House Report 111-656 - INTERNET GAMBLING REGULATION, CONSUMER PROTECTION, AND ENFORCEMENT ACT

[House Report 111-656]
[From the U.S. Government Publishing Office]

111th Congress Rept. 111-656
HOUSE OF REPRESENTATIVES
2d Session Part 1

======================================================================

INTERNET GAMBLING REGULATION, CONSUMER PROTECTION, AND ENFORCEMENT ACT

_______

September 29, 2010.--Ordered to be printed

_______

Mr. Frank of Massachusetts, from the Committee on Financial Services,
submitted the following

R E P O R T

together with

DISSENTING VIEWS

[To accompany H.R. 2267]

[Including cost estimate of the Congressional Budget Office]

The Committee on Financial Services, to whom was referred
the bill (H.R. 2267) to amend title 31, United States Code, to
provide for the licensing of Internet gambling activities by
the Secretary of the Treasury, to provide for consumer
protections on the Internet, to enforce the tax code, 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
Amendment........................................................ 2
Purpose and Summary.............................................. 18
Background and Need for Legislation.............................. 18
Hearings......................................................... 20
Committee Consideration.......................................... 21
Committee Votes.................................................. 21
Committee Oversight Findings..................................... 24
Performance Goals and Objectives................................. 25
New Budget Authority, Entitlement Authority, and Tax Expenditures 25
Committee Cost Estimate.......................................... 25
Congressional Budget Office Estimate............................. 25
Federal Mandates Statement....................................... 28
Advisory Committee Statement..................................... 28
Constitutional Authority Statement............................... 28
Applicability to Legislative Branch.............................. 28
Earmark Identification........................................... 29
Exchange of Committee Correspondence............................. 29
Section-by-Section Analysis of the Legislation................... 29
Changes in Existing Law Made by the Bill, as Reported............ 29
Dissenting Views................................................. 56

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 ``Internet Gambling Regulation,
Consumer Protection, and Enforcement Act''.

SEC. 2. FEDERAL LICENSING REQUIREMENT FOR INTERNET GAMBLING OPERATORS.

(a) In General.--Chapter 53 of title 31, United States Code, is
amended by adding at the end the following new subchapter:

``SUBCHAPTER V--REGULATION OF LAWFUL INTERNET GAMBLING

``Sec. 5381. Congressional findings

``The Congress finds the following:
``(1) Since the development of the Internet, millions of
people have chosen to gamble online, and today Internet
gambling is offered by operators located in many different
countries under a variety of licensing and regulatory regimes.
``(2) Despite the increasing use of the Internet for gambling
by persons in the United States, there is no Federal or State
regulatory regime in place to protect United States citizens
who choose to engage in this interstate activity, or to oversee
operators to establish and enforce standards of integrity and
fairness.
``(3) In the United States, gambling activities, equipment,
and operations have been subject to various forms of Federal
and State control, regulation, and enforcement, with some form
of gambling being permitted in nearly every State and by many
Indian tribes.
``(4) Internet gambling in the United States should be
controlled by a strict Federal, State, and tribal licensing and
regulatory framework to protect underage and otherwise
vulnerable individuals, to ensure the games are fair, to
address the concerns of law enforcement, and to enforce any
limitations on the activity established by the States and
Indian tribes.
``(5) An effective Federal, State, and tribal licensing
system would ensure that licenses are issued only to Internet
gambling operators which meet strict criteria to protect
consumers, and which--
``(A) are in good financial and legal standing, and
of good character, honesty, and integrity;
``(B) utilize appropriate technology to determine the
age and location of users;
``(C) adopt and implement systems to protect minors
and problem gamblers;
``(D) adopt and implement systems to enforce any
applicable Federal, State, and Indian tribe limitations
on Internet gambling; and
``(E) have in place risk-based methods to identify
and combat money laundering and fraud relating to
Internet gambling, and to protect the privacy and
security of users.
``(6) There is a need to extend the regulatory provisions of
this Act to all persons, locations, equipment, practices, and
associations related to Internet gambling, with each State and
Indian tribe having the ability to limit Internet gambling
operators from offering Internet gambling to persons located
within its territory by opting out of the provisions of this
Act.

