House Seeks to Cut Cash Flow to Online Gambling

WASHINGTON — A House panel today took a stab today at the heart of the
offshore gambling business: U.S. cash flow.

Approved on a close voice vote by the House Financial Services Committee,
the Unlawful Internet Gambling Enforcement Act (H.R. 4411) requires
financial institutions to identify and block payments to offshore casinos,
sports book and other online gambling sites.

The narrowly targeted bill contains no provisions prohibiting gambling
itself. Instead, it attempts to limit the opportunities of Americans to
gamble by narrowing the access of the offshore sites to the U.S. financial
services industry.

The legislation exempts horse racing gambling over the Internet and online
and remote gambling on Indian reservations. In addition, exemptions are made
for online and remote gambling taking place within a state such as Nevada.

“For nearly a decade, many in Congress have sought to deter Internet
gambling. But, time and again, the issue has been stymied – often in ways
that reflects imperfectly on this institution,” bill sponsor Jim Leach
(R-Iowa) said.

“While Congress has failed to act, the illegal Internet
gambling industry has boomed.”

According to Leach, Americans are projected to gamble approximately $6
billion through offshore sites. Worldwide, the total is projected at $12

Leach said online gambling characteristics are “unique” in that players can
gamble 24 hours a day; children often gamble without sufficient age
verification; and credit card gambling undercuts a player’s “perception of
the value of cash.”

Those liabilities, Leach said, leads to “addiction, bankruptcy and crime.”

“Unlike brick-and-mortar casinos in the United States where legal
protections for bettors exist and where there is some compensatory social
benefit in jobs and taxes, Internet gambling sites principally yield only
liabilities to America and to Americans,” Leach said.

Rep. Barney Frank (D-Mass.) was the only committee member to speak against
the bill, although a number of Democrats voted against the legislation.

“The fact that people bet more than they should…should not be a matter of
legislative interest,” he said. “This is motivated by an interesting
convergence of liberals and conservatives who disapprove of it [gambling]
personally. Therefore, they want to make it illegal.

An organization billing itself as the Poker Players Alliance issued a
statement at the hearing also opposing Leach’s bill.

“The Leach bill unfairly prohibits online poker, while it gives special
protections to other activities such as intrastate gambling, online
lotteries, betting on horse racing and certain fantasy sports,” the
organization stated.

“It is disingenuous to oppose Internet gambling and
then write a bill that makes select forms of online gambling legal.”

Leach’s bill is separate from legislation introduced
month that aims to make it illegal for Americans to use the
Internet for gambling.

The Internet Gambling Prohibition Act 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

“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 Leach bill now goes to the whole House for a floor vote, while the
Internet Gambling Prohibition Act awaits a hearing before the House
Judiciary Committee.

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