RealTime IT News

Banks Rap Internet Anti-Gambling Proposal

Legislation designed to put a dent in Internet gambling ran into opposition Wednesday from the banking industry and, surprisingly, the Traditional Values Coalition.

The Internet Gambling Prohibition Act proposes to make it illegal for Americans to use the Internet for gambling and would authorize law enforcement officials to stop credit card payments and other forms of electronic payments.

Violators would be subject to up to five years in prison.

"Our concern is that the added burden of monitoring all payment transactions for the taint of Internet gambling will drain finite resources currently engaged in complying with anti-terrorism, anti-money laundering regulations and the daily operation of our bank," Samuel Vallandingham, representing the Independent Bankers of America, told a House subcommittee.

Vallandingham added, "Ultimately, we question whether the Internet gambling bills currently before the House will efficiently regulate the targeted behavior at a level which will justify the time and expense required by community banks to comply with another level of regulation."

According to bill sponsor Bob Goodlatte (R-Va.), Internet gambling is estimated to be a $12 billion industry with approximately $6 billion coming from U.S. bettors.

Under current federal law, the Wire Act, passed by Congress in the early 1960s, prohibits making gambling wagers over the telephone. It is not legally clear if the Wire Act actually applies to the Internet, a situation that Goodlatte's bill hopes to correct.

"Technology has 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 made illegal by the Wire Act," the bill summary states.

The Internet Gambling Prohibition Act would crack down on illegal gambling by updating the Wire Act to clarify that it covers all forms of interstate gambling, such as lotteries and poker, and account for new technologies.

"While gambling is currently illegal in the United States unless regulated by the states, the development of the Internet has made gambling easily accessible," Goodlatte said Wednesday. "It is common for illegal gambling businesses to operate freely until law enforcement finds and stops them."

Although it was not invited to testify at Wednesday's hearing, the conservative Traditional Values Coalition sent a letter claiming Goodlatte's bill would actually expand Internet gambling.

"While the [coalition] supports the stated goals of H.R. 4777, that is, to keep gambling off the Internet, we remain deeply concerned about the legislation's real effect," the letter states. "The Goodlatte bill could more accurately be called the Internet Gambling Growth and Opportunity Expansion Act."

The coalition contends that Goodlatte's bill falls short by not banning all gambling in the United States.

As currently written, the legislation would allow intrastate Internet lotteries, interstate horse racing and online wagering on sports fantasy teams.

"If the bill's intent is to prohibit people from buying lottery tickets from their living rooms, the bill could and should make such a prohibition explicit," the letter states.

"In fact, with respect to lotteries and every other form of non-sports gambling -- dog racing, jai alai, commercial casinos, bingo -- the Goodlatte bill allows states to license anything they choose."

Bruce Ohr of the Department of Justice (DoJ) told lawmakers at the hearing that the DoJ supports the bill because the legislation amends an existing criminal statute (the Wire Act) and applies it equally to wagering over the Internet and over the telephone.

Ohr also commended the bill for providing law enforcement with a method to cut off the transfer of funds to and from offshore Internet gambling sites.

"[The bill] will return control to the states by protecting the rights of citizens in each to decide through their state legislatures if they want to allow gambling within their borders," Goodlatte said.

"This bill leaves the regulation of wholly intrastate betting and wagering to the states with tight controls to ensure betting or wagering does not extent beyond their borders or to minors."