Cable World: Gambling Bill's Stretch Run

The Internet Gambling Prohibition Act has moved out of a House committee and is on its way to the full House for a vote before the summer recess. The Senate passed a similar version of the bill late last year.

The Senate bill, sponsored by Jon Kyl (R-Ariz.), is designed to regulate/negate gambling via telephone and the Internet in the U.S. although billions of dollars are won and lost every day over personal computers.

The Television Games Network (TVG) stands to lose considerably if the bill's language is tinkered with in any way. TVG, based in Broomfield, Colo., allows cable viewers in parts of Kentucky, Maryland, Oregon and Louisiana and DISH network subscribers to watch and wager on horseracing at home.

The Kyl bill's language exempts pari-mutuel horseracing from federal prohibitions, a fact that has factions competing for the U.S. gambling dollar furiously and lobbying hard against it. Already, the Justice Department has singled out the horseracing exemption and repeatedly testified against it. Capitol Hill lobbyists say its ultimate fate will be determined in the next several weeks.

TVG is majority-owned by TV Guide, which, in turn, is jointly owned by AT&T's Liberty Media and Fox's News Corp. It's delivered via cable or satellite, with supporting wagering capabilities enabled by telephone, personal computer or a cable/satellite set-top box and its remote control.

Co-produced with Fox Productions, TVG's programming features, on average, five live horse races per hour that can be wagered on. The wagers are processed in Oregon to capitalize on the one of the lowest tax rates in the U.S.

"Internally, we don't play a game where we have to have X number of states or account holders by X date," Mark Wilson, TVG's CEO, said to Daily Racing Form. "The question is, are we pushing forward? Are we pushing the process forward? The bill is important to that process. That lets us go forward a little faster."

However, if the bill passes without the key exemption language, TVG would only be able to operate in states where telephone account wagering is legal. New York and Pennsylvania have such laws, and New Jersey is likely to pass one before legislators depart for summer recess. But those states have not welcomed TVG into their fold.

Meanwhile, financially-troubled broadband provider Youbet. com, with a current subscriber base of 10,000, would likely have to cease operations if the exemption is pulled. The California-based company's software allows the user to open an account, wager with a click of a mouse and watch a streaming video of the race they choose on their PC.

Earlier this year, Los Angeles law enforcement officials raided Youbet.com's headquarters after obtaining a search warrant from a state judge citing "probable cause of criminal activity." Youbet.com's wagers are processed in Pennsylvania, where telephone betting is legal, and, as an information provider, it was breaking no laws. However its stock (UBET;Nasdaq) is trading at 2 7/8, well below its 52-week high of 13 1/4 after recording losses of $3.1 million in the first quarter of 2000.

TVG has spent considerable capital covering major racing events, such as the Kentucky Derby and Breeders' Cup in the U.S., in addition to overseas events in the United Kingdom and United Arab Emerates. It continues on its mission to expand as more and more states attempt to legalize telephone account wagering. The company declines to divulge information on its subscriber base.

The White House has given no indication on whether President Bill Clinton would sign the bill as is.