DOJ's proposed Internet gambling bill.
Re: regulation of Internet gambling.
Date: June 15, 2000.
Source: Department of Justice. This document was attached to the prepared testimony of Kevin DiGregory at the House Telecom Subcommittee hearing on HR 3125.

See also, Tech Law Journal summary of Internet gambling bills.

A BILL

Be it enacted by the House of Representatives and the Senate of the United States of America, in Congress assembled, that

SECTION 1. SHORT TITLE.

This Act may be cited as the "Internet Gambling Prohibition Act of 2000".

SEC. 2. PURPOSES AND FINDINGS.

(a) The Congress finds and declares that--

(1) the federal government has largely deferred to the states in matters relating to gambling, devoting its resources to gambling activities involving criminal matters (e.g., organized crime and fraud) or matters involving interstate or foreign commerce;

(2) historically, states have taken actions to prohibit or heavily regulate gambling activities due to perceived social impacts, concern about criminal activities, and moral positions;

(3) earlier this century, states discovered that illegal bookmaking operations were using telephones and other communications facilities to rapidly transmit gambling information between states and to and from foreign locations. These bookmaking operations were often run by organized crime groups;

(4) the use of technology enabling gambling businesses to transmit bets or wagers in interstate and foreign commerce raised serious concerns and left states unable to effectively enforce their gambling laws and to protect their citizens;

(5) in recognition of the growing use of technology by bookmaking operations in furtherance of their criminal activities, then-Attorney General Robert F. Kennedy transmitted in 1961 to Congress a proposed bill to assist states in the enforcement of their laws pertaining to gambling and to aid in the suppression of organized gambling activities;

(6) the 1961 bill was passed and codified at 18 U.S.C. § 1084. Section 1084 made it criminal for an individual engaged in the business of betting or wagering to use a wire communication facility to transmit in interstate or foreign commerce bets or wagers, or information assisting in the placing of bets or wagers, on any sporting event or contest;

(7) the prohibition on the transmission of bets or wagers in interstate and foreign commerce was necessary to protect the health, safety, and economic welfare of the Nation's citizens, as well as to uphold the gambling laws enacted by individual states;

(8) the Internet and other new technologies have hindered the ability of federal, state, tribal, and local governments to enforce their gambling laws and have created important new concerns with respect to the health, safety, and welfare of U.S. citizens;

(9) although section 1084 clearly prohibits Internet gambling related to any sporting event or contest, emerging technologies have allowed for new types of electronic gambling, including interactive games on the Internet such as poker and blackjack, which may not clearly be included within the types of gambling currently prohibited by section 1084. As a result, it has become necessary to amend section 1084 to eliminate any ambiguities in the law and to ensure that new types of gambling activities made possible by emerging technologies are prohibited;

(10) the Internet also allows virtually instantaneous and anonymous communication that is difficult to trace to a particular individual or organization, making the medium attractive to organized crime groups operating gambling businesses since it is difficult for law enforcement to detect and prevent crimes being committed by unknown and untraceable persons;

(11) this lack of accountability also raises the potential for numerous criminal activities. First, there is the possibility of abuse by gambling operators. The ability for operators to alter, move, or entirely remove sites from the Internet within minutes makes it possible for dishonest operators to take credit cards numbers and money from deposited accounts and close down. Second, operators may tamper with gambling software to manipulate games to their benefit. Unlike the highly-regulated resort-destination and Indian casinos in the physical world, assessing the integrity of Internet operations is quite difficult. Last, gambling on the Internet may provide an easy means for money laundering, as it provides criminal anonymity, remote access, and access to encrypted data;

(12) the anonymous nature of the Internet also creates the danger that access to Internet gambling will be abused by underage gamblers. Gambling businesses have no reliable way of confirming that gamblers are not minors who have gained access to a credit card and are gambling on their websites. The government has received numerous correspondence from concerned and affected citizens regarding this problem;

(13) in addition, since the Internet provides people with the opportunity to gamble at any time and from any place, Internet gambling presents a greater danger for compulsive gamblers and may cause severe financial consequences for the player and those dependent on the player's resources (e.g., dependent children);

(14) thus, these concerns have made it necessary to amend the provisions of 18 U.S.C. § 1084 to ensure that non-sports gambling over new and emerging technologies, including the Internet, is clearly prohibited by the section; and

(15) this amendment is in accordance with the United States government's policy of enacting legislation that is technology-neutral, especially as such legislation relates to the Internet and emerging technologies.

(b) It is the purpose of this bill to amend 18 U.S.C. § 1084 to confirm that it is criminal for an individual in the business of betting or wagering to use a communication facility to transmit in interstate or foreign commerce, within the special maritime and territorial jurisdiction of the United States, or to or from any place outside the jurisdiction of any nation with respect to any transmission to or from the United States, bets or wagers, or information assisting in the placing of bets or wagers.

SEC. 3. DEFINITIONS.

Section 1081 of title 18, United States Code, is amended --

(1) by designating the five undesignated paragraphs as subsections (a) - (e) respectively;

(2) in subsection (e), as so designated --

(A) by striking "wire communication" and inserting "communication";

(B) by inserting "satellite, microwave," after "cable,"; and

(C) by inserting "(whether fixed or mobile)" after "connection"; and

(3) by adding at the end the following:

"(f) The term 'information assisting in the placing of bets or wagers' means information knowingly transmitted by an individual in the business of betting or wagering for use in placing, receiving, making, or otherwise enabling or facilitating a bet or wager that violates applicable federal, state, tribal, or local law and does not include --

"(1) the transmission of information for use in news reporting of wagering activities, as long as such transmission does not solicit or provide information for the purpose of facilitating or enabling the placing or receipt of bets or wagers in a jurisdiction where such betting is illegal;

"(2) any posting or reporting of any educational information on how to make a legal bet or wager or the nature of betting or wagering, as long as such transmission does not solicit or provide information for the purpose of facilitating or enabling the placing or receipt of bets or wagers in a jurisdiction where such betting is illegal; or

"(3) advertising relating to betting or wagering in a jurisdiction where such betting or wagering is legal, as long as such advertising does not solicit or provide information for the purpose of facilitating or enabling the placing or receipt of bets or wagers in a jurisdiction where such betting is illegal.

