[House Report 109-412]
[From the U.S. Government Publishing Office]
109th Congress Rept. 109-412
HOUSE OF REPRESENTATIVES
2d Session Part 2
======================================================================
UNLAWFUL INTERNET GAMBLING ENFORCEMENT ACT OF 2006
_______
May 26, 2006.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed.
_______
Mr. Sensenbrenner, from the Committee on the Judiciary, submitted the
following
R E P O R T
[To accompany H.R. 4411]
[Including cost estimate of the Congressional Budget Office]
The Committee on the Judiciary, to whom was referred the bill
(H.R. 4411) to prevent the use of certain payment instruments,
credit cards, and fund transfers for unlawful Internet
gambling, and for other purposes, having considered the same,
report favorably thereon with an amendment and recommend that
the bill as amended do pass.
CONTENTS
Page
The Amendment.................................................... 1
Purpose and Summary.............................................. 7
Background and Need For Legislation.............................. 8
Hearings......................................................... 9
Committee Consideration.......................................... 10
Vote of the Committee............................................ 10
Committee Oversight Findings..................................... 10
New Budget Authority and Tax Expenditures........................ 10
Congressional Budget Office Cost Estimate........................ 10
Performance Goals and Objectives................................. 13
Constitutional Authority Statement............................... 14
Section-by-Section Analysis and Discussion....................... 14
Changes in Existing Law Made by the Bill, as Reported............ 16
The Amendment
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
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.
Purpose and Summary
H.R. 4411, the ``Unlawful Internet Gambling Enforcement Act
of 2006,'' prohibits the acceptance of any bank instrument for
unlawful Internet gambling. This legislation does not amend the
Wire Act (Pub. L. No. 87-216). H.R. 4411 prohibits persons
engaged in the business of betting or wagering from knowingly
accepting credit, electronic fund transfers, checks, drafts, or
similar instruments, or the proceeds of any other financial
transaction in connection with unlawful Internet gambling.
H.R. 4411 does not prohibit any Internet gambling activity
that complies with the Interstate Horseracing Act (Pub. L. No.
95-515). Nor does this legislation cover: (1) intrastate and
intratribal transactions, provided that regulatory requirements
are met and data security standards (e.g. age and location
verification, within State or Indian lands); (2) fantasy
sports; (3) financial transaction providers, interactive
computer service or telecommunications service.
H.R. 4411 instructs the Treasury Secretary, in consultation
with the Attorney General and Federal Reserve Board, to
promulgate regulations directing banks and other members of the
payment system to adopt policies and practices to identify and
prevent restricted internet gambling transactions; and places
enforcement of this section exclusively with the Federal Trade
Commission, in a manner provided in section 5005(a) of the
Gramm-Leach-Bliley Act.
The bill also creates a Federal cause of action for the
benefit of Federal and State Attorneys General to prevent and
restrain violations of the bill's provisions, including
injunctions and temporary restraining orders under rule 65 of
the Federal Rules of Civil Procedure. Furthermore, H.R. 4411
limits relief against an interactive computer service to
removal of, or disabling access to, an online site violating
the Act. H.R. 4411 sets a maximum penalty of five years
imprisonment under title 18 of the U.S. Code, and a permanent
injunction against activity related to betting or wagering for
violations.
Background and Need for the Legislation
Gambling on the Internet has increasingly become an
extremely lucrative business. The explosive growth of this
industry has seen an increase both in gambling websites and in
industry revenues. Internet gambling is now estimated to be a
$12 billion industry, with approximately $6 billion coming from
bettors based in the United States. It has been reported that
there are as many as 2,300 gambling sites.
The booming industry of offshore websites accepting bets
and wagers from persons located in the United States raises a
number of social and criminal concerns related to Internet
gambling. The Internet's ease of accessibility and anonymous
nature: (1) make it difficult to prevent underage gambling; and
(2) feed on the compulsive behavior of the millions of
Americans suffering from gambling addiction. Worldwide Internet
gambling sites offer organized crime groups another avenue to
launder the proceeds of their criminal activity, and assist in
the facilitation of crimes.
