[House Report 109-412]
[From the U.S. Government Publishing Office]



109th Congress                                            Rept. 109-412
                        HOUSE OF REPRESENTATIVES
 2d Session                                                      Part 1

======================================================================



 
           UNLAWFUL INTERNET GAMBLING ENFORCEMENT ACT OF 2006

                                _______
                                

 April 6, 2006.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

  Mr. Oxley, from the Committee on Financial Services, submitted the 
                               following

                              R E P O R T

                             together with

                            DISSENTING VIEWS

                        [To accompany H.R. 4411]

      [Including cost estimate of the Congressional Budget Office]

      The Committee on Financial Services, to whom was referred 
the bill (H.R. 4411) to prevent the use of certain payment 
instruments, credit cards, and fund transfers for unlawful 
Internet gambling, and for other purposes, having considered 
the same, report favorably thereon with an amendment and 
recommend that the bill as amended do pass.

                                CONTENTS

                                                                   Page
Amendment........................................................     2
Purpose and Summary..............................................     8
Background and Need for Legislation..............................     8
Hearings.........................................................    11
Committee Consideration..........................................    11
Committee Votes..................................................    11
Committee Oversight Findings.....................................    12
Performance Goals and Objectives.................................    12
New Budget Authority, Entitlement Authority, and Tax Expenditures    12
Committee Cost Estimate..........................................    12
Congressional Budget Office Estimate.............................    12
Federal Mandates Statement.......................................    15
Advisory Committee Statement.....................................    15
Constitutional Authority Statement...............................    16
Applicability to Legislative Branch..............................    16
Section-by-Section Analysis of the Legislation...................    16
Changes in Existing Law Made by the Bill, as Reported............    18
Dissenting Views.................................................    28

                               Amendment

  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 Enforcement 
Act of 2006''.

SEC. 2. PROHIBITION ON ACCEPTANCE OF ANY PAYMENT INSTRUMENT FOR 
                    UNLAWFUL INTERNET GAMBLING.

  (a) In General.--Chapter 53 of title 31, United States Code, is 
amended by adding at the end the following new subchapter:

 ``SUBCHAPTER IV--PROHIBITION ON FUNDING OF UNLAWFUL INTERNET GAMBLING

``Sec. 5361. Congressional findings and purpose

  ``(a) Findings.--The Congress finds the following:
          ``(1) Internet gambling is primarily funded through personal 
        use of payment system instruments, 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 such sites.
          ``(3) Internet gambling is a growing cause of debt collection 
        problems for insured depository institutions and the consumer 
        credit industry.
          ``(4) New mechanisms for enforcing gambling laws on the 
        Internet are necessary because traditional law enforcement 
        mechanisms are often inadequate for enforcing gambling 
        prohibitions or regulations on the Internet, especially where 
        such gambling crosses State or national borders.
  ``(b) Rule of Construction.--No provision of this subchapter shall be 
construed as altering, limiting, or extending any Federal or State law 
or Tribal-State compact prohibiting, permitting, or regulating gambling 
within the United States.

``Sec. 5362. Definitions

  ``For purposes of this subchapter, the following definitions shall 
apply:
          ``(1) Bet or wager.--The term `bet or wager'--
                  ``(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 value 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;
                  ``(D) includes any instructions or information 
                pertaining to the establishment or movement of funds by 
                the bettor or customer in, to, or from an account 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 that 
                        Act);
                          ``(ii) any transaction conducted on or 
                        subject to the rules of a registered entity or 
                        exempt board of trade under 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 
                        an insured depository institution; or
                          ``(viii) any participation in a fantasy or 
                        simulation sports game, an educational game, or 
                        a 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 of the 
                                participants, or their skill at 
                                physical reaction or physical 
                                manipulation (but not chance), and, in 
                                the case of a fantasy or simulation 
                                sports game, has an outcome that is 
                                determined predominantly by accumulated 
                                statistical results of sporting events, 
                                including any nonparticipant's 
                                individual performances in such 
                                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 the activities of a 
        financial transaction provider, or any interactive computer 
        service or telecommunications service.
          ``(3) Designated payment system.--The term `designated 
        payment system' means any system utilized by a financial 
        transaction provider that the Secretary and the Board of 
        Governors of the Federal Reserve System, in consultation with 
        the Attorney General, jointly determine, by regulation or 
        order, could be utilized in connection with, or to facilitate, 
        any restricted transaction.
          ``(4) Financial transaction provider.--The term `financial 
        transaction provider' means 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 
        payment network utilized to effect a credit transaction, 
        electronic fund transfer, stored value product transaction, or 
        money transmitting service, or a participant in such network, 
        or other participant in a designated payment system.
          ``(5) Internet.--The term `Internet' means the international 
        computer network of interoperable packet switched data 
        networks.
          ``(6) Interactive computer service.--The term `interactive 
        computer service' has the same meaning as in section 230(f) of 
        the Communications Act of 1934.
          ``(7) Restricted transaction.--The term `restricted 
        transaction' means any transaction or transmittal involving any 
        credit, funds, instrument, or proceeds described in any 
        paragraph of section 5363 which the recipient is prohibited 
        from accepting under section 5363.
          ``(8) Secretary.--The term `Secretary' means the Secretary of 
        the Treasury.
          ``(9) State.--The term `State' means any State of the United 
        States, the District of Columbia, or any commonwealth, 
        territory, or other possession of the United States.
          ``(10) Unlawful internet gambling.--
                  ``(A) In general.--The term `unlawful Internet 
                gambling' means to place, receive, or otherwise 
                knowingly 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 or Tribal 
                lands in which the bet or wager is initiated, received, 
                or otherwise made.
                  ``(B) Intrastate transactions.--The term `unlawful 
                Internet gambling' shall not include placing, 
                receiving, or otherwise transmitting a bet or wager 
                where--
                          ``(i) the bet or wager is initiated and 
                        received or otherwise made exclusively within a 
                        single State;
                          ``(ii) the bet or wager and the method by 
                        which the bet or wager is initiated and 
                        received or otherwise made is expressly 
                        authorized by and placed in accordance with the 
                        laws of such State, and the State law or 
                        regulations include--
                                  ``(I) age and location verification 
                                requirements reasonably designed to 
                                block access to minors and persons 
                                located out of such State; and
                                  ``(II) appropriate data security 
                                standards to prevent unauthorized 
                                access by any person whose age and 
                                current location has not been verified 
                                in accordance with such State's law or 
                                regulations; and
                          ``(iii) the bet or wager does not violate any 
                        provision of the--
                                  ``(I) Interstate Horseracing Act;
                                  ``(II) Professional and Amateur 
                                Sports Protection Act;
                                  ``(III) Gambling Devices 
                                Transportation Act; or
                                  ``(IV) Indian Gaming Regulatory Act.
                  ``(C) Intratribal transactions.--The term `unlawful 
                Internet gambling' shall not include placing, 
                receiving, or otherwise transmitting a bet or wager 
                where--
                          ``(i) the bet or wager is initiated and 
                        received or otherwise made exclusively--
                                  ``(I) within the Indian lands of a 
                                single Indian tribe (as those terms are 
                                defined by the Indian Gaming Regulatory 
                                Act); or
                                  ``(II) between the Indian lands of 2 
                                or more Indian tribes to the extent 
                                that intertribal gaming is authorized 
                                by the Indian Gaming Regulatory Act;
                          ``(ii) the bet or wager and the method by 
                        which the bet or wager is initiated and 
                        received or otherwise made is expressly 
                        authorized by and complies with the 
                        requirements of--
                                  ``(I) the applicable tribal ordinance 
                                or resolution approved by the Chairman 
                                of the National Indian Gaming 
                                Commission; and
                                  ``(II) with respect to class III 
                                gaming, the applicable Tribal-State 
                                Compact;
                          ``(iii) the applicable tribal ordinance or 
                        resolution or Tribal-State compact includes--
                                  ``(I) age and location verification 
                                requirements reasonably designed to 
                                block access to minors and persons 
                                located out of the applicable Tribal 
                                lands; and
                                  ``(II) appropriate data security 
                                standards to prevent unauthorized 
                                access by any person whose age and 
                                current location has not been verified 
                                in accordance with the applicable 
                                tribal ordinance or resolution or 
                                Tribal-State Compact; and
                          ``(iv) the bet or wager does not violate any 
                        provision of the--
                                  ``(I) Interstate Horseracing Act;
                                  ``(II) the Professional and Amateur 
                                Sports Protection Act;
                                  ``(III) the Gambling Devices 
                                Transportation Act; or
                                  ``(IV) the Indian Gaming Regulatory 
                                Act.
                  ``(D) Interstate horseracing.--The term `unlawful 
                Internet gambling' shall not include placing, 
                receiving, or otherwise transmitting a bet or wager 
                that is governed by and complies with the Interstate 
                Horseracing Act of 1978.
                  ``(E) Intermediate routing.--The intermediate routing 
                of electronic data shall not determine the location or 
                locations in which a bet or wager is initiated, 
                received, or otherwise made.
          ``(11) Other terms.--
                  ``(A) Credit; creditor; credit card; and card 
                issuer.--The terms `credit', `creditor', `credit card', 
                and `card issuer' have the same meanings as in section 
                103 of the Truth in Lending Act.
                  ``(B) Electronic fund transfer.--The term `electronic 
                fund transfer'--
                          ``(i) has the same meaning as in section 903 
                        of the Electronic Fund Transfer Act, except 
                        that such term includes transfers that would 
                        otherwise be excluded under section 903(6)(E) 
                        of that 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 same meaning as in section 903 of 
                the Electronic Fund Transfer Act, except that such term 
                does not include a casino, sports book, or other 
                business at or through which bets or wagers may be 
                placed or received.
                  ``(D) Insured depository institution.--The term 
                `insured depository institution'--
                          ``(i) has the same meaning as in section 3 of 
                        the Federal Deposit Insurance Act; and
                          ``(ii) includes an insured credit union (as 
                        defined in section 101 of the Federal Credit 
                        Union Act).
                  ``(E) Money transmitting business and money 
                transmitting service.--The terms `money transmitting 
                business' and `money transmitting service' have the 
                same meanings as in section 5330(d) (determined without 
                regard to any regulations prescribed by the Secretary 
                thereunder).

