House Approves Unlawful Internet Gambling Enforcement Act

July 11, 2006. The House approved HR 4411, the "Unlawful Internet Gambling Enforcement Act of 2006" by a vote of 317-93. See, Roll Call No. 363. Republicans voted 201-17. Democrats voted 115-76.

Rep. James Leach (R-IA) introduced HR 4411 on November 18, 2005. However, Rep. Leach has been introducing related bills for many years. For a summary of the bill, and the history of related legislation, see story titled "House Financial Services Committee Approves Internet Gambling Bill" in TLJ Daily E-Mail Alert No. 1,330, March 16, 2006.

HR 4411 is an attempt to stop internet gambling by regulating the financial transactions that fund what already constitutes unlawful internet gambling. It provides that no one engaged in the "business of betting or wagering" may knowingly accept certain financial transactions, including checks, electronic fund transfers, and credit card debt, in connection with "unlawful Internet gambling".

The bill then requires the Department of the Treasury (DOT) and the Federal Reserve Board (FRB) to write regulations that require each "designated payment system" to identify and block these restricted transactions through the establishment of policies and procedures. The bill requires each "financial transaction provider" to comply with these DOT/FRB regulations.

The bill contains numerous exemptions and limitations. For example, the term "bet or wager" does not include "any participation in a fantasy or simulation sports game". Also, the term "unlawful Internet gambling" does not include a bet or wager where "the bet or wager is initiated and received or otherwise made exclusively within a single State ... the bet or wager ... is expressly authorized by and placed in accordance with the laws of such State ... and ... the bet or wager does not violate any provision of the ... Interstate Horseracing Act ... or ... Indian Gaming Regulatory Act." Moreover, the term "unlawful Internet gambling'" does not include betting or wagering "that is governed by and complies with the Interstate Horseracing Act of 1978".

The bill provides that "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."

On July 10 the House Rules Committee (HRC) adopted a rule for consideration of HR 4411 that made in order only one amendment [2 pages in PDF], to be offered by Rep. Shelly Berkley (D-NV), Rep. Robert Wexler (D-FL), and Rep. John Conyers (D-MI).

The rule stated that this amendment "eliminates the exceptions to the bill's general prohibition against online gambling, thereby establishing a complete ban on all internet gambling-related activities".

The sponsors for this amendment wrote in a statement for the HRC that "Somehow we find ourselves in a situation where Congress has gotten in the business of cherry-picking types of gambling. Without my amendment, this committee will effectively be saying that horse track betting is okay on the Internet but dog track and Jai Alai are out. ... The bottom is -- if we pass this bill, you will end up in a situation where horse track betting will be able to occur on the Internet, but you won't be able to do dog track betting on the Internet, you won't be able to do Jai Alai betting on the Internet."

However, the House rejected this amendment by a vote of 114-297. See, Roll Call No. 361. Republicans voted 9-210. Democrats voted 104-87. Also, a motion to recommit the bill to committee failed by a vote of 167-243. See, Roll Call No. 362. Republicans voted 1-218. Democrats voted 165-25.

There is a second bill, HR 4777, the "Internet Gambling Prohibition Act", that deals with criminal prohibitions related to internet gambling. On May 3, 2006, the House Judiciary Committee's (HJC) Subcommittee on Crime, Terrorism, and Homeland Security approved this bill by voice vote, without amendment.  See also, story titled "House Crime Subcommittee Approves Internet Gambling Prohibition Act" in TLJ Daily E-Mail Alert No. 1,364, May 5, 2006. The full Committee amended and approved the bill on May 25, 2006.

The Cato Institute's Radley Balko wrote a short piece on July 7 titled "Federal Ban on Internet Gambling Marches On". He argued that "Because the bill effectively deputizes banks to sniff out and eradicate gambling among their customers (the creepy privacy implications of that alone ought to kill this bill), it amounts to a piece of blatantly protectionist legislation. Its practical effect will be to shield a domestic company (PayPal, which is owned by eBay) from foreign competitors like FirePay and Netteller." (Parentheses in original.)

See also, Balko's June 11 piece titled "eBay Invites Internet Regulation, Backs Online Gambling Ban".