the bank regulations will take effect this year."

The Stanford Group suggests that Frank's requests to overturn the new law will "open Democrats to charges of being in bed with Internet gamblers.  It also would link Democrats with disgraced lobbyist Jack Abramoff."

They also suggest that Republicans would accuse Democrats of "tampering with criminal investigations" and that staunch anti-Internet gambling opposition from Senator Jon Kyl (R) would be able to obtain "60 votes to overcome a filibuster."  The Stanford Group expresses doubt that Senate Democrats would secure that many votes.

"Given these problems, we see only a 10% chance that Congress lifts the gambling ban."

The Stanford Group also holds out little hope that legislation from the Judiciary Committee defining poker as a game of skill will ultimately exempt it from the current law. 

"We believe the odds are against this for many of the same reasons that Congress will not overturn the broader prohibition.  It leaves Democrats accused of interfering with criminal investigations and it would force them to figure out a way to overcome the ability of Senator Kyl to Stymie legislation in the Senate."

The Stanford Group has given the poker carve out a 20% shot of happening.

There is some good news here in that the report gives a 60% chance for studying of legislation and taxation. 

"This is the option that has the greatest chance of passing.  It provides a means for Frank and others who opposed the prohibition to declare victory without actually overturning the prohibition.  We doubt that Kyl and others would expend substantial political capital to block an 18-month to 24-month study of whether it is possible to regulate and tax Internet gambling."

Legislation is expected in the next three months.  The report points out that Barney Frank has a very busy agenda right now, though it will be easy enough for him to draft legislation. 

By late June, the Federal Reserve should have banking regulations in place that will in all likelihood exempt checks and ACH transactions.  The Fed has the discretion to make these exemptions and probably will. Even so, the banks won limited protection from court injunctions and may argue for further exemptions that expand beyond just ACH transactions and checks. 

Stanford Group Company is part of Stanford Financial Group, a privately held, wholly owned global group of financial services companies founded by Lodis B. Stanford in 1932. Stanford's core businesses are private wealth management and investment banking for institutions and emerging growth companies. Stanford provides private and institutional investors with global expertise in asset allocation strategies, investment advisory services, equity research, international private banking and trust administration, commercial banking, investment banking, merchant banking, institutional sales and trading, real estate investment and insurance.

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Christopher Costigan, Gambling911.com

Originally published March 26, 2007 11:13 am ET