[House Report 108-51]
[From the U.S. Government Publishing Office]
108th Congress Rept. 108-51
HOUSE OF REPRESENTATIVES
1st Session Part 2
======================================================================
UNLAWFUL INTERNET GAMBLING FUNDING
PROHIBITION ACT
_______
May 22, 2003.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Sensenbrenner, from the Committee on the Judiciary, submitted the
following
R E P O R T
together with
DISSENTING VIEWS
[To accompany H.R. 21]
[Including cost estimate of the Congressional Budget Office]
The Committee on the Judiciary, to whom was referred the
bill (H.R. 21) to prevent the use of certain bank instruments
for unlawful Internet gambling, and for other purposes, having
considered the same, reports favorably thereon with an
amendment and recommends that the bill as amended do pass.
CONTENTS
Page
The Amendment.................................................... 2
Purpose and Summary.............................................. 7
Background and Need for the Legislation.......................... 7
Hearings......................................................... 8
Committee Consideration.......................................... 8
Vote of the Committee............................................ 9
Committee Oversight Findings..................................... 10
New Budget Authority and Tax Expenditures........................ 10
Congressional Budget Office Cost Estimate........................ 10
Performance Goals and Objectives................................. 14
Constitutional Authority Statement............................... 14
Section-by-Section Analysis and Discussion....................... 14
Changes in Existing Law Made by the Bill, as Reported............ 17
Markup Transcript................................................ 18
Dissenting Views................................................. 71
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Unlawful Internet Gambling Funding
Prohibition Act''.
SEC. 2. FINDINGS.
The Congress finds as follows:
(1) Internet gambling is primarily funded through personal
use of bank instruments, including credit cards and wire
transfers.
(2) The National Gambling Impact Study Commission in 1999
recommended the passage of legislation to prohibit wire
transfers to Internet gambling sites or the banks which
represent them.
(3) Internet gambling is a major cause of debt collection
problems for insured depository institutions and the consumer
credit industry.
(4) Internet gambling conducted through offshore
jurisdictions has been identified by United States law
enforcement officials as a significant money laundering
vulnerability.
SEC. 3. PROHIBITION ON ACCEPTANCE OF ANY BANK INSTRUMENT FOR UNLAWFUL
INTERNET GAMBLING.
(a) In General.--No person engaged in the business of betting or
wagering may knowingly accept, in connection with the participation of
another person in unlawful Internet gambling--
(1) credit, or the proceeds of credit, extended to or on
behalf of such other person (including credit extended through
the use of a credit card);
(2) an electronic fund transfer or funds transmitted by or
through a money transmitting business, or the proceeds of an
electronic fund transfer or money transmitting service, from or
on behalf of the other person;
(3) any check, draft, or similar instrument which is drawn
by or on behalf of the other person and is drawn on or payable
at or through any financial institution; or
(4) the proceeds of any other form of financial transaction
as the Secretary may prescribe by regulation which involves a
financial institution as a payor or financial intermediary on
behalf of or for the benefit of the other person.
(b) Definitions.--For purposes of this Act, the following
definitions shall apply:
(1) Bets or wagers.--The term ``bets or wagers''--
(A) means the staking or risking by any person of
something of value upon the outcome of a contest of
others, a sporting event, or a game subject to chance,
upon an agreement or understanding that the person or
another person will receive something of greater value
than the amount staked or risked in the event of a
certain outcome;
(B) includes the purchase of a chance or
opportunity to win a lottery or other prize (which
opportunity to win is predominantly subject to chance);
(C) includes any scheme of a type described in
section 3702 of title 28, United States Code;
(D) includes any instructions or information
pertaining to the establishment or movement of funds in
an account by the bettor or customer with the business
of betting or wagering; and
(E) does not include--
(i) any activity governed by the securities
laws (as that term is defined in section
3(a)(47) of the Securities Exchange Act of
1934) for the purchase or sale of securities
(as that term is defined in section 3(a)(10) of
such Act);
(ii) any transaction conducted on or
subject to the rules of a registered entity or
exempt board of trade pursuant to the Commodity
Exchange Act;
(iii) any over-the-counter derivative
instrument;
(iv) any other transaction that--
(I) is excluded or exempt from
regulation under the Commodity Exchange
Act; or
(II) is exempt from State gaming or
bucket shop laws under section 12(e) of
the Commodity Exchange Act or section
28(a) of the Securities Exchange Act of
1934;
(v) any contract of indemnity or guarantee;
(vi) any contract for insurance;
(vii) any deposit or other transaction with
a depository institution (as defined in section
3(c) of the Federal Deposit Insurance Act); and
(viii) any participation in a simulation
sports game or an educational game or contest
that--
(I) is not dependent solely on the
outcome of any single sporting event or
nonparticipant's singular individual
performance in any single sporting
event;
(II) has an outcome that reflects
the relative knowledge and skill of the
participants with such outcome
determined predominantly by accumulated
statistical results of sporting events;
and
(III) offers a prize or award to a
participant that is established in
advance of the game or contest and is
not determined by the number of
participants or the amount of any fees
paid by those participants.
(2) Business of betting or wagering.--The term ``business
of betting or wagering'' does not include, other than for
purposes of subsection (e), any creditor, credit card issuer,
insured depository institution, financial institution, operator
of a terminal at which an electronic fund transfer may be
initiated, money transmitting business, or international,
national, regional, or local network utilized to effect a
credit transaction, electronic fund transfer, stored value
product transaction, or money transmitting service, or any
participant in such network, or any interactive computer
service or telecommunications service.
(3) Designated payment system defined.--The term
``designated payment system'' means any system utilized by any
creditor, credit card issuer, financial institution, operator
of a terminal at which an electronic fund transfer may be
initiated, money transmitting business, or international,
national, regional, or local network utilized to effect a
credit transaction, electronic fund transfer, or money
transmitting service, or any participant in such network, that
the Secretary, in consultation with the Board of Governors of
the Federal Reserve System and the Attorney General,
determines, by regulation or order, could be utilized in
connection with, or to facilitate, any restricted transaction.
(4) Internet.--The term ``Internet'' means the
international computer network of interoperable packet switched
data networks.
(5) Interactive computer service.--The term ``interactive
computer service'' has the same meaning as in section 230(f) of
the Communications Act of 1934.
(6) Restricted transaction.--The term ``restricted
transaction'' means any transaction or transmittal involving
any credit, funds, instrument, or proceeds described in any
paragraph of subsection (a) which the recipient is prohibited
from accepting under subsection (a).
(7) Unlawful internet gambling.--The term ``unlawful
Internet gambling'' means to place, receive, or otherwise
transmit a bet or wager by any means which involves the use, at
least in part, of the Internet where such bet or wager is
unlawful under any applicable Federal or State law in the State
in which the bet or wager is initiated, received, or otherwise
made.
(8) Other terms.--
(A) Credit; creditor; and credit card.--The terms
``credit'', ``creditor'', and ``credit card'' have the
meanings given such terms in section 103 of the Truth
in Lending Act.
(B) Electronic fund transfer.--The term
``electronic fund transfer''--
(i) has the meaning given such term in
section 903 of the Electronic Fund Transfer
Act; and
(ii) includes any fund transfer covered by
Article 4A of the Uniform Commercial Code, as
in effect in any State.
(C) Financial institution.--The term ``financial
institution'' has the meaning given such term in
section 903 of the Electronic Fund Transfer Act.
(D) Money transmitting business and money
transmitting service.--The terms ``money transmitting
business'' and ``money transmitting service'' have the
meanings given such terms in section 5330(d) of title
31, United States Code.
(E) Secretary.--The term ``Secretary'' means the
Secretary of the Treasury.
(c) Civil Remedies.--
(1) Jurisdiction.--The district courts of the United States
shall have original and exclusive jurisdiction to prevent and
restrain violations of this section by issuing appropriate
orders in accordance with this section, regardless of whether a
prosecution has been initiated under this section.
(2) Proceedings.--
(A) Institution by federal government.--
(i) In general.--The United States, acting
through the Attorney General, may institute
proceedings under this subsection to prevent or
restrain a violation of this section.
(ii) Relief.--Upon application of the
United States under this subparagraph, the
district court may enter a preliminary
injunction or an injunction against any person
to prevent or restrain a violation of this
section, in accordance with Rule 65 of the
Federal Rules of Civil Procedure.
(B) Institution by state attorney general.--
(i) In general.--The attorney general of a
State (or other appropriate State official) in
which a violation of this section allegedly has
occurred or will occur may institute
proceedings under this subsection to prevent or
restrain the violation.
(ii) Relief.--Upon application of the
attorney general (or other appropriate State
official) of an affected State under this
subparagraph, the district court may enter a
preliminary injunction or an injunction against
any person to prevent or restrain a violation
of this section, in accordance with Rule 65 of
the Federal Rules of Civil Procedure.
(C) Indian lands.--
(i) In general.--Notwithstanding
subparagraphs (A) and (B), for a violation that
is alleged to have occurred, or may occur, on
Indian lands (as that term is defined in
section 4 of the Indian Gaming Regulatory
Act)--
(I) the United States shall have
the enforcement authority provided
under subparagraph (A); and
(II) the enforcement authorities
specified in an applicable Tribal-State
compact negotiated under section 11 of
the Indian Gaming Regulatory Act shall
be carried out in accordance with that
compact.
(ii) Rule of construction.--No provision of
this section shall be construed as altering,
superseding, or otherwise affecting the
application of the Indian Gaming Regulatory
Act.
(3) Expedited proceedings.--In addition to any proceeding
under paragraph (2), a district court may, in exigent
circumstances, enter a temporary restraining order against a
person alleged to be in violation of this section upon
application of the United States under paragraph (2)(A), or the
attorney general (or other appropriate State official) of an
affected State under paragraph (2)(B), in accordance with Rule
65(b) of the Federal Rules of Civil Procedure.
(4) Limitation relating to interactive computer services.--
(A) In general.--Relief granted under this
subsection against an interactive computer service
shall--
(i) be limited to the removal of, or
disabling of access to, an online site
violating this section, or a hypertext link to
an online site violating this section, that
resides on a computer server that such service
controls or operates; except this limitation
shall not apply if the service is subject to
liability under this section pursuant to
subsection (e);
(ii) be available only after notice to the
interactive computer service and an opportunity
for the service to appear are provided;
(iii) not impose any obligation on an
interactive computer service to monitor its
service or to affirmatively seek facts
indicating activity violating this section;
(iv) specify the interactive computer
service to which it applies; and
(v) specifically identify the location of
the online site or hypertext link to be removed
or access to which is to be disabled.
(B) Coordination with other law.--An interactive
computer service that does not violate this section
shall not be liable under section 1084 of title 18,
except this limitation shall not apply if an
interactive computer service has actual knowledge and
control of bets and wagers and--
(i) operates, manages, supervises, or
directs an Internet website at which unlawful
bets or wagers may be placed, received, or
otherwise made or at which unlawful bets or
wagers are offered to be placed, received, or
otherwise made; or
(ii) owns or controls, or is owned or
controlled by, any person who operates,
manages, supervises, or directs an Internet
website at which unlawful bets or wagers may be
placed, received, or otherwise made or at which
unlawful bets or wagers are offered to be
placed, received, or otherwise made.
(5) Factors to be considered in certain cases.--In
considering granting relief under this subsection against any
payment system, or any participant in a payment system that is
a creditor, credit card issuer, financial institution, operator
of a terminal at which an electronic fund transfer may be
initiated, money transmitting business, or international,
national, regional, or local network utilized to effect a
credit transaction, electronic fund transfer, or money
transmitting service, or a participant in such network, the
court shall consider the following factors:
(A) The extent to which such person is extending
credit or transmitting funds knowingthe transaction is
in connection with unlawful Internet gambling.
(B) The history of such person in extending credit
or transmitting funds knowing the transaction is in
connection with unlawful Internet gambling.
(C) The extent to which such person has established
and is maintaining policies and procedures in
compliance with regulations prescribed under subsection
(f).
(D) The feasibility that any specific remedy
prescribed in the order issued under this subsection
can be implemented by such person without substantial
deviation from normal business practice.
(E) The costs and burdens the specific remedy will
have on such person.
(6) Notice to regulators and financial institutions.--
Before initiating any proceeding under paragraph (2) with
respect to a violation or potential violation of this section
by any creditor, credit card issuer, financial institution,
operator of a terminal at which an electronic fund transfer may
be initiated, money transmitting business, or international,
national, regional, or local network utilized to effect a
credit transaction, electronic fund transfer, or money
transmitting service, or any participant in such network, the
Attorney General of the United States or an attorney general of
a State (or other appropriate State official) shall--
(A) notify such person, and the appropriate
regulatory agency (as determined in accordance with
subsection (f)(5)) for such person, of such violation
or potential violation and the remedy to be sought in
such proceeding; and
(B) allow such person 30 days to implement a
reasonable remedy for the violation or potential
violation, consistent with the factors described in
paragraph (5) and in conjunction with such action as
the appropriate regulatory agency may take.