"(g) The term 'transmission' or 'transmit' means to place, send, receive, transfer, post, disseminate, or otherwise convey from one person or place to another.

"(h) The term 'fantasy sports league or rotisserie league' means an activity that:

"(1) consists of persons who pay an entrance or administrative fee to participate in a league that allows each participant to create a fictitious team composed of athletes from a professional sport;

"(2) allows for the selection or subsequent replacement of players without charging any fees in excess of the initial entrance or administrative fee;

"(3) allows a participant to accrue points for the performance of that participant's team that can be compared to the points accrued by other participants and may award de minimis prizes daily, weekly, or monthly during the regular season or after each round of post season play based on total points accrued, or other prizes at the conclusion of the regular season and/or post season based on the cumulative points accrued during the regular season and/or post season;

"(4) designates the specific prizes (including amounts, if monetary prizes) to be won by participants in the league at the start of the regular season before the registration of, or acceptance of fees from, the participants and does not base the value of prizes on the number of participants or the total amount of entrance or administrative fees collected; and

"(5) provides to each participants the rules governing the conduct of the fantasy sports league."

"(i) The term 'bets or wagers' means the staking or risking by any person of something of value upon --

"(1) any contest or game based whole or in part on chance, including a lottery;

"(2) one or more sporting events or contests, or one or more performances of the participants in such events or contests, including any scheme of a type described in section 3702 of title 28, United States Code; or

"(3) a future contingent event not under the person's control or influence with an agreement or understanding that the person or another person will or may receive something of value as a result of such stake or risk. However, the term does not include a bona fide business transaction in securities or commodities of the nature governed by the federal securities and trading laws of the United States, a contract of indemnity or guarantee, a contract for insurance, or an entrance or administrative fee collected by a fantasy sports or rotisserie league where the operation of or participation in such league does not violate applicable federal, state, tribal, or local laws and such league does not collect fees from or allow participation by individuals under the age of 18.".

SEC. 4. TRANSMISSION OF WAGERING INFORMATION.

Section 1084 of title 18, United States Code, is amended to read as follows --

"§ 1084. Use of a communication facility to transmit bets or wagers; penalties.

"(a) Whoever being engaged in the business of betting or wagering knowingly uses a communication facility --

"(1) for the transmission in interstate or foreign commerce, within the special maritime and territorial jurisdiction of the United States, or to or from any place outside the jurisdiction of any nation with respect to any transmission to or from the United States, of bets or wagers, or information assisting in the placing of bets or wagers, or

"(2) for the transmission of a communication in interstate or foreign commerce, within the special maritime and territorial jurisdiction of the United States, or to or from any place outside the jurisdiction of any nation with respect to any transmission to or from the United States, which entitles the recipient to receive money or credit as a result of bets or wagers, or for information assisting in the placing of bets or wagers, shall be fined under this title or imprisoned not more than two years, or both.

"(b) Nothing contained in this section shall create immunity from criminal prosecution under any laws of any State or Tribe.

"(c) When any person or entity is notified in writing by a Federal, State, tribal or local law enforcement agency, acting within its jurisdiction, that any communication facility furnished by it is being used or will be used by its subscriber for the purpose of transmitting bets or wagers, or information assisting in the placing of bets or wagers, in interstate or foreign commerce, within the special maritime and territorial jurisdiction of the United States, or to or from any place outside the jurisdiction of any nation with respect to any transmission to or from the United States in violation of federal, state, tribal or local law, it shall discontinue or refuse, the leasing, furnishing, or maintaining of such facility, after reasonable notice to the subscriber, but no damages, penalty or forfeiture, civil or criminal, shall be found against any person or entity for any act done in compliance with any notice received from a law enforcement agency. Nothing in this section shall be deemed to prejudice the right of any person affected thereby to secure an appropriate determination, as otherwise provided by law, in a Federal court or in a State, tribal, or local tribunal or agency, that such facility should not be discontinued or removed, or should be restored.

"(d) Nothing in this section shall repeal or amend the rights or privileges secured tribes under the Indian Gaming Regulatory Act of 1988, 25 U.S.C. § 2701, et seq, or under Indian treaties.

"(e) As used in this section, the term 'State' means a State of the United States, the District of Columbia, the Commonwealth of Puerto Rico, or a commonwealth, territory or possession of the United States. The term 'tribe' or 'tribal' refers to an Indian tribe, as defined under section 4(5) of the Indian Gaming Regulatory Act of 1988, 25 U.S.C. § 2703(5).

"(f) This section shall not prohibit the use of a communication facility in the operation of a state-operated lottery (including a multi-state lottery jointly operated by several states), so long as such lottery --

"(1) only transmits bets or wagers to or from states that have explicitly authorized the operation of such a lottery within their borders;

"(2) if authorized by a state to operate within its borders, complies with all other laws of that state;

"(3) only receives bets or wagers from state-authorized locations that are open to the public generally, and does not enable betting or wagering to be transmitted to or from private residences or unauthorized locations; and

"(4) is otherwise in compliance with federal law.".