A Closer Look at HR 5020

The last day of the legislative season in July saw the introduction of a U.S. House bill proposing to prohibit Internet gambling by extending the Wire Wager Act. In a few weeks, Congress will re-convene and the new bill, HR 5020, may be among the first pieces of legislation to be considered. It came onto the scene rather quietly, and many among the interactive gambling industry were too busy celebrating Congress's failure to pass the Goodlatte bill to worry about the new threat. As the recommencing of the session lurks around the corner, sobriety is setting in, and many are beginning to wonder what 5020 is all about.

Let's have a look.

Among the most significant aspects of HR 5020 is its birthplace: the U.S. Department of Justice. The bill was written at the behest of the Clinton administration and introduced by Representatives Conyers and Cannon. Nevada gaming attorney Tony Cabot believes that 5020 is a better bill than 3125, the shark-toothed prohibition bill that Rep. Bob Goodlatte has so far failed to push through the House. He notes, however, that the bill has "the broadest definition of gambling--much broader than current law."

The most commonly accepted definition of gambling (which can be found in Chap. 3 of Cabot's book, Internet Gambling Report III) is as follows:

Generally, a bet or wager occurs when a person risks something of value on the outcome of an uncertain event; (1) in which the bettor does not exercise any control; or (2) which is determined predominantly [emphasis added] by chance.

HR 5020, however, offers a alternative definition that Cabot finds troubling:

"(9) The term 'bets or wagers' means the staking or risking by any person of something of value upon-
(A) any contest or game basing in whole or in part on chance, including a lottery;
(B) one or more sporting events or contests, or one or more performances of the participants in such events or contests, including any scheme of any type describe in section 3702 of title 28, United States Code; or
(C) a future contingent event not under the person's control or influence"

Cabot points out that almost any kind of contest or game could be considered gambling under HR 5020's definition. Fantasy sports leagues, for example would probably be affected. Additionally, consumers who are automatically entered into a contest by purchasing a product would gambling because the purchase would be considered, under the terms 5020's, a "risk."

Despite these glaring problems, Cabot feels that the bill 5020 is more effective at prohibiting Internet gambling activity than Goodlatte's bill. "The Leach bill (H.R. 4419 - the Internet Gambling Funding Prohibition) has the greatest potential of any of the bills," he added, to cause real damage.

The American Horse Council, meanwhile, is troubled by conflicting language in 5020 that could affect interstate simulcasting or account wagering. On one hand, it would not affect "the transmission of information assisting in the placing of bets or wagers from a state or foreign country where such bets or wagers are legal into a state or foreign country where such betting or wagering is legal." Another provision, however, prohibits "the transmission in interstate or foreign commerce of bets or wagers, information assisting the placing of bets or wagers, information assisting the placing of bets or wagers, or a communication that entitles the recipient to receive money or credit from bets or wagers." As a result of the contradictory language in the bill and the bill's Justice Department roots, the AHC suggests that 5020 could pose "very serious threats for the racing industry."

What does Bob Goodlatte, the author of H.R. 3125, the Internet Gambling Prohibition Act, have to say about the new bill? No comment, according to a spokesman, who said Goodlatte had not read the bill yet.

One opponent of Goodlatte's bill, Reverend Lou Sheldon, Chairman of the Traditional Values Coalition, said "We don't need 3125 if we have this other one (HR 5020.)" Sheldon approves of the new bill because it removes the carve-outs and updates the Wire Act. In his opinion, HR 5020 could survive a vote in the House of Representatives this fall, either passing as a standalone bill or as an amendment to 3125.

Congress reconvenes September 6.