(d) Criminal Penalty.--
(1) In general.--Whoever violates this section shall be
fined under title 18, United States Code, or imprisoned for not
more than 5 years, or both.
(2) Permanent injunction.--Upon conviction of a person
under this subsection, the court may enter a permanent
injunction enjoining such person from placing, receiving, or
otherwise making illegal bets or wagers or sending, receiving,
or inviting information assisting in the placing of bets or
wagers.
(e) Circumventions Prohibited.--Notwithstanding subsection (b)(2),
a creditor, credit card issuer, financial institution, operator of a
terminal at which an electronic fund transfer may be initiated, money
transmitting business, or international, national, regional, or local
network utilized to effect a credit transaction, electronic fund
transfer, or money transmitting service, or any participant in such
network, or any interactive computer service or telecommunications
service, may be liable under this section if such creditor, issuer,
institution, operator, business, network, or participant has actual
knowledge and control of bets and wagers and--
(1) operates, manages, supervises, or directs an Internet
website at which unlawful bets or wagers may be placed,
received, or otherwise made or at which unlawful bets or wagers
are offered to be placed, received, or otherwise made; or
(2) owns or controls, or is owned or controlled by, any
person who operates, manages, supervises, or directs an
Internet website at which unlawful bets or wagers may be
placed, received, or otherwise made or at which unlawful bets
or wagers are offered to be placed, received, or otherwise
made.
(f) Policies and Procedures To Identify and Prevent Restricted
Transactions in Payment for Unlawful Internet Gambling.--
(1) Regulations.--Before the end of the 6-month period
beginning on the date of the enactment of this Act, the
Secretary of the Treasury, in consultation with the Board of
Governors of the Federal Reserve System and the Attorney
General, shall prescribe regulations requiring any designated
payment system to establish policies and procedures reasonably
designed to identify and prevent restricted transactions in any
of the following ways:
(A) The establishment of policies and procedures
that--
(i) allow the payment system and any person
involved in the payment system to identify
restricted transactions by means of codes in
authorization messages or by other means; and
(ii) block restricted transactions
identified as a result of the policies and
procedures developed pursuant to clause (i).
(B) The establishment of policies and procedures
that prevent the acceptance of the products or services
of the payment system in connection with a restricted
transaction.
(2) Requirements for policies and procedures.--In
prescribing regulations pursuant to paragraph (1), the
Secretary shall--
(A) identify types of policies and procedures,
including nonexclusive examples, which would be deemed
to be ``reasonably designed to identify'' and
``reasonably designed to block'' or to ``prevent the
acceptance of the products or services'' with respect
to each type of transaction, such as, should credit
card transactions be so designated, identifying
transactions by a code or codes in the authorization
message and denying authorization of a credit card
transaction in response to an authorization message;
(B) to the extent practical, permit any participant
in a payment system to choose among alternative means
of identifying and blocking, or otherwise preventing
the acceptance of the products or services of the
payment system or participant in connection with,
restricted transactions; and
(C) consider exempting restricted transactions from
any requirement under paragraph (1) if the Secretary
finds that it is not reasonably practical to identify
and block, or otherwise prevent, such transactions.
(3) Compliance with payment system policies and
procedures.--A creditor, credit card issuer, financial
institution, operator of a terminal at which an electronic fund
transfer may be initiated, money transmitting business, or
international, national, regional, or local network utilized to
effect a credit transaction, electronic fund transfer, or money
transmitting service, or a participant in such network, meets
the requirement of paragraph (1) if--
(A) such person relies on and complies with the
policies and procedures of a designated payment system
of which it is a member or participant to--
(i) identify and block restricted
transactions; or
(ii) otherwise prevent the acceptance of
the products or services of the payment system,
member, or participant in connection with
restricted transactions; and
(B) such policies and procedures of the designated
payment system comply with the requirements of
regulations prescribed under paragraph (1).
(4) No liability for blocking or refusing to honor
restricted transactions.--A person that is subject to a
regulation prescribed or order issued under this subsection and
blocks, or otherwise refuses to honor, a restricted
transaction, or as a member of a designated payment system
relies on the policies and procedures of the payment system, in
an effort to comply with this section shall not be liable to
any party for such action.
(5) Enforcement.--This subsection shall be enforced by the
Federal functional regulators and the Federal Trade Commission
under applicable law in the manner provided in section 505(a)
of the Gramm-Leach-Bliley Act.
SEC. 4. INTERNET GAMBLING IN OR THROUGH FOREIGN JURISDICTIONS.
(a) In General.--In deliberations between the United States
Government and any other country on money laundering, corruption, and
crime issues, the United States Government should--
(1) encourage cooperation by foreign governments and
relevant international fora in identifying whether Internet
gambling operations are being used for money laundering,
corruption, or other crimes;
(2) advance policies that promote the cooperation of
foreign governments, through information sharing or other
measures, in the enforcement of this Act; and
(3) encourage the Financial Action Task Force on Money
Laundering, in its annual report on money laundering
typologies, to study the extent to which Internet gambling
operations are being used for money laundering.
(b) Report Required.--The Secretary of the Treasury shall submit an
annual report to the Congress on the deliberations between the United
States and other countries on issues relating to Internet gambling.
SEC. 5. AMENDMENTS TO GAMBLING PROVISIONS.
(a) Amendment to Definition.--Section 1081 of title 18, United
States Code, is amended--
(1) by designating the five undesignated paragraphs that
begin with ``The term'' as paragraphs (1) through (5),
respectively; and
(2) in paragraph (5), as so designated--
(A) by striking ``wire communication'' and
inserting ``communication'';
(B) by inserting ``satellite, microwave,'' after
``cable,''; and
(C) by inserting ``(whether fixed or mobile)''
after ``connection''.
(b) Increase in Penalty for Unlawful Wire Transfers of Wagering
Information and Conforming Amendment.--Section 1084(a) of title 18,
United States Code, is amended--
(1) by striking ``two years'' and inserting ``5 years'';
and
(2) by striking ``wire'' each place it appears.
Purpose and Summary
Under current Federal law, it is unclear that using the
Internet to operate a gambling business is illegal. H.R. 21,
the ``Unlawful Internet Gambling Funding Prohibition Act,'' is
intended to provide State and Federal authorities with the
means to enforce current statutes and clarify that those
statutes make gambling over the Internet illegal. This bill
creates a new crime--accepting financial instruments, such as
credit cards or electronic fund transfers, for debts incurred
in illegal Internet gambling. Because the perpetrators of this
crime are off-shore and beyond the reach of U.S. law
enforcement tactics, the bill enables State attorneys general
and Federal enforcement authorities to request that injunctions
be issued against any party, including financial institutions,
Internet service providers, and computer software providers, to
assist in the prevention or restraint of this crime. Finally,
this bill allows Federal bank regulators to create rules
requiring financial institutions to use designated methods to
block or filter illegal Internet gambling transactions.
Background and Need for the Legislation
Over the last few years, gambling websites have
proliferated on the Internet. What was once a cottage industry
has become an extremely lucrative and large business. The
Internet gambling industry's revenues grew from $445 million in
1997 \1\ to an estimated $4.2 billion in 2003 \2\. Industry
analysts estimate that it could soon easily become a $10
billion a year industry.
---------------------------------------------------------------------------
\1\ National Gambling Impact Study Commission, Final Report, 5-1,
(1999).
\2\ Testimony of Deputy Assistant Attorney General John G. Malcolm
before the House Subcommittee on Crime, Terrorism, and Homeland
Security on April 29, 2003, page 2.
---------------------------------------------------------------------------
On-line casino operators envision the day when the Internet
will provide access to a ``virtual-strip''--where gamblers who
are tired of one casino can simply ``walk'' down the virtual
boardwalk to a different casino. There are currently over 1,800
gambling sites on the Internet, offering everything from sports
betting to blackjack. Most of these virtual casinos are
organized and operated from tropical off-shore locations, where
the operators feel free from both State and Federal
interference. Among the most popular locales are Antigua, St.
Martin, and Costa Rica.
This legislation brings the current law up to date with
Internet technology by clarifying Federal law so that there is
no question that operating an Internet gambling business is
illegal. It does not, however, supersede the traditional
leadership roles of States in enforcing gambling laws within
their borders. It addresses a growing problem that no single
State, or collection of States, can adequately address. Because
of the uniquely interstate and international nature of the
Internet, H.R. 21 is necessary. At the same time, H.R. 21
provides the States and the Federal Government with the needed
tools to limit and regulate Internet gambling.
Since the founding of our country, the Federal Government
has left gambling regulation to the States. In 1996, Congress
created the National Gambling Impact Study Commission (NGISC)
to examine the issue of gambling in America. The NGISC
concluded that States are best equipped to regulate gambling
within their own borders, and recommended that Congress
continue to defer to the States in this respect.\3\
---------------------------------------------------------------------------
\3\ National Gambling Impact Study Commission, Final Report, 3-1,
(1999).
---------------------------------------------------------------------------
The Federal Government has largely deferred to the
authority of States to determine the type and amount of
gambling permitted. For over 100 years, Congress has acted to
assist States in enforcing their respective policies on
gambling when development in technology, such as the Internet,
have compromised the effectiveness of State gambling laws.
State attorneys general have been frustrated in their
attempts to prevent Internet gambling from permeating their
borders. Some have attempted to charge Internet gambling
providers with violations of State consumer fraud laws, but
jurisdictional issues and other problems have thwarted these
efforts. Attorneys general report that citizens often are
unaware that gambling on the Internet is illegal, even if those
same persons are aware that their home State does not allow
gambling.
In addition, the Department of Justice recently testified
that Internet gambling serves as a vehicle for money laundering
activities and can be exploited by terrorists to launder money.
On-line casinos are a particularly inviting target because, in
addition to using the gambling that on-line casinos offer as a
way to hide or transfer money, on-line casinos offer a broad
array of financial services to their customers, such as
providing credit accounts, fund transmittal services, check
cashing services, and currency exchange services.
Hearings
The Committee's Subcommittee on Crime, Terrorism, and
Homeland Security held a legislative hearing on H.R. 21 on
April 29, 2003. The Subcommittee also heard testimony on a
related bill, H.R. 1223, at those hearings. Testimony was
received from four witnesses. The witnesses were: Rep. James A.
Leach; Mr. John G. Malcolm, Deputy Assistant Attorney General,
Criminal Division, U.S. Department of Justice; Mr. Jeffrey A.
Modisett, former Indiana State Attorney General; and Mr.
William Hornbuckle, President & Chief Operating Officer, MGM
Mirage Online.
Committee Consideration
On May 6, 2003, the Subcommittee on Crime, Terrorism, and
Homeland Security met in open session and ordered favorably
reported the bill H.R. 21, by a voice vote, a quorum being
present. On May 14, 2003, the Committee met in open session and
ordered favorably reported the bill H.R. 21 with an amendment
by a recorded vote of 16 to 15, a quorum being present.
Vote of the Committee
In compliance with clause 3(b) of rule XIII of the Rules of
the House of Representatives, the Committee notes that the
following rollcall votes occurred during the Committee's
consideration of H.R. 21.
1. An amendment was offered by Mr. Cannon to strike
language in the bill which states that a bet or wager does not
include ``any lawful transaction with a business licensed or
authorized by a State.'' The amendment was agreed to by a
rollcall vote of 16 to 15.
ROLLCALL NO. 1
----------------------------------------------------------------------------------------------------------------
Ayes Nays Present
----------------------------------------------------------------------------------------------------------------
Mr. Hyde........................................................
Mr. Coble....................................................... X
Mr. Smith....................................................... X
Mr. Gallegly....................................................
Mr. Goodlatte................................................... X
Mr. Chabot...................................................... X
Mr. Jenkins..................................................... X
Mr. Cannon...................................................... X
Mr. Bachus...................................................... X
Mr. Hostettler.................................................. X
Mr. Green....................................................... X
Mr. Keller...................................................... X
Ms. Hart........................................................ X
Mr. Flake.......................................................
Mr. Pence....................................................... X
Mr. Forbes......................................................
Mr. King........................................................ X
Mr. Carter...................................................... X
Mr. Feeney...................................................... X
Mrs. Blackburn.................................................. X
Mr. Conyers..................................................... X
Mr. Berman...................................................... X
Mr. Boucher.....................................................
Mr. Nadler...................................................... X
Mr. Scott....................................................... X
Mr. Watt........................................................ X
Ms. Lofgren..................................................... X
Ms. Jackson Lee................................................. X
Ms. Waters...................................................... X
Mr. Meehan...................................................... X
Mr. Delahunt....................................................
Mr. Wexler...................................................... X
Ms. Baldwin..................................................... X
Mr. Weiner...................................................... X
Mr. Schiff...................................................... X
Ms. Sanchez..................................................... X
Mr. Sensenbrenner, Chairman..................................... X
-----------------------------------------------
Total....................................................... 16 15
----------------------------------------------------------------------------------------------------------------
2. Final Passage. The motion to report favorably the bill,
H.R. 21, as amended, was agreed to by a rollcall vote of 16 to
15.
