[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4350 Introduced in House (IH)]







105th CONGRESS
  2d Session
                                H. R. 4350

 To amend title 18, United States Code, to prohibit Internet gambling, 
                        and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             July 29, 1998

 Mr. Stearns (for himself, Mr. Oxley, and Mr. Largent) introduced the 
  following bill; which was referred to the Committee on the Judiciary

_______________________________________________________________________

                                 A BILL


 
 To amend title 18, United States Code, to prohibit Internet gambling, 
                        and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Internet Gambling Prohibition Act of 
1998''.

SEC. 2. DEFINITIONS.

    Section 1081 of title 18, United States Code, is amended--
            (1) in the matter immediately following the colon, by 
        designating the first 5 undesignated paragraphs as paragraphs 
        (1) through (5), respectively, and indenting each paragraph 2 
        ems to the right; and
            (2) by adding at the end the following:
            ``(6) Bets or wagers.--The term `bets or wagers'--
                    ``(A) means the staking or risking by any person of 
                something of value upon the outcome of a contest of 
                others, sporting event of others, or of any game of 
                chance, upon an agreement or understanding that the 
                person or another person will receive something of 
                value based on that outcome;
                    ``(B) includes the purchase of a chance or 
                opportunity to win a lottery or other prize (which 
                opportunity to win is predominantly subject to chance);
                    ``(C) includes any scheme of a type described in 
                section 3702 of title 28, United States Code; and
                    ``(D) does not include--
                            ``(i) a bona fide business transaction 
                        governed by the securities laws (as that term 
                        is defined in section 3(a)(47) of the 
                        Securities Exchange Act of 1934 (15 U.S.C. 
                        78c(a)(47))) for the purchase or sale at a 
                        future date of securities (as that term is 
                        defined in section 3(a)(10) of the Securities 
                        Exchange Act of 1934 (15 U.S.C. 78c(a)(10)));
                            ``(ii) a transaction on or subject to the 
                        rules of a contract market designated pursuant 
                        to section 5 of the Commodity Exchange Act (7 
                        U.S.C. 7);
                            ``(iii) a contract of indemnity or 
                        guarantee;
                            ``(iv) a contract for life, health, or 
                        accident insurance; or
                            ``(v) participation in a game or contest, 
                        otherwise lawful under applicable Federal or 
                        State law--
                                    ``(I) that, by its terms or rules, 
                                is not dependent on the outcome of any 
                                single sporting event, any series or 
                                sporting events, any tournament, or the 
                                individual performance of 1 or more 
                                athletes or teams in a single sporting 
                                event;
                                    ``(II) in which the outcome is 
                                determined by accumulated statistical 
                                results of games or contests involving 
                                the performances of amateur or 
                                professional athletes or teams; and
                                    ``(III) in which the winner or 
                                winners may receive a prize or award;
                        (otherwise known as a `fantasy sport league' or 
                        a `rotisserie league') if such participation is 
                        without charge to the participant or any charge 
                        to a participant is limited to a reasonable 
                        administrative fee.
            ``(7) Foreign jurisdiction.--The term `foreign 
        jurisdiction' means a jurisdiction of a foreign country or 
        political subdivision thereof.
            ``(8) Information assisting in the placing of a bet or 
        wager.--The term `information assisting in the placing of a bet 
        or wager'--
                    ``(A) means information that is intended by the 
                sender or recipient to be used by a person engaged in 
                the business of betting or wagering to accept or place 
                a bet or wager; and
                    ``(B) does not include--
                            ``(i) information concerning parimutuel 
                        pools that is exchanged between or among 1 or 
more racetracks or other parimutuel wagering facilities licensed by the 
State or approved by the foreign jurisdiction in which the facility is 
located, and 1 or more parimutuel wagering facilities licensed by the 
State or approved by the foreign jurisdiction in which the facility is 
located, if that information is used only to conduct common pool 
parimutuel pooling under applicable law;
                            ``(ii) information exchanged between or 
                        among 1 or more racetracks or other parimutuel 
                        wagering facilities licensed by the State or 
                        approved by the foreign jurisdiction in which 
                        the facility is located, and a support service 
                        located in another State or foreign 
                        jurisdiction, if the information is used only 
                        for processing bets or wagers made with that 
                        facility under applicable law;
                            ``(iii) information exchanged between or 
                        among 1 or more wagering facilities that are 
                        located within a single State and are licensed 
                        and regulated by that State, and any support 
                        service, wherever located, if the information 
                        is used only for the pooling or processing of 
                        bets or wagers made by or with the facility or 
                        facilities under applicable State law;
                            ``(iv) any news reporting or analysis of 
                        wagering activity, including odds, racing or 
                        event results, race and event schedules, or 
                        categories of wagering; or
                            ``(v) any posting or reporting of any 
                        educational information on how to make a bet or 
                        wager or the nature of betting or wagering.''.

