2003 Legal Overview
1995-Present

In the beginning of this year, I predicted there would be no risk that Internet poker playing would be federally banned in the year 2003. I must confess that it was one of the most effortless predictions I have ever made. This is because one need only review every effort made on Capitol Hill since the first virtual casino came upon the scene in 1995 to understand that Internet poker playing is here to stay.

In 1995, there were about 35 Internet gambling sites. The most conservative estimate is that there are at least 1,800 sites today. A recent study estimates that whereas global Internet gambling revenues were $2.2 billion in 2002 and $5 billion in 2003, that figure will reach $12.6 billion in 2006.

Let's review some of the noteworthy efforts made on Capitol Hill since 1995 affecting Internet gambling.

Please remember that in order for a bill to become law, a proposed bill must first pass the House and the Senate. Since the House and Senate versions are authored by different congressmen with different agendas, the bills are always different. If bills relating to the same issue are passed in both the House and Senate, the two versions must be reconciled and again approved by both the House and Senate. Thereafter the combined, approved bill must be signed into law by the president. If a bill is introduced but not passed before Congress adjourns, that bill dies and a new bill with a new number must be introduced the following year. One can always tell the difference between a Senate bill, which begins with an "S," and a House bill, which begins with "HR."

Sen. Jon Kyl first circulated proposed legislation that would imprison the online gambler; however, the 1995 Crime Prevention Act was so broad, it was unfeasible by all accounts and died in committee without ever being voted upon.

In 1996, the 104th Congress created the National Gambling Impact and Policy Commission in 1996 (Public Law 104-169). The stated purpose of the Federal Commission was to conduct a comprehensive study of the social and economic impacts of gambling in the United States. The Commission recommended that Congress pass legislation and develop enforcement strategies affecting Internet Service Providers, credit card providers, money transfer agencies, makers of wireless communications systems, and banks. (Congress did not complete this study until 1999!)

Sen. Jon Kyl introduced S 474 (Internet Gambling Prohibition Act of 1997) to the 105th Senate on March 19, 1997. S 474 was a version of Kyl's 1995 proposed legislation and attempted to ban all Internet gambling that the 1961 Wire Act did not cover. Internet Gambling site operators and bettors alike would be subject to fines. Further, S 474 would have allowed a state attorney general to issue a restraining order against ISPs that allowed the transmission of bets, wagers, or related gambling information. S 474 passed 90-10.

The Goodlatte bill (HR 2380) was introduced to the 105th House of Representatives on Sept. 3, 1997, as the companion bill to S 474. HR 2380 proposed the same general restrictions and penalties as S 474, but never made it out of House Committee on the Judiciary and Congress adjourned before the bill was voted upon.

Sen. Kyl and Rep. Goodlatte tried again to introduce Internet gambling legislation in 1999 with the 106th Congress. Sen. Kyl introduced S 692 on March 23, 1999. S 692 was 28 pages long, with a myriad of exceptions and immunities not included in the 1997 bill. Importantly, this bill did not criminalize Internet gambling for the individual bettor. It received full Senate approval, with an amendment that was approved on Nov. 19, 1999.

Rep. Goodlatte introduced the companion bill, HR 3125 on Oct. 21, 1999. The hefty bill was 37 pages long and full of exemptions. Although it had a substantial following, it failed by a margin of 25 votes. Although a motion to reconsider passed without objection, Congress adjourned before it was reintroduced.

Reps. Jim Leach and John LaFalce introduced HR 4419 (also known as the Internet Gambling Funding Prohibition Act) to the 106th House of Representatives on May 10, 2000. HR 4419 prohibited the use of checks, credit cards, and electronic fund transfers for Internet Gambling. The bill was immediately submitted to the House Committee on Banking and Financial Services and arguments were heard June 20, 2000. After considerable debate regarding which amendments would be approved, HR 4419 remained in the Judiciary Committee until Congress adjourned.

Rep. Jim Leach introduced HR 556 (known as either "The Unlawful Internet Gambling Funding Prohibition Act" or the "Leach-LaFalce Act") to the 107th House of Representatives on Feb. 12, 2001. HR 556 is essentially a continuation of HR 4419. That bill outlawed usage of a credit card, electronic fund transfer, or any other bank instrument to pay for Internet gambling. It also provided a vehicle requiring U.S. Internet service providers (ISPs) to block access to or pull advertising from offshore Web gambling sites. You may remember CardPlayer.com sent out a Special Bulletin explaining the bill when it passed. It passed by a special suspension of the regular house rules by a "voice vote" consisting of seven members of the house out of a total of 435 members.