``Sec. 5382. Definitions

``For purposes of this subchapter, the following definitions shall
apply:
``(1) Applicant.--The term `applicant' means any person who
has applied for a license pursuant to this subchapter.
``(2) Bet or wager.--The term `bet or wager' has the same
meaning as in section 5362(1).
``(3) Enforcement agent.--The term `enforcement agent' means
any individual authorized by the Secretary to enforce the
provisions of this subchapter and regulations prescribed under
this subchapter.
``(4) Indian lands and indian tribe.--The terms `Indian
lands' and `Indian tribe' have the same meanings as in section
4 of the Indian Gaming Regulatory Act.
``(5) Internet.--The term `Internet' has the same meaning as
in section 5362(5).
``(6) Licensee.--The term `licensee' means an entity
authorized to operate an Internet gambling facility in
accordance with this subchapter.
``(7) Operate an internet gambling facility.--The term
`operate an Internet gambling facility' or `operation of an
Internet gambling facility' means the direction, management,
supervision, or control of an Internet site through which bets
or wagers are initiated, received, or otherwise made, whether
by telephone, Internet, satellite, or other wire or wireless
communication.
``(8) Secretary.--The term `Secretary' means the Secretary of
the Treasury, or any person designated by the Secretary.
``(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) Sporting event.--The term `sporting event' means any
athletic competition, whether professional, scholastic, or
amateur.

