Summary of Internet Gambling Prohibition Act

TO: (undisclosed)

FROM: American Law Division

SUBJECT: Summary of Internet Gambling Prohibition Act (S. 692 as Reported)

This is in response to your request for a summary of the Internet Gambling Prohibition Act (S. 692), as reported by the Senate Judiciary Committee, S.Rep.No. 106-121, 106th Cong., 1st Sess. (1999). You expressed particular interest in the scope of new criminal liability established by the bill.

Overview

In very general terms, the bill prohibits anyone, engaged in the gambling business, from using the Internet to place or receive a bet on a contest, sporting event, or game of change, proposed 18 U.S.C. 1085(b)(1)(A). It also prohibits anyone, engaged in the gambling business, from using the Internet to send or receive information to facilitate placing or receiving such a bet, proposed 18 U.S.C. 1085(b)(1)(B). The proscriptions are subject to a host of definitions and exceptions, most of which limit the general prohibitions.

The prohibitions are enforced by criminal prosecution, proposed 18 U.S.C. 1085(b)(2); restraining orders, proposed 18 U.S.C. 1085(b)(3), (c), (d)(3); and instructions to Internet gatekeepers to deny access to violators, proposed 18 U.S.C. 1085(d)(2).

The "aiding and abetting" provisions of 18 U.S.C. 2 provide the hidden threshold of criminal liability for S. 692 as they do for most federal criminal law proposals. Those who aid and abet are treated as principals; they are subject to the same criminal liability as those they assist. To be guilty of aiding and abetting and individual must assist the criminal enterprise of another embracing it as his own.

The bill supplements rather than amending or replacing other federal gambling prohibitions, many of which would appear to apply to the Internet already. Unlike the predecessor proposals, it does not explicitly apply to individual bettors unless they are in the "gambling business." The bill has also dropped earlier explicit references of its application to offshore Internet gambling business.

It has general exemptions for state lotteries. horse racing and dog racing as long as the gambling is lawful in the state in which the bet is made and the state in which it is received, proposed 18 U.S.C. 1085(f)(1)(A),(B), and as long as it does not involve proxy betting, proposed 18 U.S.C. 1085(f)(2). There is an exemption for fantasy sports league contests as well, proposed 18 U,S,C. 1085(f)(1)(C).

It has fairly sweeping definitions of gambling and the Internet, that may limit segments of the gaming industry (other than those associated with state lotteries, horse rare, or dog racing) from operating on the Internet., advertising on the Internet, or even using computer networks to place or receive bets or to convey related information. The Congressional Budget Office, for example, has indicated that it reads the bill to prohibit tribal computer linked bingo, S.Rep.No. 106-121, at 31.

Good faith Internet gatekeepers ("interactive computer service providers") are immunized from criminal liability for the use of their systemi3 by gamblers in violation of the bill or of any other state or federal gambling law, proposed 18 U.S.C. 1085(d)(1), and for their denying access in response to a law enforcement alter and request to deny access, proposed 18 U.S.C. 1085(d)(4).

Criminal prohibitions

With pertinent definitions footnoted, the bill's twin criminal proscriptions provide: "(1) PROHIBITION- Subject to subsection (f)¹ [exempting state lotteries, the horse and dog racing gaming industries, and sports fantasy leagues], it should be unlawful for a person [or entity)]² engaged in a gambling business [in operation at least 10 substantially consecutive days that generates $2,000 in gross revenue during any 24 hour period, or its soliciting agent]³ knowingly to use the Internet⁴ or any other interactive computer services⁵ -- (A) to place, receive, or otherwise make a bet or wager;⁶. . . . "(1) PROHIBITION- Subject to subsection (f)⁷ [exempting state lotteries, the horse and dog racing gaming industries, and sports fantasy leagues], it shall be unlawful for a person [or entity]' engaged in a gambling business [in operation at least 10 consecutive days that generates $2,000 in gross revenue during any 24 hour period, or its soliciting agent]⁹ knowingly to use the Internet¹⁰ or any other interactive computer service¹¹--"(B) to send, receive, or invite information assisting in the placing of a bet or Wager.¹²

What's Not Covered: State lotteries, horse and dog racing gaming industries, and fantasy sports leagues are free to use the Internet and computer networking. Other gambling interests, otherwise lawful or unlawful, are subject to the bill's criminal and civil liability and are prohibited from using, for gambling or gambling advertising purposes, the Internet or any other computer network that involves interstate telephone lines or their equivalent (using a "channel or instrumentality of interstate commerce") unless they are covered by another exception or definitional exemption.