No bill similar to HR 556 passed in the Senate in 2001.

Rep. John J. LaFalce introduced HR 2579 (also known as the Internet Gambling Payments Prohibition Act) to the 107th House of Representatives on July 20, 2001. HR 2579 was created as an alternative to HR 556. The difference was that this bill assumed that all Internet gambling was illegal as opposed to the language in HR 556, which prohibited only "unlawful" Internet Gambling, which was defined in the statute as gambling not permitted by the state. This bill remained in a subcommittee until Congress adjourned.

Rep. Michael G. Oxley introduced HR 3004 (also known as the Financial Anti-Terrorism Act of 2001) to the 107th House of Representatives on Oct. 3, 2001. HR 3004 was created to combat the financing of terrorism in light of the Sept. 11, 2001, attack. Many analysts believe it was hastily put together. The bill covered money laundering and "suspicious" financial transactions. Originally there were anti-gambling sections in the Anti-Terrorism Act, which were promptly eliminated. Removed were sections 303 and 304, which dealt with illegal financial transactions for Internet gambling within the United States. HR 3004 went to the floor without the Internet Gambling portion and passed 412-1 on Oct. 17, 2001.

Sen. Thomas Daschle introduced the companion bill, S 1510 (also known as the Uniting and Strengthening America Act) on Oct. 4, 2001. S 1510 contained no Internet Gambling provisions at all and passed without conflict on Oct. 11, 2001, by a vote of 96-1.

In late 2002, John Conyers Jr. introduced a bill that would create a five-member commission to study the feasibility of making Internet gambling legal in the United States. HR 5760, known as the Internet Gambling Licensing and Regulation Commission Act, had no chance of passing in 2002 since the Senate had already adjourned when the bill was introduced. Conyers said he meant to start a dialogue for the next Congress.

Congressman Conyers from the U.S. House of Representatives introduced HR 1223 (also known as the "Internet Gambling Licensing and Regulation Commission Act"). This was a reintroduction of his similar 2002 bill.

Rep. James A. Leach reintroduced a version of the Unlawful Internet Gambling Funding Prohibition Act (HR 566). The new bill number is HR 21. It is predominantly a reconciliation of HR 556 and HR 3215.

On May 19 of this year, Rep. Bachus introduced HR 2143, which is a variation of HR 21. HR 2143 (also known as the Unlawful Internet Gambling Funding Prohibition Act) passed in the House of Representatives by a vote of 319-104. The bill contains no criminal or civil liabilities and is a shell of last year's version. It does not make online poker playing illegal; it merely makes it more difficult to get money into an offshore site.

A companion bill was introduced in the Senate. S 627 prohibits gambling businesses from accepting credit cards, checks, or other bank instruments from gamblers who "illegally" place wagers over the Internet.

A summary of S 627 ordered reported by the Senate Committee on Banking Housing and Urban Affairs on July 31, 2003, states:

"S 627 would prohibit gambling businesses from accepting credit cards, checks, or other bank instruments from gamblers who illegally bet over the Internet. The bill also would require financial institutions to take steps to identify and block gambling-related transactions that are transmitted through their payment systems. The Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation (FDIC), the Office of Thrift Supervision (OTS), and the National Credit Union Administration (NCUA) would enforce the provisions of S 627 as they apply to financial institutions. The Federal Trade Commission and the Department of Justice would be responsible for other enforcement actions. Finally, S 627 would establish an Office of Electronic Funding Oversight in the Department of Treasury to issue regulations, coordinate federal programs, and implement certain initiatives."

This bill also adds criminal and civil liabilities for companies engaging in the forbidden acts. The bill is not scheduled for hearing on the Senate floor and is substantially different than the companion bill passed by the House. This means that even if the Senate were to pass the bill, reconciling it with the House bill this year is unfeasible, at best.

HR 2143 and S 627 are the only remaining pieces of current legislation that speak to the issue of online gambling. What the bills have in common is that they prevent the use of credit cards, checks, and electronic fund transfers for Internet gambling. Since most Internet gamblers no longer use credit cards, checks, or electronic fund transfers emanating from the United States, this year's legislation will not even put a dent into the $5 billion generated this year from Internet gambling.