``Sec. 5363. Prohibition on acceptance of any financial instrument for 
                    unlawful Internet gambling

  ``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 such other person;
          ``(3) any check, draft, or similar instrument which is drawn 
        by or on behalf of such 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 and the Board of Governors of the 
        Federal Reserve System may jointly prescribe by regulation, 
        which involves a financial institution as a payor or financial 
        intermediary on behalf of or for the benefit of such other 
        person.

``Sec. 5364. Policies and procedures to identify and prevent restricted 
                    transactions

  ``(a) Regulations.--Before the end of the 270-day period beginning on 
the date of the enactment of this subchapter, the Secretary and the 
Board of Governors of the Federal Reserve System, in consultation with 
the Attorney General, shall prescribe regulations (which the Secretary 
and the Board jointly determine to be appropriate) requiring each 
designated payment system, and all participants therein, to identify 
and block or otherwise prevent or prohibit restricted transactions 
through the establishment of policies and procedures reasonably 
designed to identify and block or otherwise prevent or prohibit the 
acceptance of restricted transactions in any of the following ways:
          ``(1) The establishment of policies and procedures that--
                  ``(A) 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
                  ``(B) block restricted transactions identified as a 
                result of the policies and procedures developed 
                pursuant to subparagraph (A).
          ``(2) The establishment of policies and procedures that 
        prevent or prohibit the acceptance of the products or services 
        of the payment system in connection with a restricted 
        transaction.
  ``(b) Requirements for Policies and Procedures.--In prescribing 
regulations under subsection (a), the Secretary and the Board of 
Governors of the Federal Reserve System shall--
          ``(1) identify types of policies and procedures, including 
        nonexclusive examples, which would be deemed, as applicable, to 
        be reasonably designed to identify and block or otherwise 
        prevent or prohibit the acceptance of the products or services 
        with respect to each type of restricted transaction;
          ``(2) to the extent practical, permit any participant in a 
        payment system to choose among alternative means of identifying 
        and blocking, or otherwise preventing or prohibiting the 
        acceptance of the products or services of the payment system or 
        participant in connection with, restricted transactions; and
          ``(3) consider exempting certain restricted transactions or 
        designated payment systems from any requirement imposed under 
        such regulations, if the Secretary and the Board jointly find 
        that it is not reasonably practical to identify and block, or 
        otherwise prevent or prohibit the acceptance of, such 
        transactions.
  ``(c) Compliance With Payment System Policies and Procedures.--A 
financial transaction provider shall be considered to be in compliance 
with the regulations prescribed under subsection (a), if--
          ``(1) 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--
                  ``(A) identify and block restricted transactions; or
                  ``(B) otherwise prevent or prohibit the acceptance of 
                the products or services of the payment system, member, 
                or participant in connection with restricted 
                transactions; and
          ``(2) such policies and procedures of the designated payment 
        system comply with the requirements of regulations prescribed 
        under subsection (a).
  ``(d) No Liability for Blocking or Refusing to Honor Restricted 
Transactions.--A person that identifies and blocks a transaction, 
prevents or prohibits the acceptance of its products or services in 
connection with a transaction, or otherwise refuses to honor a 
transaction--
          ``(1) that is a restricted transaction;
          ``(2) that such person reasonably believes to be a restricted 
        transaction; or
          ``(3) as a designated payment system or a member of a 
        designated payment system in reliance on the policies and 
        procedures of the payment system, in an effort to comply with 
        regulations prescribed under subsection (a),
shall not be liable to any party for such action.
  ``(e) Regulatory Enforcement.--The requirements of this section shall 
be enforced exclusively by--
          ``(1) the Federal functional regulators, with respect to the 
        designated payment systems and financial transaction providers 
        subject to the respective jurisdiction of such regulators under 
        section 505(a) of the Gramm-Leach-Bliley Act and section 5g of 
        the Commodities Exchange Act; and
          ``(2) the Federal Trade Commission, with respect to 
        designated payment systems and financial transaction providers 
        not otherwise subject to the jurisdiction of any Federal 
        functional regulators (including the Commission) as described 
        in paragraph (1).