``Sec. 5383. Establishment and administration of licensing program

``(a) Treasury Responsibilities.--The Secretary shall have
responsibility for the following activities:
``(1) Exercising full regulatory jurisdiction over--
``(A) the operation of Internet gambling facilities
by licensees; and
``(B) the licensure and regulation of all applicants,
except to the extent that powers have been delegated to
qualified State and tribal regulatory bodies pursuant
to this subchapter.
``(2) Prescribing such regulations as may be necessary to
administer and enforce the requirements of this subchapter.
``(3) Employing enforcement agents with sufficient training
and experience to administer the requirements of this
subchapter and the regulations prescribed under this
subchapter.
``(4) Enforcing the requirements of this subchapter through
all appropriate means provided under this subchapter and other
provisions of law.
``(b) Internet Gambling Licensing Program.--
``(1) Licensing required for certain internet gambling.--No
person may operate an Internet gambling facility that knowingly
accepts bets or wagers from persons located in the United
States without a license issued by the Secretary in accordance
with this subchapter.
``(2) Authority under valid license.--A licensee may accept
bets or wagers from persons located in the United States,
subject to the limitations set forth in this subchapter, so
long as its license remains in good standing.
``(c) Application for License.--
``(1) In general.--Any person seeking authority to operate an
Internet gambling facility offering services to persons in the
United States may apply for a license issued by the Secretary.
``(2) Information required.--Any application for a license
under this subchapter shall contain such information as may be
required by the Secretary, including the following:
``(A) The criminal and credit history of the
applicant, any senior executive and director of the
applicant, and any person deemed to be in control of
the applicant.
``(B) The financial statements of the applicant.
``(C) Documentation showing the corporate structure
of the applicant and all related businesses and
affiliates.
``(D) Documentation containing detailed evidence of
the applicant's plan for complying with all applicable
regulations should a license be issued, with particular
emphasis on the applicant's ability to--
``(i) protect underage and problem gamblers;
``(ii) ensure games are being operated
fairly; and
``(iii) comply with and address the concerns
of law enforcement.
``(E) Certification that the applicant agrees to
submit to United States jurisdiction and all applicable
United States laws relating to acceptance by the
applicant of bets or wagers over the Internet from
persons located in the United States and all associated
activities.
``(F) Certification that the applicant has
established a corporate entity or other separate
business entity in the United States, a majority of
whose officers are United States persons and, if there
is a board of directors, that the board is majority-
controlled by directors who are United States persons.
``(d) Standards for License Issuance; Suitability Qualifications
and Disqualification Standards.--
``(1) Suitability for licensing standards.--
``(A) In general.--No person shall be eligible to
obtain a license unless the Secretary or an appropriate
State officer or agency has determined, upon completion
of a background check and investigation, that the
applicant, and any person deemed to be in control of
the applicant, is suitable for licensing.
``(B) Associates of applicants.--If the applicant is
a corporation, partnership, or other business entity, a
background check and investigation shall occur with
respect to the president or other chief executive of
the corporation, partnership, or other business entity
and other partners or senior executives and directors
of the corporation, partnership, or entity, as
determined appropriate by the Secretary or any
appropriate State or tribal officer or agency.
``(C) Background check and investigation.--The
Secretary shall establish standards and procedures for
conducting background checks and investigations for
purposes of this subsection.
``(2) Suitability for licensing standards described.--For
purposes of this subchapter, an applicant and any other person
associated with the applicant, as applicable, is suitable for
licensing if the applicant demonstrates to the Secretary or
appropriate State or tribal officer or agency by clear and
convincing evidence that the applicant (or individual
associated with the applicant, as applicable)--
``(A) is a person of good character, honesty, and
integrity;
``(B) is a person whose prior activities, reputation,
habits, and associations do not--
``(i) pose a threat to the public interest or
to the effective regulation and control of the
licensed activities; or
``(ii) create or enhance the dangers of
unsuitable, unfair, or illegal practices,
methods, and activities in the conduct of the
licensed activities or the carrying on of the
business and financial arrangements incidental
to such activities;
``(C) is capable of and likely to conduct the
activities for which the applicant is licensed in
accordance with the provisions of this subchapter and
any regulations prescribed under this subchapter;
``(D) has or guarantees acquisition of adequate
business competence and experience in the operation of
Internet gambling facilities; and
``(E) has or will obtain sufficient financing for the
nature of the proposed operation and from a suitable
source.
``(3) Unsuitable for licensing.--An applicant or any other
person may not be determined to be suitable for licensing
within the meaning of this subchapter if the applicant or such
person--
``(A) has failed to provide information and
documentation material to a determination of
suitability for licensing under paragraph (1);
``(B) has supplied information which is untrue or
misleading as to a material fact pertaining to any such
determination;
``(C) has been convicted of an offense punishable by
imprisonment of more than 1 year;
``(D) is delinquent in filing any applicable Federal
or State tax returns or in the payment of any taxes,
penalties, additions to tax, or interest owed to a
State or the United States;
``(E) has, on or after the date of the enactment of
the Unlawful Internet Gambling Enforcement Act of
2006--
``(i) knowingly participated in, or should
have known they were participating in, any
illegal Internet gambling activity, including
the taking of an illegal Internet wager, the
