[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4411 Reported in House (RH)]
Union Calendar No. 267
109th CONGRESS
2d Session
H. R. 4411
[Report No. 109-412, Parts I and II]
To prevent the use of certain payment instruments, credit cards, and
fund transfers for unlawful Internet gambling, and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
November 18, 2005
Mr. Leach (for himself, Mr. Pence, Mr. Bachus, Mr. Osborne, Mr. Pitts,
Mr. Boehlert, Mr. Gillmor, Mr. Gilchrest, Mr. Rogers of Michigan, Mr.
Bass, Mr. Fortenberry, Mr. Ehlers, Mr. Kirk, Mr. Ramstad, Mr. Dent, Mr.
Walsh, Mr. McCaul of Texas, Mr. Latham, and Mr. Akin) introduced the
following bill; which was referred to the Committee on Financial
Services
April 6, 2006
Reported with an amendment and referred to the Committee on the
Judiciary for a period ending not later than May 26, 2006, for
consideration of such provisions of the bill and amendment as fall
within the jurisdiction of that committee pursuant to clause 1(l), rule
X
[Strike out all after the enacting clause and insert the part printed
in italic]
May 26, 2006
Additional sponsors: Mr. Shadegg, Mr. Kennedy of Minnesota, Mr. Franks
of Arizona, Mr. Terry, Ms. Hooley, Mr. Wicker, Mr. McCotter, Mr. Wilson
of South Carolina, Mr. Upton, Mr. Inglis of South Carolina, Mr. Petri,
Mr. Blunt, Mr. Shays, Ms. Wasserman Schultz, Ms. Bordallo, Mr. Barrett
of South Carolina, and Mr. Souder
May 26, 2006
Reported from the Committee on the Judiciary with an amendment;
committed to the Committee of the Whole House on the State of the Union
and ordered to be printed
[Strike out all after the enacting clause and insert the part printed
in boldface roman]
[For text of introduced bill, see copy of bill as introduced on
November 18, 2005]
_______________________________________________________________________
A BILL
To prevent the use of certain payment instruments, credit cards, and
fund transfers for unlawful 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 ``Unlawful Internet Gambling
Enforcement Act of 2006''.
SEC. 2. PROHIBITION ON ACCEPTANCE OF ANY PAYMENT INSTRUMENT FOR
UNLAWFUL INTERNET GAMBLING.
(a) In General.--Chapter 53 of title 31, United States Code, is
amended by adding at the end the following new subchapter:
``SUBCHAPTER IV--PROHIBITION ON FUNDING OF UNLAWFUL INTERNET GAMBLING
``Sec. 5361. Congressional findings and purpose
``(a) Findings.--The Congress finds the following:
``(1) Internet gambling is primarily funded through
personal use of payment system instruments, 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 such sites.
``(3) Internet gambling is a growing cause of debt
collection problems for insured depository institutions and the
consumer credit industry.
``(4) New mechanisms for enforcing gambling laws on the
Internet are necessary because traditional law enforcement
mechanisms are often inadequate for enforcing gambling
prohibitions or regulations on the Internet, especially where
such gambling crosses State or national borders.
``(b) Rule of Construction.--No provision of this subchapter shall
be construed as altering, limiting, or extending any Federal or State
law or Tribal-State compact prohibiting, permitting, or regulating
gambling within the United States.
``Sec. 5362. Definitions
``For purposes of this subchapter, the following definitions shall
apply:
``(1) Bet or wager.--The term `bet or wager'--
``(A) means the staking or risking by any person of
something of value upon the outcome of a contest of
others, a sporting event, or a game subject to chance,
upon an agreement or understanding that the person or
another person will receive something of value in the
event of a certain 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;
``(D) includes any instructions or information
pertaining to the establishment or movement of funds by
the bettor or customer in, to, or from an account with
the business of betting or wagering; and
``(E) does not include--
``(i) any activity governed by the
securities laws (as that term is defined in
section 3(a)(47) of the Securities Exchange Act
of 1934 for the purchase or sale of securities
(as that term is defined in section 3(a)(10) of
that Act);
``(ii) any transaction conducted on or
subject to the rules of a registered entity or
exempt board of trade under the Commodity
Exchange Act;
``(iii) any over-the-counter derivative
instrument;
``(iv) any other transaction that--
``(I) is excluded or exempt from
regulation under the Commodity Exchange
Act; or
``(II) is exempt from State gaming
or bucket shop laws under section 12(e)
of the Commodity Exchange Act or
section 28(a) of the Securities
Exchange Act of 1934;
``(v) any contract of indemnity or
guarantee;
``(vi) any contract for insurance;
``(vii) any deposit or other transaction
with an insured depository institution; or
``(viii) any participation in a fantasy or
simulation sports game, an educational game, or
a contest, that--
``(I) is not dependent solely on
the outcome of any single sporting
event or nonparticipant's singular
individual performance in any single
sporting event;
``(II) has an outcome that reflects
the relative knowledge of the
participants, or their skill at
physical reaction or physical
manipulation (but not chance), and, in
the case of a fantasy or simulation
sports game, has an outcome that is
determined predominantly by accumulated
statistical results of sporting events,
including any nonparticipant's
individual performances in such
sporting events; and
``(III) offers a prize or award to
a participant that is established in
advance of the game or contest and is
not determined by the number of
participants or the amount of any fees
paid by those participants.