``Sec. 5365. Civil remedies

  ``(a) Jurisdiction.--The district courts of the United States shall 
have original and exclusive jurisdiction to prevent and restrain 
restricted transactions by issuing appropriate orders in accordance 
with this section, regardless of whether a prosecution has been 
initiated under this subchapter.
  ``(b) Proceedings.--
          ``(1) Institution by federal government.--
                  ``(A) In general.--The United States, acting through 
                the Attorney General, may institute proceedings under 
                this section to prevent or restrain a restricted 
                transaction.
                  ``(B) Relief.--Upon application of the United States 
                under this paragraph, the district court may enter a 
                temporary restraining order, a preliminary injunction, 
                or an injunction against any person to prevent or 
                restrain a restricted transaction, in accordance with 
                rule 65 of the Federal Rules of Civil Procedure.
          ``(2) Institution by state attorney general.--
                  ``(A) In general.--The attorney general (or other 
                appropriate State official) of a State in which a 
                restricted transaction allegedly has been or will be 
                initiated, received, or otherwise made may institute 
                proceedings under this section to prevent or restrain 
                the violation or threatened violation.
                  ``(B) Relief.--Upon application of the attorney 
                general (or other appropriate State official) of an 
                affected State under this paragraph, the district court 
                may enter a temporary restraining order, a preliminary 
                injunction, or an injunction against any person to 
                prevent or restrain a restricted transaction, in 
                accordance with rule 65 of the Federal Rules of Civil 
                Procedure.
          ``(3) Indian lands.--
                  ``(A) In general.--Notwithstanding paragraphs (1) and 
                (2), for a restricted transaction that allegedly has 
                been or will be initiated, received, or otherwise made 
                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 paragraph 
                        (1); and
                          ``(ii) the enforcement authorities specified 
                        in an applicable Tribal-State compact 
                        negotiated under section 11 of the Indian 
                        Gaming Regulatory Act (25 U.S.C. 2710) shall be 
                        carried out in accordance with that compact.
                  ``(B) 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.
  ``(c) Limitation Relating to Interactive Computer Services.--
          ``(1) In general.--Relief granted under this section against 
        an interactive computer service shall--
                  ``(A) be limited to the removal of, or disabling of 
                access to, an online site violating section 5363, or a 
                hypertext link to an online site violating such 
                section, that resides on a computer server that such 
                service controls or operates, except that the 
                limitation in this subparagraph shall not apply if the 
                service is subject to liability under this section 
                under section 5367;
                  ``(B) be available only after notice to the 
                interactive computer service and an opportunity for the 
                service to appear are provided;
                  ``(C) not impose any obligation on an interactive 
                computer service to monitor its service or to 
                affirmatively seek facts indicating activity violating 
                this subchapter;
                  ``(D) specify the interactive computer service to 
                which it applies; and
                  ``(E) specifically identify the location of the 
                online site or hypertext link to be removed or access 
                to which is to be disabled.
          ``(2) Coordination with other law.--An interactive computer 
        service that does not violate this subchapter shall not be 
        liable under section 1084(d) of title 18, except that the 
        limitation in this paragraph shall not apply if an interactive 
        computer service has actual knowledge and control of bets and 
        wagers and--
                  ``(A) 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
                  ``(B) 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.
  ``(d) Limitation on Injunctions Against Regulated Persons.--
Notwithstanding any other provision of this section, and subject to 
section 5367, no provision of this subchapter shall be construed as 
authorizing the Attorney General of the United States, or the attorney 
general (or other appropriate State official) of any State to institute 
proceedings to prevent or restrain a restricted transaction against any 
financial transaction provider, to the extent that the person is acting 
as a financial transaction provider.

``Sec. 5366. Criminal penalties

  ``(a) In General.--Whoever violates section 5363 shall be fined under 
title 18, or imprisoned for not more than 5 years, or both.
  ``(b) Permanent Injunction.--Upon conviction of a person under this 
section, the court may enter a permanent injunction enjoining such 
person from placing, receiving, or otherwise making bets or wagers or 
sending, receiving, or inviting information assisting in the placing of 
bets or wagers.

``Sec. 5367. Circumventions prohibited

  ``Notwithstanding section 5362(2), a financial transaction provider, 
or any interactive computer service or telecommunications service, may 
be liable under this subchapter if such person 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.''.
  (b) Technical and Conforming Amendment.--The table of sections for 
chapter 53 of title 31, United States Code, is amended by adding at the 
end the following:

   ``Subchapter IV--Prohibition on funding of unlawful internet gambling

``5361. Congressional findings and purpose.
``5362. Definitions.
``5363. Prohibition on acceptance of any financial instrument for 
unlawful Internet gambling.
``5364. Policies and procedures to identify and prevent restricted 
transactions.
``5365. Civil remedies.
``5366. Criminal penalties.
``5367. Circumventions prohibited.''.

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 purposes.
  (b) Report Required.--The Secretary of the Treasury shall submit an 
annual report to the Congress on any deliberations between the United 
States and other countries on issues relating to Internet gambling.

                          Purpose and Summary

    The Unlawful Internet Gambling Enforcement Act of 2006, 
H.R. 4411, prohibits the acceptance of any bank instrument for 
unlawful Internet gambling. It defines certain terms for 
purposes of the Act; establishes civil remedies, criminal 
penalties, and regulatory enforcement authorities; encourages 
cooperation by foreign governments in the enforcement of the 
Act; and requires the Secretary of the Treasury to report 
annually to Congress on deliberations between the United States 
and other countries on issues relating to Internet gambling. 
Its primary purpose is to give U.S. law enforcement new, more 
effective tools for combating offshore Internet gambling sites 
that illegally extend their services to U.S. residents via the 
Internet.