As a general rule, Congress has found that:
(1) the States should have the primary responsibility for
determining what forms of gambling may legally take place
within their borders; and
(2) the Federal government should prevent interference by
one State with the gambling policies of another, and should act
to protect identifiable national interests. (Title 15 U.S.C.
57, Sec. 3001.)
Although the separate States generally regulate gambling,
the Federal government has in limited circumstances proscribed
certain gambling activities.
In 1961, Congress enacted the ``Interstate Wire
Communications Act'', 18 U.S.C. Sec. 1084, (Pub. L. No. 87-216)
which prohibits any person who is ``engaged in the business of
betting or wagering'' from ``knowingly using a wire
communication facility for the transmission in interstate or
foreign commerce of bets or wagers, or information assisting in
the placing of bets or wagers on any sporting event or
contest.'' The Act also grants State and local law enforcement
agencies the power to direct a communication service provider
(``common carrier'') to disconnect any persons who are using
communication facilities to transmit gambling information.
Violations of this Act can result in imprisonment for not more
than two years, a fine, or both.
Also in 1961, Congress passed the ``Travel Act'', 18 U.S.C.
Sec. 1952, (Pub. L. No. 87-228), which makes it illegal to
``travel in interstate or foreign commerce or use the mail or
any facility in interstate or foreign commerce, with intent to
(1) distribute the proceeds of any unlawful activity; or (2)
commit any crime of violence to further any unlawful activity;
or (3) otherwise promote, manage, establish, carry on, or
facilitate the promotion, management, establishment, or
carrying on, of any unlawful activity.'' An unlawful activity
is defined as, among other things, any business involving
gambling committed in violation of State or Federal laws.
In 1970, Congress enacted 18 U.S.C. Sec. 1955, the
``Prohibition of Illegal Gambling Business Act.'' This section
provides for imprisonment of not more than five years for any
person who ``conducts, finances, manages, supervises, directs
or owns all or part of an illegal gambling business.'' An
``illegal gambling business'' is defined as a gambling business
which is (1) in violation of State law; (2) involves five or
more persons; and (3) has been or remains in substantially
continuous operation for a period in excess of thirty days or
has a gross revenue of $2,000 in any single day.
However, there are specific Federal laws which allow
interstate gambling. For example, the ``Interstate Horseracing
Act'' 15 U.S.C. Sec. Sec. 3001-3007, (Pub. L. No. 95-515) was
enacted in 1978, permitting interstate off-track wagers under
certain specified conditions. In 1988, Congress enacted the
Indian Gaming Regulatory Act, 25 U.S.C. Sec. 2701, (``IGRA'')
(Pub. L. No. 100-497), allowing casinos to be built on Indian
reservations.
H.R. 4411 was introduced by Representative Leach on
November 18, 2005. The bill has 35 cosponsors. The bill was
referred to the Committee on Financial Services, and then to
the Subcommittee on Financial Institutions and Consumer Credit.
The Full Financial Services Committee held a markup on March
15, 2006. Mr. Leach offered an amendment in the nature of a
substitute, which included both technical and substantive
changes. The bill was reported favorably via voice vote. On
April 6, 2006 the bill was referred sequentially, until May 26,
2006, to the Committee on the Judiciary.
Hearings
The Committee on the Judiciary held no hearings on H.R.
4411, the ``Unlawful Internet Gambling Enforcement Act of
2006.''
Committee Consideration
On May 25, 2006, the Committee met in open session and
ordered favorably reported the bill H.R. 4411, as amended, by
voice vote, a quorum being present.
Vote of the Committee
In compliance with clause 3(b) of rule XIII of the Rules of
the House of Representatives, the Committee notes that there
were no recorded votes during the committee consideration of
H.R. 4411.