payment of winnings on an illegal Internet
wager, the promotion through advertising of any
illegal Internet gambling website or service,
or the collection of any payments to an entity
operating an illegal Internet gambling website;
or
``(ii) knowingly been owned, operated,
managed, or employed by, or should have known
they were owned, operated, managed, or employed
by, any person who was knowingly participating
in, or should have known they were
participating in, any illegal Internet gambling
activity, including the taking of an illegal
Internet wager, the payment of winnings on an
illegal Internet wager, the promotion through
advertising of any illegal Internet gambling
website or service, or the collection of any
payments to an entity operating an illegal
Internet gambling website;
``(F) has--
``(i) received any assistance, financial or
otherwise, from any person who has, before the
date of the enactment of the Internet Gambling
Regulation, Consumer Protection, and
Enforcement Act, knowingly accepted bets or
wagers from a person located in the United
States in violation of Federal or State law; or
``(ii) provided any assistance, financial or
otherwise, to any person who has, before the
date of the enactment of the Internet Gambling
Regulation, Consumer Protection, and
Enforcement Act, knowingly accepted bets or
wagers from a person located in the United
States in violation of Federal or State law;
``(G) with respect to another entity that has
accepted a bet or wager from any individual in
violation of United States law, has purchased or
otherwise obtained--
``(i) such entity;
``(ii) a list of the customers of such
entity; or
``(iii) any other part of the equipment or
operations of such entity;
``(H) is listed on a State gambling excluded persons
list; or
``(I) fails to certify in writing, under penalty of
perjury, that the applicant or other such person, and
all affiliated business entities (including all
entities under common control), has through its entire
history--
``(i) not committed an intentional felony
violation of Federal or State gambling laws;
and
``(ii) used diligence to prevent any United
States person from placing a bet on an Internet
site in violation of Federal or State gambling
laws.
``(4) Appeal of determination.--With respect to any applicant
or other person that the Secretary determines is not suitable
for licensing within the meaning of this subchapter by reason
of subparagraph (E) or (F) of paragraph (3), and where the
Secretary has not determined that such applicant or person was
acting in their capacity as a managerial employee of an
Internet gambling website, the Secretary shall establish an
appeals process by which such applicant or person may appeal
the Secretary's determination.
``(5) Ongoing requirement.--A licensee (and any other person
who is required to be determined to be suitable for licensing
in connection with such licensee) shall meet the standards
necessary to be suitable for licensing throughout the term of
the license.
``(6) Protection of the public trust.--The Secretary may take
such action as is necessary to protect the public trust,
including the implementation of such safeguards as may be
necessary to ensure the operation of an Internet gambling
facility licensed under this subchapter is controlled only by
persons who are suitable for licensing.
``(7) Enforcement actions.--
``(A) Determination of unsuitability for continued
licensure.--If the Secretary finds that an individual
owner or holder of a security of a licensee, or of a
holding or intermediary company of a licensee or any
person with an economic interest in a licensee or a
director, partner, or officer of a licensee is not
suitable for licensing, the Secretary may determine
that the licensee is not qualified to continue as a
licensee.
``(B) Action to protect the public interest,
including suspension.--If the Secretary may determine
that the licensee is not qualified to continue as a
licensee, the Secretary shall propose action necessary
to protect the public interest, including, if deemed
necessary, the suspension of the authority of the
licensee to engage in licensed activities.
``(C) Imposition of conditions including removal of
parties.--Notwithstanding a determination under
subparagraph (A), the Secretary may allow a licensee to
continue engaging in licensed activities by imposing
conditions on the licensee under penalty of revocation
or suspension of the authority of the licensee to
engage in licensed activities, including--
``(i) the identification of any person
determined to be unsuitable for licensing; and
``(ii) the establishment of appropriate
safeguards to ensure such person is excluded
from any interest in the licensed activities.
``(e) Assessments for Administrative Expenses.--
``(1) User fees.--
``(A) In general.--The cost of administering this
subchapter with respect to each licensee, including the
cost of any review or examination of a licensee to
ensure compliance with the terms of the license and
this subchapter, shall be assessed by the Secretary
against the licensee institution by written notice in
an amount appropriate to meet the Secretary's expenses
in carrying out such administration, review, or
examination.
``(B) Disposition.--Amounts assessed by the Secretary
as user fees under subparagraph (A) shall--
``(i) be maintained by the Secretary solely
for use in accordance with clause (ii);
``(ii) be available to the Secretary to cover
all expenses incurred by the Secretary in
carrying out this subchapter; and
``(iii) not be construed to be Government
funds or appropriated monies, or subject to
apportionment for the purposes of chapter 15 or
any other authority.
``(C) Hearing.--Any licensee against whom an
assessment is assessed under this paragraph shall be
afforded an agency hearing if such person submits a
request for such hearing within 20 days after the
issuance of the notice of assessment.
``(D) Collection.--
``(i) Referral.--If any licensee fails to pay
an assessment under this paragraph after the
assessment has become final, the Secretary
shall recover the amount assessed by action in
the appropriate United States district court.
``(ii) Appropriateness of assessment not
reviewable.--In any civil action under clause
(i), the validity and appropriateness of the
assessment shall not be subject to review.
``(2) Direct and exclusive obligation of licensee.--The user
fee shall be the direct and exclusive obligation of the
licensee and may not be deducted from amounts available as
deposits to any person placing a bet.