                  Background and Need for Legislation

    The Committee on Financial Services has established a 
comprehensive hearing and markup record on Internet gambling, 
most particularly in the 107th Congress. In addition to the 
extensive debate at the Committee's October 11, 2001 markup of 
H.R. 3004, the Financial Anti-Terrorism Act of 2001, Internet 
gambling was addressed at the Committee's October 3, 2001 
hearing on terrorism and money laundering. At that hearing, the 
Federal Bureau of Investigation (FBI), the Department of 
Justice, and a money laundering expert testified that Internet 
gambling serves as a vehicle for money laundering and can be 
exploited by terrorists for that purpose. The FBI also 
testified about pending litigation linking organized crime to 
money laundering and Internet gambling.
    At two hearings held in July 2001 by the Subcommittee on 
Oversight and Investigations and the Subcommittee on Financial 
Institutions and Consumer Credit, witnesses discussed the legal 
status of Internet gambling, the social and financial 
challenges it poses, and legislative options for addressing 
those challenges.
    Many legal experts, including officials from the Department 
of Justice, State attorneys general, and others involved in law 
enforcement hold the view that Internet gambling is generally 
prohibited under various Federal statutes. Among them, the 
Federal Wire Act (18 U.S.C. 1084 et seq.) criminalizes the 
knowing use of a wire communication facility by a gambling 
establishment for the transmission of bets and wagers in 
interstate or foreign commerce.
    Conventional forms of gambling activities, such as casino 
wagering, State lotteries, slot machines and horse racing, 
legal in many jurisdictions, are regulated by the individual 
States. However, these activities are subject to intense 
scrutiny and a myriad of licensing and other operational 
requirements. Virtually all States prohibit the operation of 
gambling businesses not expressly permitted by their respective 
constitutions or special legislation. Internet gambling 
currently constitutes illegal gambling activity in all 50 
States. Although in June of 2001 the Nevada legislature 
authorized the Nevada Gaming Commission to legalize on-line, 
Internet gambling operations if and when such operations can be 
conducted in compliance with Federal law, the Gaming Commission 
believes that such compliance cannot be ensured at present.
    Because Internet gambling is generally held to be illegal 
under Federal and State law, most of the estimated 2,000 
Internet gambling sites today operate from offshore locations 
in the Caribbean and elsewhere. As such, they operate 
effectively beyond the reach of U.S. regulators and law 
enforcement, as well as the statutory anti-money laundering 
regimes that apply to U.S.-based casinos. These ``virtual 
casinos'' advertise the ease of opening betting accounts mainly 
through the use of credit cards and alternative payment 
systems. Internet gambling sites are not only vulnerable to 
criminal exploitation by money launderers; they also can easily 
abuse a customer's credit card information or manipulate the 
odds of a particular wager to the casino's advantage.
    At the Oversight Subcommittee's hearing on July 12, 2001, 
the American Gaming Association (AGA), representing commercial 
casinos and their supporters in the United States, addressed 
some of the practical problems associated with Internet 
gambling, including the difficulty of subjecting Internet 
operations to the kinds of regulation currently applied to 
U.S.-based casinos. According to the AGA, its major concern is 
that offshore Internet gambling sites ``frustrate important 
state policies, including restrictions on the availability of 
gaming within each State.'' The AGA went on to say: ``* * * 
unregulated Internet gambling that exists today allows an 
unlicensed, untaxed, unsupervised operator to engage in 
wagering that is otherwise subject to stringent federal and 
state regulatory controls. These controls are vital to 
preserving the honesty, integrity and fairness that those in 
the gaming industry today have worked so hard for so long to 
bring about.'' The AGA further reported that it does not 
believe the technology for exercising such controls with 
respect to Internet gambling is yet available.
    Testifying from a State perspective, the New Jersey 
Director of Gaming Enforcement also noted that offshore 
Internet gamblingoperations provide no tax revenue or jobs to 
States, unlike State-regulated casinos.
    In addition to the legal and economic challenges cited 
above, problem gambling, including problem Internet gambling, 
can lead to personal and family hardships, such as lost 
savings, excessive debt, bankruptcy, foreclosed mortgages, and 
divorce. In particular, Internet gambling is proving to be a 
serious problem for many college students. The National 
Collegiate Athletic Association (NCAA) at the July 2001 
hearings underscored the vulnerability of young people to 
losing large sums through Internet gambling. A 2003 study by 
the NCAA showed that almost 35 percent of male student-athletes 
engaged in some type of sports wagering behavior in the past 
year, and 10 percent of female student-athletes. One student 
reportedly lost $10,000 on Internet sports gambling over a 
three-month period. In another case, a student reportedly lost 
$5,000 on a single Internet wager on the Super Bowl and was 
forced to drop out of school. Further, current events show that 
not just student athletes, but professional athletes can be 
caught by the lure of Internet gambling, as the sports pages 
have detailed the roughly $500,000 owed by Washington Capitals 
hockey star Jaromir Jagr to a Caribbean Internet betting site.
    The New Jersey Director of Gaming Enforcement testified 
that the State of New Jersey had filed a suit against certain 
offshore casinos found to be taking online bets from minors in 
that State. Witnesses from the National Council on Problem 
Gambling and the Compulsive Gambling Center testified about the 
problems associated with compulsive or pathological gambling, 
and the Christian Coalition, in a letter to a Member of the 
Committee, echoed concerns about the impact of gambling on 
families and society and, in particular, the impact of Internet 
gambling on the poor, youth, and those who are already 
compulsive gamblers.
    Because of the pervasive legal, economic and social 
challenges posed by the rapid growth of Internet gambling, the 
National Gambling Impact Study Commission unanimously 
recommended in its 1999 final report that the Federal 
government prohibit, with no new exemptions, all Internet 
gambling not already authorized by law. The Commission also 
recommended that legislation be adopted to prohibit wire 
transfers to Internet gambling sites or to the banks which 
represent them, and called on the government to develop 
enforcement strategies that include credit card providers and 
money transfer agencies that facilitate Internet gambling.
    H.R. 4411, the Unlawful Internet Gambling Enforcement Act 
of 2006, builds on the recommendations of the National Gambling 
Impact Study Commission by prohibiting gambling businesses from 
accepting credit cards or other bank instruments in connection 
with unlawful Internet gambling. The bill requires the 
Secretary of the Treasury and the Federal Reserve Board, in 
conjunction with the U.S. Attorney General, to prescribe 
regulations requiring any payment system to establish policies 
and procedures reasonably designed to identify and block 
restricted transactions, or otherwise 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 bill's 
enforcement. It is intended to provide regulatory flexibility 
so that compliance may be achieved through coding of 
transactions or--for those financial instruments for which 
coding is not viable--through alternative methods consistent 
with the bill's goals. The bill is similar to H.R. 21, reported 
by the House Financial Services Committee by voice vote in the 
108th Congress, and H.R. 556, which passed the House of 
Representatives by voice vote in the 107th Congress. It is 
similar to provisions incorporated in the 108th Congress in the 
Committee-reported H.R. 10 and the 107th Congress in the 
Committee-reported version of H.R. 3004, the Financial Anti-
Terrorism Act of 2001, as well as to legislation adopted by the 
House Banking Committee in the 106th Congress (H.R. 4419).
    H.R. 4411 does not spell out which activities are legal and 
which are illegal under the bill; rather, it relies on the 
substantive laws in effect at the time a case is brought under 
the legislation, and law enforcement's interpretation of the 
underlying law. It clarifies that ``bet or wager'' does not 
include bona fide business transactions such as securities 
trading or buying or selling insurance contracts, or 
participation in a simulation sports game or educational game.
    H.R. 4411 does not change the legality of any gambling-
related activity in the United States. For instance, if use of 
the Internet in connection with dog racing is approved by state 
regulatory agencies and does not violate any Federal law, then 
it is allowed under the new section 5362(10)(A) of title 31.
    H.R. 4411 does not interfere with intrastate laws. New 
section 5362(10)(B) creates a safe harbor from the term 
``unlawful internet gambling'' for authorized intrastate 
transactions. The safe harbor would leave intact the current 
interstate gambling prohibitions such as the Wire Act, federal 
prohibitions on lotteries, and the Gambling Ship Act so that 
casino and lottery games could not be placed on websites and 
individuals could not access these games from their homes or 
businesses. The safe harbor is intended to recognize current 
law which allows states jurisdiction over wholly intrastate 
activity, where bets or wagers, or information assisting bets 
or wagers, do not cross state lines. This would, for example, 
allow retail lottery terminals to interact with a processing 
center within a state, and linking of terminals between 
separate casinos within a state if authorized by the state.
    H.R. 4411 is not intended to impose new burdens on 
financial institutions to identify which offshore gambling 
sites may be engaged in unlawful activities. Rather, the 
legislation contemplates a mechanism whereby banks and other 
financial service providers will be provided with the identity 
of specific Internet gambling bank accounts to which payments 
are to be prohibited. The obligation of financial institutions 
under H.R. 4411 would be similar in effect to their obligations 
under certain other U.S. laws, such as those administered by 
the Office of Foreign Assets Control (OFAC) barring financial 
transactions with terrorists and drug kingpins. The bill 
recognizes that manycredit card companies and issuing banks are 
taking steps to identify, block or prevent Internet gambling 
transactions, and builds on the experience gained through these 
voluntary efforts.
    It is the view of the Committee that the definition of 
``bets or wagers'' does not include 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. 
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.''

                                Hearings

    No hearings were held on this legislation in the 109th 
Congress.

                        Committee Consideration

    The Committee on Financial Services met in open session on 
March 15, 2006, and ordered H.R. 4411, the Unlawful Internet 
Gambling Enforcement Act of 2006, reported to the House as 
amended by a voice vote.

                            Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto. No 
record votes were taken in conjunction with the consideration 
of this legislation. A motion by Mr. Oxley to report the bill 
as amended to the House with a favorable recommendation was 
agreed to by a voice vote.
    The Committee considered the following amendment:
          An amendment in the nature of a substitute by Mr. 
        Leach, No.1, making various substantive and technical 
        changes in the bill, was agreed to by a voice vote.

                      Committee Oversight Findings

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee has held hearings and 
made findings that are reflected in this report.

                    Performance Goals and Objectives

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House of Representatives, the Committee establishes the 
following performance related goals and objectives for this 
legislation:
    By prohibiting the acceptance of any payment instruments 
for unlawful internet gambling, the availability of illegal 
offshore Internet gambling in the United States will be 
reduced.

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee adopts as its 
own the estimate of new budget authority, entitlement 
authority, or tax expenditures or revenues contained in the 
cost estimate prepared by the Director of the Congressional 
Budget Office pursuant to section 402 of the Congressional 
Budget Act of 1974.

                        Committee Cost Estimate

    The Committee adopts as its own the cost estimate prepared 
by the Director of the Congressional Budget Office pursuant to 
section 402 of the Congressional Budget Act of 1974.

                  Congressional Budget Office Estimate

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate 
provided by the Congressional Budget Office pursuant to section 
402 of the Congressional Budget Act of 1974:

                                                    March 30, 2006.
Hon. Michael G. Oxley,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 4411, the Unlawful 
Internet Gambling Enforcement Act of 2006.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Kathleen 
Gramp.
            Sincerely,
                                          Donald B. Marron,
                                                   Acting Director.
    Enclosure.