ROLLCALL NO. 2
----------------------------------------------------------------------------------------------------------------
Ayes Nays Present
----------------------------------------------------------------------------------------------------------------
Mr. Hyde........................................................
Mr. Coble....................................................... X
Mr. Smith.......................................................
Mr. Gallegly....................................................
Mr. Goodlatte................................................... X
Mr. Chabot...................................................... X
Mr. Jenkins..................................................... X
Mr. Cannon...................................................... X
Mr. Bachus...................................................... X
Mr. Hostettler.................................................. X
Mr. Green....................................................... X
Mr. Keller...................................................... X
Ms. Hart........................................................ X
Mr. Flake....................................................... X
Mr. Pence....................................................... X
Mr. Forbes......................................................
Mr. King........................................................ X
Mr. Carter...................................................... X
Mr. Feeney...................................................... X
Mrs. Blackburn.................................................. X
Mr. Conyers..................................................... X
Mr. Berman...................................................... X
Mr. Boucher.....................................................
Mr. Nadler...................................................... X
Mr. Scott....................................................... X
Mr. Watt........................................................ X
Ms. Lofgren..................................................... X
Ms. Jackson Lee................................................. X
Ms. Waters...................................................... X
Mr. Meehan...................................................... X
Mr. Delahunt....................................................
Mr. Wexler...................................................... X
Ms. Baldwin..................................................... X
Mr. Weiner...................................................... X
Mr. Schiff...................................................... X
Ms. Sanchez..................................................... X
Mr. Sensenbrenner, Chairman..................................... X
-----------------------------------------------
Total....................................................... 16
----------------------------------------------------------------------------------------------------------------
Committee Oversight Findings
In compliance with clause 3(c)(1) of rule XIII of the Rules
of the House of Representatives, the Committee reports that the
findings and recommendations of the Committee, based on
oversight activities under clause 2(b)(1) of rule X of the
Rules of the House of Representatives, are incorporated in the
descriptive portions of this report.
New Budget Authority and Tax Expenditures
Clause 3(c)(2) of House rule XIII is inapplicable because
this legislation does not provide new budgetary authority or
increased tax expenditures.
Congressional Budget Office Cost Estimate
In compliance with clause 3(c)(3) of rule XIII of the Rules
of the House of Representatives, the Committee sets forth, with
respect to the bill, H.R. 21, the following estimate and
comparison prepared by the Director of the Congressional Budget
Office under section 402 of the Congressional Budget Act of
1974:
U.S. Congress,
Congressional Budget Office,
Washington, DC, May 16, 2003.
Hon. F. James Sensenbrenner, Jr., Chairman,
Committee on the Judiciary,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed revised cost estimate for H.R. 21, the
Unlawful Internet Gambling Funding Prohibition Act.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contacts are Mark Hadley
(for Federal costs), who can be reached at 226-2860, and Cecil
McPherson (for the impact on the private sector), who can be
reached at 226-2940.
Sincerely,
Douglas Holtz-Eakin.
Enclosure
cc:
Honorable John Conyers, Jr.
Ranking Member
H.R. 21--Unlawful Internet Gambling Funding Prohibition Act.
SUMMARY
H.R. 21 would prohibit gambling businesses from accepting
credit cards, checks, or other bank instruments from gamblers
who illegally bet over the Internet. The bill also would
require financial institutions to take steps to identify and
block gambling-related transactions that are transmitted
through their payment systems. The Office of the Comptroller of
the Currency (OCC), the Board of Governors of the Federal
Reserve System, the Federal Deposit Insurance Corporation
(FDIC), the Office of Thrift Supervision (OTS), and the
National Credit Union Administration (NCUA) would enforce the
provisions of H.R. 21 as they apply to financial institutions.
CBO estimates that implementing this legislation would
result in no significant cost to the Federal Government. The
bill could affect direct spending and revenues, but CBO
estimates that any impact on direct spending and revenues would
not be significant.
H.R. 21 would create no new intergovernmental mandates as
defined in the Unfunded Mandates Reform Act (UMRA) and would
impose no costs on State, local, or tribal governments. The
bill would impose a private-sector mandate, but CBO estimates
that the direct costs of the mandate would fall well below the
annual threshold established in UMRA ($117 million in 2003,
adjusted annually for inflation) in any of the next 5 years.
ESTIMATED COST TO THE FEDERAL GOVERNMENT
CBO estimates that the Government would incur no
significant costs under H.R. 21. CBO estimates that
implementing H.R. 21 would increase administrative costs of the
Department of Justice, but any such costs would be negligible.
The bill also would have a small effect on the operating costs
of the FDIC and the Federal Reserve System. Finally, the bill
would have a negligible effect on the collection and spending
of criminal penalties.
BASIS OF ESTIMATE
The bill would have only minor budgetary effects, as
described below.
Spending Subject to Appropriation
Because H.R. 21 would establish new Federal crimes relating
to Internet gambling, the Federal Government would be able to
pursue cases that it otherwise would not be able to prosecute.
CBO expects, however, that most cases would be pursued under
existing State laws. Therefore, we estimate that any increase
in Federal costs for law enforcement, court proceedings, or
prison operations would not be significant. Any such additional
costs would be subject to the availability of appropriated
funds.
H.R. 21 would require the Department of the Treasury to
submit an annual report on deliberations with other countries
on issues related to Internet gambling. CBO estimates that
preparing and completing the report would cost less than
$100,000 a year, subject to the availability of appropriated
funds.
Direct Spending and Revenues
The NCUA, the OTS, and the OCC charge fees to cover all
their administrative costs; therefore, any additional spending
by those agencies to implement the bill would have no net
budgetary effect. That is not the case with the FDIC, however,
which uses deposit insurance premiums paid by banks to cover
the expenses it incurs to supervise State-chartered
institutions. (Under current law, CBO estimates that the vast
majority of thrift institutions insured by the FDIC would not
pay any premiums for most of the 2004-2013 period.)
The bill would cause a small increase in FDIC spending but
would not affect its premium income. In total, CBO estimates
that H.R. 21 would increase direct spending and offsetting
receipts of the NCUA, OTS, OCC, and FDIC by less than $500,000
a year over the 2004-2013 period.
Budgetary effects on the Federal Reserve are recorded as
changes in revenues (governmental receipts). Based on
information from the Federal Reserve, CBO estimates that
enacting H.R. 21 would reduce such revenues by less than
$500,000 a year.
Because those prosecuted and convicted under the bill could
be subject to criminal fines, the Federal Government might
collect additional fines if the bill is enacted. Collections of
such fines are recorded in the budget as governmental receipts
(i.e., revenues), which are deposited in the Crime Victims Fund
and spent in subsequent years. Any additional collections are
likely to be negligible because of the small number of cases
involved. Because any increase in direct spending would equal
the amount of fines collected (with a lag of 1 year or more),
the additional direct spending also would be negligible.
ESTIMATED IMPACT ON STATE AND LOCAL GOVERNMENTS
Although H.R. 21 would prohibit gambling businesses from
accepting credit card payments and other bank instruments from
gamblers who bet illegally over the Internet, the bill would
not create a new intergovernmental mandate as defined in UMRA.
Under current Federal and State law, gambling businesses are
generally prohibited from accepting bets or wagers over the
Internet. Thus, H.R. 21 does not contain a new mandate relative
to current law and would impose no costs on State, local, or
tribal governments.
ESTIMATED IMPACT ON THE PRIVATE SECTOR
H.R. 21 would impose a new Federal mandate on the private
sector. The bill would require designated payment systems to
establish policies and procedures designed to identify and
prevent transactions in connection with unlawful Internet
gambling. Designated payment systems are defined in the bill to
include any system utilized by businesses such as creditors,
credit card issuers, or financial institutions to effect a
credit transaction, an electronic fund transfer, or other
transfer of funds. Information provided by representatives of
the financial services industry indicates that such
transactions can currently be identified through the use of
codes. Most financial institutions are currently able to
identify and block restricted transactions by using the coding
system. Thus, CBO estimates that the private sector's cost to
comply with the mandate would be small. There also could be
direct savings to those entities subject to the mandate as the
bill limits their liability arising from their compliance with
the requirement. CBO estimates that the total direct costs for
private-sector mandates in this bill would fall well below the
annual threshold established in UMRA ($117 million in 2003,
adjusted annually for inflation).
Although section 3 would prohibit gambling businesses from
accepting credit card payments and other bank instruments from
gamblers who bet illegally over the Internet, those provisions
would not create a new private-sector mandate as defined in
UMRA. Under current Federal and State law, gambling businesses
are generally prohibited from accepting bets or wagers over the
Internet. Thus, those provisions do not contain a new mandate
relative to current law.
PREVIOUS ESTIMATE
On May 15, 2003, CBO transmitted a cost estimate for H.R.
21, as reported by the House Committee on Financial Services on
March 27, 2003. The two versions of the bill are similar, and
the cost estimates are identical.
Both versions of the bill contain identical private-sector
mandates, for which CBO estimates that the total direct costs
would fall well below the annual threshold for private-sector
mandates established in UMRA.
ESTIMATE PREPARED BY:
Federal Spending: Lanette J. Walker and Mark Hadley (226-2860)
Federal Revenues: Mark Booth (226-2680)
Impact on State, Local, and Tribal Governments: Victoria Heid
Hall (225-3220)
Impact on the Private Sector: Cecil McPherson (226-2940)
ESTIMATE APPROVED BY:
Peter H. Fontaine
Deputy Assistant Director for Budget Analysis
Performance Goals and Objectives
H.R. 21 does not authorize funding. Therefore, clause
3(c)(4) of rule XIII of the Rules of the House of
Representatives is inapplicable.
Constitutional Authority Statement
Pursuant to clause 3(d)(1) of rule XIII of the Rules of the
House of Representatives, the Committee finds the authority for
this legislation in article I, section 8 of the Constitution.
Section-by-Section Analysis and Discussion
Section 1. Short title
This Act may be cited as the `Unlawful Internet Gambling
Funding Prohibition Act.''
Section 2. Findings
The Congressional findings note that: (1) Internet gambling
is primarily funded through the use of personal banking
instruments and plays a large role in the creation of
ultimately uncollectible personal debt; and (2) Internet
gambling is susceptible to abuse by money launderers.
Section 3. Prohibition on acceptance of any bank instrument for
Internet gambling
Subsection (a) creates a new crime that prohibits a
gambling business from accepting bank instruments in connection
with unlawful Internet gambling. Covered instruments include
credit cards, electronic fund transfers, and checks.
Subsection (b)(1) defines the term ``bets or wagers'' as
the staking or risking by any person of something of value upon
the outcome of a contest of others, a sporting event, or a game
subject to chance with the agreement that the winner will
receive something of greater value than the amount staked or
risked. This subsection clarifies that the term ``bets or
wagers'' does not include a bona fide business transaction
governed by the securities laws; a transaction subject to the
Commodity Exchange Act; an over-the-counter derivative
instrument and any other transaction exempt from State gaming
or bucket shop laws pursuant to the Commodity Exchange Act or
Securities Exchange Act; a contract of indemnity or guarantee;
a contract for life, health, or accident insurance; a deposit
with a depository institution; or certain participation in a
simulation sports game or education game.
It is the view of the Committee that the term ``bets or
wagers'' does not include participation in a simulation sports
game or educational game or contest that: (1) is not dependent
solely on the outcome of any single sporting event or
nonparticipant's singular individual performance in any single
sporting event; (2) has an outcome that reflects the knowledge
and skill of the participants, with an outcome determined
predominantly by accumulated statistical results of sporting
events; and (3) offers a prize or award established in advance
of the game and not determined by the number of participants.
This exclusion is intended to cover ``fantasy sports league
games'' which are simulation sports games in which the outcome
is determined using the results of actual sporting events, and
the outcome reflects the relative knowledge and skill of the
participants in determining those results. It is the view of
the Committee that fantasy sport leagues operated in this
manner are not gambling. It is important to note, however, that
this exclusion from the definition of a bet or wager is not
intended to change the legality of fantasy sports league games
or contests under the laws of any State, or under any other
applicable Federal law.
The Committee recognizes that many computer and video games
played on the Internet are based predominantly on skill, and
are not intended to be included within the definition of ``bets
or wagers.'' Also, such computer and video games, including
those that feature real sports teams and/or teams that are
members of an amateur or professional sports organization, do
not involve the staking or risking by any person of something
of value. The Committee intends that the courts will continue
to perform their traditional functions in determining whether
games are ``bets or wagers.''