``(f) Approval of License.--The Secretary shall grant licenses
under this subchapter if the applicant meets the criteria set by the
Secretary set forth in this subchapter and in any regulations
promulgated thereunder.
``(g) Safeguards Required of Licensee.--No person may operate an
Internet gambling facility in accordance with this subchapter unless
the person maintains or requires mechanisms so that the following
requirements, and the standards established under section 5384, are met
with respect to any Internet bet or wager:
``(1) Legal age.--Appropriate safeguards to ensure that the
individual placing a bet or wager is of legal age as defined by
the law of the State or tribal area in which the individual is
located at the time the bet or wager is placed.
``(2) Permissible location.--Appropriate safeguards to ensure
that the individual placing a bet or wager is physically
located in a jurisdiction that permits Internet gambling at the
time the bet or wager is placed.
``(3) Collection of customer taxes.--Appropriate mechanisms
to ensure that all taxes relating to Internet gambling from
persons engaged in Internet gambling are collected at the time
of any payment of any proceeds of Internet gambling.
``(4) Collection of taxes of licensee.--Appropriate
mechanisms to ensure that all taxes relating to Internet
gambling from any licensee are collected and disbursed as
required by law, and that adequate records to enable later
audit or verification are maintained.
``(5) Safeguards against financial crime.--Appropriate
safeguards to combat fraud, money laundering, and terrorist
finance.
``(6) Safeguards against compulsive gambling.--Appropriate
safeguards to combat compulsive Internet gambling.
``(7) Privacy safeguards.--Appropriate safeguards to protect
the privacy and security of any person engaged in Internet
gambling.
``(8) Payment of assessments.--Appropriate mechanisms to
ensure that any assessment under subsection (e) is paid to the
Secretary.
``(9) Other requirements.--Such other requirements as the
Secretary may establish by regulation or order.
``(h) Term and Renewal of License.--
``(1) Term.--Any license issued under this section shall be
issued for a 5-year term beginning on the date of issuance.
``(2) Renewal.--Licenses may be renewed in accordance with
the requirements prescribed by the Secretary pursuant to this
subchapter.
``(i) Revocation of License.--
``(1) In general.--Any license granted under this subchapter
may be revoked by the Secretary if--
``(A) the licensee fails to comply with any provision
of this subchapter;
``(B) the licensee is determined to be unsuitable for
licensing, within the meaning of this subchapter; or
``(C) the licensee is determined to be targeting
marketing or advertising materials at individuals who
are not of legal age to place a bet or wager, as
defined by the law of the State or tribal area in which
the individuals are located.
``(2) Final action.--Any revocation of a license under
paragraph (1) shall be treated as a final action by the
Secretary.
``(j) Regulations.--The regulations prescribed by the Secretary
under this subchapter shall include regulations to fully implement--
``(1) safeguards required for licensees under subsection (g);
and
``(2) the requirements for programs relating to the Problem
Gambling, Responsible Gambling, and Self-Exclusion Program
under section 5384.
``(k) Administrative Provisions.--
``(1) General powers of secretary.--
``(A) In general.--The Secretary shall have the
authority to engage in the following:
``(i) Investigate the suitability of each
licensee to ensure compliance with this
subchapter and regulations prescribed under
this subchapter.
``(ii) Require licensees to maintain
appropriate procedures to ensure compliance
with this subchapter and regulations prescribed
under this subchapter.
``(iii) Require licensees to maintain
substantial facilities involved with the
processing of bets or wagers from the United
States within the United States.
``(iv) Require that a majority of all of the
employees of the applicant or licensee, and of
its affiliated business entities, be residents
or citizens of the United States. All entities
under common control shall be considered
affiliated business entities for the purposes
of this subparagraph.
``(v) Require licensees to maintain in the
United States all facilities that are essential
to the regulation of bets or wagers placed from
the United States at a location that is
accessible to the appropriate regulatory
personnel at all times.
``(vi) Examine any licensee and any books,
papers, records, or other data of licensees
relevant to any recordkeeping or reporting
requirements imposed by the Secretary under
this subchapter.
``(vii) Require licensees to maintain all
facilities within the United States for
processing of bets or wagers made or placed
from the United States.
``(viii) When determined by the Secretary to
be necessary, summon a licensee or an applicant
for a license, an officer or employee of a
licensee or any such applicant (including a
former officer or employee), or any person
having possession, custody, or care of the
reports and records required by the Secretary
under this subchapter, to appear before the
Secretary or a designee of the Secretary at a
time and place named in the summons and to
produce such books, papers, records, or other
data, and to give testimony, under oath, as may
be relevant or material to any investigation in
connection with the enforcement of this
subchapter or any application for a license
under this subchapter.
``(ix) Investigate any violation of this
subchapter and any regulation under this
subchapter and any other violation of law
relating to the operation of an Internet
gambling facility.
``(x) Conduct continuing reviews of
applicants and licensees and the operation of
Internet gambling facilities by use of
technological means, onsite observation of
facilities, including servers, or other
reasonable means to assure compliance with this
subchapter and any regulations promulgated
hereunder.
``(xi) Prohibit inappropriate advertising
practices by licensees, including unsolicited
emails targeting members of vulnerable
populations, including problem gamblers and
minors, or Internet advertising linked to
search terms associated with children, problem
gamblers, or other topics deemed inappropriate.
``(B) Effect of wto ruling.--Clauses (iii) and (iv)
of subparagraph (A) shall cease to have effect if a
tribunal of the World Trade Organization of final
arbitration rules that the implementation of such
