(Corrects last paragraph of April 28 story to reflect non-prosecution agreement announced April 7 between PartyGaming

Plc and the U.S. Attorney's Office for the Southern District of New York)

U.S. Rep. Barney Frank, chairman of the House of Representatives Financial Services Committee, said on Tuesday he would introduce a bill next week to overturn a three-year-old U.S. ban on Internet gambling.

The legislation, likely to be opposed by anti-gambling Republicans, would overturn a law imposed during the Bush administration that has hurt U.S. trade ties with the European Union. Frank said the bill was being drafted this week.

We'll be introducing it next week and I plan to move on it, said Frank, a Democrat, speaking at the Reuters Global Financial Regulation Summit in Washington.

The European Commission, the EU's executive, said late last month in a draft report that a U.S. Justice Department crackdown on European online gambling companies violated U.S. commitments under the World Trade Organization.

But the commission, which oversees trade policy for the 27-nation EU bloc, said it would seek a negotiated solution with the United States rather than file a WTO complaint.

European online gambling firms lost billions of euros in market value after Congress in 2006 made it illegal for banks and credit card companies to make payments to online gambling sites.

Republicans still controlled the White House and Congress when the law was approved. Now, Democrats are in control in both branches of the government, but it's unclear how the Obama administration will handle the issue.

EU companies like PartyGaming and 888.com subsequently withdrew from the United States.

On April 7, PartyGaming said it had entered into a non-prosecution agreement with the U.S. Attorney's Office for the Southern District of New York covering its U.S. business activities before the ban. The company agreed to pay $105 million under the agreement, which protects it from being prosecuted.

(For summit blog: http://blogs.reuters.com/summits/)