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House Panel Approves Anti-Online Gambling Bill

WASHINGTON -- A House Judiciary subcommittee approved on a seemingly close voice vote Tuesday legislation prohibiting U.S.-based banks, credit card companies and other Internet payment systems from making payments to gambling sites. The Unlawful Internet Gambling Funding Prohibition Act (H.R. 21) now moves to the full committee where opponents have promised a fight to defeat or seriously amend the measure.

One of the first pieces of legislation introduced in the 108th Congress, the bill, sponsored by Rep. Jim Leach (R.-Iowa) is strongly supported by the White House, family groups, sports leagues and law enforcement agencies. In the 107th Congress, a similar bill passed the House but failed in the Senate.

Companion legislation to Leach's bill has been introduced in the Senate by Sen. John Kyl (R.-Ariz.). The Senate Banking Committee heard testimony on the bill on March 18.

The legislation creates a new crime of accepting financial instruments, such as credit cards or electronic fund transfers, for debts incurred in Internet gambling. Also, because the operators of Internet gambling sites are off-shore and beyond the reach of U.S. law enforcement tactics, the bill enables state and federal attorneys general to request that injunctions be issued to any party, such as financial institutions and Internet service providers, to assist in the prevention or restraint of the new crime.

The bill allows federal bank regulators to create rules requiring financial institutions to use designated methods to block or filter illegal Internet gambling transactions.

"Federal law is currently unclear as to whether or not all types of Internet gambling is illegal. H.R. 21 is intended to make it crystal clear that operating a gambling business on the Internet is illegal," said Howard Coble (R.-N.C.), chairman of the House Judiciary Subcommittee on Crime, Terrorism and Homeland Security.

Although the Internet is flooded with ads promoting offshore casinos, it is, according to most law enforcement officials, illegal for Americans to bet through the sites. The Justice Department contends existing laws already make all Internet gambling illegal for Americans.

The 1961 Wire Wager Act specifically prohibits the use of telephone lines for the purpose of placing a sporting bet. Since the Internet uses telephone lines, courts have ruled the Wire Act also covers Web sports wagering, but a recent federal appeals court decision said it was beyond the scope of the original law to include placing a casino bet online.

The feds are appealing the ruling, but even if a future court decision says the law does apply to online casinos, all of them are located offshore and beyond the jurisdiction of the U.S. That leaves the government with only two options: go after individual gamblers or convince the countries licensing offshore casinos and sports books to cease and desist. Neither seems likely.

Despite current laws, Americans are driving the growth of online gambling sites, which grew from about two dozen sites in 1995 to almost 2,000 locations in 2002. Last year, the sites are estimated to have pulled in more than $4 billion in revenue.

Controversy on the potential effectiveness of Leach's bill prompted Rep. John Conyers (R.-Mich.) earlier this year to introduce legislation calling a national commission to study the effects of legalizing Internet gambling in the U.S. The panel would consider the benefits if licensing, regulating and taxing the gambling sites.

Conyers likens attempts to ban online gambling with the national effort to ban alcohol in the 1920's. He says a federal prohibition will create online gambling speakeasies controlled by organized crime or crooked operators.

Last week, the House judiciary subcommittee heard testimony on both the Leach and Conyers bills, but Tuesday only Leach's bill was considered. That prompted Rep. Bobby Scott (D.-Va.) to say he would seek to amend the Leach bill in the full Judiciary Committee with a provision to regulate online gambling.

Scott contended that Leach's bill will do little to curb online gambling, serving only to force gamblers to find more creative ways to get money to the sites.