It is the view of the Committee that the definition of
``bets or wagers'' does not include: (1) information exchanged
via private network if the information is used only to monitor
gaming device play, display prize amounts, provide security
information, and provide other accounting information; (2) news
reporting or analysis of wagering activity; and (3) posting or
reporting of educational information on how to make a bet or
wager or the nature of betting or wagering. Furthermore, it is
the view of the Committee that information exchanged via a
linked progressive game accounting system that does not accept
bets or wagers and that does not affect game outcome is not
included in the definition of the term ``bets or wagers.''
Subsection (b)(2) excludes from the term ``business of
betting or wagering'' any creditor, credit card issuer, insured
depository institution, financial institution, operator of a
terminal at which an electronic fund transfer may be initiated,
money transmitting business, or international, national,
regional, or local network utilized to effect a credit
transaction, electronic fund transfer, stored value product
transaction, or money transmitting service, or any participant
in such network, or any interactive computer service or
telecommunications service, unless such entity has actual
knowledge and control of bets and wagers and operates or is
controlled by an entity that operates an unlawful Internet
gambling site. Subsection (b) also defines the terms
``designated payment system,'' ``Internet,'' ``interactive
computer service,'' ``restricted transaction'' and ``unlawful
Internet gambling.''
Subsection (c) authorizes the Attorney General of the
United States and State Attorneys General to pursue civil
remedies, including a preliminary injunction or permanent
injunction against any person to prevent or restrain a
violation of this Act. It clarifies that the Act does not
alter, supersede, or otherwise affect the Indian Gaming
Regulatory Act; generally limits the liability of an
interactive computer service to the removal or disabling of
access to an online site violating this section, upon proper
notice; clarifies that an interactive computer service not
liable under this Act is not liable under the Wire Act unless
it has actual knowledge and control of bets and wagers, and
operates or is controlled by an entity that operates, an
unlawful Internet gambling site; sets out factors to be
considered by a court in deciding whether to issue an
injunction against any payment system; and provides for notice
to bank regulators and institutions to allow violations to be
addressed through the bank regulatory process before the
injunction process is triggered.
Subsection (d) authorizes criminal penalties, including
fines or imprisonment for not more than 5 years or both.
Subsection (e) provides that, notwithstanding the safe
harbor provided in subsection (b)(2), a financial intermediary
(creditor, credit card issuer, financial institution, operator
of a terminal at which an electronic fund transfer may be
initiated, money transmitting business, or national, regional,
or local network), or interactive computer service or
telecommunications service that has actual knowledge and
control of bets and wagers, and operates or is controlled by an
entity that operates, an unlawful Internet gambling site can be
held liable under this section.
Subsection (f) requires the Secretary of the Treasury, in
conjunction with the Federal Reserve and the U.S. Attorney
General, to prescribe regulations within 6 months requiring any
payment system to establish policies and procedures reasonably
designed to identify restricted transactions, block restricted
transactions, or prevent restricted transactions from entering
its system; and provides that a payment system is not liable
for blocking or refusing a restricted transaction in an attempt
to comply with the Act's enforcement. The Federal functional
regulators and the Federal Trade Commission are given the
authority to enforce this subsection.
Section 4. Internet gambling in or through foreign jurisdictions
Section 4 provides that, in deliberations between the U.S.
Government and any other country on money laundering,
corruption, and crime issues, the U.S. Government should
encourage cooperation by foreign governments in identifying
whether Internet gambling operations are being used for money
laundering, corruption, or other crimes, advance policies that
promote the cooperation by foreign governments in the
enforcement of this Act, and encourage the Financial Action
Task Force on Money Laundering to study the extent to which
Internet gambling operations are being used for money
laundering. It also requires the Secretary of the Treasury to
submit an annual report to Congress on the deliberations
between the United States and other countries on issues
relating to Internet gambling.
Section 5. Amendments to gambling provisions
Section 5 makes certain amendments to definitions under
sections 1081 and 1084 of title 18, the Federal Wire Act, and
increases the penalty for unlawful transfers of wagering
information. The term ``wire communication facility'' under the
current law would now read ``communication facility'' and
includes transmissions by satellite and microwave as covered
means of communication. The Committee intends that this
definition will cover all present and future forms of
communication.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italics, existing law in which no change
is proposed is shown in roman):
CHAPTER 50 OF TITLE 18, UNITED STATES CODE
CHAPTER 50--GAMBLING
* * * * * * *
Sec. 1081. Definitions
As used in this chapter:
(1) The term ``gambling ship'' means a vessel used
principally for the operation of one or more gambling
establishments. Such term does not include a vessel
with respect to gambling aboard such vessel beyond the
territorial waters of the United States during a
covered voyage (as defined in section 4472 of the
Internal Revenue Code of 1986 as in effect on January
1, 1994).
(2) The term ``gambling establishment'' means any
common gaming or gambling establishment operated for
the purpose of gaming or gambling, including accepting,
recording, or registering bets, or carrying on a policy
game or any other lottery, or playing any game of
chance, for money or other thing of value.
(3) The term ``vessel'' includes every kind of
water and air craft or other contrivance used or
capable of being used as a means of transportation on
water, or on water and in the air, as well as any ship,
boat, barge, or other water craft or any structure
capable of floating on the water.
(4) The term ``American vessel'' means any vessel
documented or numbered under the laws of the United
States; and includes any vessel which is neither
documented or numbered under the laws of the United
States nor documented under the laws of any foreign
country, if such vessel is owned by, chartered to, or
otherwise controlled by one or more citizens or
residents of the United States or corporations
organized under the laws of the United States or of any
State.
(5) The term ``[wire] communication facility''
means any and all instrumentalities, personnel, and
services (among other things, the receipt, forwarding,
or delivery of communications) used or useful in the
transmission of writings, signs, pictures, and sounds
of all kinds by aid of wire, cable, satellite,
microwave, or other like connection (whether fixed or
mobile) between the points of origin and reception of
such transmission.
* * * * * * *
Sec. 1084. Transmission of wagering information; penalties
(a) Whoever being engaged in the business of betting or
wagering knowingly uses a [wire] communication facility for the
transmission in interstate or foreign commerce of bets or
wagers or information assisting in the placing of bets or
wagers on any sporting event or contest, or for the
transmission of a [wire] communication which entitles the
recipient to receive money or credit as a result of bets or
wagers, or for information assisting in the placing of bets or
wagers, shall be fined under this title or imprisoned not more
than [two] 5 years, or both.
* * * * * * *
Markup Transcript
BUSINESS MEETING
WEDNESDAY, MAY 14, 2003
House of Representatives,
Committee on the Judiciary,
Washington, DC.
The Committee met, pursuant to notice, at 10:01 a.m., in
Room 2141, Rayburn House Office Building, Hon. F. James
Sensenbrenner, Jr. [Chairman of the Committee] presiding.
[Intervening business.]
Chairman Sensenbrenner. The second item on the agenda is
the adoption of H.R. 21, the ``Unlawful Internet Gambling
Funding Prohibition Act.''
The Chair recognizes the gentleman from North Carolina, Mr.
Coble, the Chairman of the Subcommittee on Crime, Terrorism,
and Homeland Security, for a motion.
Mr. Coble. Mr. Chairman, the Subcommittee on Crime,
Terrorism, and Homeland Security reports in favor of the bill
H.R. 21, and moves its favorable recommendation to the full
House.
Chairman Sensenbrenner. Without objection, H.R. 21 will be
considered as read, and open for amendment at any point.
[The bill, H.R. 21, follows:]
Chairman Sensenbrenner. And the Chair recognizes the
gentleman from North Carolina to strike the last word.
Mr. Coble. I thank the Chairman.
Mr. Chairman, H.R. 21, the ``Unlawful Internet Gambling
Funding Prohibition Act,'' introduced by Congressman Jim Leach,
addresses a serious concern for many Americans; that is, the
problem of Internet gambling.
It is now estimated that 4.2 billion is wagered over the
Internet each year. This is an increase from $445 million just
6 years ago. There are currently more than 1,800 Internet
gambling sites, and the total dollar amount wagered worldwide
is expected to reach 10 billion in the near future.
The most troubling aspect of Internet gambling is the
relative ease of accessibility for our Nation's children. The
anonymous nature of the Internet makes it almost impossible to
prevent underage gamblers from using their parents' credit
cards, or even their own in some cases, to log on to a Web
site.
Another group of people particularly susceptible to
Internet gambling are America's problem gamblers. The National
Council of Problem Gambling estimates that there are currently
11 million Americans directly suffering from gambling problems.
High rates of financial debt, unemployment, bankruptcy,
divorce, homelessness, and suicide are all associated with
problem gambling. Virtual casinos and their video game
structure have been labeled the crack cocaine of gambling.
These facilities are open 24 hours a day, 7 days a week, all
within a person's own home. By making gambling more convenient,
it can do nothing but make the problem worse, it seems to me.
In addition to the social problems associated with Internet
gambling, these Internet sites also offer organized crime
groups a very simple opportunity to launder the proceeds of
their criminal activities. Because of the lack of oversight or
regulations and the high degree of anonymity, money laundering
through Internet gambling sites is already a major concern to
our Nation's law enforcement agencies.
Federal law is currently unclear as to whether or not all
types of Internet gambling is illegal. H.R. 21 is intended to
make it crystal clear that operating a gambling business on the
Internet is, in fact, illegal.
This bill creates a new crime of accepting financial
instruments such as credit cards or electronic fund transfers
for debts incurred in illegal Internet gambling.
Also, because the perpetrators of this crime are offshore
and beyond the reach of U.S. law enforcement tactics, the bill
enables State and Federal attorneys general to request that
injunctions be issued to any party, such as financial
institutions and Internet service providers, to assist in the
prevention or restraint of this crime.
Finally, the bill allows Federal bank regulators to create
rules requiring financial institutions to use designated
methods to block or filter illegal Internet gambling
transactions.
Mr. Speaker, I urge my colleagues to support this
legislation, and I yield back the balance of my time.
Chairman Sensenbrenner. The gentleman from Michigan.
Mr. Conyers. Thank you, Mr. Chairman.
This is our annual Internet gambling bill that we have to
deal with on a yearly basis. And in this ritual, the Congress
considers a bill that is supposed to prohibit Internet
gambling, but actually expands it.
By the way, to my friend from Carolina, Mr. Coble, didn't
the Department of Justice have some reservations about this
bill? I yield.
Mr. Coble. Not known to me, Mr. Conyers. Perhaps they did,
but I am not aware of it.
Mr. Conyers. Did they testify before this Subcommittee?
They testified, and they pointed out it would permit more
gambling.
Now, the bill has a different name, but it is the same
game. While proponents--you know, we talk about the evils of
gambling. Did Bennett testify before your Subcommittee, Mr.
Chairman--Subcommittee Chairman? Did Bill Bennett testify
before your Subcommittee?
Mr. Coble. He did not.
Mr. Conyers. He didn't. Okay. Proponents talk about the
evils of gambling, and they expand it yet for horse racing, dog
racing. And the bill explicitly carves out for any lawful
transaction within a business license or authorized by the
State--that translates into horse racing, dog racing, on
Internet sites--it doesn't require that these businesses be
licensed for Internet gambling, just any kind of license will
do.
Now, we dealt with this last year, and it is back again in
a new form.
Now, what about lotteries? Boy, there I am proud to join
with the Free Congress Foundation, the Traditional Values
Coalition, that say that this bill will expand gambling. And so
this is a critical issue here. Either at the hearings, which we
are so happy to have at the Subcommittee level, either supports
that it expands gambling or it doesn't. The United States
Department of Justice suggested that in its present form, it
would. So all we are saying is this: Instead of imposing an
Internet gambling prohibition that will drive many Internet
gambling operations offshore--that is the problem we have
here--into the hands of the unscrupulous, why don't we in the
Committee set an example by examining the feasibility of
strictly licensing and regulating the on-line gaming industry?
A gambling industry will ensure that gaming companies play fair
and drive out the disreputable operators in the field. It also,
incidentally--if anybody cares anymore--it preserves States
rights.
The rules should be simple. If the State does not want to
allow gambling in its borders, a licensed operator should
exclude the State's residents from being able to gamble on its
Web site. That is why we have another bill, 1223, that will
create a national Internet gambling licensing regulation study
commission to go into this.
Now, the R's and the D's in this Committee have stood
together against those who wanted to regulate the Internet and
restrict its boundaries, and so I hope we don't head down that
road to break up this bipartisan opposition that we have
enjoyed in the previous years.
Thank you, Mr. Chairman.
Chairman Sensenbrenner. The gentleman's time has expired.
Are there other amendments? The gentleman from Utah, Mr.
Cannon.
Mr. Cannon. Thank you, Mr. Chairman. I have an amendment at
the desk.
Chairman Sensenbrenner. The clerk will report the
amendment.
The Clerk. Amendment to H.R. 21 offered by Mr. Cannon:
Page 6, strike line 15 and all that follows through line
16.
Make appropriate clerical and technical changes.
[The amendment follows:]
Chairman Sensenbrenner. The gentleman from Utah is
recognized for 5 minutes.