H.R. 4411--Unlawful Internet Gambling Enforcement Act of 2006

    Summary: H.R. 4411 would prohibit businesses from accepting 
credit cards, checks, or other bank instruments from gamblers 
who illegally bet over the Internet. It also would direct the 
Department of the Treasury and the Board of Governors of the 
Federal Reserve System (the Federal Reserve) to issue 
regulations outlining policies and procedures that could be 
used by financial institutions to identify and block gambling-
related transactions that are transmitted through their payment 
systems. Compliance with those prohibitions and regulations 
would be enforced by various federal agencies as well as state 
governments, and violations would be subject to new civil 
remedies and criminal penalties. Finally, the bill would 
require the Secretary of the Treasury to report annually to the 
Congress on any international deliberations regarding Internet 
gambling.
    Assuming appropriation of the necessary amounts, CBO 
estimates that implementing H.R. 4411 would cost about $2 
million over the 2007-2011 period. Enacting the bill would 
affect direct spending and revenues, but CBO estimates that the 
net impact on direct spending and revenues would not be 
significant in any year.
    H.R. 4411 contains no intergovernmental mandates as defined 
in the Unfunded Mandates Reform Act (UMRA) and would impose no 
costs on state, local, or tribal governments.
    H.R. 4411 would impose mandates, as defined in UMRA, on 
financial institutions and other financial transaction 
providers. Because the cost of the mandates would depend on 
regulations to be prescribed under the bill, CBO cannot 
determine whether the direct cost to comply with those mandates 
would exceed the annual threshold established by UMRA for 
private-sector mandates ($128 million in 2006, adjusted 
annually for inflation).
    Estimated cost to the Federal Government: The estimated 
budgetary impact of H.R. 4411 is shown in the following table. 
The costs of this legislation fall within budget function 370 
(commerce and housing credit).

----------------------------------------------------------------------------------------------------------------
                                                                       By fiscal year, in millions of dollars--
                                                                    --------------------------------------------
                                                                       2007     2008     2009     2010     2011
----------------------------------------------------------------------------------------------------------------
                                  CHANGES IN SPENDING SUBJECT TO APPROPRIATION

Estimated Authorization Level......................................        1        *        *        *        *
Estimated Outlays..................................................        1        *        *        *        *
----------------------------------------------------------------------------------------------------------------
Note.--* = Less than $500,000.

    Basis of estimate: For this estimate, CBO assumes that H.R. 
4411 will be enacted near the end of fiscal year 2006 and that 
funds will be appropriated for the activities authorized by the 
bill.

Spending subject to appropriation

    Based on information from the Department of the Treasury 
and other affected agencies, CBO estimates that implementing 
this bill would cost about $2 million over the 2007-2011 
period, assuming appropriation of the necessary amounts. That 
estimate primarily reflects the cost of developing regulations 
to identify and block financial transactions related to illegal 
Internet gambling. The cost of preparing annual reports to the 
Congress on international deliberations on this issue would not 
be significant. Spending by the Department of Justice and the 
Federal Trade Commission to enforce certain provisions in the 
bill would likely be negligible in any given year, CBO 
estimates.

Direct spending and revenues

    Enacting H.R. 4411 would affect direct spending and 
revenues because of provisions affecting financial regulatory 
agencies and criminal penalties. CBO estimates that such 
effects would not be significant.
    H.R. 4411 would direct financial regulatory agencies to 
enforce the regulations on illegal Internet gambling as they 
apply to financial institutions, including Office of the 
Comptroller of the Currency (OCC), Federal Deposit Insurance 
Corporation (FDIC), the Federal Reserve, the National Credit 
Union Administration (NCUA), and the Office of Thrift 
Supervision (OTS). Any additional direct spending by NCUA, OCC, 
and OTS to implement the bill would have no net budgetary 
impact because those agencies charge annual fees to cover all 
of their administrative expenses. In contrast, the FDIC's 
sources of income--primarily intragovernmental interest 
earnings and deposit insurance premiums--do not change in 
tandem with in its annual expenditures; as a result, any added 
costs would increase direct spending unless and until the FDIC 
raised deposit insurance premiums to offset those expenses. 
Budgetary effects on the Federal Reserve are recorded as 
changes in revenues.
    According to financial regulatory agency officials, 
enacting H.R. 4411 would not have a significant effect on their 
workload or budgets. For this estimate, CBO assumes that the 
FDIC would not assess additional premiums to cover the small 
costs associated with implementing this bill. Thus, CBO 
estimates that enacting this bill would increase direct 
spending and offsetting receipts of the NCUA, OCC, OTS, and 
FDIC by less than $500,000 a year. Based on information from 
the Federal Reserve, CBO estimates that the rulemaking and 
enforcement activities required by H.R. 4411 would reduce 
revenues by less than $500,000 a year.
    Because those prosecuted and convicted under the bill could 
be subject to criminal penalties, the federal government might 
collect additional fines if the bill is enacted. Collections of 
such fines are recorded in the budget as 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 one year or more), the additional 
direct spending also would be insignificant.
    Estimated impact on state, local, and tribal governments: 
Although H.R. 4411 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. 4411 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. 4411 would 
impose mandates, as defined in UMRA, on financial institutions 
and other financial transaction providers. Because the cost of 
the mandates would depend on regulations to be prescribed under 
the bill, CBO cannot determine whether the direct cost to 
comply with those mandates would exceed the annual threshold 
established by UMRA for private-sector mandates ($128 million 
in 2006, adjusted annually for inflation).
    The bill would require the Secretary of the Treasury and 
the Board of Governors of the Federal Reserve System, in 
consultation with the Attorney General, to prescribe 
regulations that would require financial transaction providers 
to identify and block restricted transactions in connection 
with unlawful Internet gambling through the establishment of 
reasonable policies and procedures. Such requirements would 
impose private-sector mandates on certain financial entities. 
Under the bill, the term ``financial transaction providers'' 
means creditors, credit card issuers, financial institutions, 
or other payment networks that utilize a designated payment 
system. Such systems would be determined by regulation.
    The cost for financial transaction providers to comply with 
those mandates would depend on the regulations to be 
prescribed. Information from representatives of the financial 
services industry indicates that electronic transactions can 
currently be identified and blocked through the use of a coding 
system. If the regulations apply only to those transactions, 
based on information from industry and government sources, CBO 
expects that the cost of the mandates would fall below UMRA's 
annual threshold. However, if the regulations also include the 
requirement for banks to identify and block checks or similar 
paper instruments used in a restricted transaction, the direct 
cost to comply with the mandates could increase significantly 
and CBO has no basis to estimate whether those costs would be 
above or below the annual threshold.
    Although section 2 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.
    Estimate prepared by: Federal Spending: Kathleen Gramp and 
Melissa Petersen. Federal Revenues: Barbara Edwards. Impact on 
State, Local, and Tribal Governments: Sarah Puro. Impact on the 
Private Sector: Page Piper/Bach.
    Estimate approved by: Peter H. Fontaine, Deputy Assistant 
Director for Budget Analysis.

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                   Constitutional Authority Statement

    Pursuant to clause 3(d)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee finds that the 
Constitutional Authority of Congress to enact this legislation 
is provided by Article 1, section 8, clause 1 (relating to the 
general welfare of the United States) and clause 3 (relating to 
the power to regulate interstate commerce).

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 102(b) 
(3) of the Congressional Accountability Act.

             Section-by-Section Analysis of the Legislation


Section 1. Short title

    This Act may be cited as the ``Unlawful Internet Gambling 
Enforcement Act of 2006.''

Section 2. Prohibition on acceptance of any payment instrument for 
        unlawful Internet gambling

    Subsection (a) adds a new ``Subchapter IV-Prohibition on 
Funding of Unlawful Internet Gambling'' to Chapter 53 of Title 
31 (Monetary Transactions). The new subchapter will come 
immediately after subchapter III, covering Money Laundering and 
Related Financial Crimes.