Committee Oversight Findings
In compliance with clause 3(c)(1) of rule XIII of the Rules
of the House of Representatives, the Committee reports that the
findings and recommendations of the Committee, based on
oversight activities under clause 2(b)(1) of rule X of the
Rules of the House of Representatives, are incorporated in the
descriptive portions of this report.
New Budget Authority and Tax Expenditures
Clause 3(c)(2) of rule XIII of the Rules of the House of
Representatives is inapplicable because this legislation does
not provide new budgetary authority or increased tax
expenditures.
Congressional Budget Office Cost Estimate
In compliance with clause 3(c)(3) of rule XIII of the Rules
of the House of Representatives, the Committee sets forth, with
respect to the bill H.R. 4411, the following estimate and
comparison prepared by the Congressional Budget Office pursuant
to section 402 of the Congressional Budget Act of 1974.
May 26, 2006.
Hon. F. James Sensenbrenner, Jr.,
Chairman, Committee on the Judiciary, House of Representatives,
Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 4411, the Unlawful
Internet Gambling Enforcement Act of 2006.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Kathleen
Gramp.
Sincerely,
Donald B. Marron,
Acting Director.
Enclosure.
H.R. 4411--Unlawful Internet Gambling Enforcement Act of 2006
Summary: H.R. 4411 would prohibit businesses from accepting
credit cards, checks, or other bank instruments from gamblers
who illegally bet over the Internet. It also would direct the
Department of Treasury and the Board of Governors of the
Federal Reserve System (the Federal Reserve) to issue
regulations outlining policies and procedures that could be
used by financial institutions to identify and block gambling-
related transactions that are transmitted through their payment
systems. Compliance with those prohibitions and regulations
would be enforced by various federal agencies as well as state
governments, and violations would be subject to new civil
remedies and criminal penalties. Finally, the bill would
require the Secretary of the Treasury to report annually to the
Congress on any international deliberations regarding Internet
gambling.
Assuming appropriation of the necessary amounts, CBO
estimates that implementing H.R. 4411 would cost about $2
million over the 2007-2011 period. Enacting the bill would
affect direct spending and revenues, but CBO estimates that the
net impact on direct spending and revenues would not be
significant in any year.
H.R. 4411 contains intergovernmental mandates as defined in
the Unfunded Mandates Reform Act (UMRA) and would impose no
costs on state, local, or tribal governments.
H.R. 4411 would impose mandates, as defined in UMRA, on
financial institution and other financial transaction
providers. Because the cost of the mandates would depend on
regulations to be prescribed under the bill, CBO cannot
determine whether the direct cost to comply with those mandates
would exceed the annual threshold established by UMRA for
private-sector mandates ($128 million in 2006, adjusted
annually for inflation).
Estimated cost to the Federal Government: The estimated
budgetary impact of H.R. 4411 is shown in the following table.
The costs of this legislation fall within budget function 370
(commerce and housing credit).
----------------------------------------------------------------------------------------------------------------
By fiscal year, in millions of dollars--
--------------------------------------------
2007 2008 2009 2010 2011
----------------------------------------------------------------------------------------------------------------
CHANGES IN SPENDING SUBJECT TO APPROPRIATION
Estimated Authorization Level...................................... 1 * * * *
Estimated Outlays.................................................. 1 * * * *
----------------------------------------------------------------------------------------------------------------
Note.--* = Less than $500,000.
Basis of estimate: For this estimate, CBO assumes that H.R.
4411 will be enacted near the end of fiscal year 2006 and that
funds will be appropriated for the activities authorized by the
bill.
Spending subject to appropriation
Based on information from the Department of the Treasury
and other affected agencies, CBO estimates that implementing
this bill would cost about $2 million over the 2007-2011
period, assuming appropriation of the necessary amounts. That
estimate primarily reflects the cost of developing regulations
to identify and block financial transactions related to illegal
Internet gambling. The cost of preparing annual reports to the
Congress on international deliberations on this issue would not
be significant. Spending by the Department of Justice and the
Federal Trade Commission to enforce certain provisions in the
bill would likely be negligible in any given year, CBO
estimates.
