RealTime IT News

Internet Anti-Gambling Bill Suffers Setback

Momentum for a bill aimed at prohibiting U.S.-based banks, credit card companies and other Internet payment systems from making payments to Internet gambling sites slowed considerably Wednesday when the House Judiciary Committee voted to modify the legislation and dim its prospects for passage.

On a narrow 16-15 vote, the committee approved an amendment by Rep. Chris Cannon (R.-Utah) to H.R. 21, the Unlawful Internet Gambling Funding Prohibition Act, that stripped exemptions for horse and dog racing sites and other state-licensed gambling businesses from the bill.

That amendment will force the House Rules Committee to choose between Cannon's amended version that effectively prohibits credit card payments to all Web gambling sites or the original version of the bill passed by the House Financial Services Committee that includes the exemptions.

House staff members and gambling industry sources predicted the amended version of H.R. 21 stands little chance of passing a full House vote. If the Rules Committee votes to put the original version of the bill before the House, an amendment similar to Cannon's is sure to be proposed.

Cannon said he offered the amendment because he feared the exemptions could lead to legalized gambling in his home state and the fact he didn't want to get in the business of regulating credit card companies.

Whatever Cannon's reason, the amendment was good news for the Interactive Gaming Council (IGC), which has been lobbying against the original version of the bill introduced by Rep. Jim Leach (R.-Iowa). The original version is strongly supported by the White House, family groups, sports leagues and law enforcement agencies.

"The Cannon amendment doesn't make H.R. 21 a better bill, but it makes it into an honest bill," Dan Walsh, a spokesman for the IGC, told Internetnews.com.

Companion legislation to Leach's original 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. In the 107th Congress, a similar bill passed the House but failed in the Senate.

Although the Internet is flooded with ads promoting offshore casinos, it is, in fact, illegal for Americans to bet through the sites. Similarly, it is illegal for Americans to place sports wagers through Web sites. Despite the law, Americans, according to law enforcement authorities, are driving the growth of online gambling sites, which grew from about two dozen sites in 1995 to almost 2,000 locations in 2002.

It is estimated that more than $2 billion will be wagered through the sites this year alone.

One of the first pieces of legislation introduced in the 108th Congress, Leach's bill 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.