Mr. Cannon. Thank you, Mr. Chairman.
I would like to start off by just pointing out that I am
against gambling, I don't like gambling, and agree with the
expression of the Chairman of the Crime Subcommittee as to the
vices that are associated with gambling, including youth
gambling, people who get addicted and carried away. Did I hear
that this bill was called the Bennett bill earlier today
somewhere, Mr. Chairman?
There are all kinds of problems with gambling. Utah is one
of only two States left in the Union that prohibits all forms
of gambling. Hawaii is the only one. We are feeling a little
bit in the minority in Utah, and it is my determination to
protect Utah from the invasion of gambling outside and in
particular on the Internet.
It is my view that whatever we do in this body should limit
gambling. There are some disagreements on that, I understand,
but in my view is that we ought to be limiting gambling. And,
secondly, where we can't limit it, we ought to be thinking in
terms of regulation. And, in fact, while there are difficulties
in regulating offshore entities, there are entities offshore
that want to be regulated and therefore subject themselves to
the jurisdiction of the United States and, therefore,
prosecution of illegality and crime.
Now, there are a couple problems with this bill, and I
don't want to mix them up in my amendment. I have passed out
letters from several people that I will come to in a moment,
but the opposition to the bill breaks down to a couple of
things.
The first is the burden that this bill would create on the
Internet. I agree with that, and the statements of people that
believe that this bill would be a burden on the Internet. I
encourage you to read the letters that we passed out and that I
will make part of the record shortly. That is very important to
me, so I oppose the underlying bill.
But, secondly, as I read this bill and several other people
read it, this bill--the section that I am striking,
III(b)(1)(e)(ix), on page 6, lines 15 and 16, specifically
exempt from the definition of bets or wagers any lawful
transaction with a business license or authorized by the State.
This would exempt, in my view, horse racing, dog racing,
lotteries, and in some cases casino-style wagers.
In support of that view--actually, in support of the bill
we have, the New York Thoroughbred Breeders, Inc., which would
like this bill because they view it as, I believe--in fact, Mr.
Chairman, I would like to make four letters part of the record.
Chairman Sensenbrenner. Without objection.
[The material referred to follows:]
Mr. Cannon. And request to do that.
The second letter is from the Conservative Free Congress
Foundation. And the gist of this letter is that, first of all,
there are--this section creates carveouts for horse racing, dog
racing, and jai alai; and, secondly, that it is not good to
regulate commerce on the Internet. The Chamber of Commerce
focuses on the enforcement mechanism, and points out that
electronic checks or electronic debt transactions don't have
the same system that credit cards have today, and that the
current bill would encumber the development of those
transactions.
The Traditional Values Coalition focuses with clarity on
the carveouts.
And then, finally, a letter from the Americans for Tax
Reform opposes this on the basis that it creates additional
costs on financial institutions, and also that it chooses
winners and losers in Internet commerce.
The U.S. Department of Justice and the National Association
of Attorneys General have concerns about the carveout. In
testimony before the Senate Banking Committee, John Malcomb of
the U.S. Department of Justice testified that the
aforementioned section was one of the reasons DOJ could not
endorse Senate 627, which is nearly identical to H.R. 21.
Testifying on behalf of the National Association of Attorneys
General, Richard Blumenthal, the Attorney General of
Connecticut, warned that under that bill the exceptions could
swallow the rule. In testimony before the House Judiciary
Committee, when asked if that section of H.R. 21 would allow
lotteries to go on-line, Malcomb responded: Absolutely.
H.R. 21 is not really an Internet gambling prohibition
bill. In fact, it is an Internet gambling industrial policy
bill, defining a favored class of State-sponsored Internet
gambling. Last year, during consideration of a similar bill in
the 107th Congress, the Judiciary Committee voted
overwhelmingly against allowing carveouts in Internet gaming
legislation.
Chairman. Sensenbrenner. The gentleman's time has expired.
Mr. Cannon. Thank you, Mr. Chairman. I yield back.
Chairman Sensenbrenner. The gentleman from Florida, Mr.
Keller.
Mr. Keller. Thank you, Mr. Chairman. I move to strike the
last word.
Chairman Sensenbrenner. The gentleman is recognized for 5
minutes.
Mr. Keller. Mr. Cannon's amendment I believe is very well-
intentioned. In fact, the last time around, I tell you that I
voted in favor of it. This time, however, I am going to vote
against it, and I will tell you why.
First, I think it makes this bill unnecessarily
controversial. Second, it interferes with States' rights. And,
third, most importantly--for me anyway--is that this bill will
have the effect, albeit unintentionally, of killing this
legislation. And we don't have to guess, because last year
after we put this in the bill, the legislation was never even
brought to a floor vote based on its controversial nature.
I want to see this legislation pass. I am a big fan of Mr.
Cannon both personally and in terms of his legislative prowess,
and I am certain that his heart is in the right place. But as a
practical matter, because I want to see this pass, I am going
to vote no, and I would urge other people to consider doing the
same.
Mr. Cannon. Would the gentleman yield?
Mr. Keller. I will.
Mr. Cannon. I thank the gentleman. I don't know if this
will kill the legislation or not. Last year, the sponsor, in
the Judiciary Committee, of the bill congratulated me for
making the bill more conservative. I think that that is clearly
the case.
There is an alternative to the bill and the way we are
doing it. And, if it can't be passed without the carveouts,
then it probably shouldn't be passed. I think the only thing we
can really do that makes a difference is to regulate. And I
don't know how to did that yet. And so Mr. Conyers and I have
introduced a bill that would propose a study for doing that. I
think the weight of the problems of this bill are greater than
any good that might come out of it, and I will tell you that
from my perspective and from the State of Utah--we don't have
anyone here from Hawaii, but I suspect the feeling would be the
same there--this is insidious. The section that I am moving to
strike is either irrelevant--in other words, it won't kill the
bill to take it out--or it is insidious. If it is insidious,
then it ought to come out for the sake of Utah and Hawaii and
all the other States that want to limit gambling around the
country.
Thank you, And I yield back.
Mr. Keller. Mr. Cannon, and just to reclaim my time. I
certainly respect what you have to say. I guess it just comes
down to the fact that ultimately I would rather have 90 percent
of a loaf of bread than no loaf, frankly. And, with that, I
will yield back.
Chairman Sensenbrenner. The gentleman from Florida, Mr.
Wexler.
Mr. Wexler. Thank you, Mr. Chairman. And I move to strike
the last word.
Chairman Sensenbrenner. The gentleman is recognized for 5
minutes.
Mr. Wexler. Thank you.
I, too, am a big fan of Mr. Cannon, and I very much
appreciate his candor at the beginning of the explanation of
his amendment, which is, he very rightfully says he does not
like gambling.
[11:00 a.m.]
Mr. Wexler. And Mr. Cannon rightfully points out that the
State which he represents is apparently one of two, as I
understand it, that specifically prohibit gambling in the
context that he speaks of. The issue is not whether Mr. Cannon
or any one of us likes or doesn't like gambling. If I
understand Mr. Cannon's amendment correctly, the issue is
whether we are going to make a policy that says Americans
cannot use credit cards for behavior that is entirely legal.
That is the question.
I think smoking is awful, but I would never suggest that
Americans shouldn't be able to use credit cards to purchase
cigarettes because I happen to think it is a bad thing. Or I
wouldn't argue that somebody shouldn't be able to use a credit
card to purchase alcohol because I may think alcohol may not be
the right thing or there is a list, God knows, we could all
come up with of behaviors that people may find objectionable.
The issue here is whether or not Congress is going to make
a policy that says Americans cannot use credit cards to engage
in a behavior which in their State is legal. That is the only
issue. And Mr. Cannon, very honestly and deliberately, says he
believes that because gambling is bad we as a national
legislature should prohibit Americans from using credit cards
for a----
Mr. Cannon. Would the gentleman yield? That is not exactly
what I am saying. The underlying bill prohibits using credit
cards, and I agree with everything the gentleman has said up to
this point. I am only suggesting--I don't like that. I would
associate myself with your comments up to this point. In my
amendment, all we are doing is limiting the extension of this
bill to the State of Utah. In other words, the amendment I am
making either removes an irrelevant piece of this bill or
removes a piece of this bill which is insidious.
Mr. Keller's comment that this amendment makes the bill
controversial. If the gentleman doesn't want to limit credit
card access to gambling, then he would want to support my bill
if he believes that Mr. Keller is correct that my amendment
would make the bill more controversial.
I yield back.
Mr. Wexler. If I may retake my time for just a quick
moment. As I understand the bill, if any State prohibits a
behavior or activity, then this bill would not give people the
right to engage in it. Only activity which is legal under a
State's law, that is the activity in which that an individual
can engage in. In Utah, if it is already illegal, it would seem
to me already under this bill, Mr. Cannon, you and the people
of Utah have nothing to worry about.
Mr. Goodlatte. Would the gentleman yield? I thank the
gentleman for yielding. The gentleman from Florida is exactly
right. This has no impact on the people of the State of Utah
because the State of Utah, as the gentleman correctly notes, is
one of two States that don't allow any type of gambling. So the
language he seeks to strike, which says any lawful transaction
with a business licensed or authorized by a State, clearly does
not affect the State of Utah.
Mr. Wexler. I yield to Mr. Cannon. He wanted time.
Mr. Cannon. Thank you. If that was the case then there
wouldn't be a question about making the bill more controversial
with my amendment.
Mr. Wexler. Retaking my time, yes, because it seems that
your amendment would make it so that in other States where
there is, in fact, legal activity it would prohibit the use of
credit cards by those citizens.
Mr. Cannon. No, no. That is the underlying bill that does
that.
Mr. Wexler. No. The underlying bill allows credit card use
if it is for a legal activity already sanctioned in the State.
If it is not sanctioned, then you can't do it anyway.
Mr. Conyers. Could I ask my friend, have you seen page 3 of
this bill in which casinos can't use credit cards? And I will
read it to you just in case you may not have seen it. Means the
staking or risking by any person or something of value upon the
outcome of a contest, a sporting event, now catch this, or a
game subject to chance. And so you are absolutely right, Mr.
Cannon, that what we are doing for one we are now not doing for
the others. We are saying that casinos where it is lawful can't
use credit cards. Now so much for people smoking and not being
able to use credit cards and gamblers not being able to----
Chairman Sensenbrenner. Gentleman's time has expired.
Mr. Conyers.--what is wrong with casinos? Why do casinos
get discriminated?
Chairman Sensenbrenner. The gentleman from North Carolina,
Mr. Coble.
Mr. Coble. Mr. Chairman, I want to associate myself with
the glowing comments that have been directed in the direction
of Mr. Cannon. I also am an avid fan of Mr. Cannon, however, I
oppose this amendment. Not unlike much legislation that comes
before us, Mr. Chairman, conclusions are oftentimes subject to
interpretation. It is my belief that Mr. Wexler and Mr.
Goodlatte are on the money. It is my belief--no pun intended--
maybe I should strike that.
Chairman Sensenbrenner. Would the gentleman yield? Do you
have a license from North Carolina for that?
Mr. Coble. We will strike that previous word. I believe Mr.
Wexler and Mr. Goodlatte are correct in that if this bill
passes in its present form, I believe that gambling would still
be unlawful in Utah. Now I think Mr. Cannon probably does not
agree with that, but I oppose the amendment further because it
would strike the provision of the bill that states that the
term ``bets or wages'' does not include any lawful transaction
with a business licensed or authorized by a State. This
provision is duplicative of the actual definition of unlawful
Internet gambling as it appears on page 8 of the bill which is
defined as a bet or wager that is unlawful under any applicable
Federal or State law.
I am told that some groups feel that this is a carve-out in
their favor from the prohibition set forth in the bill. I
believe that those groups are misinterpreting current law and
with or without this provision will have to contend with the
prohibitions of the Wire Act. Contrary to what some have said,
this subsection does not serve as a loophole for the expansion
of gambling.
First, the provision requires a State to authorize or
license the business. This requires action by the States so
that Internet gambling sites do not justify their existence
with the fact that a State does not specifically forbid that
activity.
Second, the transaction must be lawful to fall under the
exemption. In other words, the authorization or license must be
consistent with State and Federal law. For example, in order
not to violate the Wire Act, a State that wants to sell lottery
tickets online would have to show that nobody outside of that
State is able to purchase those tickets online. And I believe,
Mr. Chairman, with current technology this is practically
impossible. I believe the language that the gentleman seeks to
strike simply preserves the ability of States to regulate
gambling. Because of this I would ask my colleagues to oppose
the amendment.
Mr. Cannon. Mr. Coble, would you yield for a question? We
had testimony the other day that indicated that MGM could limit
the place from which people were placing bets, at least with
current technology. Are you suggesting by your comments that no
State lottery could go online because of the prohibition--
because they would have an almost impossible time proving that
no one in Utah could place a bet on a lottery from, say,
Tennessee?
