INTERNET GAMBLING LEGISLATION
Opponents of Internet gambling have introduced legislation in the last five Congresses to prohibit this form of gambling.
Passage of legislation prohibiting
all Internet wagering, without language permitting the
racing industry to continue to offer the wagering opportunities that it has
been providing for many years, would be devastating. At the same time, legislation that protects pari-mutuel
wagering, but also prohibits unlawful off-shore Internet wagering could help
with a problem important to the racing industry. Many in racing are concerned that some large
bettors are wagering off-shore with unregulated Internet sites that can offer
rebates, rather than with
To date, the racing industry has been successful in carving out exclusions for itself from the various prohibitory bills, each of which defines the Internet so broadly that they would have prohibited the use of any interactive computer, such as racing’s totalisator machines, the telephone or any electronic media that uses the Internet even minimally, for wagering. In addition, “credit” has always been so broadly defined under these bills that almost all forms of payment would have been prohibited, except the exchange of cash.
In effect, without exclusions for racing, these bills would have prohibited activities that racing has been offering for some time, such as simulcast wagering and advance deposit wagering, under the Interstate Horseracing Act and state law.
House Legislation
Leach Bill. Last Fall, Congressman Jim Leach (R-IA) introduced the Unlawful Internet Gambling Enforcement Act of 2005 (H.R. 4411) to prohibit the use of credit in connection with Internet gambling. This bill is similar to legislation he has introduced in the past, but includes specific exclusions for horse racing, along with intrastate wagering and tribal gaming.
Like Mr. Leach’s previous legislation, the bill prohibits the use of credit for “unlawful Internet gambling,” which is defined in the bill to mean:
“..to place, receive, or otherwise knowingly transmit a bet or wager by any means which involves the use, at least in part, of the Internet where such bet or wager is unlawful under any applicable Federal or State law in the State or Tribal lands in which the bet or wager is initiated, received, or otherwise made.”
But the bill specifically excludes from the definition of “unlawful Internet gambling” “interstate horseracing,” which is defined as:
“[the] placing, receiving, or otherwise transmitting [of] a bet or wager that is governed by and complies with the Interstate Horseracing Act of 1978.”
Goodlatte-Boucher
Bill. In early February,
2006, Congressmen Bob Goodlatte (R-VA) and Rick Boucher (D-VA) re-introduced their
legislation, the Internet Gambling Prohibition Act (H.R. 4777), to prohibit
illegal Internet gambling. Like the legislation they introduced in the 107th
Congress, the bill updated and tightened the federal Wire Statute (18 U.S.C.
1084) to clarify that the federal prohibitions on interstate wagering in that
statute apply to the Internet and other new technologies.
Because the bill was not intended
to affect what the racing industry is presently offering through account
wagering by telephone or other electronic media, it included a specific
exclusion for pari-mutuel horse racing and wagering transactions pursuant to
the Interstate Horseracing Act (IHA). Section
3 of that bill referenced the IHA and provided:
Nothing in this section [Act] shall be construed to prohibit an
activity allowed under Public Law 95-515 (15 U.S.C. 3001 et seq.)
The bill would amend the Wire Act
to prohibit any “gambling business” to use a “wire communication facility” to
transmit “bets or wagers,” “information assisting in the placing of bets or
wagers,” or a communication entitling one to receive money as a result of
either, in interstate or foreign commerce.
It also prohibited a gambling business from accepting “credit,”
including electronic fund transfers, checks, drafts, etc. in connection with
such activity.
With respect to other forms of wagering, the bill allowed a state to legalize and regulate gaming on an intrastate basis with tight controls. Native Americans could also offer Internet wagering, provided it complied with the Indian Gaming Regulatory Act and the participants were on tribal land.
The bill provided for criminal penalties for violations and grants federal courts the authority to issue injunctions against those who violate it.
Congressional Action
Leach Bill. The Leach bill was referred to the House
Committee on Financial Services. On
There was little debate in the Committee, which passed similar legislation in the last Congress that was ultimately passed by the House of Representatives. Congressman Leach spoke in support of the bill. Mr. Leach referred to the legislation introduced by Congressmen Goodlatte and Boucher. Mr. Leach said that he supported the Goodlatte bill and suggested that if that bill moved out of the Judiciary Committee provisions could be taken from each bill and one bill be brought to the House for a vote.
The bill did not go to the full House directly because it had been sequentially referred to the House Judiciary Committee.
Goodlatte Bill. The Goodlatte-Boucher bill was referred to
the House Judiciary Committee. On
Mr. Ohr said the Department “generally supports” the legislation, although it believes that the federal Wire Statute presently prohibits Internet wagering. But, he said, the Department believes that some provisions in the bill “…may weaken current law and standards and that it would also permit gambling over the Internet from the home and favor certain industries over others,” a reference to horse racing. He reiterated that the Department views the existing criminal statutes as prohibiting the interstate transmission of bets or wagers, including wagers on horse races. “H.R. 4777, however, could change current law and amend Section 1084 to permit the interstate transmission of bets and wagers on horse races.”
Mr. Goodlatte responded that he had always maintained that his legislation is intended to maintain the “status quo” regarding what is legal with respect to interstate Internet wagering, be it on horse racing or lotteries, always making the important point that only racing has a federal statute passed to govern its interstate wagering activities.
Following the hearing, Mr. Goodlatte worked with the Department to alleviate the Department’s concerns with the horse racing language in particular, and a number of members of the Judiciary Committee, in general. The compromise reached was to move the horse racing provision to its own section, out of the section amending the Wire Act, and to add a section clarifying that the bill was not intended to change the relationship between the IHA and other federal statutes now in effect, such as the Wire Statute. With these changes, DOJ supported the bill and the amended racing provisions, although the Department continues to maintain that the IHA does not allow interstate wagering.
.
On May 25, the Judiciary Committee approved the Goodlatte and reported it out of committee.
The Judiciary Committee also reported out the Leach Unlawful Internet Gambling Enforcement Act of 2006 (H.R. 4411), which had been sequentially referred to it. That bill had already been considered and approved by the House Financial Services Committee.
House Action
On July 11, the House of Representatives passed the Internet Gambling Prohibition and Enforcement Act (H.R. 4477) on a vote of 317 to 93. The pari-mutuel provisions were once again one of the focuses of the debate on the bill. An amendment offered by Representatives Berkley/Wexler and Conyers to strike all the so-called exclusions, including the racing provisions, was defeated 114 to 297.
The pari-mutuel horse racing provisions in the House-passed bill are those that were in the Judiciary-Committee-approved Goodlatte bill, which will maintain the status quo regarding what is legal with respect to interstate Internet wagering pursuant to the Interstate Horseracing Act. That language was supported by the Department of Justice. It provides that whatever interstate wagering is legal under the IHA, including that over the Internet, will not be affected by the prohibitions of the bill. It also includes a “Sense of the Congress” provision that provides that the Act is not intended to change the legal relationship between the IHA and other federal wagering laws.
Senate Legislation
Senator Jon Kyl (R-AZ) has continued to work on a bill to prohibit the use of credit for unlawful Internet wagering. The latest draft of this legislation is very similar to the Leach bill and includes an exclusion for pari-mutuel horse racing.
AHC Position
The AHC supports the House bill and the draft of the Kyl bill. Either would, at a minimum, maintain the status quo with respect to the legality of interstate simulcasting and account wagering under the IHA.
The industry must continue to work with Congress to ensure that any bill ultimately passed maintains this distinction and does not prevent racing from offering simulcasting and account wagering whether on the phone, the Internet or any electronic media.