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Bill to Outlaw Internet Gambling Approved

13 March 2003

by Benjamin Grove

WASHINGTON, DC -- A House panel today approved a bill that would effectively outlaw Internet gambling by making it illegal for website operators to accept wagers with bank instruments including credit cards, checks or wire transfers.

The House Financial Services Committee passed the legislation on a voice vote. The bill was introduced again this year by Rep. Jim Leach, R-Iowa, and it now faces a full House vote. The House passed the bill last year but the Senate did not vote on the legislation.

Meanwhile this week Rep. Shelley Berkley, D-Nev., and three other lawmakers introduced a bill that amounts to competing legislation. The bill would create a five-member federal gaming commission, appointed by Congress, to study Internet gambling for one year and recommend the best methods of regulating it.

"Regulating web-based gaming is difficult at best," Berkley said. "How do we stop money laundering by terrorists and organized crime? How do we address problem gamers? Or minors? And how does each state enforce its own gaming laws?"

The number of Internet gambling websites has grown sharply in recent years. Industry representatives say Congress should regulate, not ban, on-line wagers. The Rep. John Conyers-Berkley bill is "the most rational response yet" from Congress on Internet gambling, Rick Smith, executive director of the Interactive Gaming Council, said Wednesday.

Nevada lawmakers have been caught in the complex debate as Congress has grappled with Internet gambling. Some members of Congress want to ban it altogether, but many of the websites are based off-shore, outside the reach of U.S. law enforcement.

Nevada lawmakers say they are concerned about the adverse effects of Internet gambling but also want to protect casinos that would like to offer web gaming if it were legalized.

One possible outcome of the Conyers-Berkley bill is that states could regulate and tax Internet gambling.

"Just as outlawing alcohol did not work in the 1920s, current attempts to prohibit online gaming will not work, either," said Conyers, of Michigan, the ranking Democrat on the House Judiciary Committee.

In a series of votes since 1998, large majorities in the House and Senate have voted to outlaw gambling over the Internet. But disputes over how to define illegal gambling, what forms of wagering to exempt from a ban, and how to enforce a ban, have prevented Congress from agreeing on any one bill to send to the White House.

As Congress has debated a crackdown, Internet gambling has exploded: Christiansen Capital Advisors, which studies the gambling industry, estimates that online wagering worldwide will exceed $6 billion this year and $10 billion in 2005, with a hefty share of the betting taking place in the United States.

But leaders of the long-running effort to ban Internet gambling say it cannot be effectively regulated. They cite underage gambling, fraud and money laundering as possible side effects.

Rep. Bob Goodlatte, R-Va., said he doubts that an online casino would ever be able to distinguish a bet placed legally in a state that regulates Internet gambling from a bet placed illegally in a state that bans it.

Joining Conyers as original sponsors of the pro-regulation bill, his office said, are Reps. Chris Cannon, R-Utah; Joe Baca, D-Calif.; and Berkley.

MGM MIRAGE, one of the largest operators of Las Vegas Strip hotels, last year became the first major U.S. gambling company to open an online casino, based in and regulated by the Isle of Man off the coast of Great Britain.

Because the current legal status of Internet gambling in the United States is hazy -- some site operators have been prosecuted under the 1961 Wire Communications Act, which was written to cover sports betting via telephone -- MGM's online casino does not yet accept bets from the United States.

MGM MIRAGE spokesman Alan Feldman said the Conyers proposal is a welcome indication that some lawmakers have open minds about how technology and the public appetite for gambling have evolved.

"This is deserving of a good debate here in the United States," he said. "Let's look at technology today, where the industry stands today, and what the public is doing. There are hundreds of thousands of Americans who go online every day and wager millions of dollars."

The American Gaming Association, which represents commercial casinos, continues to support a ban on Internet gambling "as it exists today," while holding out the option of backing a system in which online casinos are regulated and taxed.

But Nevada Sen. Harry Reid, the number two Democrat in the Senate, said late last year that online gambling is still "ripe for cheating" and should be banned.

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