Mr. Coble. With current technology, yeah.
Mr. Cannon. In other words, you are saying that Tennessee
will not go online with its lottery because Tennessee cannot
prove that it cannot prohibit people in Utah from betting?
Mr. Coble. That is my belief.
Mr. Cannon. With all due respect, I don't want this law to
turn on technology or the lack thereof. I don't think that we
can rely on that. I think if this is duplicative, as you just
said, then it ought to come out. I don't see a purpose for it
if it is duplicative. If it is not duplicative then we are
going to have judges and appeals courts determining what this
actually means from their own light instead of the light we are
trying to shine here. If this does what I believe it does,
which is create carveouts, it ought to go, or at least we want
to be clear about that as they vote. If it is duplicative then
it ought to go.
Mr. Coble. Let me reclaim. I think what I have tried to
make clear is the fact that I think this bill in its present
form preserves the right for States to regulate gambling. And
with that I yield back.
Chairman Sensenbrenner. The question is on the adoption----
Mr. Goodlatte. Mr. Chairman.
Chairman Sensenbrenner. Gentleman from Virginia, Mr.
Goodlatte.
Mr. Goodlatte. Mr. Chairman, I move to strike the last
word.
Chairman Sensenbrenner. The gentleman is recognized for 5
minutes.
Mr. Goodlatte. Thank you, Mr. Chairman. I will be brief. I
want to associate myself with the remarks of the Chairman of
the Subcommittee, the gentleman from Florida, in opposition to
this amendment. Now it is noteworthy that both gentlemen from
Florida voted for a Cannon amendment when a different bill came
before this Committee last year, but therein lies the key. This
is a very different piece of legislation than the legislation
that I brought before the Committee last year. This is the
legislation that came from the Financial Services Committee
passed by Mr. Oxley and Mr. Leach. They strongly opposed this
amendment because they know that it gets back to the problems
everybody told me they had with my bill last time.
We don't need to jump back into that thicket. We need to
address this legislation. It has an incredibly wide basis of
support. The gentleman cited some letters he made a part of the
record which were conflicting. Some of those folks like Free
Congress don't want any regulation on the Internet. Others like
the Traditional Values want total regulation on the Internet.
These are the groups, however, who support this specific bill
and not the Cannon amendment: The National Collegiate Athletic
Association, Major League Baseball, the Family Research
Council, the United Methodist Church, the American Family
Association, SBC, the United States Telephone Association,
American Express, Morgan Stanley, Citigroup, Securities
Industries Association, Christian Coalition, the National
Football League, the Federal Law Enforcement Officers
Association, the Family Foundation, Focus on the Family,
Southern Baptist Convention, Presbyterian Church, Net
Coalition.com, Qwest, Allegiance Telecom, the AARP, Household
Finance, eBay, MBNA and Concerned Women for America. That is an
amazingly broad based support for this legislation.
Don't spoil it by throwing it back into the thicket that I
had you in in the last Congress. And believe me, I have learned
from that. If you do, then suddenly you have this whole issue
of whether or not certain groups, whether it is horses or dogs
or jai alai or State lotteries
Or casinos or Indians, you name it, whatever the group is,
if they think that their current view of the law is affected by
removing the right of the States to regulate gambling, which
this bill preserves, they are going to be off of the sidelines
and again involved in this thicket. We don't need to go there
with this kind of broad based support for the current bill.
I urge my colleagues to oppose the amendment and support
the underlying bill.
Chairman Sensenbrenner. Question is on the amendment
offered by the gentleman from Utah, Mr. Cannon. Those in favor
will say aye. Opposed no. The ayes appear to have it.
Mr. Cannon. I ask for a rollcall.
Chairman Sensenbrenner. The question is on the Cannon
amendment. Those in favor will as your name is called, answer
aye. Those opposed no, and the Clerk will call the roll.
The Clerk. Mr. Hyde.
[no response.]
The Clerk. Mr. Coble.
Mr. Coble. No.
The Clerk. Mr. Coble votes no.
Mr. Smith.
Mr. Smith. No.
The Clerk. Mr. Smith votes no.
Mr. Gallegly.
[no response.]
The Clerk. Mr. Goodlatte.
Mr. Goodlatte. No.
The Clerk. Mr. Goodlatte votes no.
Mr. Chabot.
[no response.]
The Clerk. Mr. Jenkins.
[no response.]
The Clerk. Mr. Cannon.
Mr. Cannon. Aye.
The Clerk. Mr. Cannon votes aye.
Mr. Bachus.
Mr. Bachus. No.
The Clerk. Mr. Bachus votes no.
Mr. Hostettler.
Mr. Hostettler. Aye.
The Clerk. Mr. Hostettler votes aye.
Mr. Green.
Mr. Green. Aye.
The Clerk. Mr. Green votes aye.
Mr. Keller.
Mr. Keller. No.
The Clerk. Mr. Keller votes no.
Ms. Hart.
[no response.]
The Clerk. Mr. Flake.
[no response.]
The Clerk. Mr. Pence.
Mr. Pence. No.
The Clerk. Mr. Pence votes no.
Mr. Forbes.
[No response.]
The Clerk. Mr. King.
Mr. King. No.
The Clerk. Mr. King votes no.
Mr. Carter.
Mr. Carter. No.
The Clerk. Mr. Carter votes no.
Mr. Feeney.
Mr. Feeney. No.
The Clerk. Mr. Feeney votes no.
Mrs. Blackburn.
Mrs. Blackburn. Aye.
The Clerk. Mrs. Blackburn votes aye.
Mr. Conyers.
Mr. Conyers. Aye.
The Clerk. Mr. Conyers votes aye.
Mr. Berman.
[no response.]
The Clerk. Mr. Boucher.
[no response.]
The Clerk. Mr. Nadler.
Mr. Nadler. No.
The Clerk. Mr. Nadler votes no.
Mr. Scott.
Mr. Scott. No.
The Clerk. Mr. Scott votes no.
Mr. Watt.
Mr. Watt. Aye.
The Clerk. Mr. Watt votes aye.
Ms. Lofgren.
Ms. Lofgren. Aye.
The Clerk. Ms. Lofgren votes aye.
Ms. Jackson Lee.
Ms. Jackson Lee. Aye.
The Clerk. Ms. Jackson Lee votes aye.
Ms. Waters.
[no response.]
The Clerk. Mr. Meehan.
Mr. Meehan. Aye.
The Clerk. Mr. Meehan votes aye.
Mr. Delahunt.
[no response.]
The Clerk. Mr. Wexler.
Mr. Wexler. No.
The Clerk. Mr. Wexler votes no.
Ms. Baldwin.
Ms. Baldwin. Aye.
The Clerk. Ms. Baldwin votes aye.
Mr. Weiner.
Mr. Weiner. Aye.
The Clerk. Mr. Weiner votes aye.
Mr. Schiff.
Mr. Schiff. No.
The Clerk. Mr. Schiff votes no.
Ms. Sanchez.
Ms. Sanchez. Aye.
The Clerk. Ms. Sanchez votes aye.
Mr. Chairman.
Chairman Sensenbrenner. Aye.
The Clerk. Mr. Chairman votes aye.
Chairman Sensenbrenner. Additional Members wish to cast or
change their vote?
Gentleman from Ohio, Mr. Chabot.
Mr. Chabot. No.
The Clerk. Mr. Chabot, no.
Chairman Sensenbrenner. Gentleman from Tennessee, Mr.
Jenkins.
Mr. Jenkins. Aye.
The Clerk. Mr. Jenkins, aye.
The Clerk. Gentlewoman from Pennsylvania, Ms. Hart.
Ms. Hart. No.
The Clerk. Ms. Hart, no.
Chairman Sensenbrenner. Gentleman from California, Mr.
Berman.
Mr. Berman. Aye.
The Clerk. Mr. Berman, aye.
Chairman Sensenbrenner. Further Members who wish to cast or
change their votes? If not, the Clerk will report.
Gentlewoman from California, Ms. Waters.
Mr. Nadler. Mr. Chairman.
Chairman Sensenbrenner. Are there further Members?
Gentlewoman from California, Ms. Waters.
Ms. Waters. Aye.
The Clerk. Ms. Waters, aye.
Chairman Sensenbrenner. Further Members wish to cast or
change their vote? If not, the Clerk will report.
The Clerk. Mr. Chairman, there are 16 ayes and 15 nays.
Chairman Sensenbrenner. And the amendment is agreed to. Are
there further amendments?
Ms. Jackson Lee. Mr. Chairman, I have an amendment at the
desk. Amendment No. 1.
Chairman Sensenbrenner. The Clerk will report the
amendment.
The Clerk. Amendment to H.R. 21 offered by Ms. Jackson Lee.
Unlawful Internet gambling, strike section 3.
[The amendment follows:]
Chairman Sensenbrenner. Gentlewoman is recognized for 5
minutes.
Ms. Jackson Lee. Specifically, Mr. Chairman, thank you very
much. And might I say that I am in support of understanding the
impact of Internet gambling and would encourage this Committee
at the appropriate time to support the Conyers-Cannon
legislation that would allow us to do so. I think it is
appropriate to note that I have been on record in supporting
the concept and this bill in the past. I have no, if you will,
skepticism of now approaching it from a different perspective
and to also ask to move this bill or this theory along by
supporting the legislation of Conyers-Cannon, but because I
think we will gain a further understanding.
But this amendment in particular strikes all of section 3.
[The prepared statement of Ms. Jackson Lee follows:]
Prepared Statement of the Honorable Sheila Jackson Lee, a
Representative in Congress From the State of Texas
Mr. Chairman and Mr. Ranking Member, I have serious reservations
about H.R. 21, the ``Unlawful Internet Gambling Funding Act'' because I
believe that this legislation is premature, should be opposed by all of
my colleague, or in the alternative, should be subjected to copious
amendments.
I have reservations about H.R. 21 because while I believe very
strongly that internet gambling should be heavily regulated, I am not
convinced that the bans proposed in H.R. 21 are the most prudent course
of action at this time.
We have several options that we should consider before imposing
bans. For example, I believe the legislative option proposed by my
distinguished colleague, and Ranking Member of the full Judiciary
Committee, John Conyers in H.R. 1223 should be given our full
consideration before imposing the bans in H.R. 21. Congressman Conyers
recommend that we conduct further inquiries into the best ways to
regulate the Internet gambling issue instead of rushing to ban portions
of it.
H.R. 21 prohibits Internet gambling businesses from accepting bets
from credit cards, electronic fund transfers, money transmitting
business transfers, and instruments or transactions drawn through
financial institutions. It also grants Federal district courts
jurisdiction over violations of bill, requires the Secretary of the
Treasury to prescribe regulations on payment systems and policies to
prevent restricted transactions, and calls for U.S. and foreign
governments to cooperate to prevent money laundering and other crimes.
The issue of Internet gambling is always debated vigorously. The
Internet gambling industry receives wagers amounting to an estimated
$4.2 billion dollars per year through 1,800 internet gambling sites.
Internet gambling has a high likelihood of causing personal bankruptcy,
provides a fertile ground for fraud and money laundering, is difficult
for states to regulate, and offers an addictive and appealing gambling
outlet for children.
I was an original co-sponsor of H.R. 3215, an internet gambling
bill considered in the last Congress, because of my grave concern that
children and teenage gamblers, who have wide access to the Internet,
will abuse the Internet for gambling. A study released by the American
Psychological Association finds that pathological gambling is more
prevalent among youths than adults. Between five and eight percent of
young Americans and Canadians have a serious gambling problem, compared
with one to three percent of adults. The study went on to say that with
gambling becoming more accessible in U.S. society, it will be important
to be able to intervene in children's and adolescent's lives before the
activity can develop into a problem behavior.
Many Internet gambling sites require bare minimum information from
gamblers to participate. Security on bets placed over the Internet has
proven ineffective. And unlike traditional regulated casinos, Internet
operators have no demonstrated ability or requirement to verify a
participant's age or identification. Also, an Internet gambling site
can easily take a person's money, shut down their sites, and move on.
Gambling over the Internet, particularly because of the danger it
poses to our children, is an industry that I feel is in dire need of
heavy regulation. Particularly, given the fact that the majority of our
citizens and children have access to computers and the Internet, we
must ensure that laws are in place to eliminate the potential harm of
Internet gambling.
I will propose two amendments to H.R. 21 specifically geared toward
protecting children from the dangers of internet gambling.
While I am concerned about the impact of Internet gambling and
support rigorous regulation, I am also concerned that we have
insufficient data to reach a conclusion at this time. For example, I
recently met with representatives of Sure Fire Commerce, an on-line
payment processing company that represents Internet gaming merchants.
According to Sure Fire's records, they receive approximately 60,000
complaints yearly from customers who found unrecognized charges on
their credit cards. Of those 60,000 unrecognized charges an average of
only 5 have been for underage gambling. While I find one incident of
underage gambling unacceptable, Sure Fire's statistics suggest that
more study into the impact of Internet gambling is necessary.
