Barney Frank, a Democrat in the House of Representatives, proposed the Internet Gambling Regulation and Enforcement Act. Frank is the chairman of the House Financial Services Committee.
"The fundamental issue here is a matter of individual freedom," Frank said at a press conference.
Financial institutions were barred from processing payments to and from online gambling firms by a law which was rejected by Congress but passed at the very end of a Congressional session as part of a ports security bill that was guaranteed to be passed.
Frank's bill, The Internet Gambling Regulation and Enforcement Act of 2007, proposes that background checks are conducted on executives before a company is given a licence, and that only licensed companies can legally trade. Financial institutions are protected from liability under his bill.
Any licensed companies must demonstrate that they can weed out gamblers who are under 18 years' old, can beat fraud and money laundering, and identify and deal with compulsive gamblers.
They must also ensure an individual placing a bet is physically located in a jurisdiction that permits internet gambling. Individual states and Indian tribes would have the option to prohibit or impose limits on iternet gambling within their borders, according to the bill.
The director of the Financial Crimes Enforcement Network will have the power to establish regulations and issue licences to online gambling operators.
"Congressman Frank's bill is a common sense approach to internet gambling," said Alfonse D'Amato, chairman of the Poker Players' Alliance. "Licensing and regulation will allow us to sort out the most responsible sites – those that are good corporate citizens – from those engaged in unscrupulous activities and practices."
Frank told news agency Reuters that 11 of the 435 member House of Representatives had co-sponsored his bill, but that he hoped it would pick up support. "There is a group of voters who've been activated here," he said.
Last year's law banning online gambling payments clarified an uncertain position in which legal opinion was divided on whether or not the 1961 Wire Act, which prohibits inter-state telephone betting, applied to online gambling.
The US Department of Justice was operating a clampdown on online gambling even before last year's law was passed. US authorities managed to arrest Gary Kaplan, the founder of BetOnSports earlier this year in what was considered a major coup. Kaplan lived in exile in Costa Rica and was arrested in The Domincan Republic in April.