These exceptions and exemptions might appear to include:

(l.) Gambling businesses that rest on the 10th day (the bill only covers gambling businesses "that have been or remain in substantially continuous operation for a period in excess of 10 days"). It may be that "substantially" is intended to cover these evasionary breaks, but it is not clear how, long or what kind of respite a gaming operation might take to place itself beyond the definition.

(2) Contests that do not involve human beings ("others" in 1085(a)(1)(A) appears to refer to other "persons") and that cannot be considered either a "sporting event" or a "game of chance." This might include things like dog racing, cock fighting, and the like.

Beyond the exceptions are omissions. In its earlier versions the Kyl Internet Gambling bill made explicit provision for individual bettors, see e.g., S. 474 (Internet Gambling Prohibition Act of 1997)(as introduced)("OTHER PERSONS. Whoever other than a person described in paragraph (1)[persons engaged in the business of betting or wagering] knowing uses a communication facility for the transmission or receipt in interest or foreign commerce of bets or wagers ... shall be fined not more than $5,000, imprisoned not more than 1 year, or both," proposed 18 U.S.C. 1084(a)(2)). S. 692 contains no such provision. Senator Leahy in his comments in the Committee report indicates the bill is not intended to cover individual bettors who are not in the gambling business, S.Rep.No. 106-121, at 35 (additional views of Sen. Leahy)(the main body of the report is silent on the question).

Technically, individual bettors might be considered liable for aiding and abetting those who violate the new law, 18 U.S.C. 2.¹³ A Supreme Court case decided some years ago, however, discourages federal criminal prosecution of bettors in the absence of clear Congressional intent, Rewis v. United States, 401 (U.S. 808, 810-11 (1971).¹⁴

Section 2 may or not may ensnarl those who provide technical services for an illicit Internet gambling business depending largely on how much they know of the uses its customers intend to make their services. To be guilty of a violation of section 2, "it is necessary that a defendant in some sort associate himself with the [criminal] venture, that he participate in it as in something that he wishes to bring about, [and] that he seek by his action to make it succeed," United States v, Klimavicius-Viloria, 144 F.3d 1249, 1263 (96th Cir. 1998), quoting, Nye & Nissen, v. United States, 336 U.S. 613, 619 (1949).

In the computer service context, one court has noted in dicta that:

"In our case, under Sec. 1955, it is quite obvious that bettors should not be held criminally liable either under the statute or under Sec. 2 and that local merchants who sell the accounting paper or the computers on which bets are registered are not sufficiently connected to the enterprise to be included even if they know that their goods will be used in connection with the work of the business. On the other hand, it seems similarly obvious that the seller of computer hardware or software who is fully knowledgeable about the nature and scope of the gambling business would be liable under See. 2 if he installs the computer, electronic equipment and cables necessary to operate a "wire shop" or a pari-mutuel betting parlor, configures the software programs to process betting information and instructs the owners of the gambling business on how to use the equipment to make the illegal business more profitable and efficient. Such actions would probably be sufficient proof that the seller intended to further the criminal enterprise," United States v. Hill 55 F.3d 1197, 1200 (6th Cir. 1995).

A second omission involves the bill's application to offshore Internet gambling businesses. Earlier versions of the bill specifically referred to its extraterritorial application.¹⁵ S. 692 does not. It defines "foreign jurisdiction," proposed 18 U.S.C. 1085(a)(3), but then only appears to use the phrase in connection with the parimutuel pool exception to the definition of "information assisting in the placing of a bet or wager," proposed 18 U.S.C. 1085(a)(5). Finally, it seems unlikely that the bill is intended to apply to offshore Internet gambling business activities involving only customers from other countries, All of which might suggest that the bill is only meant to apply to activities within the United States.

On the other hand, the Committee report makes it clear that its members were both aware and concerned about the offshore aspects of Internet gambling and their impact on the United States.¹⁶

Closing the Gate

The bill has detailed provisions dealing with gatekeeper liability and the procedure for closing the Internet to the abuses proscribed in the bill. Interactive computer service providers who maintain and enforce policies to prevent use of their services for illicit gambling purposes¹⁷ are given civil and criminal immunity from liability arising under any state or federal gambling law. ¹⁸The Immunity likewise extends to gatekeepers who close, down access in response to a notification from law enforcement authorities.¹⁹ Under specified limitations ²⁰ and procedures,²¹ the bill also empowers law enforcement officials to seek a restraining order against the continued abusive access.²²

We are enclosing a copy of S-Rep-No, 106-121 that includes the text of the bill, from which you will note that our summary omits several provisions of the bill that did not seem relevant to your focus.

Charles Doyle
Senior Specialist
American Public Law
7-6006

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