``(2) Business of betting or wagering.--The term `business
of betting or wagering' does not include the activities of a
financial transaction provider, or any interactive computer
service or telecommunications service.
``(3) Designated payment system.--The term `designated
payment system' means any system utilized by a financial
transaction provider that the Secretary and the Board of
Governors of the Federal Reserve System, in consultation with
the Attorney General, jointly determine, by regulation or
order, could be utilized in connection with, or to facilitate,
any restricted transaction.
``(4) Financial transaction provider.--The term `financial
transaction provider' means a creditor, credit card issuer,
financial institution, operator of a terminal at which an
electronic fund transfer may be initiated, money transmitting
business, or international, national, regional, or local
payment network utilized to effect a credit transaction,
electronic fund transfer, stored value product transaction, or
money transmitting service, or a participant in such network,
or other participant in a designated payment system.
``(5) Internet.--The term `Internet' means the
international computer network of interoperable packet switched
data networks.
``(6) Interactive computer service.--The term `interactive
computer service' has the same meaning as in section 230(f) of
the Communications Act of 1934.
``(7) Restricted transaction.--The term `restricted
transaction' means any transaction or transmittal involving any
credit, funds, instrument, or proceeds described in any
paragraph of section 5363 which the recipient is prohibited
from accepting under section 5363.
``(8) Secretary.--The term `Secretary' means the Secretary
of the Treasury.
``(9) State.--The term `State' means any State of the
United States, the District of Columbia, or any commonwealth,
territory, or other possession of the United States.
``(10) Unlawful internet gambling.--
``(A) In general.--The term `unlawful Internet
gambling' means 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.
``(B) Intrastate transactions.--The term `unlawful
Internet gambling' shall not include placing,
receiving, or otherwise transmitting a bet or wager
where--
``(i) the bet or wager is initiated and
received or otherwise made exclusively within a
single State;
``(ii) the bet or wager and the method by
which the bet or wager is initiated and
received or otherwise made is expressly
authorized by and placed in accordance with the
laws of such State, and the State law or
regulations include--
``(I) age and location verification
requirements reasonably designed to
block access to minors and persons
located out of such State; and
``(II) appropriate data security
standards to prevent unauthorized
access by any person whose age and
current location has not been verified
in accordance with such State's law or
regulations; and
``(iii) the bet or wager does not violate
any provision of the--
``(I) Interstate Horseracing Act;
``(II) Professional and Amateur
Sports Protection Act;
``(III) Gambling Devices
Transportation Act; or
``(IV) Indian Gaming Regulatory
Act.
``(C) Intratribal transactions.--The term `unlawful
Internet gambling' shall not include placing,
receiving, or otherwise transmitting a bet or wager
where--
``(i) the bet or wager is initiated and
received or otherwise made exclusively--
``(I) within the Indian lands of a
single Indian tribe (as those terms are
defined by the Indian Gaming Regulatory
Act); or
``(II) between the Indian lands of
2 or more Indian tribes to the extent
that intertribal gaming is authorized
by the Indian Gaming Regulatory Act;
``(ii) the bet or wager and the method by
which the bet or wager is initiated and
received or otherwise made is expressly
authorized by and complies with the
requirements of--
``(I) the applicable tribal
ordinance or resolution approved by the
Chairman of the National Indian Gaming
Commission; and
``(II) with respect to class III
gaming, the applicable Tribal-State
Compact;
``(iii) the applicable tribal ordinance or
resolution or Tribal-State compact includes--
``(I) age and location verification
requirements reasonably designed to
block access to minors and persons
located out of the applicable Tribal
lands; and
``(II) appropriate data security
standards to prevent unauthorized
access by any person whose age and
current location has not been verified
in accordance with the applicable
tribal ordinance or resolution or
Tribal-State Compact; and
``(iv) the bet or wager does not violate
any provision of the--
``(I) Interstate Horseracing Act;
``(II) the Professional and Amateur
Sports Protection Act;
``(III) the Gambling Devices
Transportation Act; or
``(IV) the Indian Gaming Regulatory
Act.
``(D) Interstate horseracing.--The term `unlawful
Internet gambling' shall not include placing,
receiving, or otherwise transmitting a bet or wager
that is governed by and complies with the Interstate
Horseracing Act of 1978.
``(E) Intermediate routing.--The intermediate
routing of electronic data shall not determine the
location or locations in which a bet or wager is
initiated, received, or otherwise made.
``(11) Other terms.--
``(A) Credit; creditor; credit card; and card
issuer.--The terms `credit', `creditor', `credit card',
and `card issuer' have the same meanings as in section
103 of the Truth in Lending Act.
``(B) Electronic fund transfer.--The term
`electronic fund transfer'--
``(i) has the same meaning as in section
903 of the Electronic Fund Transfer Act, except
that such term includes transfers that would
otherwise be excluded under section 903(6)(E)
of that Act; and
``(ii) includes any fund transfer covered
by Article 4A of the Uniform Commercial Code,
as in effect in any State.