Additionally, there is also evidence that passing H.R. 21, and
banning certain Internet gambling funding mechanisms, will worsen the
problems of underage internet gambling. If U.S. financial institutions
are prohibited from processing Internet gambling bets, habitual
gamblers and children will be forced to make the bets through foreign
financial institutions that are far less regulated. The global scope of
the Internet makes these foreign financial institutions readily
accessible. By passing H.R. 21 prematurely, we may not reduce the
incidence of underage gambling or habitual gambling at all. We may
simply force children and gambling addicts to use less credible betting
outlets.
Mr. Chairman and Mr. Ranking Member, I strongly believe that
gambling is a protected individual freedom and personal choice. I also
believe that the Congress should pass legislation that strictly
regulates the gambling industry to prevent underage gambling, habitual
gambling, and also money laundering. However, I feel that regulating
such as massive industry should not be done without a comprehensive
analysis to determine the most prudent regulations. For, these reasons
I believe that H.R. 21 is premature, and I encourage my colleagues
reconsider passing this legislation without ample amendment.
Mr. Chairman, the Committee is not in order.
Chairman Sensenbrenner. The gentlewoman is correct. The
meeting will be in order.
Ms. Jackson Lee. The amendment strikes all of section 3. It
leaves section 4, Internet gambling in or through foreign
jurisdictions, United States and international countries
cooperate to prevent money laundering. It leaves section 5,
amendments to gambling provisions, increases penalty for
unlawful wire transfers. This amendment removes the loophole
riddled portion of the bill that creates significant new
hardships on financial institutions, has troubling implications
for Internet privacy and is probably unworkable.
It leaves in place a simple amendment to the Wire Act,
which is the current law banning the interstate transmission of
bets or wages that makes clear that any bet that is illegal
under current law over the telephone is also illegal on the
Internet regardless of whether Internet wage passes through a
wire, is wireless, satellite based on whatever. But what this
does is of course manages to get us to where we would like to
be, and that is to get a better understanding of this problem
of Internet gambling and to allow this bill not to be shackled,
if you will, with some of the aspects that have been
controversial in the bill.
I ask my colleagues to support it.
[The prepared statement of Ms. Jackson Lee follows:]
Prepared Statement of the Honorable Sheila Jackson Lee, a
Representative in Congress From the State of Texas
Mr. Chairman, I propose this amendment to H.R. 21 to strike Section
3 of the bill which contains the provisions prohibiting persons engaged
in betting or wagering businesses from accepting credit, the proceeds
of credit, electronic funds transfers, checks, drafts, or similar
instruments, in connection with the participation of another person in
unlawful Internet gambling.
With Section 3 stricken, the bill would be streamlined to include
only the provisions in Sections 4 and 5 dealing with encouraging
cooperation between the United States and foreign countries in
investigating Internet gambling operations as a possible avenue for
money laundering, corruption, and other crimes. The amended bill would
also advance policies to promote international cooperation, and
encourage annual reports from the Financial Action Task Force on Money
Laundering, and the Secretary of the Treasury to address international
efforts to prevent money laundering through Internet gambling sites.
Finally, the amended bill will amend the gambling provisions and
increase the penalty for unlawful wire transfers of wagering
information from two years to five years.
I propose this amendment because the provisions of Section 3 of the
bill have not been adequately researched. There remains substantial
disagreement and debate about whether the bans proposed in H.R. 21 will
actually do more to encourage unlawful Internet gambling than to
prevent it. There is ample evidence that if H.R. 21 is passed, Internet
gamblers will be forced to place bets on websites based overseas. The
overseas websites are fertile ground for unscrupulous businesses and
may result in higher incidence of gambling addiction, gambling by
minors, and money laundering. The provisions in Section 3 should be
stricken and the most prudent means of regulating Internet gambling
should be researched before an outright ban on the use of instruments
from financial institutions is passed.
For these reasons, Mr. Speaker, I propose this amendment to H.R.
21.
Chairman Sensenbrenner. Gentlewoman yields back. The Chair
recognizes himself for 5 minutes in opposition to the
amendment. This amendment basically strikes the guts of the
bill, which is the prohibition on the use of credit cards for
unlawful Internet gambling. I don't think we wish to have
credit cards being used willy-nilly for any kind of gambling,
whether it is lawful or unlawful. I would hope that this
amendment would be defeated.
I yield back the balance of my time.
The question is on the Jackson Lee amendment. Those in
favor will say aye. Opposed no. Noes appear to have it. The
noes have it.
Ms. Jackson Lee. I have another amendment at the desk.
Chairman Sensenbrenner. The Clerk will report the second
amendment.
The Clerk. Amendment to H.R. 21 offered by Ms. Jackson Lee.
Delete all language in section 3, subpart (a)(1). The deleted
language reads one, credit or the proceeds of credit extended
to or on behalf of such other person, including credit extended
through the use of a credit card. Strike this language in full.
[The amendment follows:]
Chairman Sensenbrenner. Gentlewoman is recognized for 5
minutes.
Ms. Jackson Lee. Mr. Chairman, this amendment specifically
goes to what I think is the crux of the problem of this
particular bill, and it removes credit cards from the scope of
H.R. 21 because it does not make sense when credit cards can be
an effective tool of age verification if minors are using it.
It does not make sense in essence to utilize or have the bill
structured as it is. In the Children's Online Privacy
Protection Act Congress allowed credit cards as a method of age
verification to restrict access by minors to adult Web sites.
Clearly I believe--I am not sure the intent to allegedly bring
down the utilization of financial structures such as a credit
card system to decrease access to gambling. You are also
decreasing the access to information, to tracking, to utilizing
financial products that might actually help solve the problem
as opposed to enhance the problem. Certainly what you do is you
keep us from being able to track overusage, abuse and certainly
the use by minors.
I think it is important for this aspect of the bill to be
stricken, and I ask my colleagues to support it.
[The prepared statement of Ms. Jackson Lee follows:]
Prepared Statement of the Honorable Sheila Jackson Lee, a
Representative in Congress From the State of Texas
Mr. Chairman, I propose this amendment to H.R. 21 to protect minors
from the dangers of Internet gambling. This amendment removes credit
card transactions from the scope of the bill.
As H.R. 21 is presently drafted, no betting or wagering businesses
may knowingly accept credit cards, proceeds of credit, electronic fund
transfers, monies transmitted through a money-transmitting business, or
a check or similar draft, in connection with another person's
participation in unlawful Internet gambling.
Allowing credit cards to be used in Internet gambling transactions
helps to protect minors. Credit cards, unlike the other methods of
payment prohibited in H.R. 21, provide safeguards that help to insure
that minors do not engage in Internet gambling. For example, acquiring
a credit card requires the individual to verify he or she has reached
the age of 18. Credit cards are an effective method of verifying age
because minors are not issued their own accounts. Credit card companies
may also conduct a background or credit check to confirm the individual
is of age. The procedures help to deter minors from using credit cards
to gamble.
In fact, in previous legislation passed by Congress to protect
children from harmful Internet sites, credit cards were used as a
deterrent. In the Children's Online Privacy Protection Act (``COPPA'')
Congress specifically allowed the use of credit cards as a method of
age verification in order to restrict access by minors to websites
containing adult material. By prohibiting the use of credit cards, H.R.
21 ties the hands of law enforcement agencies and federal regulatory
agencies like the FTC to ensure sufficient controls to identify minors
who may attempt to gamble online.
There are also transactional safeguards available from credit card
companies that will help prevent Internet gambling by minors. For
example, several of the major credit card companies have a coding
system that tracks the type of merchandise that is being sold by a
merchant.
Mr. Speaker, Mr. Ranking Member, the age verification and
merchandise tracking safeguards provided by credit cards are not
sufficient alone to cure the problem of minors engaging in Internet
gambling. However, these safeguards are a step in the right direction
and they will prevent some minors from using Internet gambling
websites. If we pass this legislation without amendment, H.R. 21 will
eliminate the one proven method of effectively preventing children from
accessing Internet gambling websites. For these reasons, I propose that
H.R. 21 be amended so that credit cards can be used by betting and
wagering businesses.
Chairman Sensenbrenner. Gentlewoman yields back.
Ms. Jackson Lee. I yield back.
Chairman Sensenbrenner. The Chair recognizes himself for 5
minutes in opposition of the amendment. This amendment is
narrower but just as bad as her previous amendment. It allows
for the use of credit cards to pay for unlawful gambling. I
don't think we should encourage that and I would really
encourage my people on my left to complain about credit card
companies passing out too many credit cards when the bankruptcy
bill came up, to at least restrict the use of credit cards so
they can't be used to run up unlawful gambling debt.
Yield back the balance of my time and urge a no vote on the
amendment.
The question is on the amendment by the gentlewoman from
Texas, Ms. Jackson Lee. Those in favor will say aye. Opposed
no. Noes appear to have it. The noes have it. The amendment is
not agreed to.
Are there further amendments? Gentleman from Virginia, Mr.
Scott.
Mr. Scott. Mr. Chairman, I have an amendment at the desk.
Chairman Sensenbrenner. The Clerk will report the
amendment.
[The amendment follows:]
Mr. Scott. Mr. Chairman, the amendment was drawn to the
previous version of the bill. I ask unanimous consent that line
18 be changed to line 20.
Chairman Sensenbrenner. Without objection. The gentleman is
recognized for 5 minutes.
Mr. Scott. Did the Clerk report the amendment, Mr.
Chairman?
Chairman Sensenbrenner. The Clerk will report the
amendment.
The Clerk. Amendment to H.R. 21 offered by Mr. Scott of
Virginia. Page 2, line 20, after ``person'' insert ``may
knowingly offer and no person.''
Chairman Sensenbrenner. The gentleman is recognized for 5
minutes.
Mr. Scott. Thank you, Mr. Chairman, and I appreciate you
convening the markup. Mr. Chairman, I believe that gambling
should be tightly regulated. It has traditionally been
primarily a State regulatory responsibility. It should continue
to be so in my judgment, although I think it is also
appropriate for the Federal Government to have a role to assist
the States in the total regulatory scheme.
While I can appreciate the need to update the ability of
the Department of Justice to address illegal gambling in
today's context, I am concerned that this bill, similar to the
bills in the last several Congresses which have attempted to
control Internet gambling, will not be likely to be effective
in doing so.
Mr. Chairman, this bill is not about prohibiting Internet
gambling, it is only about regulating how you can bet on the
Internet and then it is only affected in the United States
Internet gambling market. It is not about reducing Internet
gambling because foreign sites are not affected.
Regulating anything on the Internet is problematic even
when it is desirable. Most law enforcement is jurisdiction
dependent. The Internet has no specific jurisdiction. As a
result, I suspect that even if we are successful in closing
down businesses physically located in the United States or even
in countries we can get to cooperate, because of the nature of
the Internet and electronic funds transfers we have no way to
control the activities physically located in other countries.
Therefore, the approach in H.R. 21 will be ultimately
ineffective.
Furthermore, a gambling Web site can simply code an
Internet gambling transaction as another type of transaction
and thereby evade the primary enforcement mechanism in this
bill. Or an eCash or electronic payment system can relocate to
another country and thereby evade any enforcement of the
provisions of the bill.
Mr. Chairman, I fear that the illegal Internet gambling,
money laundering, fraud and other problems will only be
encouraged by removing the transparent credit card process.
This will bring about the development of less transparent
processes where such illegal activities can flourish.
Mr. Chairman, we should not overestimate the cooperation we
will get from other countries. Presently over 50 nations allow
some form of gambling online and that number is likely to grow.
So even if we are successful in getting cooperation from most
countries, we would be simply increasing profit opportunities
for uncooperative countries, especially those without
diplomatic relations with the United States. The net result
will be flourishing Internet gambling exclusively run by
businesses over which the Department of Justice has no control.
To have any chance to be effective in prosecuting illegal
gambling over the Internet, you have to prosecute individuals.
This bill does not. Prosecuting individuals for illegal
Internet gambling would be effective because the technology of
the Internet would be in the Government's favor since
activities of illegal gambling would lead a trail leading
directly back to the gambler. So long as individuals can gamble
over the Internet with impunity a market will be provided for
them, which the regulatory scheme in this bill will not be able
to stop. If we prohibit domestic firms from supplying this
demand, it will be supplied by foreign companies who are
totally unregulated beyond any consumer protections and beyond
the reach of the United States taxing authorities.
Accordingly, Mr. Chairman, I offer an amendment to make
individuals subject to the prohibitions of the bill as well as
gambling businesses to ensure that the bill has some chance of
accomplishing its goal of restricting gambling over the
Internet.
Thank you, Mr. Chairman. I yield back the balance of my
time.
Chairman Sensenbrenner. The gentleman from North Carolina,
Mr. Coble.
Mr. Coble. Thank you, Mr. Chairman. I rise to oppose----
Chairman Sensenbrenner. The gentleman is recognized for 5
minutes.