Direct spending and revenues
Enacting H.R. 4411 would affect direct spending and
revenues because of provisions affecting financial regulatory
agencies and criminal penalties. CBO estimates that such
effects would not be significant.
H.R. 4411 would direct financial regulatory agencies to
enforce the regulations on illegal Internet gambling as they
apply to financial institutions, including Office of the
Comptroller of the Currency (OCC), Federal Deposit Insurance
Corporation (FDIC), the Federal Reserve, the National Credit
Union Administration (NCUA), and the Office of Thrift
Supervision (OTS). Any additional direct spending by NCUA, OCC,
and OTS to implement the bill would have no net budgetary
impact because those agencies charge annual fees to cover all
of their administrative expenses. In contrast, the FDIC's
sources of income--primarily intragovernmental interest
earnings and deposit insurance premiums--do not change in
tandem within its annual expenditures; as a result, any added
costs would increase direct spending unless and until the FDIC
raised deposit insurance premiums to offset those expenses.
Budgetary effects on the Federal Reserve are recorded as
changes in revenues.
According to financial regulatory agency officials,
enacting H.R. 4411 would not have a significant effect on their
workload or budgets. For this estimate, CBO assumes that the
FDIC would not assess additional premiums to cover the small
costs associated with implementing this bill. Thus, CBO
estimates that enacting this bill would increase direct
spending and offsetting receipts of the NCUA, OCC, OTS, and
FDIC by less than $500,000 a year. Based on information from
the Federal Reserve, CBO estimates that the rulemaking and
enforcement activities required by H.R. 4411 would reduce
revenues by less than $500,000 a year.
Because those prosecuted and convicted under the bill could
be subject to criminal penalties, the federal government might
collect additional fines if the bill is enacted. Collections of
such fines are recorded in the budget as revenues, which are
deposited in the Crime Victims Fund and spent in subsequent
years. Any additional collections are likely to be negligible
because of the small number of cases involved. Because any
increase in direct spending would equal the amount of fines
collected (with a lag of one year or more), the additional
direct spending also would be significant.
Estimated impact on state, local, and tribal governments:
Although H.R. 4411 would prohibit gambling businesses from
accepting credit card payments and other bank instruments from
gamblers who bet illegally over the Internet, the bill would
not create a new intergovernmental mandate as defined in UMRA.
Under current federal and state law, gambling businesses are
generally prohibited from accepting bet or wagers over the
Internet. Thus, H.R. 4411 does not contain a new mandate
relative to current law and would impose no costs on state,
local, or tribal governments.
Estimated impact on the private sector: H.R. 4411 would
impose mandates, as defined in UMRA, on financial institutions
and other financial transaction providers. Because the cost of
the mandates would depend on regulations to be prescribed under
the bill, CBO cannot determine whether the direct cost to
comply with those mandates would exceed the annual threshold
established by UMRA for private-sector mandates ($128 million
in 2006, adjusted annually for inflation).
The bill would require the Secretary of Treasury and the
Board of Governors of the Federal Reserve System, in
consultation with the Attorney General, to prescribe
regulations that would require financial transaction providers
to identify and block restricted transactions in connection
with unlawful Internet gambling through the establishment of
reasonable policies and procedures. Such requirements would
impose private-sector mandates on certain financial entities.
Under the bill, the term ``financial transaction providers''
means creditors, credit card issuers, financial institutions,
or other payment networks that utilize a designated payment
system. Such systems would be determined by regulation.
The cost for financial transaction providers to comply with
those mandates would depend on the regulations to be
prescribed. Information from representatives of the financial
services industry indicates that certain electronic
transactions can currently be identified and blocked through
the use of a coding system. If the regulations apply only to
those transactions, based on information from industry and
government sources, CBO expects that the cost of the mandates
would fall below UMRA's annual threshold. However, if the
regulations also include the requirement for banks to identify
and block checks or other bank instruments used in a restricted
transaction, the direct cost to comply with the mandates could
increase significantly and CBO has no basis to estimate whether
those costs would be above or below the annual threshold.