clauses would violate the trade commitments of the
United States under the World Trade Organization.
``(2) Consultation with indian tribes.--In implementing this
subchapter, the Secretary shall conduct meaningful consultation
with Indian tribes regarding all aspects of this subchapter
which affect Indian tribes, both as potential licensing
entities or operating entities.
``(3) Administrative aspects of summons.--
``(A) Production at designated site.--A summons
issued pursuant to this subsection may require that
books, papers, records, or other data stored or
maintained at any place be produced at any business
location of a licensee or applicant for a license or
any designated location in any State or in any
territory or other place subject to the jurisdiction of
the United States not more than 500 miles distant from
any place where the licensee or applicant for a license
operates or conducts business in the United States.
``(B) No liability for expenses.--The United States
shall not be liable for any expense incurred in
connection with the production of books, papers,
records, or other data under this subsection.
``(C) Service of summons.--Service of a summons
issued under this subsection may be by registered mail
or in such other manner calculated to give actual
notice as the Secretary may prescribe by regulation.
``(4) Contumacy or refusal.--
``(A) Referral to attorney general.--In case of
contumacy by a person issued a summons under this
subsection or a refusal by such person to obey such
summons or to allow the Secretary to conduct an
examination, the Secretary shall refer the matter to
the Secretary of the Treasury for referral to the
Attorney General.
``(B) Jurisdiction of court.--The Attorney General
may invoke the aid of any court of the United States to
compel compliance with the summons within the
jurisdiction of which--
``(i) the investigation which gave rise to
the summons or the examination is being or has
been carried on;
``(ii) the person summoned is an inhabitant;
or
``(iii) the person summoned carries on
business or may be found.
``(C) Court order.--The court may issue an order
requiring the person summoned to appear before the
Secretary or a delegate of the Secretary to produce
books, papers, records, and other data, to give
testimony as may be necessary to explain how such
material was compiled and maintained, to allow the
Secretary to examine the business of a licensee, and to
pay the costs of the proceeding.
``(D) Failure to comply with order.--Any failure to
obey the order of the court may be punished by the
court as a contempt thereof.
``(E) Service of process.--All process in any case
under this subsection may be served in any judicial
district in which such person may be found.
``(5) Compilation of datasets on player behavior.--
``(A) In general.--The Secretary shall compile and
make available to the public, on the website of the
Secretary, datasets on player behavior.
``(B) Regulations requiring submission of
information.--The Secretary shall prescribe regulations
to require licensees under this subchapter to provide
information on player behavior that the Secretary
determines is appropriate for the datasets under
subparagraph (A).
``(C) Information required to be included.--Datasets
prepared under this paragraph shall include information
on any individual player, if requested by the
Secretary, including but not limited to information
concerning gambling frequency, gaming duration, the
amount wagered, the number of bets placed, and net
losses, provided that such request complies with the
provisions of subparagraph (D).
``(D) Protection of privacy.--All information
provided pursuant to this paragraph shall be aggregated
and anonymized, and shall not contain information that
either alone or in combination with other data elements
would permit identification of any individual player.
``(l) Civil Money Penalties.--
``(1) In general.--The Secretary may assess upon any licensee
or other person subject to the requirements of this subchapter
for any willful violation of this subchapter or any regulation
prescribed or order issued under this subchapter, a civil
penalty of not more than the greater of--
``(A) the amount (not to exceed $100,000) involved in
the violation, if any; or
``(B) $25,000.
``(2) Assessment.--
``(A) Written notice.--Any penalty imposed under
paragraph (1) may be assessed and collected by the
Secretary by written notice.
``(B) Finality of assessment.--If, with respect to
any assessment under paragraph (1), a hearing is not
requested pursuant to subparagraph (E) within the
period of time allowed under such subparagraph, the
assessment shall constitute a final and unappealable
order.
``(C) Authority to modify or remit penalty.--The
Secretary may compromise, modify, or remit any penalty
which the Secretary may assess or has already assessed
under paragraph (1).
``(D) Mitigating factors.--In determining the amount
of any penalty imposed under paragraph (1), the
Secretary shall take into account the appropriateness
of the penalty with respect to--
``(i) the size of the financial resources and
the good faith of the person against whom the
penalty is assessed;
``(ii) the gravity of the violation;
``(iii) the history of previous violations;
and
``(iv) such other matters as justice may
require.
``(E) Hearing.--The person against whom any penalty
is assessed under paragraph (1) shall be afforded an
agency hearing if such person submits a request for
such hearing within 20 days after the issuance of the
notice of assessment.
``(F) Collection.--
``(i) Referral.--If any person fails to pay
an assessment after any penalty assessed under
this paragraph has become final, the Secretary
shall recover the amount assessed by action in
the appropriate United States district court.
``(ii) Appropriateness of penalty not
reviewable.--In any civil action under clause
(i), the validity and appropriateness of the
penalty shall not be subject to review.
``(G) Disbursement.--All penalties collected under
authority of this subsection shall be deposited into
the Treasury.
``(3) Condition for licensure.--Payment by a licensee of any
civil penalty assessed under this subsection that has become
final shall be a requirement for the retention of its license.
``(m) Treatment of Records.--In light of business competition,
confidentiality, and privacy concerns, the Secretary shall protect from
disclosure information submitted in support of a license application
under this subchapter and information collected in the course of
regulating licensees to the full extent permitted by sections 552 and