SEC. 3. PROHIBITION ON INTERNET GAMBLING.

    (a) In General.--Chapter 50 of title 18, United States Code, is 
amended by adding at the end the following:
``Sec. 1085. Internet gambling
    ``(a) Definitions.--In this section:
            ``(1) Closed-loop subscriber-based service.--The term 
        `closed-loop subscriber-based service' means any information 
        service or system that uses--
                    ``(A) a device or combination of devices--
                            ``(i) expressly authorized and operated in 
                        accordance with the laws of a State for the 
                        purposes described in subsection (e); and
                            ``(ii) by which a person located within a 
                        State must subscribe to be authorized to place, 
                        receive, or otherwise make a bet or wager, and 
                        must be physically located within that State in 
                        order to be authorized to do so;
                    ``(B) a customer verification system to ensure that 
                all applicable Federal and State legal and regulatory 
                requirements for lawful gambling are met; and
                    ``(C) appropriate data security standards to 
                prevent unauthorized access.
            ``(2) Gambling business.--The term `gambling business' 
        means a business that is conducted at a gambling establishment, 
        or that--
                    ``(A) involves--
                            ``(i) the placing, receiving, or otherwise 
                        making of bets or wagers; or
                            ``(ii) offers to engage in placing, 
                        receiving, or otherwise making bets or wagers;
                    ``(B) involves 1 or more persons who conduct, 
                finance, manage, supervise, direct, or own all or part 
                of such business; and
                    ``(C) has been or remains in substantially 
                continuous operation for a period in excess of 10 days 
                or has a gross revenue of $2,000 or more during any 24-
                hour period.
            ``(3) Interactive computer service.--The term `interactive 
        computer service' means any information service, system, or 
        access software provider that uses a public communication 
        infrastructure or operates in interstate or foreign commerce to 
        provide or enable computer access by multiple users to a 
        computer server, including specifically a service or system 
        that provides access to the Internet.
            ``(4) Internet.--The term `Internet' means the 
        international computer network of both Federal and non-Federal 
        interoperable packet switched data networks.
            ``(5) Person.--The term `person' means any individual, 
        association, partnership, joint venture, corporation, State or 
        political subdivision thereof, department, agency, or 
        instrumentality of a State or political subdivision thereof, or 
        any other government, organization, or entity.
            ``(6) Private network.--The term `private network' means a 
        communications channel or channels, including voice or computer 
        data transmission facilities, that use either--
                    ``(A) private dedicated lines; or
                    ``(B) the public communications infrastructure, if 
                the infrastructure is secured by means of the 
                appropriate private communications technology to 
                prevent unauthorized access.
            ``(7) State.--The term `State' means a State of the United 
        States, the District of Columbia, the Commonwealth of Puerto 
        Rico, or a commonwealth, territory, or possession of the United 
        States.
    ``(b) Gambling.--
            ``(1) Prohibition.--Subject to subsection (e), it shall be 
        unlawful for a person knowingly to use the Internet or any 
        other interactive computer service--
                    ``(A) to place, receive, or otherwise make a bet or 
                wager with any person; or
                    ``(B) to send, receive, or invite information 
                assisting in the placing of a bet or wager with the 
                intent to send, receive, or invite information 
                assisting in the placing of a bet or wager.
            ``(2) Penalties.--A person who violates paragraph (1) shall 
        be--
                    ``(A) fined in an amount that is not more than the 
                greater of--
                            ``(i) three times the greater of--
                                    ``(I) the total amount that the 
                                person is found to have wagered through 
                                the Internet or other interactive 
                                computer service; or
                                    ``(II) the total amount that the 
                                person is found to have received as a 
                                result of such wagering; or
                            ``(ii) $500;
                    ``(B) imprisoned not more than 3 months; or
                    ``(C) both.
    ``(c) Gambling Businesses.--
            ``(1) Prohibition.--Subject to subsection (e), it shall be 
        unlawful for a person engaged in a gambling business knowingly 
        to use the Internet or any other interactive computer service--
                    ``(A) to place, receive, or otherwise make a bet or 
                wager; or
                    ``(B) to send, receive, or invite information 
                assisting in the placing of a bet or wager.
            ``(2) Penalties.--A person engaged in a gambling business 
        who violates paragraph (1) shall be--
                    ``(A) fined in an amount that is not more than the 
                greater of--
                            ``(i) the amount that such person received 
                        in bets or wagers as a result of engaging in 
                        that business in violation of this subsection; 
                        or
                            ``(ii) $20,000;
                    ``(B) imprisoned not more than 4 years; or
                    ``(C) both.
    ``(d) Permanent Injunctions.--Upon conviction of a person under 
this section, the court may, as an additional penalty, enter a 
permanent injunction enjoining the transmission of bets or wagers or 
information assisting in the placing of a bet or wager.
    ``(e) Exceptions.--
            ``(1) In general.--Subject to paragraph (2), the 
        prohibitions in this section shall not apply to any--
                    ``(A) otherwise lawful bet or wager that is placed, 
                received, or otherwise made wholly intrastate for a 
                State lottery or a racing or parimutuel activity, or a 
                multi-State lottery operated jointly between 2 or more 
                States in conjunction with State lotteries, (if the 
                lottery or activity is expressly authorized, and 
                licensed or regulated, under applicable Federal or 
                State law) on--
                            ``(i) an interactive computer service that 
                        uses a private network, if each person placing 
                        or otherwise making that bet or wager is 
                        physically located at a facility that is open 
                        to the general public; or
                            ``(ii) a closed-loop subscriber-based 
                        service that is wholly intrastate; or
                    ``(B) otherwise lawful bet or wager for class II or 
                class III gaming (as defined in section 4 of the Indian 
                Gaming Regulatory Act (25 U.S.C. 2703)) that is placed, 
                received, or otherwise made on a closed-loop 
                subscriber-based service or an interactive computer 
                service that uses a private network, if--
                            ``(i) each person placing, receiving, or 
                        otherwise making that bet or wager is 
                        physically located on Indian land; and
                            ``(ii) all games that constitute class III 
                        gaming are conducted in accordance with an 
                        applicable Tribal-State compact entered into 
                        under section 11(d) of the Indian Gaming 
Regulatory Act (25 U.S.C. 2701(d)) by a State in which each person 
placing, receiving, or otherwise making that bet or wager is physically 
located.
            ``(2) Inapplicability of exception to bets or wagers made 
        by agents or proxies.--An exception under subparagraph (A) or 
        (B) of paragraph (1) shall not apply in any case in which a bet 
        or wager is placed, received, or otherwise made by the use of 
        an agent or proxy using the Internet or an interactive computer 
        service. Nothing in this paragraph shall be construed to 
        prohibit the owner operator of a parimutuel wagering facility 
        that is licensed by a State from employing an agent in the 
        operation of the account wagering system owned or operated by 
        the parimutuel facility.
    ``(f) State Law.--Nothing in this section shall be construed to 
create immunity from criminal prosecution or civil liability under the 
law of any State.''.
    (b) Technical Amendment.--The analysis for chapter 50 of title 18, 
United States Code, is amended by adding at the end the following:

``1085. Internet gambling.''.

SEC. 4. CIVIL REMEDIES.