``(C) Financial institution.--The term `financial
institution' has the same meaning as in section 903 of
the Electronic Fund Transfer Act, except that such term
does not include a casino, sports book, or other
business at or through which bets or wagers may be
placed or received.
``(D) Insured depository institution.--The term
`insured depository institution'--
``(i) has the same meaning as in section 3
of the Federal Deposit Insurance Act; and
``(ii) includes an insured credit union (as
defined in section 101 of the Federal Credit
Union Act).
``(E) Money transmitting business and money
transmitting service.--The terms `money transmitting
business' and `money transmitting service' have the
same meanings as in section 5330(d) (determined without
regard to any regulations prescribed by the Secretary
thereunder).
``Sec. 5363. Prohibition on acceptance of any financial instrument for
unlawful Internet gambling
``No person engaged in the business of betting or wagering may
knowingly accept, in connection with the participation of another
person in unlawful Internet gambling--
``(1) credit, or the proceeds of credit, extended to or on
behalf of such other person (including credit extended through
the use of a credit card);
``(2) an electronic fund transfer, or funds transmitted by
or through a money transmitting business, or the proceeds of an
electronic fund transfer or money transmitting service, from or
on behalf of such other person;
``(3) any check, draft, or similar instrument which is
drawn by or on behalf of such other person and is drawn on or
payable at or through any financial institution; or
``(4) the proceeds of any other form of financial
transaction, as the Secretary and the Board of Governors of the
Federal Reserve System may jointly prescribe by regulation,
which involves a financial institution as a payor or financial
intermediary on behalf of or for the benefit of such other
person.
``Sec. 5364. Policies and procedures to identify and prevent restricted
transactions
``(a) Regulations.--Before the end of the 270-day period beginning
on the date of the enactment of this subchapter, the Secretary and the
Board of Governors of the Federal Reserve System, in consultation with
the Attorney General, shall prescribe regulations (which the Secretary
and the Board jointly determine to be appropriate) requiring each
designated payment system, and all participants therein, to identify
and block or otherwise prevent or prohibit restricted transactions
through the establishment of policies and procedures reasonably
designed to identify and block or otherwise prevent or prohibit the
acceptance of restricted transactions in any of the following ways:
``(1) The establishment of policies and procedures that--
``(A) allow the payment system and any person
involved in the payment system to identify restricted
transactions by means of codes in authorization
messages or by other means; and
``(B) block restricted transactions identified as a
result of the policies and procedures developed
pursuant to subparagraph (A).
``(2) The establishment of policies and procedures that
prevent or prohibit the acceptance of the products or services
of the payment system in connection with a restricted
transaction.
``(b) Requirements for Policies and Procedures.--In prescribing
regulations under subsection (a), the Secretary and the Board of
Governors of the Federal Reserve System shall--
``(1) identify types of policies and procedures, including
nonexclusive examples, which would be deemed, as applicable, to
be reasonably designed to identify and block or otherwise
prevent or prohibit the acceptance of the products or services
with respect to each type of restricted transaction;
``(2) to the extent practical, permit any participant in a
payment system to choose among alternative means of identifying
and blocking, or otherwise preventing or prohibiting the
acceptance of the products or services of the payment system or
participant in connection with, restricted transactions; and
``(3) consider exempting certain restricted transactions or
designated payment systems from any requirement imposed under
such regulations, if the Secretary and the Board jointly find
that it is not reasonably practical to identify and block, or
otherwise prevent or prohibit the acceptance of, such
transactions.
``(c) Compliance With Payment System Policies and Procedures.--A
financial transaction provider shall be considered to be in compliance
with the regulations prescribed under subsection (a), if--
``(1) such person relies on and complies with the policies
and procedures of a designated payment system of which it is a
member or participant to--
``(A) identify and block restricted transactions;
or
``(B) otherwise prevent or prohibit the acceptance
of the products or services of the payment system,
member, or participant in connection with restricted
transactions; and
``(2) such policies and procedures of the designated
payment system comply with the requirements of regulations
prescribed under subsection (a).
``(d) No Liability for Blocking or Refusing to Honor Restricted
Transactions.--A person that identifies and blocks a transaction,
prevents or prohibits the acceptance of its products or services in
connection with a transaction, or otherwise refuses to honor a
transaction--
``(1) that is a restricted transaction;
``(2) that such person reasonably believes to be a
restricted transaction; or
``(3) as a designated payment system or a member of a
designated payment system in reliance on the policies and
procedures of the payment system, in an effort to comply with
regulations prescribed under subsection (a),
shall not be liable to any party for such action.
``(e) Regulatory Enforcement.--The requirements of this section
shall be enforced exclusively by--
``(1) the Federal functional regulators, with respect to
the designated payment systems and financial transaction
providers subject to the respective jurisdiction of such
regulators under section 505(a) of the Gramm-Leach-Bliley Act
and section 5g of the Commodities Exchange Act; and
``(2) the Federal Trade Commission, with respect to
designated payment systems and financial transaction providers
not otherwise subject to the jurisdiction of any Federal
functional regulators (including the Commission) as described
in paragraph (1).
``Sec. 5365. Civil remedies
``(a) Jurisdiction.--The district courts of the United States shall
have original and exclusive jurisdiction to prevent and restrain
restricted transactions by issuing appropriate orders in accordance
with this section, regardless of whether a prosecution has been
initiated under this subchapter.