552a of title 5.
``(n) Suitability for Licensing Requirements for Certain Service
Providers.--
``(1) In general.--Any person that knowingly--
``(A) manages, administers, or controls bets or
wagers that are initiated, received, or otherwise made
within the United States,
``(B) otherwise manages or administers the games with
which such bets or wagers are associated, or
``(C) develops, maintains or operates, or distributes
or makes available for downloading software, other
system programs or hardware that create, operate, or
otherwise affect the outcome of a game,
shall meet all of the suitability for licensing criteria
established under this section in the same manner and to the
same extent as if that person were itself a licensee.
``(2) Suitability for licensing requirements for certain
service providers.--Any failure on the part of person described
in any subparagraph of paragraph (1) to remain suitable for
licensing shall be grounds for revocation of the authority of
the licensee for whom such service is provided to operate an
Internet gambling facility, in the same manner and in
accordance with subsection (i).
``(o) Reliance on State and Tribal Regulatory Body Certifications
of Suitability for Applicants.--
``(1) Qualification of state and tribal regulatory bodies.--
``(A) Application for determination.--Any State or
tribal regulatory body with expertise in regulating
gambling may--
``(i) notify the Secretary of its willingness
to review prospective applicants to certify
whether any such applicant meets the
qualifications established under this
subchapter; and
``(ii) provide the Secretary with such
documentation as the Secretary determines
necessary for the Secretary to determine
whether such State or tribal regulatory body is
qualified to conduct such review and may be
relied upon by the Secretary to make any such
certification.
``(B) Determination and notice.--Within 60 days after
receiving any notice under subparagraph(A)(i), the
Secretary shall--
``(i) make the determination as to whether a
State or tribal regulatory body is qualified to
conduct a review of prospective applicants and
may be relied upon to certify whether any such
applicant meets the qualifications established
under this subchapter; and
``(ii) notify the State or tribal regulatory
body of such determination.
``(2) Actions by qualified authorities.--During the period
that any determination of qualification under paragraph (1)(B)
is in effect with respect to any such State or tribal
regulatory body, the State or tribal regulatory body--
``(A) may undertake reviews of any applicant to
determine whether the applicant or any person
associated with the applicant meets the criteria for
suitability for licensing established under this
subchapter;
``(B) may impose on each such applicant an
administrative fee or assessment for conducting such
review in an amount the regulatory body determines to
be necessary to meet its expenses in the conduct of
such review; and
``(C) shall process and assess each applicant fairly
and equally based on objective criteria, regardless of
any prior licensing of an applicant by the State or
tribal regulatory body.
``(3) Reliance on state or tribal certification.--Any
applicant may provide a certification of suitability for
licensing made by any State or tribal regulatory body under
paragraph (2), together with all documentation the applicant
has submitted to any such State or tribal regulatory body, to
the Secretary, and any such certification and documentation
shall be relied on by the Secretary as evidence that an
applicant has met the suitability for licensing requirements
under this section.
``(4) Authority of secretary to review.--Notwithstanding any
certification of suitability for licensing made by any State or
tribal regulatory body, the Secretary retains the authority to
review, withhold, or revoke any license if the Secretary has
reason to believe that any applicant or licensee does not meet
the suitability requirements for licensing established under
this section, or any other requirement of a licensee.
``(5) Reliance on qualified regulatory body for other
purposes, including examination and enforcement.--The Secretary
shall rely on any State and tribal regulatory body found
qualified under this subsection for such other regulatory and
enforcement activities as the Secretary finds to be useful and
appropriate to carry out the purposes of this subchapter,
including authority under paragraph (6).
``(6) Additional authority of qualified state or tribal
authorities.--The qualified state or tribal authorities may--
``(A) examine licensees who are licensed under a
State or tribal program referred to in paragraph (1);
``(B) employ enforcement agents with sufficient
training and experience to administer the requirements
of this subchapter; and
``(C) enforce any requirement of this subchapter that
is within the jurisdiction of the qualified state or
tribal authority through all appropriate means provided
under this subchapter and other provisions of law.
``(7) Revocation of qualification.--The Secretary may revoke,
at any time and for any reason, the qualification of any State
or tribal regulatory body to certify or to conduct any other
regulatory or enforcement activity to carry out the purposes of
this subchapter.
``(p) Prevention of Minors From Placing Bets or Wagers.--The
Secretary shall--
``(1) frequently monitor, evaluate, and measure compliance
effectiveness of each licensee's software, mechanisms, and
other systems for preventing minors from placing bets or wagers
through the Internet site of the licensee; and
``(2) impose a sanction of either a fine, a revocation of
license, or both, on a licensee whose minor protection
software, mechanisms, and other systems are found to be
insufficiently effective.
``(q) Requirements With Respect to Child Support Delinquents.--
``(1) In general.--When it is made known to the Secretary by
a Federal or State court or a competent State agency involved
with the administration or enforcement of a court-ordered child
support payment that a particular individual is delinquent with
respect to court-ordered child support payments, the Secretary
shall include that individual on the list established under
section 5384(c)(1)(A).
``(2) Removal from list.--Individuals placed on the list
pursuant to paragraph (1) shall be removed from such list if
the court or agency that made such individual's delinquency
known to the Secretary notifies the Secretary that such
individual is no longer delinquent.