Section 5361. Congressional findings and purpose

    (a) Findings. The Congressional findings note that: (1) 
Internet gambling is primarily funded through the personal use 
of payment system instruments, 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 such sites; (3) Internet gambling is a growing cause 
of debt collection problems for insured depository institutions 
and the consumer credit industry; and (4) new mechanisms for 
enforcing gambling laws on the Internet are necessary because 
traditional law enforcement mechanisms are often inadequate for 
enforcing gambling prohibitions on the Internet, especially 
where such gambling crosses State or national borders.
    (b) Rule of Construction. No provision is to be construed 
as altering, limiting, or extending any Federal or State law or 
Tribal-State compact prohibiting, permitting or regulating 
gambling within the United States. This is intended to 
alleviate fears that this bill could have the effect of 
changing the legality of any gambling-related activity in the 
United States.

Section 5362. Definitions

    This defines the term ``bet or wager'' 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 value in the event of a certain outcome. This 
subsection clarifies that ``bet or wager'' does not include 
bona fide business transactions such as securities trading or 
buying or selling insurance contracts, or participation in a 
simulation sports game or educational game.
    Defines the term ``unlawful Internet gambling'' as placing, 
receiving, or transmitting a bet or wager by any means which 
involves the use of the Internet, where such bet or wager 
isunlawful under any applicable Federal or State law in the State or 
Tribal lands in which the bet or wager is initiated, received, or 
otherwise made. Clarifies that purely intrastate transactions conducted 
in accordance with state laws with appropriate security controls will 
not be considered unlawful internet gambling. Likewise, transactions 
solely within Tribal lands complying with similar security requirements 
and the Indian Gaming Regulatory Act will not be considered unlawful. 
Section 5362 (10)(D) addresses transactions complying with Interstate 
Horseracing Act (IHA) which will not be considered unlawful, because 
the IHA only regulates legal transactions that are lawful in each of 
the states involved. Also clarifies that intermediate routing of data 
packets does not determine the location in which bets or wagers are 
made.
    Section 5362 also defines the terms ``business of betting 
or wagering,'' ``designated payment system,'' ``Internet,'' and 
``restricted transaction.'' Several additional terms are 
defined by reference to other sections of the U.S. Code.

Section 5363. Prohibition on acceptance of any financial instrument for 
        unlawful Internet gambling

    Prohibits persons engaged in the business of betting or 
wagering from knowingly accepting credit, funds, bank 
instruments, or proceeds of any other form of financial 
transaction in connection with the participation of another 
person in unlawful Internet gambling. This is called a 
``restricted transaction'' according to the definitions 
section.

Section 5364. Policies and procedures to identify and prevent 
        restricted transactions

    (a) Regulations and (b) Requirements for Policies and 
procedures. Requires the Secretary of the Treasury and the 
Federal Reserve Board, in conjunction with the U.S. Attorney 
General, to prescribe regulations within nine months requiring 
any payment system to establish policies and procedures 
reasonably designed to identify and block restricted 
transactions, or otherwise prevent restricted transactions from 
entering its system.
    (c) Compliance and (d) Liability. Provides persons 
operating financial systems with immunity from civil liability 
for blocking transactions that they reasonably believe are 
restricted transactions, or in reliance on the regulations 
promulgated by the Treasury Department and Federal Reserve. 
Though a financial institution may block additional 
transactions based on reasonable belief, it has no duty to do 
so, and may rely solely on the regulations to fully discharge 
its obligations.
    (e) Enforcement. The Federal functional regulators and the 
Federal Trade Commission are given the exclusive authority to 
enforce this section.

Section 5365. Civil remedies

    Authorizes the U.S. Attorney General and State Attorneys 
General to pursue civil remedies, including a preliminary 
injunction or injunction against any person to prevent or 
restrain a violation of this legislation. It clarifies that the 
bill does not alter, supersede or otherwise affect the Indian 
Gaming Regulatory Act; generally limits responsibility of an 
interactive computer service to the removal or disabling of 
access to an online site violating this section, upon proper 
notice; restricts the ability to bring injunctive cases against 
financial transaction provider activities.

Section 5366. Criminal penalties

    Authorizes criminal penalties for violating section 5363, 
including fines or imprisonment for not more than five years or 
both. Also authorizes permanently enjoining a person convicted 
under this section from engaging in gambling activities.

Section 5367. Circumventions prohibited

    Provides that, notwithstanding the safe harbor provided in 
section 5362(2), a financial intermediary 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 criminally liable under this 
subchapter.

Section 3. Internet gambling in or through foreign jurisdictions

    Section 4(a) 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.
    Subsection (b) requires the Secretary of the Treasury to 
submit an annual report to Congress on any deliberations 
between the United States and other countries on tissues 
relating to Internet Gambling.

         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 (new matter is 
printed in italic and existing law in which no change is 
proposed is shown in roman):

TITLE 31, UNITED STATES CODE

           *       *       *       *       *       *       *



SUBTITLE IV--MONEY

           *       *       *       *       *       *       *


                   CHAPTER 53--MONETARY TRANSACTIONS


               SUBCHAPTER I--CREDIT AND MONETARY EXPANSION

Sec.
5301.  Buying obligations of the United States Government.
     * * * * * * *

    Subchapter IV--Prohibition on funding of unlawful internet gambling

5361. Congressional findings and purpose.
5362. Definitions.
5363. Prohibition on acceptance of any financial instrument for unlawful 
          Internet gambling.
5364. Policies and procedures to identify and prevent restricted 
          transactions.
5365. Civil remedies.
5366. Criminal penalties.
5367. Circumventions prohibited.

           *       *       *       *       *       *       *


  SUBCHAPTER IV--PROHIBITION ON FUNDING OF UNLAWFUL INTERNET GAMBLING

Sec. 5361. Congressional findings and purpose

  (a) Findings.--The Congress finds the following:
          (1) Internet gambling is primarily funded through 
        personal use of payment system instruments, 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 such sites.
          (3) Internet gambling is a growing cause of debt 
        collection problems for insured depository institutions 
        and the consumer credit industry.
          (4) New mechanisms for enforcing gambling laws on the 
        Internet are necessary because traditional law 
        enforcement mechanisms are often inadequate for 
        enforcing gambling prohibitions or regulations on the 
        Internet, especially where such gambling crosses State 
        or national borders.
  (b) Rule of Construction.--No provision of this subchapter 
shall be construed as altering, limiting, or extending any 
Federal or State law or Tribal-State compact prohibiting, 
permitting, or regulating gambling within the United States.