    (a) In General.--The district courts of the United States shall 
have original and exclusive jurisdiction to prevent and restrain 
violations of section 1085 of title 18, United States Code, as added by 
section 3, by issuing appropriate orders.
    (b) Proceedings.--
            (1) Institution by federal government.--The United States 
        may institute proceedings under this section. Upon application 
        of the United States, the district court may enter a temporary 
        restraining order or an injunction against any person to 
        prevent a violation of section 1085 of title 18, United States 
        Code, as added by section 3, if the court determines, after 
        notice and an opportunity for a hearing, that there is a 
        substantial probability that such violation has occurred or 
        will occur.
            (2) Institution by state attorney general.--
                    (A) In general.--Subject to subparagraph (B), the 
                attorney general of a State (or other appropriate State 
                official) in which a violation of section 1085 of title 
                18, United States Code, as added by section 3, is 
                alleged to have occurred, or may occur, after providing 
                written notice to the United States, may institute 
                proceedings under this section. Upon application of the 
                attorney general (or other appropriate State official) 
                of the affected State, the district court may enter a 
                temporary restraining order or an injunction against 
                any person to prevent a violation of section 1085 of 
                title 18, United States Code, as added by section 3, if 
                the court determines, after notice and an opportunity 
                for a hearing, that there is a substantial probability 
                that such violation has occurred or will occur.
                    (B) Indian lands.--With respect to a violation of 
                section 1085 of title 18, United States Code, as added 
                by section 3, that is alleged to have occurred, or may 
                occur, on Indian lands (as defined in section 4 of the 
                Indian Gaming Regulatory Act (25 U.S.C. 2703)), the 
                enforcement authority under subparagraph (A) shall be 
                limited to the remedies under the Indian Gaming 
                Regulatory Act (25 U.S.C. 2701 et seq.), including any 
                applicable Tribal-State compact negotiated under 
                section 11 of that Act (25 U.S.C. 2710).
            (3) Orders and injunctions against internet service 
        providers.--Notwithstanding paragraph (1) or (2), the following 
        rules shall apply in any proceeding instituted under this 
        subsection in which application is made for a temporary 
        restraining order or an injunction against an interactive 
        computer service:
                    (A) Scope of relief.--
                            (i) If the violation of section 1085 of 
                        title 18, United States Code, originates with a 
                        customer of the interactive computer service's 
                        system or network, the court may require the 
                        service to terminate the specified account or 
                        accounts of the customer, or of any readily 
                        identifiable successor in interest, who is 
                        using such service to place, receive or 
                        otherwise make a bet or wager, engage in a 
                        gambling business, or to initiate a 
                        transmission that violates such section 1085.
                            (ii) Any other relief ordered by the court 
                        shall be technically feasible for the system or 
                        network in question under current conditions, 
                        reasonably effective in preventing a violation 
                        of section 1085, of title 18, United States 
                        Code, and shall not unreasonably interfere with 
                        access to lawful material at other online 
                        locations.
                            (iii) No relief shall be issued under 
                        subparagraph (A)(ii) if the 
interactive computer service demonstrates, after an opportunity to 
appear at a hearing, that such relief is not economically reasonable 
for the system or network in question under current conditions.
                    (B) Considerations.--In the case of an application 
                for relief under subparagraph (A)(ii), the court shall 
                consider, in addition to all other factors that the 
                court shall consider in the exercise of its equitable 
                discretion, whether--
                            (i) such relief either singularly or in 
                        combination with such other injunctions issued 
                        against the same service under this subsection, 
                        would seriously burden the operation of the 
                        service's system network compared with other 