Although section 2 would prohibit gambling businesses from
accepting credit card payments and other bank instruments from
gamblers who bet illegally over the Internet, those provisions
would not create a new private-sector mandate, as defined in
UMRA. Under current federal and state law, gambling businesses
are generally prohibited from accepting bets or wagers over the
Internet. Thus, those provisions do not contain a new mandate
relative to current law.
Previous estimates: On March 30, 2006, CBO transmitted a
cost estimate for H.R. 4411, the Unlawful Internet Gambling
Enforcement Act of 2006, as ordered reported by the House
Committee on Financial Services on March 15, 2006. The two
bills are virtually identical and the estimated costs are the
same.
Estimate prepared by: Federal Spending: Kathleen Gramp and
Melissa Petersen. Federal Revenues: Barbara Edwards. Impact on
State, Local, and Tribal Governments: Sarah Puro. Impact on the
Private Sector: Page Piper/Bach.
Estimate approved by: Peter H. Fontaine, Deputy Assistant
Director for Budget Analysis.
Performance Goals and Objectives
The Committee states that pursuant to clause 3(c)(4) of
rule XIII of the Rules of the House of Representatives, H.R.
4411 is to prevent the use of certain payment instruments,
credit cards, and fund transfers for unlawful Internet
gambling, and for other purposes.
Constitutional Authority Statement
Pursuant to clause 3(d)(1) of rule XIII of the Rules of the
House of Representatives, the Committee finds the authority for
this legislation in art. I, Sec. 8 of the Constitution.
Section-By-Section Analysis and Discussion
The following discussion describes the bill as reported by
the Committee on the Judiciary.
Section 1. Short title
This section would provide that this legislation may be
cited as the ``Unlawful Internet Gambling Enforcement Act of
2006.''
Section 2. Prohibition on acceptance of any payment instrument for
unlawful Internet gambling
Subsection (a) adds a new ``Subchapter IV--Prohibition on
Funding of Unlawful Internet Gambling'' to Chapter 53 of Title
31 (Monetary Transactions). The new subchapter will come
immediately after subchapter III, covering money laundering and
related financial crimes.
SECTION 5361. CONGRESSIONAL FINDINGS AND PURPOSE
(a) Findings. The Congressional findings note that: (1)
Internet gambling is primarily funded through the 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; and (4) new mechanisms for
enforcing gambling laws on the Internet are necessary because
traditional law enforcement mechanisms are often inadequate for
enforcing gambling prohibitions on the Internet, especially
where such gambling crosses State or national borders.
(b) Rule of Construction. No provision is to 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.
SECTION 5362. DEFINITIONS
This defines the term ``bet or wager'' as 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 with the agreement that the winner will receive
something of value in the event of a certain outcome. This
subsection clarifies that `bet or wager' does not include bona
fide business transactions such as securities trading or buying
or selling insurance contracts, or participation in a
simulation sports game or educational game.
Defines the term ``unlawful Internet gambling'' as placing,
receiving, or transmitting a bet or wager by any means which
involves the use 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. Clarifies that purely intrastate
transactions conducted in accordance with State laws with
appropriate security controls will not be considered unlawful
internet gambling. Likewise, transactions solely within Tribal
lands complying with similar security requirements and the
Indian Gaming Regulatory Act will not be considered unlawful.
Section 5362(10)(D) addresses transactions complying with
Interstate Horseracing Act (Pub. L. No. 95-515) (IHA) which
will not be considered unlawful, because the IHA only regulates
legal transactions that are lawful in each of the states
involved. This section also clarifies that intermediate routing
of data packets does not determine the location in which bets
or wagers are made.
Section 5362 also defines the terms ``business of betting
or wagering,'' ``designated payment system,'' ``Internet,'' and
``restricted transaction.'' Several additional terms are
defined by reference to other sections of the U.S. Code.