``(b) Proceedings.--
``(1) Institution by federal government.--
``(A) In general.--The United States, acting
through the Attorney General, may institute proceedings
under this section to prevent or restrain a restricted
transaction.
``(B) Relief.--Upon application of the United
States under this paragraph, the district court may
enter a temporary restraining order, a preliminary
injunction, or an injunction against any person to
prevent or restrain a restricted transaction, in
accordance with rule 65 of the Federal Rules of Civil
Procedure.
``(2) Institution by state attorney general.--
``(A) In general.--The attorney general (or other
appropriate State official) of a State in which a
restricted transaction allegedly has been or will be
initiated, received, or otherwise made may institute
proceedings under this section to prevent or restrain
the violation or threatened violation.
``(B) Relief.--Upon application of the attorney
general (or other appropriate State official) of an
affected State under this paragraph, the district court
may enter a temporary restraining order, a preliminary
injunction, or an injunction against any person to
prevent or restrain a restricted transaction, in
accordance with rule 65 of the Federal Rules of Civil
Procedure.
``(3) Indian lands.--
``(A) In general.--Notwithstanding paragraphs (1)
and (2), for a restricted transaction that allegedly
has been or will be initiated, received, or otherwise
made on Indian lands (as that term is defined in
section 4 of the Indian Gaming Regulatory Act)--
``(i) the United States shall have the
enforcement authority provided under paragraph
(1); and
``(ii) the enforcement authorities
specified in an applicable Tribal-State compact
negotiated under section 11 of the Indian
Gaming Regulatory Act (25 U.S.C. 2710) shall be
carried out in accordance with that compact.
``(B) Rule of construction.--No provision of this
section shall be construed as altering, superseding, or
otherwise affecting the application of the Indian
Gaming Regulatory Act.
``(c) Limitation Relating to Interactive Computer Services.--
``(1) In general.--Relief granted under this section
against an interactive computer service shall--
``(A) be limited to the removal of, or disabling of
access to, an online site violating section 5363, or a
hypertext link to an online site violating such
section, that resides on a computer server that such
service controls or operates, except that the
limitation in this subparagraph shall not apply if the
service is subject to liability under this section
under section 5367;
``(B) be available only after notice to the
interactive computer service and an opportunity for the
service to appear are provided;
``(C) not impose any obligation on an interactive
computer service to monitor its service or to
affirmatively seek facts indicating activity violating
this subchapter;
``(D) specify the interactive computer service to
which it applies; and
``(E) specifically identify the location of the
online site or hypertext link to be removed or access
to which is to be disabled.
``(2) Coordination with other law.--An interactive computer
service that does not violate this subchapter shall not be
liable under section 1084(d) of title 18, except that the
limitation in this paragraph shall not apply if an interactive
computer service has actual knowledge and control of bets and
wagers and--
``(A) operates, manages, supervises, or directs an
Internet website at which unlawful bets or wagers may
be placed, received, or otherwise made or at which
unlawful bets or wagers are offered to be placed,
received, or otherwise made; or
``(B) owns or controls, or is owned or controlled
by, any person who operates, manages, supervises, or
directs an Internet website at which unlawful bets or
wagers may be placed, received, or otherwise made, or
at which unlawful bets or wagers are offered to be
placed, received, or otherwise made.
``(d) Limitation on Injunctions Against Regulated Persons.--
Notwithstanding any other provision of this section, and subject to
section 5367, no provision of this subchapter shall be construed as
authorizing the Attorney General of the United States, or the attorney
general (or other appropriate State official) of any State to institute
proceedings to prevent or restrain a restricted transaction against any
financial transaction provider, to the extent that the person is acting
as a financial transaction provider.
``Sec. 5366. Criminal penalties
``(a) In General.--Whoever violates section 5363 shall be fined
under title 18, or imprisoned for not more than 5 years, or both.
``(b) Permanent Injunction.--Upon conviction of a person under this
section, the court may enter a permanent injunction enjoining such
person from placing, receiving, or otherwise making bets or wagers or
sending, receiving, or inviting information assisting in the placing of
bets or wagers.
``Sec. 5367. Circumventions prohibited
``Notwithstanding section 5362(2), a financial transaction
provider, or any interactive computer service or telecommunications
service, may be liable under this subchapter if such person has actual
knowledge and control of bets and wagers, and--
``(1) operates, manages, supervises, or directs an Internet
website at which unlawful bets or wagers may be placed,
received, or otherwise made, or at which unlawful bets or
wagers are offered to be placed, received, or otherwise made;
or
``(2) owns or controls, or is owned or controlled by, any
person who operates, manages, supervises, or directs an
Internet website at which unlawful bets or wagers may be
placed, received, or otherwise made, or at which unlawful bets
or wagers are offered to be placed, received, or otherwise
made.''.
(b) Technical and Conforming Amendment.--The table of sections for
chapter 53 of title 31, United States Code, is amended by adding at the
end the following:
``subchapter iv--prohibition on funding of unlawful internet gambling
``5361. Congressional findings and purpose.
``5362. Definitions.
