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Federal Internet Gambling Prohibition Legislation Re-Introduced

1 March 2006

On February 16th, 2006 United States Congressmen Bob Goodlatte (R-VA) and Rick Boucher (D-VA) reintroduced proposed legislation (the "Bill") entitled the "Internet Gambling Prohibition Act" in the United States Congress. A similar piece of proposed legislation was previously introduced in both the 106th and 107th sessions of Congress but did not gain the necessary support for passage.

The Bill seeks to amend certain definitions in Title 18 of the United States Code, indirectly changing the Federal Wire Act also contained in Title 18, to make it clear that the prohibition on the use of the wires to conduct a betting or wagering business includes the use of the Internet. Also, the Bill seeks to expand the prohibition to extend to all bets or wagers, not merely bets or wagers on "sporting events" or "contests."

Below is a summary of what the proposed bill seeks to accomplish, as outlined in a summary on Rep. Goodlatte's website:

Increases Penalty - The maximum prison term for a violation is increased from 2 years to 5 years.

Defines Gambling - The bill defines a bet or wager to include wagering on sporting events, lotteries and games of chance. A bet or wager does not include securities and commodities transactions, indemnity and insurance contracts, and fantasy sports leagues.

Prohibits Credit Card Use for Illegal Gambling - The bill prohibits a gambling business from accepting certain forms of non-cash payment, including credit cards and electronic transfers, for the transmission of bets and wagers. This provision provides an enforcement mechanism to address the situation where the gambling business is located offshore but the gambling business used bank accounts in the United States.

Provides Additional Law Enforcement Tools to Combat Illegal Gambling - The bill provides an additional tool to fight illegal gambling by allowing Federal, State, local and tribal law enforcement to seek injunctions against any party to prevent and restrain violations of the Act. For example, law enforcement can use such injunctions to get assistance from Internet Service Providers to remove or disable access to hypertext links to online gambling sites that violate the Act.

Respects States Rights - The regulation of intrastate gambling is within the jurisdiction of the states, so the bill leaves the regulation of wholly intrastate betting or wagering to the states with tight controls to be sure that it does not extend beyond their borders or to minors. For this provision to be applicable, at the time of transmission, the bettor, the gambling business, and any facility processing the bets or wagers must be physically located in the same state and the state must explicitly permit such bets or wagers and explicitly authorize and license the gambling business.

Congressman Goodlatte made it clear that he is determined to see federal legislation addressing Internet gambling passed.

"I have been continuously committed to putting an end to gambling on the Internet," said Rep. Goodlatte. "The Internet Gambling Prohibition Act brings the current ban against interstate gambling up to speed with the development of new technology."

"Illegal online gambling doesn't just hurt gamblers and their families, it hurts the economy by draining dollars from the United States and serve as a vehicle for money laundering," stated Goodlatte. "It is time to shine a bright light on these illegal sites and bring a quick end to illegal gambling on the Internet."

The question that remains to be answered is whether the proposed legislation will do anything to curb the number of websites operating offshore and accepting wagers placed from the United States, which the federal government has a desire to prohibit. Clearly Internet gambling and Internet gaming are going to be hot topics for years to come. For the past decade many countries across the globe have developed licensing and regulatory systems to govern Internet operators. More recently, and largely the result of the United States federal governments adverse position towards Internet wagering, certain countries have developed more detailed regulatory systems concerning the operation of Internet wagering websites. With free trade treaties and restrictions, no matter what steps are taken legislatively, it will be several years before the issue is fully sorted out. The regulations that govern the United States commercial gaming industry have illustrated that there is a method for developing a sound regulatory system that assures the involvement of suitability individuals and the offering of fair games of chance. Consequently, as the debate proceeds on the topic of prohibiting Internet wagering it is important that an open dialogue occur on the merits of Rep. Goodlatte's legislation and the alternative of a developing a sound regulatory system for Internet wagering in the United States.

David Waddell
David Waddell is an attorney for Regulatory Management Counselors, P.C. (RMC), which assists businesses in navigating the legislative, regulatory and licensing systems governing Michigan’s commercial and tribal casino industries. He is the co-author of The State of Michigan Gaming Law Legal Resource Book and one of the founders of The Michigan Gaming Newsletter.

David Waddell Websites:

www.michigangaming.com
David Waddell
David Waddell is an attorney for Regulatory Management Counselors, P.C. (RMC), which assists businesses in navigating the legislative, regulatory and licensing systems governing Michigan’s commercial and tribal casino industries. He is the co-author of The State of Michigan Gaming Law Legal Resource Book and one of the founders of The Michigan Gaming Newsletter.

David Waddell Websites:

www.michigangaming.com