SECTION 5363. PROHIBITION ON ACCEPTANCE OF ANY FINANCIAL INSTRUMENT FOR
UNLAWFUL INTERNET GAMBLING
Prohibits persons engaged in the business of betting or
wagering from knowingly accepting credit, funds, bank
instruments, or proceeds of any other form of financial
transaction in connection with the participation of another
person in unlawful Internet gambling. This is called a
``restricted transaction'' according to the definitions
section.
SECTION 5364. POLICIES AND PROCEDURES TO IDENTIFY AND PREVENT
RESTRICTED TRANSACTIONS
(a) Regulations and (b) Requirements for Policies and
procedures. Requires the Secretary of the Treasury and the
Federal Reserve Board, in conjunction with the United States
Attorney General, to prescribe regulations within nine months
requiring any payment system to establish policies and
procedures reasonably designed to identify and block restricted
transactions, or otherwise prevent restricted transactions from
entering its system, including transactions that are in
violation of the Wire Act.
(c) Compliance and (d) Liability. Provides persons
operating financial systems with immunity from civil liability
for blocking transactions that they reasonably believe are
restricted transactions, or in reliance on the regulations
promulgated by the Treasury Department and Federal Reserve.
Though a financial institution may block additional
transactions based on reasonable belief, it has no duty to do
so, and may rely solely on the regulations to fully discharge
its obligations.
(e) Enforcement. The Federal functional regulators and the
Federal Trade Commission are given the exclusive authority to
enforce this section.
SECTION 5365. CIVIL REMEDIES
Authorizes the United States Attorney General and State
Attorneys General to pursue civil remedies, including a
preliminary injunction or injunction against any person to
prevent or restrain a violation of this legislation. It
clarifies that the bill does not alter, supersede or otherwise
affect the Indian Gaming Regulatory Act; generally limits
responsibility of an interactive computer service to the
removal or disabling of access to an online site violating this
section, upon proper notice; restricts the ability to bring
injunctive cases against financial transaction provider
activities.
SECTION 5366. CRIMINAL PENALTIES
Authorizes criminal penalties, under title 18 of the U.S.
Code, for violating section 5363, including fines or
imprisonment for not more than five years or both. Also
authorizes permanently enjoining a person convicted under this
section from engaging in gambling activities.
SECTION 5367. CIRCUMVENTIONS PROHIBITED
Provides that, notwithstanding the safe harbor provided in
section 5362(2), a financial intermediary or interactive
computer service or telecommunications service that has actual
knowledge and control of bets and wagers, and operates or is
controlled by an entity that operates, an unlawful Internet
gambling site can be held criminally liable under this
subchapter.
Section 4. Internet gambling in or through foreign jurisdictions
Section 4(a) provides that, in deliberations between the
United States government and any other country on money
laundering, corruption, and crime issues, the United States
government should encourage cooperation by foreign governments
in identifying whether Internet gambling operations are being
used for money laundering, corruption, or other crimes, advance
policies that promote the cooperation by foreign governments in
the enforcement of this Act, and encourage the Financial Action
Task Force on Money Laundering to study the extent to which
Internet gambling operations are being used for money
laundering. It also requires the Secretary of the Treasury to
submit an annual report to Congress on the deliberations
between the United States and other countries on issues
relating to Internet gambling.
Subsection (b) requires the Secretary of the Treasury to
submit an annual report to Congress on any deliberations
between the United States and other countries on issues
relating to Internet Gambling.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (new matter is
printed in italic and existing law in which no change is
proposed is shown in roman):
TITLE 31, UNITED STATES CODE
* * * * * * *
SUBTITLE IV--MONEY
* * * * * * *
CHAPTER 53--MONETARY TRANSACTIONS
SUBCHAPTER I--CREDIT AND MONETARY EXPANSION
Sec.
5301. Buying obligations of the United States Government.
* * * * * * *
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.
* * * * * * *
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 (butnot
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.
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