``5363. Prohibition on acceptance of any financial instrument for
unlawful Internet gambling.
``5364. Policies and procedures to identify and prevent restricted
transactions.
``5365. Civil remedies.
``5366. Criminal penalties.
``5367. Circumventions prohibited.''.
SEC. 4. INTERNET GAMBLING IN OR THROUGH FOREIGN JURISDICTIONS.
(a) In General.--In deliberations between the United States
Government and any other country on money laundering, corruption, and
crime issues, the United States 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; and
(3) encourage the Financial Action Task Force on Money
Laundering, in its annual report on money laundering
typologies, to study the extent to which Internet gambling
operations are being used for money laundering purposes.
(b) Report Required.--The Secretary of the Treasury shall submit an
annual report to the Congress on any deliberations between the United
States and other countries on issues relating to Internet gambling.
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Unlawful Internet Gambling
Enforcement Act of 2006''.
SEC. 2. PROHIBITION ON ACCEPTANCE OF ANY PAYMENT INSTRUMENT FOR
UNLAWFUL INTERNET GAMBLING.
(a) In General.--Chapter 53 of title 31, United States Code, is
amended by adding at the end the following new subchapter:
``SUBCHAPTER IV--PROHIBITION ON FUNDING OF UNLAWFUL INTERNET GAMBLING
``Sec. 5361. Congressional findings and purpose
``(a) Findings.--The Congress finds the following:
``(1) Internet gambling is primarily funded through
personal use of payment system instruments, 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 such sites.
``(3) Internet gambling is a growing cause of debt
collection problems for insured depository institutions and the
consumer credit industry.
``(4) New mechanisms for enforcing gambling laws on the
Internet are necessary because traditional law enforcement
mechanisms are often inadequate for enforcing gambling
prohibitions or regulations on the Internet, especially where
such gambling crosses State or national borders.
``(b) Rule of Construction.--No provision of this subchapter shall
be construed as altering, limiting, or extending any Federal or State
law or Tribal-State compact prohibiting, permitting, or regulating
gambling within the United States.
``Sec. 5362. Definitions
``For purposes of this subchapter, the following definitions shall
apply:
``(1) Bet or wager.--The term `bet or wager'--
``(A) means the staking or risking by any person of
something of value upon the outcome of a contest of
others, a sporting event, or a game subject to chance,
upon an agreement or understanding that the person or
another person will receive something of value in the
event of a certain 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;
``(D) includes any instructions or information
pertaining to the establishment or movement of funds by
the bettor or customer in, to, or from an account with
the business of betting or wagering; and
``(E) does not include--
``(i) any activity governed by the
securities laws (as that term is defined in
section 3(a)(47) of the Securities Exchange Act
of 1934 for the purchase or sale of securities
(as that term is defined in section 3(a)(10) of
that Act);
``(ii) any transaction conducted on or
subject to the rules of a registered entity or
exempt board of trade under the Commodity
Exchange Act;
``(iii) any over-the-counter derivative
instrument;
``(iv) any other transaction that--
``(I) is excluded or exempt from
regulation under the Commodity Exchange
Act; or
``(II) is exempt from State gaming
or bucket shop laws under section 12(e)
of the Commodity Exchange Act or
section 28(a) of the Securities
Exchange Act of 1934;
``(v) any contract of indemnity or
guarantee;
``(vi) any contract for insurance;
``(vii) any deposit or other transaction
with an insured depository institution; or
``(viii) any participation in a fantasy or
simulation sports game, an educational game, or
a contest, that--
``(I) is not dependent solely on
the outcome of any single sporting
event or nonparticipant's singular
individual performance in any single
sporting event;
``(II) has an outcome that reflects
the relative knowledge of the
participants, or their skill at
physical reaction or physical
manipulation (but not chance), and, in
the case of a fantasy or simulation
sports game, has an outcome that is
determined predominantly by accumulated
statistical results of sporting events,
including any nonparticipant's
individual performances in such
sporting events; and
``(III) offers a prize or award to
a participant that is established in
advance of the game or contest and is
not determined by the number of
participants or the amount of any fees
paid by those participants.
``(2) Business of betting or wagering.--The term `business
of betting or wagering' does not include the activities of a
financial transaction provider, or any interactive computer
service or telecommunications service.
``(3) Designated payment system.--The term `designated
payment system' means any system utilized by a financial
transaction provider that the Secretary and the Board of
Governors of the Federal Reserve System, in consultation with
the Attorney General, jointly determine, by regulation or
order, could be utilized in connection with, or to facilitate,
any restricted transaction.
``(4) Financial transaction provider.--The term `financial
transaction provider' means a creditor, credit card issuer,
financial institution, operator of a terminal at which an
electronic fund transfer may be initiated, money transmitting
business, or international, national, regional, or local
payment network utilized to effect a credit transaction,
electronic fund transfer, stored value product transaction, or
money transmitting service, or a participant in such network,
or other participant in a designated payment system.
``(5) Internet.--The term `Internet' means the
international computer network of interoperable packet switched
data networks.
``(6) Interactive computer service.--The term `interactive
computer service' has the same meaning as in section 230(f) of
the Communications Act of 1934.