Sec. 5362. Definitions

  For purposes of this subchapter, the following definitions 
shall apply:
          (1) Bet or wager.--The term ``bet or wager''--
                  (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 value 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;
                  (D) includes any instructions or information 
                pertaining to the establishment or movement of 
                funds by the bettor or customer in, to, or from 
                an account 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 
                        that Act);
                          (ii) any transaction conducted on or 
                        subject to the rules of a registered 
                        entity or exempt board of trade under 
                        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 an insured depository 
                        institution; or
                          (viii) any participation in a fantasy 
                        or simulation sports game, an 
                        educational game, or a 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 
                                of the participants, or their 
                                skill at physical reaction or 
                                physical manipulation (but not 
                                chance), and, in the case of a 
                                fantasy or simulation sports 
                                game, has an outcome that is 
                                determined predominantly by 
                                accumulated statistical results 
                                of sporting events, including 
                                any nonparticipant's individual 
                                performances in such 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 
        the activities of a financial transaction provider, or 
        any interactive computer service or telecommunications 
        service.
          (3) Designated payment system.--The term ``designated 
        payment system'' means any system utilized by a 
        financial transaction provider that the Secretary and 
        the Board of Governors of the Federal Reserve System, 
        in consultation with the Attorney General, jointly 
        determine, by regulation or order, could be utilized in 
        connection with, or to facilitate, any restricted 
        transaction.
          (4) Financial transaction provider.--The term 
        ``financial transaction provider'' means 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 payment 
        network utilized to effect a credit transaction, 
        electronic fund transfer, stored value product 
        transaction, or money transmitting service, or a 
        participant in such network, or other participant in a 
        designated payment system.
          (5) Internet.--The term ``Internet'' means the 
        international computer network of interoperable packet 
        switched data networks.
          (6) Interactive computer service.--The term 
        ``interactive computer service'' has the same meaning 
        as in section 230(f) of the Communications Act of 1934.
          (7) Restricted transaction.--The term ``restricted 
        transaction'' means any transaction or transmittal 
        involving any credit, funds, instrument, or proceeds 
        described in any paragraph of section 5363 which the 
        recipient is prohibited from accepting under section 
        5363.
          (8) Secretary.--The term ``Secretary'' means the 
        Secretary of the Treasury.
          (9) State.--The term ``State'' means any State of the 
        United States, the District of Columbia, or any 
        commonwealth, territory, or other possession of the 
        United States.
          (10) Unlawful internet gambling.--
                  (A) In general.--The term ``unlawful Internet 
                gambling'' means to place, receive, or 
                otherwise knowingly 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 or Tribal lands in which 
                the bet or wager is initiated, received, or 
                otherwise made.
                  (B) Intrastate transactions.--The term 
                ``unlawful Internet gambling'' shall not 
                include placing, receiving, or otherwise 
                transmitting a bet or wager where--
                          (i) the bet or wager is initiated and 
                        received or otherwise made exclusively 
                        within a single State;
                          (ii) the bet or wager and the method 
                        by which the bet or wager is initiated 
                        and received or otherwise made is 
                        expressly authorized by and placed in 
                        accordance with the laws of such State, 
                        and the State law or regulations 
                        include--
                                  (I) age and location 
                                verification requirements 
                                reasonably designed to block 
                                access to minors and persons 
                                located out of such State; and
                                  (II) appropriate data 
                                security standards to prevent 
                                unauthorized access by any 
                                person whose age and current 
                                location has not been verified 
                                in accordance with such State's 
                                law or regulations; and
                          (iii) the bet or wager does not 
                        violate any provision of the--
                                  (I) Interstate Horseracing 
                                Act;
                                  (II) Professional and Amateur 
                                Sports Protection Act;
                                  (III) Gambling Devices 
                                Transportation Act; or
                                  (IV) Indian Gaming Regulatory 
                                Act.
                  (C) Intratribal transactions.--The term 
                ``unlawful Internet gambling'' shall not 
                include placing, receiving, or otherwise 
                transmitting a bet or wager where--
                          (i) the bet or wager is initiated and 
                        received or otherwise made 
                        exclusively--
                                  (I) within the Indian lands 
                                of a single Indian tribe (as 
                                those terms are defined by the 
                                Indian Gaming Regulatory Act); 
                                or
                                  (II) between the Indian lands 
                                of 2 or more Indian tribes to 
                                the extent that intertribal 
                                gaming is authorized by the 
                                Indian Gaming Regulatory Act;
                          (ii) the bet or wager and the method 
                        by which the bet or wager is initiated 
                        and received or otherwise made is 
                        expressly authorized by and complies 
                        with the requirements of--
                                  (I) the applicable tribal 
                                ordinance or resolution 
                                approved by the Chairman of the 
                                National Indian Gaming 
                                Commission; and
                                  (II) with respect to class 
                                III gaming, the applicable 
                                Tribal-State Compact;
                          (iii) the applicable tribal ordinance 
                        or resolution or Tribal-State compact 
                        includes--
                                  (I) age and location 
                                verification requirements 
                                reasonably designed to block 
                                access to minors and persons 
                                located out of the applicable 
                                Tribal lands; and
                                  (II) appropriate data 
                                security standards to prevent 
                                unauthorized access by any 
                                person whose age and current 
                                location has not been verified 
                                in accordance with the 
                                applicable tribal ordinance or 
                                resolution or Tribal-State 
                                Compact; and
                          (iv) the bet or wager does not 
                        violate any provision of the--
                                  (I) Interstate Horseracing 
                                Act;
                                  (II) the Professional and 
                                Amateur Sports Protection Act;
                                  (III) the Gambling Devices 
                                Transportation Act; or
                                  (IV) the Indian Gaming 
                                Regulatory Act.
                  (D) Interstate horseracing.--The term 
                ``unlawful Internet gambling'' shall not 
                include placing, receiving, or otherwise 
                transmitting a bet or wager that is governed by 
                and complies with the Interstate Horseracing 
                Act of 1978.
                  (E) Intermediate routing.--The intermediate 
                routing of electronic data shall not determine 
                the location or locations in which a bet or 
                wager is initiated, received, or otherwise 
                made.
          (11) Other terms.--
                  (A) Credit; creditor; credit card; and card 
                issuer.--The terms ``credit'', ``creditor'', 
                ``credit card'', and ``card issuer'' have the 
                same meanings as in section 103 of the Truth in 
                Lending Act.
                  (B) Electronic fund transfer.--The term 
                ``electronic fund transfer''--
                          (i) has the same meaning as in 
                        section 903 of the Electronic Fund 
                        Transfer Act, except that such term 
                        includes transfers that would otherwise 
                        be excluded under section 903(6)(E) of 
                        that 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 same meaning 
                as in section 903 of the Electronic Fund 
                Transfer Act, except that such term does not 
                include a casino, sports book, or other 
                business at or through which bets or wagers may 
                be placed or received.
                  (D) Insured depository institution.--The term 
                ``insured depository institution''--
                          (i) has the same meaning as in 
                        section 3 of the Federal Deposit 
                        Insurance Act; and
                          (ii) includes an insured credit union 
                        (as defined in section 101 of the 
                        Federal Credit Union Act).
                  (E) Money transmitting business and money 
                transmitting service.--The terms ``money 
                transmitting business'' and ``money 
                transmitting service'' have the same meanings 
                as in section 5330(d) (determined without 
                regard to any regulations prescribed by the 
                Secretary thereunder).

Sec. 5363. Prohibition on acceptance of any financial instrument for 
                    unlawful Internet gambling

  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 such other 
        person;
          (3) any check, draft, or similar instrument which is 
        drawn by or on behalf of such 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 and the Board of 
        Governors of the Federal Reserve System may jointly 
        prescribe by regulation, which involves a financial 
        institution as a payor or financial intermediary on 
        behalf of or for the benefit of such other person.

Sec. 5364. Policies and procedures to identify and prevent restricted 
                    transactions

