Representatives Barney Frank and Peter King introduced legislation on Wednesday that, if passed, would create a regulatory framework for online gambling in the US.

The bill, which calls on the treasury department to regulate the industry, is careful about making sure individual states and Native American tribes have the right to impose further restrictions on internet gambling or ban it outright.

All operators would have to pass a background check and, if granted the standard five-year licence, they would have to make sure all players were of legal age and allowed to wager from their location, collect customer taxes, pay any of their own taxes, safeguard against financial crime, implement safeguards for problem gamblers, implement privacy safeguards and meet any other requirements the treasury department might ask for.

The legislation also clearly spells out that sports betting on the internet is illegal. “Online poker is a legal, thriving industry and poker players deserve the consumer protections and the freedom to play that are provided for in this legislation,” said Poker Players Alliance chairman and former Senator Alfonse D’Amato.

“As Americans continue to wager online more than US$100bn annually in a thriving underground marketplace, it is time for Congress to acknowledge that prohibition has been a failure and a new approach is needed,” said Jeffrey Sandman, spokesperson for the Safe and Secure Internet Gambling Initiative.

Representative Jim McDermott introduced a companion bill to the King and Frank legislation on Wednesday that calls for any operator licensed under the Frank bill to pay a two per cent fee to the government on all deposits.

“We are losing billions of dollars in federal and state taxes every year because a prior administration and its supporters drove legitimate US online gambling offshore by passing an ill-conceived late-night amendment in Congress that has done nothing except make Americans more vulnerable to scams when they wager online and cost us billions in lost revenue," said McDermott said.