``(7) Restricted transaction.--The term `restricted
transaction' means any transaction or transmittal involving any
credit, funds, instrument, or proceeds described in any
paragraph of section 5363 which the recipient is prohibited
from accepting under section 5363.
``(8) Secretary.--The term `Secretary' means the Secretary
of the Treasury.
``(9) State.--The term `State' means any State of the
United States, the District of Columbia, or any commonwealth,
territory, or other possession of the United States.
``(10) Unlawful internet gambling.--
``(A) In general.--The term `unlawful Internet
gambling' means 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.
``(B) Intrastate transactions.--The term `unlawful
Internet gambling' shall not include placing,
receiving, or otherwise transmitting a bet or wager
where--
``(i) the bet or wager is initiated and
received or otherwise made exclusively within a
single State;
``(ii) the bet or wager and the method by
which the bet or wager is initiated and
received or otherwise made is expressly
authorized by and placed in accordance with the
laws of such State, and the State law or
regulations include--
``(I) age and location verification
requirements reasonably designed to
block access to minors and persons
located out of such State; and
``(II) appropriate data security
standards to prevent unauthorized
access by any person whose age and
current location has not been verified
in accordance with such State's law or
regulations; and
``(iii) the bet or wager does not violate
any provision of the--
``(I) Interstate Horseracing Act;
``(II) Professional and Amateur
Sports Protection Act;
``(III) Gambling Devices
Transportation Act; or
``(IV) Indian Gaming Regulatory
Act.
``(C) Intratribal transactions.--The term `unlawful
Internet gambling' shall not include placing,
receiving, or otherwise transmitting a bet or wager
where--
``(i) the bet or wager is initiated and
received or otherwise made exclusively--
``(I) within the Indian lands of a
single Indian tribe (as those terms are
defined by the Indian Gaming Regulatory
Act); or
``(II) between the Indian lands of
2 or more Indian tribes to the extent
that intertribal gaming is authorized
by the Indian Gaming Regulatory Act;
``(ii) the bet or wager and the method by
which the bet or wager is initiated and
received or otherwise made is expressly
authorized by and complies with the
requirements of--
``(I) the applicable tribal
ordinance or resolution approved by the
Chairman of the National Indian Gaming
Commission; and
``(II) with respect to class III
gaming, the applicable Tribal-State
Compact;
``(iii) the applicable tribal ordinance or
resolution or Tribal-State compact includes--
``(I) age and location verification
requirements reasonably designed to
block access to minors and persons
located out of the applicable Tribal
lands; and
``(II) appropriate data security
standards to prevent unauthorized
access by any person whose age and
current location has not been verified
in accordance with the applicable
tribal ordinance or resolution or
Tribal-State Compact; and
``(iv) the bet or wager does not violate
any provision of the--
``(I) Interstate Horseracing Act;
``(II) the Professional and Amateur
Sports Protection Act;
``(III) the Gambling Devices
Transportation Act; or
``(IV) the Indian Gaming Regulatory
Act.
``(D) Interstate horseracing.--The term `unlawful
Internet gambling' shall not include placing,
receiving, or otherwise transmitting a bet or wager
that is governed by and complies with the Interstate
Horseracing Act of 1978.
``(E) Intermediate routing.--The intermediate
routing of electronic data shall not determine the
location or locations in which a bet or wager is
initiated, received, or otherwise made.
``(11) Other terms.--
``(A) Credit; creditor; credit card; and card
issuer.--The terms `credit', `creditor', `credit card',
and `card issuer' have the same meanings as in section
103 of the Truth in Lending Act.
``(B) Electronic fund transfer.--The term
`electronic fund transfer'--
``(i) has the same meaning as in section
903 of the Electronic Fund Transfer Act, except
that such term includes transfers that would
otherwise be excluded under section 903(6)(E)
of that Act; and
``(ii) includes any fund transfer covered
by Article 4A of the Uniform Commercial Code,
as in effect in any State.
``(C) Financial institution.--The term `financial
institution' has the same meaning as in section 903 of
the Electronic Fund Transfer Act, except that such term
does not include a casino, sports book, or other
business at or through which bets or wagers may be
placed or received.
``(D) Insured depository institution.--The term
`insured depository institution'--
``(i) has the same meaning as in section 3
of the Federal Deposit Insurance Act; and
``(ii) includes an insured credit union (as
defined in section 101 of the Federal Credit
Union Act).
``(E) Money transmitting business and money
transmitting service.--The terms `money transmitting
business' and `money transmitting service' have the
same meanings as in section 5330(d) (determined without
regard to any regulations prescribed by the Secretary
thereunder).
``Sec. 5363. Prohibition on acceptance of any financial instrument for
unlawful Internet gambling
``No person engaged in the business of betting or wagering may
knowingly accept, in connection with the participation of another
person in unlawful Internet gambling--
``(1) credit, or the proceeds of credit, extended to or on
behalf of such other person (including credit extended through
the use of a credit card);
``(2) an electronic fund transfer, or funds transmitted by
or through a money transmitting business, or the proceeds of an
electronic fund transfer or money transmitting service, from or
on behalf of such other person;
``(3) any check, draft, or similar instrument which is
drawn by or on behalf of such other person and is drawn on or
payable at or through any financial institution; or
``(4) the proceeds of any other form of financial
transaction, as the Secretary and the Board of Governors of the
Federal Reserve System may jointly prescribe by regulation,
which involves a financial institution as a payor or financial
intermediary on behalf of or for the benefit of such other
person.
