SEARCH NEWS:

 

U.S. Congressman Tries Again on "Internet Gambling Funding" Ban

Unlike efforts by Senator Jon Kyl and Rep. Robert Goodlatte to legislatively prohibit online gaming, the Leach bill (HR 556) seeks to cut off the industry's financial lifeline: the transactions, mostly on credit cards, through which bettors send money to the gaming sites.

Under "Findings," the bill declares that:

"(1) Internet gambling is primarily funded through personal use of bank instruments, including credit cards and wire transfers.

"(2) The National Gambling Impact Study Commission in 1999 recommended the passage of legislation to prohibit wire transfers to Internet gambling sites or the banks which represent them.

"(3) Internet gambling is a major cause of debt collection problems for insured depository institutions and the consumer credit industry.

"(4) Internet gambling conducted through offshore jurisdictions has been identified by United States law enforcement officials as a significant money laundering vulnerability."

The bill defines "unlawful Internet gambling" as using the Internet to place a bet or wager where betting or wagering is "unlawful under any applicable Federal or State law in the State in which the bet or wager is initiated, received, or otherwise made."

The bill would prohibit anyone engaged in a gambling business from accepting credit cards, electronic fund transfers, checks, drafts or similar instruments that are drawn on or payable at any financial institution.

The penalty for violating such a law would be a fine and/or up to five years in prison. Federal banking agencies would be authorized to prohibit banks from extending credit or collecting on checks if the banks have knowledge that the credit or checks are involved in transactions that violate this bill.

The bill appears to exempt fantasy sports leagues.

Leach is chairman of the House Committee on Banking and Financial Services. Last May, along with co-sponsors, he introduced a similar bill, which did not make it through Congress.

The new version of the bill does not include harsh provisions in last year's bill that sought to punish Third World countries that were home to Internet gaming operators. It instructed the Treasury Department to withhold funds and loans to international lending organizations (such as the International Monetary Fund) that help such countries.

Since scores of Internet casinos and sports books are based in, and often licensed by, small Caribbean countries, these provisions were a big stick designed to get these countries to close down the gaming sites. But the provisions would have also caused headaches diplomatically, injecting Internet gaming into U.S. foreign policy.

The 2001 version of the Leach bill contains much milder language when it comes to foreign jurisdictions. It says that the U.S. government should (1)"encourage cooperation by foreign governments and relevant international fora in identifying whether Internet gambling operations are being used for money laundering, corruption, or other crimes; (2) advance policies that promote the cooperation of foreign governments, through information sharing or other measures, in the enforcement of this Act. . ."

The bill also requires that the "Secretary of the Treasury shall submit an annual report to the Congress on the deliberations between the United States and other countries on issues relating to Internet gambling."

While the Goodlatte bill became mired in disagreements over exemptions such as those for parimutuel wagering, experts believe that the Leach approach may be the most potent threat to participation in online gaming by U.S. residents. An executive of the Interactive Gaming Council estimates that 60 to 70 percent of online gaming revenue comes from the U.S.

Las Vegas gaming lawyer Anthony Cabot recently published "Internet Gaming Report IV." In concluding a chapter on "Prohibitory Challenges," Cabot writes:

"Of all the methods, this [the 2000 Leach bill] may have the most promise because the vast majority of financial transaction providers are United States companies. Unlike ISPs or Internet advertisers, the number of financial transaction providers is manageable."

The new Leach bill was assigned to two House committees: Judiciary and Financial Services.

< Gaming News