Online Gambling Bill Would Up Penalties for Illegal Practice

The bill would update the Wire Act to cover all forms of interstate gambling and account for new technologies. Federal law is hazy on the illegality of running a gambling business on the Web, Goodlatte said. The 1961 Wire Act bars gambling via phone. “For too long our children have been placed in harm’s way as online gambling has been permitted to flourish,” the Congressional Internet Caucus co-chmn. said. Late last session Rep. Leach (R-Ia.) introduced the more enforcement-oriented Unlawful Internet Gambling Enforcement Act (HR-4411). Professional sports leagues back Leach’s bill, a spokesman said.

Fervor for lobby reform could give the Goodlatte/Boucher bill a 4th ace, supporters said. Cosponsor Rep. Shadegg (R-Ariz.) used the Abramoff scandal in a failed campaign for majority leader. Tighter control of lobbyists is a welcome step but addressing more substantive problems, like online gambling, makes multiple points, he said.

Besides addressing international issues, HR-4777 would let states that allow gambling continue to do so, provided they regulate within their borders using tight controls that bar the pastime’s spread to minors across state lines. It also would bars gaming operations from accepting certain forms of payment -- including credit cards, checks, wire and Internet transfers -- in unlawful gambling transactions, Goodlatte said. The bill would let federal, state, local and tribal law enforcement authorities seek injunctions to prevent and restrain violations of the measure. The measure would up the maximum prison term for Wire Act violations from 2 years to 5 years, Goodlatte said.

The bill’s earlier incarnation, backed by more than 60% of the House, suffocated under the weight of an Abramoff-led “campaign of misinformation” blocking the 2/3 vote needed to pass under suspension of the rules, Goodlatte said. That allowed Web gambling to burgeon into a $12 billion a year industry, he said. Wire Act reform is crucial, since Internet communication doesn’t use the public switch network, Boucher said.

“Illegal gambling doesn’t just hurt gamblers and their families, it hurts the economy by draining dollars from the U.S. and serves as a vehicle for money laundering,” Goodlatte said. Rep. Wolf (R-Va.) scolded the Bush Administration for not championing Goodlatte’s bill and speaking out against the enterprise in general.

Some questioned whether HR-4777 is the right approach. The Wire Act never was intended as and can’t really be an effective control on gambling that involves international operations, U. of Pa. prof. Dan Hunter told us. “You can update the Wire Act until the cows come home, but that doesn’t help you get these guys directly,” the online legal expert said. Goodlatte’s bill could knock out smalltime domestic operators who might quail at the risk of a federal rap, but won’t wipe out the larger problem, he said.

If outfits go down, the market will be more concentrated, with major players getting larger and eventually moving offshore, Hunter said: “They'll find the beaches in Barbados are really nice” and comfortably outside U.S. reach. “As long as the principals stay away, it’s hard to do anything directly with the proprietors of these sites wherever the hell they are,” he said. That’s why it’s key to target intermediaries like payment processors and ISPs, as Goodlatte’s bill does.

The American Gaming Assn. (AGA), a casino trade group, is for any bill to “eliminate illegal, unregulated offshore gambling,” said Vp-Govt. Affairs Brett Hale. AGA is uncertain about Goodlatte’s bill; its lawyers hadn’t examined it yet, he said. AGA didn’t oppose the Leach bill last year.

Regulate online gambling, don’t try to outlaw it, said Interactive Gaming Council Deputy Dir. Keith Furlong. Any bill to ban bets is “destined to fail,” he said. “Their intentions are good, but I just don’t agree with legislating morality,” Furlong said: “If people enjoy doing it on their free will, we need to protect them by making sure the games are fair, that honest companies are running the games and that there are protections for compulsive gamblers and preventions to keep minors from playing.”

Online gaming has proven a growth industry in the U.S. and abroad, with countries like the U.K. embracing it, Furlong said: “You're talking about an industry now that’s not fly-by-night. You're talking about real professional businessmen here… If you push it underground, you're going to have more problems controlling it.” IGC doesn’t think credit card firms or ISPs should be “Internet police,” he said. Plus, entities like those already have acted internally to boost protections against illegal activity, he said.

Conservative groups lauded Goodlatte’s bill. HR-4777 has backing from Phyllis Schlafly’s Eagle Forum, the Christian Coalition of America (CCA), James Dobson’s Focus on the Family (FOF) and the Family Research Council. CCA urged lawmakers to act this year “before gambling on the Internet spirals out of control.”

Across the Hill, Sen. Kyl (R-Ariz.) plans a similar bill soon. His office wouldn’t talk details, but its provisions likely will mirror previous Kyl bids to pass such legislation. Goodlatte said he’s not sure how Kyl’s bill would differ from his or Leach’s. Congressional sources told us Goodlatte’s bill may not founder in the Senate on resistance to amending the Wire Act.