``Sec. 5364. Policies and procedures to identify and prevent restricted
transactions
``(a) Regulations.--Before the end of the 270-day period beginning
on the date of the enactment of this subchapter, the Secretary and the
Board of Governors of the Federal Reserve System, in consultation with
the Attorney General, shall prescribe regulations (which the Secretary
and the Board jointly determine to be appropriate) requiring each
designated payment system, and all participants therein, to identify
and block or otherwise prevent or prohibit restricted transactions
through the establishment of policies and procedures reasonably
designed to identify and block or otherwise prevent or prohibit the
acceptance of restricted transactions in any of the following ways:
``(1) The establishment of policies and procedures that--
``(A) allow the payment system and any person
involved in the payment system to identify restricted
transactions by means of codes in authorization
messages or by other means;
``(B) block restricted transactions identified as a
result of the policies and procedures developed
pursuant to subparagraph (A); and
``(C) block transactions that are in violation of
section 1084 of title 18.
``(2) The establishment of policies and procedures that
prevent or prohibit the acceptance of the products or services
of the payment system in connection with a restricted
transaction.
``(b) Requirements for Policies and Procedures.--In prescribing
regulations under subsection (a), the Secretary and the Board of
Governors of the Federal Reserve System shall--
``(1) identify types of policies and procedures, including
nonexclusive examples, which would be deemed, as applicable, to
be reasonably designed to identify and block or otherwise
prevent or prohibit the acceptance of the products or services
with respect to each type of restricted transaction;
``(2) to the extent practical, permit any participant in a
payment system to choose among alternative means of identifying
and blocking, or otherwise preventing or prohibiting the
acceptance of the products or services of the payment system or
participant in connection with, restricted transactions; and
``(3) consider exempting certain restricted transactions or
designated payment systems from any requirement imposed under
such regulations, if the Secretary and the Board jointly find
that it is not reasonably practical to identify and block, or
otherwise prevent or prohibit the acceptance of, such
transactions.
``(c) Compliance With Payment System Policies and Procedures.--A
financial transaction provider shall be considered to be in compliance
with the regulations prescribed under subsection (a), if--
``(1) such person relies on and complies with the policies
and procedures of a designated payment system of which it is a
member or participant to--
``(A) identify and block restricted transactions;
or
``(B) otherwise prevent or prohibit the acceptance
of the products or services of the payment system,
member, or participant in connection with restricted
transactions; and
``(2) such policies and procedures of the designated
payment system comply with the requirements of regulations
prescribed under subsection (a).
``(d) No Liability for Blocking or Refusing to Honor Restricted
Transactions.--A person that identifies and blocks a transaction,
prevents or prohibits the acceptance of its products or services in
connection with a transaction, or otherwise refuses to honor a
transaction--
``(1) that is a restricted transaction;
``(2) that such person reasonably believes to be a
restricted transaction; or
``(3) as a designated payment system or a member of a
designated payment system in reliance on the policies and
procedures of the payment system, in an effort to comply with
regulations prescribed under subsection (a),
shall not be liable to any party for such action.
``(e) Regulatory Enforcement.--The requirements of this section
shall be enforced exclusively by--
``(1) the Federal functional regulators, with respect to
the designated payment systems and financial transaction
providers subject to the respective jurisdiction of such
regulators under section 505(a) of the Gramm-Leach-Bliley Act
and section 5g of the Commodities Exchange Act; and
``(2) the Federal Trade Commission, with respect to
designated payment systems and financial transaction providers
not otherwise subject to the jurisdiction of any Federal
functional regulators (including the Commission) as described
in paragraph (1).
``Sec. 5365. Civil remedies
``(a) Jurisdiction.--The district courts of the United States shall
have original and exclusive jurisdiction to prevent and restrain
restricted transactions by issuing appropriate orders in accordance
with this section, regardless of whether a prosecution has been
initiated under this subchapter.
``(b) Proceedings.--
``(1) Institution by federal government.--
``(A) In general.--The United States, acting
through the Attorney General, may institute proceedings
under this section to prevent or restrain a restricted
transaction.
``(B) Relief.--Upon application of the United
States under this paragraph, the district court may
enter a temporary restraining order, a preliminary
injunction, or an injunction against any person to
prevent or restrain a restricted transaction, in
accordance with rule 65 of the Federal Rules of Civil
Procedure.
``(2) Institution by state attorney general.--
``(A) In general.--The attorney general (or other
appropriate State official) of a State in which a
restricted transaction allegedly has been or will be
initiated, received, or otherwise made may institute
proceedings under this section to prevent or restrain
the violation or threatened violation.
``(B) Relief.--Upon application of the attorney
general (or other appropriate State official) of an
affected State under this paragraph, the district court
may enter a temporary restraining order, a preliminary
injunction, or an injunction against any person to
prevent or restrain a restricted transaction, in
accordance with rule 65 of the Federal Rules of Civil
Procedure.
