US Law Roundup - September 2003

24 September 2003

Staying on top of interactive gambling bills as they move through the United States' federal and state legislatures no longer entails hours of research, thanks to this monthly update on U.S. state and federal legislation. All was quiet on the state and legislative fronts this month in terms of I-gaming legislation. On the federal scene, the industry is waiting for the Senate to address the Kyl Internet gambling bill in the Banking Committee.

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State Legislation

Illinois HB 1515

Bill Summary HB 1515 would make it illegal for banks and credit card companies to facilitate payments for Internet gambling. Introduced by Illinois State Rep. Elizabeth Coulson, the bill would fine banks $1,000 per offense if they are found to have allowed wire transfers to be processed for online gambling transactions. The bill would also make all credit card debt resulting from online gambling null and void. Coulson told the Copley News Service that credit card companies would, under her bill, effectively put a stop to Internet gambling.

Bill Status The bill has been introduced to the House of Representatives Gaming Committee and awaits a hearing there. On March 13, it was referred to the Rules Committee.

Outlook Gaming Committee Chairman Rep. Lou Lang said he is not sure Coulson's bill is the best way to legislate Internet gambling. He told Interactive Gaming News: "At first blush, I'm not sure why we want to make financial institutions criminally responsible for people taking their money out of their bank account, which is basically what the bill does. Whether Internet gambling is or isn't legal, I'm not sure this is the appropriate place to put the enforcement mechanism."

Indiana SB 71

Bill Summary SB 71 would hold Internet services providers liable if they host online casinos or allow online casinos to target their customers. The bill passed the Senate last year, but died in the House. This year, the author of the bill, Sen. David Ford, said he's garnered more support. If passed, the bill would allow county prosecutors to send a written notice to Internet service providers--such as America Online--saying that Web-based gambling is illegal in Indiana. The notice would list specific Web sites that are providing gambling opportunities and require the Internet providers to restrict their Indiana customers' access to those sites within 30 days. If the companies fail to comply, they could be charged with a Class D felony, punishable by up to three years in prison and a $10,000 fine. (Currently, illegal gambling in Indiana is a misdemeanor.) The casino operators also would face the same penalty. The bill additionally calls for the state attorney general to maintain a list of gambling Web sites that Internet providers should block. Eventually, Ford said, Internet companies would routinely acquire new lists from the attorney general and make the appropriate changes in their software to block the sites, without an overt threat of prosecution.

Bill Status The bill was passed on Tuesday, Jan. 27, 2003 by the state Senate. It will now be put to a vote in the House, where it has been referred to the Ways and Means Committee. The bill has seen no action since April 7, 2003.

Outlook The bill's sponsor in the House is optimistic about its passage, but ISP's who could be opposed to the bill have yet to come forward.

Nevada AB 466

Bill Summary AB 466 permits gambling sites to operate from Nevada. The original bill, AB 296, was eventually incorporated into a companion bill, AB 578. At first the bill steamrolled its way through both houses of the Nevada legislature, yet failed at the final step--by all accounts, suffering from a political tiff between the two houses--while awaiting a vote on the Senate floor. The legislation, however, was brought back to life by being piggybacked with AB 466, a bill that creates a uniform, statewide system for issuing work cards to gambling employees. Gov. Kenny Guinn signed the legislation on June 14, and the bill went into effect on July 1. The next step is for the Nevada Gaming Commission and the Gaming Control Board to do a survey of applicable legislation on the state and federal levels

Bill Status AB 466 went into effect July 1, 2001. The Commission has checked with the U.S. Department of Justice and found the bill to be in violation of federal law.
Outlook Internet gambling probably remains a few years from becoming a reality in Nevada. There has been no determination whether the federal government could prevent a state or territorial government from offering interactive gambling services. Recent discussion of anti-Internet gambling bills in the U.S. House of Representatives Financial Services Committee couldn't solve the problem of overlap between state and federal laws. In late August, the U.S. Justice Department responded to an inquiry put forth by the Nevada Gaming Commission and Gaming Control Board regarding whether AB 446 is legal according to the Wire Act. The Justice Department responded that its interpretation of federal law indicates that gambling via the Internet, including casino-style gambling, is illegal. The legislature is now considering an intrastate model for gambling.

New Jersey A-3356

Bill Summary A3356, authored and co-sponsored by Assemblyman Gary Guear, would make it illegal for credit card companies to collect debt incurred via online gambling. The bill also states that if any party involved in a transaction is located in New Jersey then the transaction is illegal.