                        comparably effective means of preventing 
                        violations of section 1085 of title 18, United 
                        States Code;
                            (ii) in the case of an application for a 
                        temporary restraining order or an injunction to 
                        prevent a violation of section 1085 of title 
                        18, United States Code, by a gambling business 
                        (as is defined in such section 1085) located 
                        outside the United States, the relief is more 
                        burdensome to the service than taking 
                        comparably effective steps to block access to 
                        specific, identified sites used by the gambling 
                        business located outside the United States; and
                            (iii) in the case of an application for a 
                        temporary order or an injunction to prevent a 
                        violation of section 1085 of title 18, United 
                        States Code, as added by section 3, relating to 
                        material or activity located within the United 
                        States, whether less burdensome, but comparably 
                        effective means are available to block access 
                        by a customer of the service's system or 
                        network to information or activity that 
                        violates such section 1085.
                    (C) Findings.--In any order issued by the court 
                under this subsection, the court shall set forth the 
                reasons for its issuance, shall be specific in its 
                terms, and shall describe in reasonable detail, and not 
                be reference to the complaint or other document, the 
                act or acts sought to be restrained and the general 
                steps to be taken to comply with the order.
            (4) Expiration.--Any temporary restraining order or 
        preliminary injunction entered pursuant to this subsection 
        shall expire if, and as soon as, the United States, or the 
        attorney general (or other appropriate State official) of the 
        State, as applicable, notifies the court that issued the 
        injunction that the United States or the State, as applicable, 
        will not seek a permanent injunction.
    (c) Expedited Proceedings.--
            (1) In general.--In addition to proceedings under 
        subsection (b), a district court may enter a temporary 
        restraining order against a person alleged to be in violation 
        of section 1085 of title 18, United States Code, as added by 
        section 3, upon application of the United States under 
        subsection (b)(1), or the attorney general (or other 
        appropriate State official) of an affected State under 
        subsection (b)(2), without notice and the opportunity for a 
        hearing, if the United States or the State, as applicable, 
        demonstrates that there is probable cause to believe that the 
        transmission at issue violates section 1085 of title 18, United 
        States Code, as added by section 3.
            (2) Expiration.--A temporary restraining order entered 
        under this subsection shall expire on the earlier of--
                    (A) the expiration of the 30-day period beginning 
                on the date on which the order is entered; or
                    (B) the date on which a preliminary injunction is 
                granted or denied.
            (3) Hearings.--A hearing requested concerning an order 
        entered under this subsection shall be held at the earliest 
        practicable time.
    (d) Rule of Construction.--In the absence of fraud or bad faith, no 
interactive computer service (as defined in section 1085(a) of title 
18, United States Code, as added by section 3) shall be liable for any 
damages, penalty, or forfeiture, civil or criminal, for any reasonable 
course of action taken to comply with a court order issued under 
subsection (b) or (c) of this section.
    (e) Protection of Privacy.--Nothing in this Act or the amendments 
made by this Act shall be construed to authorize an affirmative 
obligation on an interactive computer service--
            (1) to monitor use of its service; or
            (2) except as required by an order of a court, to access, 
        remove or disable access to material where such material 
        reveals conduct prohibited by this section and the amendments 
        made by this section.
    (f) No Effect on Other Remedies.--Nothing in this section shall be 
construed to affect any remedy under section 1084 or 1085 of title 18, 
United States Code, as amended by this Act, or under any other Federal 
or State law. The availability of relief under this section shall not 
depend on, or be affected by, the initiation or resolution of any 
action under section 1084 or 1085 of title 18, United States Code, as 
amended by this Act, or under any other Federal or State law.
    (g) Continuous Jurisdiction.--The court shall have continuous 
jurisdiction under this section to enforce section 1085 of title 18, 
United States Code, as added by section 3.