``(3) Indian lands.--
``(A) In general.--Notwithstanding paragraphs (1)
and (2), for a restricted transaction that allegedly
has been or will be initiated, received, or otherwise
made on Indian lands (as that term is defined in
section 4 of the Indian Gaming Regulatory Act)--
``(i) the United States shall have the
enforcement authority provided under paragraph
(1); and
``(ii) the enforcement authorities
specified in an applicable Tribal-State compact
negotiated under section 11 of the Indian
Gaming Regulatory Act (25 U.S.C. 2710) shall be
carried out in accordance with that compact.
``(B) Rule of construction.--No provision of this
section shall be construed as altering, superseding, or
otherwise affecting the application of the Indian
Gaming Regulatory Act.
``(c) Limitation Relating to Interactive Computer Services.--
``(1) In general.--Relief granted under this section
against an interactive computer service shall--
``(A) be limited to the removal of, or disabling of
access to, an online site violating section 5363, or a
hypertext link to an online site violating such
section, that resides on a computer server that such
service controls or operates, except that the
limitation in this subparagraph shall not apply if the
service is subject to liability under this section
under section 5367;
``(B) be available only after notice to the
interactive computer service and an opportunity for the
service to appear are provided;
``(C) not impose any obligation on an interactive
computer service to monitor its service or to
affirmatively seek facts indicating activity violating
this subchapter;
``(D) specify the interactive computer service to
which it applies; and
``(E) specifically identify the location of the
online site or hypertext link to be removed or access
to which is to be disabled.
``(2) Coordination with other law.--An interactive computer
service that does not violate this subchapter shall not be
liable under section 1084(d) of title 18, except that the
limitation in this paragraph shall not apply if an interactive
computer service has actual knowledge and control of bets and
wagers and--
``(A) operates, manages, supervises, or directs an
Internet website at which unlawful bets or wagers may
be placed, received, or otherwise made or at which
unlawful bets or wagers are offered to be placed,
received, or otherwise made; or
``(B) owns or controls, or is owned or controlled
by, any person who operates, manages, supervises, or
directs an Internet website at which unlawful bets or
wagers may be placed, received, or otherwise made, or
at which unlawful bets or wagers are offered to be
placed, received, or otherwise made.
``(d) Limitation on Injunctions Against Regulated Persons.--
Notwithstanding any other provision of this section, and subject to
section 5367, no provision of this subchapter shall be construed as
authorizing the Attorney General of the United States, or the attorney
general (or other appropriate State official) of any State to institute
proceedings to prevent or restrain a restricted transaction against any
financial transaction provider, to the extent that the person is acting
as a financial transaction provider.
``Sec. 5366. Criminal penalties
``(a) In General.--Whoever violates section 5363 shall be fined
under title 18, or imprisoned for not more than 5 years, or both.
``(b) Permanent Injunction.--Upon conviction of a person under this
section, the court may enter a permanent injunction enjoining such
person from placing, receiving, or otherwise making bets or wagers or
sending, receiving, or inviting information assisting in the placing of
bets or wagers.
``Sec. 5367. Circumventions prohibited
``Notwithstanding section 5362(2), a financial transaction
provider, or any interactive computer service or telecommunications
service, may be liable under this subchapter if such person has actual
knowledge and control of bets and wagers, and--
``(1) operates, manages, supervises, or directs an Internet
website at which unlawful bets or wagers may be placed,
received, or otherwise made, or at which unlawful bets or
wagers are offered to be placed, received, or otherwise made;
or
``(2) owns or controls, or is owned or controlled by, any
person who operates, manages, supervises, or directs an
Internet website at which unlawful bets or wagers may be
placed, received, or otherwise made, or at which unlawful bets
or wagers are offered to be placed, received, or otherwise
made.''.
(b) Technical and Conforming Amendment.--The table of sections for
chapter 53 of title 31, United States Code, is amended by adding at the
end the following:
``subchapter iv--prohibition on funding of unlawful internet gambling
``5361. Congressional findings and purpose.
``5362. Definitions.
``5363. Prohibition on acceptance of any financial instrument for
unlawful Internet gambling.
``5364. Policies and procedures to identify and prevent restricted
transactions.
``5365. Civil remedies.
``5366. Criminal penalties.
``5367. Circumventions prohibited.''.
SEC. 4. INTERNET GAMBLING IN OR THROUGH FOREIGN JURISDICTIONS.
(a) In General.--In deliberations between the United States
Government and any other country on money laundering, corruption, and
crime issues, the United States 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; and
(3) encourage the Financial Action Task Force on Money
Laundering, in its annual report on money laundering
typologies, to study the extent to which Internet gambling
operations are being used for money laundering purposes.
(b) Report Required.--The Secretary of the Treasury shall submit an
annual report to the Congress on any deliberations between the United
States and other countries on issues relating to Internet gambling.
Union Calendar No. 267
109th CONGRESS
2d Session
H. R. 4411
[Report No. 109-412, Parts I and II]
_______________________________________________________________________
A BILL
To prevent the use of certain payment instruments, credit cards, and
fund transfers for unlawful Internet gambling, and for other purposes.
_______________________________________________________________________
May 26, 2006
Reported from the Committee on the Judiciary with an amendment;
committed to the Committee of the Whole House on the State of the Union
and ordered to be printed