Bill Status The bill was introduced on Feb. 24, 2003 and passed the Assembly on March 13. On March 17 it was received in the Senate and referred to the Senate Judiciary Committee.
Outlook In introducing his bill before the Assembly, Guear warned credit card companies that they "need to realize that they are the ones who are placing a bet if they allow Internet gambling sites to impose runaway charges on card holders."

New Jersey AJR-51

Bill Summary This bill, which is an assembly joint resolution, was proposed by Assemblymen Gary L. Guear Sr. and Anthony Impreveduto on Dec. 9. It would create a 21-member Internet Gambling Study Commission that would be charged with recommending a course of action regarding online gaming in New Jersey.

Bill Status The bill was referred to the Assembly Tourism and Gaming Committee.
Outlook Impreveduto told IGN that the bill was created because Guear, who is chairman of the Tourism and Gaming Committee, wanted more information about the Internet gambling industry before considering other bills on I-gaming.

New Jersey A-568

Bill Summary This controversial bill would authorize licensed land-based casinos in New Jersey to offer their games via the Internet.

Bill Status A-568 is this year's prefiled version of A-3150, a bill Assemblyman Tony Impreveduto filed during the 2000-2001 legislative session. A-3150 had been sent to the Commerce, Tourism, Gaming and Military and Veterans Affairs Committee on Jan. 23, 2001, where it remained for the rest of the session.
Outlook Unlike the pro I-gaming bill in Nevada that passed last year, New Jersey's A-3150 had failed to garner great support among legislators and Atlantic City casino operators.

New Jersey A-1532

Bill Summary This bill was prefiled for the 2002-2003 legislative session by Assemblymen Joseph Azzolina and Nicholas Asselta. It replaces A-3932, which they introduced on Nov. 9, 2001. Both the old bill and the new one propose to allow Atlantic City casinos to offer real-time card games via the Internet.
Bill Status A-3932 was heard by the Commerce, Tourism, Gaming and Military and Veterans Affairs Committee on Nov. 20. The purpose of the hearing was to educate the committee members about the technology that could be implemented if the bill is passed. The committee received more than an hour of demonstrations, at which point it decided to table the bill until another hearing could be scheduled. The legislative session ended before A-3932 could be revisited.

Outlook Azzolina and Asselta have pre-filed A-1532 for the current session. It faces competition from Assemblyman Tony Impreveduto's A-568.

Federal Legislation

HR 21 Unlawful Internet Gambling Funding Prohibition Act

Bill Summary This bill would prohibit Internet gambling businesses from accepting the following payment methods from customers: credit cards, electronic fund transfers, any instrument drawn by or on behalf of another and payable through any financial institution and the proceeds of any other form of financial transaction involving a financial institution as payer or financial intermediary for another.
Bill Status HR 21 was introduced by Rep. James Leach, R-Iowa, on the first day of the 108th session of Congress, which was Jan. 8, 2003. The bill is virtually the same as HR 556, which Leach introduced last year. HR 556 was passed in the House by a voice vote, but it did not go to a vote in the Senate and thus died. House Financial Services Committee Chairman Michael Oxley, R-Ohio, says that HR 21 is a priority for his committee this year.

HR 556 was the second attempt by Leach to prohibit Internet gambling by making it nearly impossible for Americans to pay for it. The bill was introduced in February, 2001, by Leach but was revisited in the Financial Anti-Terrorism Act of 2001, which was proposed by Oxley and Rep. John LaFalce, D-N.Y. A response to the Sept. 11 terrorist attacks, that bill aimed to squash money-laundering opportunities for terrorists. Leach's bill against online gambling was included in the anti-terrorism legislation. After being discussed by the House Financial Services Committee, the anti-terrorism bill was fast-tracked without the Internet gambling provisions and approved by the full House on Oct. 17, 2001. On Oct. 31, 2001, the Internet gambling section was reconsidered and approved by the committee by a vote of 34 to 18. HR 556 was discussed on Nov. 29, 2001, along with HR 3215 at a legislative session of the House Judiciary Committee's Subcommittee on Crime.

