House Subcommittee Refers Internet Gambling Bill to Full Judiciary Committee

10 May 2006
Last week, the House Judiciary Subcommittee on Crime, Terrorism and Homeland Security referred an Internet Gambling bill (H.R. 4777) to the full Judiciary Committee for consideration. The proposed legislature, sponsored by Rep. Bob Goodlatte and 131 co-sponsors, is the latest attempt by the United States Congress to put the genie back in the bottle with respect to Internet gambling.

As currently structured, the bill seeks to make an amendment to the federal Wire Act that would specifically prohibit gambling businesses from accepting online wagers or bets on the outcome of any contest of others, a sporting event, or any game that is "predominately subject to chance." The bill increases the maximum prison term for a violation to five years, and also prohibits gambling businesses from accepting credit cards or electronic transfers of funds for the placement of bets or wagers. It also empowers the government to be able to ask Internet Service Providers to disable or remove access to online gambling sites or to disable a hyperlink. The bill contains several exemptions, including provisions for the horse racing industry. Further details on the bill are set forth in my column dated March 1, 2006, entitled "Federal Internet Gambling Prohibition Legislation Re-Introduced."

Just days before the subcommittee referred the bill, the American Gaming Association ("AGA") announced a new position on the topic of Internet gambling. The board of directors for the AGA unanimously agreed to call for a one-year study of Internet gambling by a federal commission.

AGA President Frank Fahrenkopf was quoted by GamingWire as saying: "Something has got to be done about this, and we need to know if technology exists that can protect young people, pathological gamblers and prevent money laundering."

Fahrenkopf estimated between $12 billion and $15 billion will be bet on the Internet this year, with 60% coming from U.S. citizens.

The association's support for a study of Internet gambling echoes a 2003 bill by Rep. John Conyers, D-Mich. Co-sponsors of the Conyers bill included Reps. Shelley Berkley, D-Nev., and Chris Cannon, R-Utah.

No matter where you stand on the issue of Internet wagering, the action taken by Congress needs to be very well thought out and fully analyzed. The current bill, HR 4777, contains many terms and standards that are not clearly defined, and inevitably will lead to litigation and disputes. For example, the language "predominantly of chance" has many interpretations throughout the U.S. Is the game of poker "predominantly of chance"? The bill suffers in that it fails to recognize the unique laws of the many states in this country, some of which may arguably impact the topic of Internet gambling.

The current bill also lacks a clear means of enforcement. How will action be taken against Internet Service Providers and credit card companies, or electronic fund transfer companies, that choose to locate in other countries similar to what some of the gambling related Web sites have done?

Also, the bill does not fully take into account the impact of some recent World Trade Organization rulings in disputes brought about by the country of Antigua. In March, the WTO ordered the United States to allow Antigua-based online gambling companies to offer Internet horse race betting in the same fashion as certain United States based companies. To date, the U.S. has not taken any steps to comply with this directive.

Further complicating the proposed legislation will be the international community's reaction to the United States' decision to censor and restrict content on the Internet. China has been criticized for restricting Internet content, and it is possible that similar action by the United States may create a similar controversy.

By calling for a one-year study of the issue, the AGA has taken a very responsible position. Only through clear and comprehensive analysis of all the implications can a good public policy be crafted.

David Waddell

David Waddell is an attorney for Regulatory Management Counselors, P.C. (RMC), which assists businesses in navigating the legislative, regulatory and licensing systems governing Michigan’s commercial and tribal casino industries. He is the co-author of The State of Michigan Gaming Law Legal Resource Book and one of the founders of The Michigan Gaming Newsletter.

David Waddell Website