Mr. Coble.--the amendment of my good friend from Virginia,
which would criminalize the activity of individual betters who
gamble online in addition to the activities of gambling
businesses. Although I am in favor, Mr. Chairman and
colleagues, of prohibiting gambling on the Internet, I do not
believe the testimony that we heard at the hearing would
support this amendment. The consensus seems to be that not only
from the witnesses but also from the authors of various
legislative proposals that the most effective way to prohibit
Internet gambling is to effectively shut down the gambling
businesses or sites themselves. And I believe the bill before
us to date accomplishes that goal.
If this measure is enacted into law and it proves to be
ineffective in prohibiting all lines of gambling, I would
certainly be willing to examine the issue of whether or not
criminalizing the acts of individuals is necessary. For the
time being, however, I believe that the provision of the bill
will make the most effective use of the limited law enforcement
resources that the country has. These same resources it would
take to prevent one individual from gambling online could be
better used, it seems to me, to prevent an entire online
gambling business or gambling site from operating and thereby
prevent thousands of people from accessing that site.
As we heard at the hearing, the problem of Internet
gambling is a complex problem in light of the fact that this
amendment could be placing undue burden on Federal law
enforcement agencies and the fact that the States will still
have the option of prosecuting an individual better under its
own State laws. I do not think it would be wise to adopt this
amendment at this time and urge my colleagues to oppose it.
Chairman Sensenbrenner. Question is on the amendment
offered by the gentleman from Virginia, Mr. Scott. Those in
favor will say aye. Opposed no. Noes appear to have it. The
noes have it, and the amendment is not agreed to.
Mr. Scott. Mr. Chairman, recorded vote.
Chairman Sensenbrenner. A recorded vote is requested. Those
in favor of the Scott amendment will as their name is called
answer aye. Those opposed no. And the Clerk will call the roll.
The Clerk. Mr. Hyde.
[no response.]
The Clerk. Mr. Coble.
Mr. Coble. No.
The Clerk. Mr. Coble votes no.
Mr. Smith.
[no response.]
The Clerk. Mr. Gallegly.
[no response.]
The Clerk. Mr. Goodlatte.
Mr. Goodlatte. No.
The Clerk. Mr. Goodlatte votes no.
Mr. Chabot.
Mr. Chabot. No.
The Clerk. Mr. Chabot votes no.
Mr. Jenkins.
[no response.]
The Clerk. Mr. Cannon.
Mr. Cannon. No.
Mr. Scott. Mr. Chairman, ask unanimous consent that the
recorded vote be eviscerated.
Chairman Sensenbrenner. Without objection, so ordered and
the recorded vote is eviscerated.
Are there further amendments. There are no further
amendments?
A reporting quorum is present. The question is on reporting
the bill H.R. 21 favorably, as amended. Those in favor will say
aye. Opposed no.
Chairman Sensenbrenner. The noes appear to have it.
Mr. Goodlatte. I ask for a recorded vote.
Chairman Sensenbrenner. Recorded vote is ordered. Those in
favor of reporting H.R. 21 favorably, as amended, will as your
name is called answer aye. Those opposed no. And the Clerk will
call the roll.
The Clerk. Mr. Hyde.
[no response.]
The Clerk. Mr. Coble.
Mr. Coble. Aye.
The Clerk. Mr. Coble votes aye.
Mr. Smith.
[no response.]
The Clerk. Mr. Gallegly.
[no response.]
The Clerk. Mr. Goodlatte.
Mr. Goodlatte. Aye.
The Clerk. Mr. Goodlatte votes aye.
Mr. Chabot.
Mr. Chabot. Aye.
The Clerk. Mr. Chabot votes aye.
Mr. Jenkins.
Mr. Jenkins. Aye.
The Clerk. Mr. Jenkins votes aye.
Mr. Cannon.
Mr. Cannon. No.
The Clerk. Mr. Cannon votes no.
Mr. Bachus.
Mr. Bachus. Aye.
The Clerk. Mr. Bachus votes aye.
Mr. Hostettler.
Mr. Hostettler. Aye.
The Clerk. Mr. Hostettler votes aye.
Mr. Green.
Mr. Green. Aye.
The Clerk. Mr. Green votes aye.
Mr. Keller.
Mr. Keller. Aye.
The Clerk. Mr. Keller votes aye.
Ms. Hart.
Ms. Hart. Aye.
The Clerk. Ms. Hart votes aye.
Mr. Flake.
Mr. Flake. No.
The Clerk. Mr. Flake votes no.
Mr. Pence.
Mr. Pence. Aye.
The Clerk. Mr. Pence votes aye.
Mr. Forbes.
[No response.]
The Clerk. Mr. King.
Mr. King. Aye.
The Clerk. Mr. King votes aye.
Mr. Carter.
Mr. Carter. Aye.
The Clerk. Mr. Carter votes aye.
Mr. Feeney.
Mr. Feeney. Aye.
The Clerk. Mr. Feeney votes aye.
Mrs. Blackburn.
Mrs. Blackburn. Aye.
The Clerk. Mrs. Blackburn votes aye.
Mr. Conyers.
Mr. Conyers. No.
The Clerk. Mr. Conyers votes no.
Mr. Berman.
Mr. Berman. No.
The Clerk. Mr. Berman votes no.
Mr. Boucher.
[no response.]
The Clerk. Mr. Nadler.
Mr. Nadler. No.
The Clerk. Mr. Nadler votes no.
Mr. Scott.
Mr. Scott. No.
The Clerk. Mr. Scott votes no.
Mr. Watt.
Mr. Watt. No.
The Clerk. Mr. Watt votes no.
Ms. Lofgren.
Ms. Lofgren. Pass.
The Clerk. Ms. Lofgren passes.
Ms. Jackson Lee.
Ms. Jackson Lee. No.
The Clerk. Ms. Jackson Lee votes no.
Ms. Waters.
Ms. Waters. No.
The Clerk. Ms. Waters votes no.
Mr. Meehan.
Mr. Meehan. No.
The Clerk. Mr. Meehan votes no.
Mr. Delahunt.
[no response.]
The Clerk. Mr. Wexler.
Mr. Wexler. No.
The Clerk. Mr. Wexler votes no.
Ms. Baldwin.
Ms. Baldwin. No.
The Clerk. Ms. Baldwin votes no.
Mr. Weiner.
Mr. Weiner. No.
The Clerk. Mr. Weiner votes no.
Mr. Schiff.
Mr. Schiff. No.
The Clerk. Mr. Schiff votes no.
Ms. Sanchez.
Ms. Sanchez. No.
The Clerk. Ms. Sanchez votes no.
Mr. Chairman.
Chairman Sensenbrenner. Aye.
The Clerk. Mr. Chairman votes aye.
Further Members who wish to cast or change their votes?
Gentlewoman from California, Ms. Lofgren.
Ms. Lofgren. Aye.
The Clerk. Ms. Lofgren, aye.
Chairman Sensenbrenner. Further Members who wish to cast or
change their votes? If not, the Clerk will report.
The Clerk. Mr. Chairman, there are 16 ayes and 15 noes.
Chairman Sensenbrenner. And the motion to report favorably
is agreed to.
I thank the Members of the Committee for their vigorous
debate. The business for this--without objection, the Chairman
is authorized to move to go to conference pursuant to House
rules. Without objection, the staff is directed to make any
technical and conforming changes. Without objection, the bill
will be reported to the House in the form of a single amendment
in the nature of a substitute incorporating the amendment
adopted here today. And all Members will be given 2 days, as
provided by the House rules, in which to submit additional
dissenting, supplemental or minority views. And the Committee
stands adjourned.
[Whereupon, at 11:35 a.m., the Committee was adjourned.]
Dissenting Views
Although we are opposed to illegal gambling, whether done
over the Internet or otherwise, we cannot support the
legislation reported by the Judiciary Committee because the
enforcement mechanisms will likely be ineffective. We question
the wisdom of spending valuable prosecutorial resources on
attempting to shut down Internet gambling sites--an endeavor
which ultimately is likely to be futile.
H.R. 21 makes it unlawful for a person engaged in a
gambling business knowingly to accept, with respect to the
transmission of bets or wagers, credit, electronic fund
transfers, checks and other similar financial instruments.\1\
By prohibiting the payment of credit, electronic funds, checks
and other similar instruments to Internet gambling businesses,
H.R. 21 deputizes the financial services industry to be the
primary enforcers of the law.
---------------------------------------------------------------------------
\1\ H.R. 21, subsection 3(a).
---------------------------------------------------------------------------
In order to ensure compliance, the bill authorizes law
enforcement to obtain injunctive or declaratory relief to
restrain or prevent any person from paying or assisting in the
payment of bets or wagers in interstate commerce.\2\ Such
relief, when granted against an interactive computer service,
is limited to the removal of, or disabling of access to, an
online site violating the law or a hypertext link to an online
site violating the law, that resides on a computer server that
such service controls or operates.\3\
---------------------------------------------------------------------------
\2\ H.R. 21, subsection (3)(c).
\3\ H.R. 21, subsection (3)(c)(4).
---------------------------------------------------------------------------
The version of H.R. 21 that the Committee initially
considered would have created an unfair situation in which
Internet betting was legal for certain types of gambling (e.g.
horse racing, lotteries, and dog racing \4\), but illegal for
other types of Internet gambling (e.g. charitable gaming and
Tribal gaming). At markup, however, the Committee adopted an
amendment offered by Rep. Cannon that would make it illegal for
any gambling business knowingly to accept financial
instruments, thereby eliminating the bill's preferences for
certain types of gambling interests.
---------------------------------------------------------------------------
\4\ Such wagering was legal if it was a ``lawful transaction with a
business licensed or authorized by a State.''
---------------------------------------------------------------------------
Credit card companies such as Visa and Master Card have
raised concerns with the bill in the past because it could
subject them to injunctions in numerous jurisdictions that
require different--or even conflicting--remedies to prevent the
payment of Internet bets or wagers. The result will be a hodge-
podge of inconsistent court orders, rather than a cohesive
enforcement scheme.
In addition, the U.S. Chamber of Commerce has expressed
concerns about the bill.\5\ They are concerned that the bill's
prohibition on accepting financial instruments for ``unlawful
Internet gambling'' is unduly vague and, as such, will subject
the financial services industry to criminal liability without
sufficient notice of the law. We agree that the law governing
what constitutes ``unlawful Internet gambling'' is not well
settled.
---------------------------------------------------------------------------
\5\ Letter from R. Bruce Josten to Chairman Sensenbrenner dated May
13, 2003.
---------------------------------------------------------------------------
Also, relying on financial institutions to enforce the law
will likely be ineffective. Credit card companies have a
limited ability to block financial transactions to illegal
Internet gambling businesses. The companies rely on a merchant
coding system to ascertain the nature of particular
transactions, but this system has limitations. First, it
depends on the merchant to accurately code a transaction. There
are obvious incentives for many Internet gambling merchants to
falsify their merchant identification.\6\
---------------------------------------------------------------------------
\6\ Testimony of Mark MacCarthy, Senior Vice President of Public
Policy, Visa U.S.A., Inc., before the Subcommittee on Oversight and
Investigations of the Committee on Financial Services, 107th Congress,
2nd Sess. (July 12, 2001).
---------------------------------------------------------------------------
More significantly, the Chamber also contends the coding
system applies only when an online gambler uses a credit card
to transact business directly with an online gambling merchant.
Often times, an Internet gambler will use electronic cash and
account funding systems to create a pool of electronically
available funds. Thus, a cardholder could use his or her credit
card to purchase ``e-cash'' on a web site that does not,
itself, offer gambling, but allows that e-cash to be used on
another web site that does offer gambling. The credit card
coding system would not capture these transactions as Internet
gambling.\7\ And if the e-cash website is offshore, it could be
beyond the reach of U.S. law enforcement.
---------------------------------------------------------------------------
\7\ Id.
---------------------------------------------------------------------------
Additionally, the bill does not make it illegal for an
individual to place an Internet bet. Rather, the bill only
criminalizes an Internet gambling business which accepts bets
or wagers or accepts credit or other types of financial
instruments. As such, the bill leaves out the most effective
enforcement mechanism--targeting individual bettors. This
legislation, therefore, has little or no deterrent value.
Offshore gambling sites will evade any restrictions easily, and
individual bettors will continue to seek out these sites and
gamble free from any fear of any legal consequences.
CONCLUSION
Although the intent of this legislation is laudable, we
believe conscripting credit card companies to enforce our
criminal laws is ineffective and will set a bad precedent
regarding the Internet. In addition, criminalizing only the
Internet gambling business without placing any penalty on the
individual bettor further weakens the enforcement scheme of the
bill. In the end, it is unlikely that this legislation will
successfully halt Internet gambling.
John Conyers, Jr.
Melvin L. Watt.
Sheila Jackson Lee.
Tammy Baldwin.
Anthony D. Weiner.
Linda T. Sanchez.