SEC. 5. REPORT ON ENFORCEMENT.

    Not later than 3 years after the date of enactment of this Act, the 
Attorney General shall submit a report to Congress that includes--
            (1) an analysis of the problems, if any, associated with 
        enforcing section 1085 of title 18, United States Code, as 
        added by section 3;
            (2) recommendations for the best use of the resources of 
        the Department of Justice to enforce that section; and
            (3) an estimate of the amount of activity and money being 
        used to gamble on the Internet.

SEC. 6. REPORT ON COSTS.

    Not later than 3 years after the date of enactment of this Act, the 
Secretary of Commerce shall submit a report to Congress that includes--
            (1) an analysis of existing and potential methods or 
        technologies for filtering or screening transmissions in 
        violation of section 1085 of title 18, United States Code, as 
        added by section 3, that originate outside of the territorial 
        boundaries of any State or the United States;
            (2) a review of the effect, if any, on interactive computer 
        services of any court ordered temporary restraining orders or 
        injunctions imposed on those services under this section;
            (3) a calculation of the cost to the economy of illegal 
        gambling on the Internet, and other societal costs of such 
        gambling; and
            (4) an estimate of the effect, if any, on the Internet 
        caused by any court ordered temporary restraining orders or 
        injunctions imposed under this Act.

SEC. 7. SEVERABILITY.

    If any provision of this Act, an amendment made by this Act, or the 
application of such provision or amendment to any person or 
circumstance is held to be unconstitutional, the remainder of this Act, 
the amendments made by this Act, and the application of the provisions 
of such to any person or circumstance shall not be affected thereby.
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