  (a) Regulations.--Before the end of the 270-day period 
beginning on the date of the enactment of this subchapter, the 
Secretary and the Board of Governors of the Federal Reserve 
System, in consultation with the Attorney General, shall 
prescribe regulations (which the Secretary and the Board 
jointly determine to be appropriate) requiring each designated 
payment system, and all participants therein, to identify and 
block or otherwise prevent or prohibit restricted transactions 
through the establishment of policies and procedures reasonably 
designed to identify and block or otherwise prevent or prohibit 
the acceptance of restricted transactions in any of the 
following ways:
          (1) The establishment of policies and procedures 
        that--
                  (A) 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
                  (B) block restricted transactions identified 
                as a result of the policies and procedures 
                developed pursuant to subparagraph (A).
          (2) The establishment of policies and procedures that 
        prevent or prohibit the acceptance of the products or 
        services of the payment system in connection with a 
        restricted transaction.
  (b) Requirements for Policies and Procedures.--In prescribing 
regulations under subsection (a), the Secretary and the Board 
of Governors of the Federal Reserve System shall--
          (1) identify types of policies and procedures, 
        including nonexclusive examples, which would be deemed, 
        as applicable, to be reasonably designed to identify 
        and block or otherwise prevent or prohibit the 
        acceptance of the products or services with respect to 
        each type of restricted transaction;
          (2) to the extent practical, permit any participant 
        in a payment system to choose among alternative means 
        of identifying and blocking, or otherwise preventing or 
        prohibiting the acceptance of the products or services 
        of the payment system or participant in connection 
        with, restricted transactions; and
          (3) consider exempting certain restricted 
        transactions or designated payment systems from any 
        requirement imposed under such regulations, if the 
        Secretary and the Board jointly find that it is not 
        reasonably practical to identify and block, or 
        otherwise prevent or prohibit the acceptance of, such 
        transactions.
  (c) Compliance With Payment System Policies and Procedures.--
A financial transaction provider shall be considered to be in 
compliance with the regulations prescribed under subsection 
(a), if--
          (1) 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--
                  (A) identify and block restricted 
                transactions; or
                  (B) otherwise prevent or prohibit the 
                acceptance of the products or services of the 
                payment system, member, or participant in 
                connection with restricted transactions; and
          (2) such policies and procedures of the designated 
        payment system comply with the requirements of 
        regulations prescribed under subsection (a).
  (d) No Liability for Blocking or Refusing to Honor Restricted 
Transactions.--A person that identifies and blocks a 
transaction, prevents or prohibits the acceptance of its 
products or services in connection with a transaction, or 
otherwise refuses to honor a transaction--
          (1) that is a restricted transaction;
          (2) that such person reasonably believes to be a 
        restricted transaction; or
          (3) as a designated payment system or a member of a 
        designated payment system in reliance on the policies 
        and procedures of the payment system, in an effort to 
        comply with regulations prescribed under subsection 
        (a),
shall not be liable to any party for such action.
  (e) Regulatory Enforcement.--The requirements of this section 
shall be enforced exclusively by--
          (1) the Federal functional regulators, with respect 
        to the designated payment systems and financial 
        transaction providers subject to the respective 
        jurisdiction of such regulators under section 505(a) of 
        the Gramm-Leach-Bliley Act and section 5g of the 
        Commodities Exchange Act; and
          (2) the Federal Trade Commission, with respect to 
        designated payment systems and financial transaction 
        providers not otherwise subject to the jurisdiction of 
        any Federal functional regulators (including the 
        Commission) as described in paragraph (1).

Sec. 5365. Civil remedies

  (a) Jurisdiction.--The district courts of the United States 
shall have original and exclusive jurisdiction to prevent and 
restrain restricted transactions by issuing appropriate orders 
in accordance with this section, regardless of whether a 
prosecution has been initiated under this subchapter.
  (b) Proceedings.--
          (1) Institution by federal government.--
                  (A) In general.--The United States, acting 
                through the Attorney General, may institute 
                proceedings under this section to prevent or 
                restrain a restricted transaction.
                  (B) Relief.--Upon application of the United 
                States under this paragraph, the district court 
                may enter a temporary restraining order, a 
                preliminary injunction, or an injunction 
                against any person to prevent or restrain a 
                restricted transaction, in accordance with rule 
                65 of the Federal Rules of Civil Procedure.
          (2) Institution by state attorney general.--
                  (A) In general.--The attorney general (or 
                other appropriate State official) of a State in 
                which a restricted transaction allegedly has 
                been or will be initiated, received, or 
                otherwise made may institute proceedings under 
                this section to prevent or restrain the 
                violation or threatened violation.
                  (B) Relief.--Upon application of the attorney 
                general (or other appropriate State official) 
                of an affected State under this paragraph, the 
                district court may enter a temporary 
                restraining order, a preliminary injunction, or 
                an injunction against any person to prevent or 
                restrain a restricted transaction, in 
                accordance with rule 65 of the Federal Rules of 
                Civil Procedure.
          (3) Indian lands.--
                  (A) In general.--Notwithstanding paragraphs 
                (1) and (2), for a restricted transaction that 
                allegedly has been or will be initiated, 
                received, or otherwise made 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 
                        paragraph (1); and
                          (ii) the enforcement authorities 
                        specified in an applicable Tribal-State 
                        compact negotiated under section 11 of 
                        the Indian Gaming Regulatory Act (25 
                        U.S.C. 2710) shall be carried out in 
                        accordance with that compact.
                  (B) 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.
  (c) Limitation Relating to Interactive Computer Services.--
          (1) In general.--Relief granted under this section 
        against an interactive computer service shall--
                  (A) be limited to the removal of, or 
                disabling of access to, an online site 
                violating section 5363, or a hypertext link to 
                an online site violating such section, that 
                resides on a computer server that such service 
                controls or operates, except that the 
                limitation in this subparagraph shall not apply 
                if the service is subject to liability under 
                this section under section 5367;
                  (B) be available only after notice to the 
                interactive computer service and an opportunity 
                for the service to appear are provided;
                  (C) not impose any obligation on an 
                interactive computer service to monitor its 
                service or to affirmatively seek facts 
                indicating activity violating this subchapter;
                  (D) specify the interactive computer service 
                to which it applies; and
                  (E) specifically identify the location of the 
                online site or hypertext link to be removed or 
                access to which is to be disabled.
          (2) Coordination with other law.--An interactive 
        computer service that does not violate this subchapter 
        shall not be liable under section 1084(d) of title 18, 
        except that the limitation in this paragraph shall not 
        apply if an interactive computer service has actual 
        knowledge and control of bets and wagers and--
                  (A) 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
                  (B) 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.
  (d) Limitation on Injunctions Against Regulated Persons.--
Notwithstanding any other provision of this section, and 
subject to section 5367, no provision of this subchapter shall 
be construed as authorizing the Attorney General of the United 
States, or the attorney general (or other appropriate State 
official) of any State to institute proceedings to prevent or 
restrain a restricted transaction against any financial 
transaction provider, to the extent that the person is acting 
as a financial transaction provider.

Sec. 5366. Criminal penalties

  (a) In General.--Whoever violates section 5363 shall be fined 
under title 18, or imprisoned for not more than 5 years, or 
both.
  (b) Permanent Injunction.--Upon conviction of a person under 
this section, the court may enter a permanent injunction 
enjoining such person from placing, receiving, or otherwise 
making bets or wagers or sending, receiving, or inviting 
information assisting in the placing of bets or wagers.

Sec. 5367. Circumventions prohibited

  Notwithstanding section 5362(2), a financial transaction 
provider, or any interactive computer service or 
telecommunications service, may be liable under this subchapter 
if such person 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.

           *       *       *       *       *       *       *


                            DISSENTING VIEWS

    H.R. 4411 limits the ability of individual citizens to use 
bank instruments, including credit cards or checks, to finance 
Internet gambling. This legislation should be rejected by 
Congress since the federal government has no constitutional 
authority to ban or even discourage any form of gambling.
    In addition to being unconstitutional, H.R. 4411 is likely 
to prove ineffective at ending Internet gambling. Instead, this 
bill will ensure that gambling is controlled by organized 
crime. History, from the failed experiment of prohibition to 
today's futile ``war on drugs,'' shows that the government 
cannot eliminate demand for something like Internet gambling 
simply by passing a law. Instead, H.R. 4411 will force those 
who wish to gamble over the Internet to patronize suppliers 
willing to flaunt the ban. In many cases, providers of services 
banned by the government will be members of criminal 
organizations. Even if organized crime does not operate 
Internet gambling enterprises, their competitors are likely to 
be controlled by organized crime. After all, since the owners 
and patrons of Internet gambling cannot rely on the police and 
courts to enforce contracts and resolve other disputes, they 
will be forced to rely on members of organized crime to perform 
those functions. Thus, the profits of Internet gambling will 
flow into organized crime. Furthermore, outlawing an activity 
will raise the price vendors are able to charge consumers, thus 
increasing the profits flowing to organized crime from Internet 
gambling. It is bitterly ironic that a bill masquerading as an 
attack on crime will actually increase organized crime's 
ability to control and profit from Internet gambling.
    In conclusion, H.R. 4411 violates the constitutional limits 
on federal power. Furthermore, laws such as H.R. 4411 are 
ineffective in eliminating the demand for vices such as 
Internet gambling; instead, they ensure that these enterprises 
will be controlled by organized crime. Therefore I urge my 
colleagues to reject H.R. 4411, the Unlawful Internet Gambling 
Funding Prohibition Act.

                                                          Ron Paul.