On Dec. 13, 2001, the House Committee on Judiciary granted an extension for further consideration of the HR 556 no later than Dec. 21, 2001; on Dec. 20, 2001, the same committee granted another extension for consideration of the bill ending on March 29, 2002. On Jan. 29, 2002, LaFalce and Oxley testified before the Senate Banking, Housing and Urban Affairs Committee. They told the committee that online gambling and credit card fraud are terrorists' key money laundering methods. On Feb. 5, 2002, Leach, Oxley and LaFalce sent a letter to members of the House asking them to support and consider co-sponsoring HR 556. In the letter, the authors ask House members to support their bill over other proposals that have been introduced to ban Internet gambling, most notably, Rep. Bob Goodlatte's bill. In early September of 2002, elements of Goodlatte's bill were implanted into Leach's bill, essentially putting the two legislators on the same team regarding Internet gambling.

In May this bill was reported favorably to the full House by the Judiciary Committee. However, the Committee voted to amend the bill in a way that many industry experts say could stop the bill in its tracks. The amendment, proposed by Rep. Chris Cannon, R-Utah, removes the bill's carve-outs for horse racing, dog racing, lotteries and casino games. The lack of those carve-outs means that those affected industries could withdraw their support for the bill.

Outlook The Justice Department has stated its disapproval of the bill; Rep. Spencer Bacchus' bill, HR-2143, was adopted instead.

S-627 Unlawful Internet Gambling Funding Prohibition Act

Bill Summary Sen. Jon Kyl, R-Ariz., on March 17 introduced a bill that would ban Internet gambling. The bill, S. 627, is very similar to the bill that was proposed by Rep. James Leach, R-Iowa, in the U.S. House of Representatives. In a press release, Kyl said he is opposed to Internet gambling because he believes it exacerbates the problem of gaming addiction, funds criminal activities, targets children and has the potential for fraud. "Internet gambling is not a fun diversion, but feeds a dangerous and growing addiction," Kyl said. "It is linked to organized crime, rife with fraud, ruins credit ratings, and allows many young people to build up thousands of dollars in debt on their parents' credit cards."
Bill Status The bill was unanimously voted out of the Senate Banking Committee and now awaits a vote from the entire Senate.

Outlook Washington insiders said it is likely that the bill will be marked up by the Senate banking committee.

HR-1223 Internet Gambling Licensing and Regulation Commission Act

Bill Summary Rep. John Conyers, D-Mich., introduced this bill on March 12. Called the Internet Gambling Licensing and Regulation Act, the bill is a reprisal of the legislation he introduced late in the last Congressional session. When announcing his bill, Conyers compared the prohibition of Internet gambling with the U.S. prohibition of alcohol in the 1920s. "Today, Congress is rushing to pass a similar ill-conceived prohibition of Internet gambling," Conyers said. "Gaming prohibitionists believe they can stop the millions of Americans who gamble online by prohibiting the use of credit cards to gamble on the Internet. Just as outlawing alcohol did not work in the 1920s, current attempts to prohibit online gaming will not work, either."
Bill Status The bill has been referred to the House Financial Services Committee.

OutlookBills that would prohitit Internet gambling are gaining much momentum in the Congress, and Washington insiders say it is unlikely that this bill will be marked up by the House Financial Services Committee. However, the bill was discussed, but not voted on, during the Judiciary Committee's markup on the Leach Internet gambling bill.

HR-2143 Unlawful Internet Gambling Funding Prohibition Act

Bill Summary This bill was introduced on May 19 in the House Financial Services Committee. It is basically the same bill as HR 21, except that it lacks the civil and criminal penalties set forth in that bill. Rep. Spencer Bachus, R-Ala., introduced the bill to compete with the version of HR 21 that the Judiciary Committee passed on May 14, which was amended to strike away all exceptions for various gambling industries including horse racing and lotteries.
Bill Status On May 20, the Judiciary Committee voted to report this bill favorably to the full House. Since it has no civil and criminal penalties, it will no be heard by the Judiciary Committee. A source who spoke with Interactive Gaming News on the condition of not having his name used said the chairman of the Financial Services Committee would like to see this version of the bill pass the full House and the Senate. If that happens, he said, then the penalties can be added back in during a conference between members of both Congressional bodies.

On June 10, after hours of debate, the U.S. House of Representatives passed HR 2143 by a vote of 300-104. A key amendment that would have effectively killed the bill was narrowly defeated. The amendment, introduced by Jim Sensenbrenner, R. Wis., would have removed carve-outs for racing, state lotteries and other interests. On June 11, the bill was received in the Senate and referred to the Committee on Banking, Housing and Urban Affairs.

Outlook The Senate may rather take up the Kyl Internet gambling bill, which would have similar consequences as the Bachus bill.