House Subcommittee Debates Goodlatte Bil

The U.S. House of Representatives Judiciary Subcommittee on Crime, Terrorism and Homeland Security today held a legislative hearing on Rep. Goodlatte's, R-Va., HR 4777, the "Internet Gambling Prohibition Act," which seeks to outlaw certain forms of online gambling in the United States by updating the Wire Act with language that clearly applies to new forms of communication technologies. Much of the discussion in the nearly two-hour hearing centered around confusion as to whether the bill would exempt remote horse race wagering. The matter still had not been settled by the time the hearing ended.

The hearing commenced with prepared opening statements from subcommittee chairman Howard Coble, R-NC, and ranking member Robert Scott, D-Va., immediately followed by prepared statements from Rep. Goodlatte and witnesses Bruce G. Ohr of the Department of Justice's Organized Crime and Racketeering Section's Criminal Division, John Warren Kindt, a professor at the University of Illinois, and Samuel A. Vallandingham, vice president of the First State Bank of Barboursville, West Virginia, who spoke on behalf of the Independent Community Bankers of America.

With the opening statements completed, Rep. John Conyers, D-Mich., the ranking member of the Judiciary Committee, immediately steered discussion toward the issue of exempted online gambling activities. Goodlatte stated that his bill does not contain exemptions for the horse racing industry, but Conyers pointed out that this contradicts with Ohr's remarks that the Department of Justice is concerned about the exemptions contained in the bill.

Goodlatte argued, however, that the bill makes no interpretation about whether remote horse race wagering is permitted by the Interstate Horse Racing Act. Ohr then stated that the DOJ has always believed that the Interstate Horseracing Act does not authorize remote horse racing and that it is investigating the matter.

Conyers said that despite Goodlatte's claims at the hearing, the legislation exempts not only remote horse race wagering but other forms of gambling at the state level. He demonstrated that the bill contains such language as:

Nothing in this section prohibits the transmission of information assisting in the placing of bets or wagers from a State or foreign country where such betting or wagering is permitted under Federal, State, tribal or local law into a State or foreign country in which such betting on the same event is permitted under Federal, State, tribal or local law; or the interstate transmission of information relating to a State-specific lottery between a State or foreign country where such betting or wagering is permitted under Federal, State, local or tribal law and an out-of-State data center for the purposes in assisting in the operation of such State-specific lottery.

Said Conyers, "This carve-out just didn't get invented this afternoon; it's gone through several administrations. . . . The good intentions of an author notwithstanding, we must be clear and careful."

Debate on the horse racing issue continued among subcommittee members, and witnesses for much of the hearing, but Rep. Goodlatte was unable to lend clarity to a lot of the discussion because he left the hearing at the one-hour mark and did not return for 30 minutes.

The record of the hearing remains open for seven days, and both Ohr and Goodlatte are expected to submit further statements clarifying the legality of remote horse race wagering and whether it would be exempted by Goodlatte's bill.

Rep. Chris Cannon, R-Utah, who is not a member of the subcommittee but is part of the Judiciary Committee, was on hand to voice concerns that Goodlatte's bill might actually expand gambling. Cannon, who hails from one of only two U.S. states that prohibit all forms of gambling, said he cannot support Goodlatte's bill because it is unclear about exemptions.

Further, subcommittee members Scott and Sheila Jackson Lee, D-Tex., stressed concerns about the practicality of Goodlatte's measures. Ranking Member Scott made it clear in his opening remarks that he believes regulation is the only solution to America's online gambling problem. Scott pointed out that Goodlatte's bill does not prohibit gambling, but instead prohibits the running of online gambling operations, which are based offshore anyway.

Scott later questioned Ohr about how effective the DOJ could be in prosecuting foreign companies that provide wagering services to Americans. Ohr stated that the DOJ had many ways to extradite individuals involved in foreign online gambling businesses, but Scott pointed out that even though the DOJ has maintained for 10 years that online gambling operations are illegal, it has so far managed to prosecute only one individual, and only because that person voluntarily returned to the United States to fight the charges against him.

Rep. Jackson Lee asked Goodlatte if he was familiar with the regulatory models in use by the United Kingdom and Australia, and she noted that a prerequisite of licensees in Britain will be sufficient methods to verify customers' identities and ages. Goodlatte replied that his bill does provide for the licensing of online gambling companies by American states, but only if adequate verification is possible--and he doesn't believe it is at this time.

Also of interest was the testimony of Vallandingham, who said that Goodlatte's bill would harm America's financial institutions, which are already under a substantial burden. He said the bill would drain critical resources that should be directed at combating terrorism.

Additionally, Vallandingham doubts the bill would be effective in reducing the amount of gambling done by Americans. He noted particularly the trouble that ACH transaction would pose. In such transactions, the payee is not known, but Goodlatte's bill would give financial institutions the impossible task of policing not only where the payment is being sent, but for which sort of service such payment is being used.

Opponents of the bill have related to IGN that they are quite pleased with today's hearing. The DOJ's admission that it cannot support a bill with carve-outs, followed by the ensuing confusion over the carve-outs has lead not only to doubts about whether the bill could be effective, but also to fears that it could even serve to legalize gambling in some cases. No vote was taken to pass the bill out of committee, and a second hearing has not been scheduled.