``Sec. 5384. Problem Gambling, Responsible Gambling, Consumer
Safeguards, and Self-Exclusion Program

``(a) Regulations Required.--The Secretary and any State or tribal
regulatory body that has been qualified under subsection 5383(o) shall
prescribe regulations for the development of a Problem Gambling,
Responsible Gambling, Consumer Safeguards, and Self-Exclusion Program
on the basis of standards that each licensee shall implement as a
condition of licensure.
``(b) Minimum Requirements.--
``(1) In general.--Any application for a license shall
include a submission to the Secretary or qualified State or
tribal regulatory body setting forth a comprehensive program
that is intended--
``(A) to verify the identity and age of each customer
through the use of commercially available data sources
or any approved government database that is available
for access in real-time through an automated process;
``(B) to ensure that no customers under the legal age
21 may initiate or otherwise make any bets or wagers
for real money;
``(C) to verify the State or tribal land in which the
customer is located at the time the customer attempts
to initiate a bet or wager;
``(D) to ensure that no customer who is located in a
State or tribal land that opts out pursuant to section
5387 can initiate or otherwise make a bet or wager
prohibited by such opt-out;
``(E) to ensure that responsible gambling materials
including materials on problem gambling, services and
resources to address problem gambling, descriptions of
games offered by the licensee, and when appropriate,
odds of winning or payout rates of games, and any other
materials that the Secretary or qualified State or
tribal regulatory body may deem appropriate are made
available to customers;
``(F) to make available player-selectable responsible
gambling options that may include, as appropriate to
specific gambling games, a stake limit, loss limit,
time-based loss limits, deposit limit, session time
limit, time-based exclusion from all gambling and other
similar options that the Secretary or qualified State
or tribal regulatory body may deem appropriate and
require to be made available;
``(G) to require each customer, before making or
placing any bet or wager, to establish personal limits
as a condition of play that apply across all betting
sites, which may be in hourly, daily, weekly or monthly
increments, at the discretion of the customer;
``(H) to protect the privacy and security of any
customer in connection with any lawful Internet
gambling activity;
``(I) to protect against fraud and to provide for
dispute resolution relating to internet gambling
activity through programs to insure the integrity and
fairness of the games; and
``(J) to protect against money laundering relating to
Internet gambling activities.
``(2) Requirements for programs ensuring integrity and
fairness.--The programs referred to in paragraph (1)(I) to
insure the integrity and fairness of the games shall include
requirements for--
``(A) real-time, multiparty cryptographic protocols
for random number generation where 1 of the parties is
the player;
``(B) secure audit trails;
``(C) detailed player betting logs that record and
store each wager placed by the player;
``(D) real time confirmation of high value bets or
wagers, where appropriate; or
``(E) equally effective options that the Secretary or
qualified State or tribal regulatory officer or agency
may determine to be appropriate.
``(c) Periodic Review.--
``(1) In general.--The Secretary shall, on a regular basis,
review the minimum requirements under this section and may,
based on the best available technology, update the standards
that each licensee shall implement as a condition of licensure.
``(2) Consultation.--In conducting the review required under
paragraph (1), the Secretary shall consult with--
``(A) State and tribal gaming regulatory officials;
``(B) law enforcement officials;
``(C) experts in underage and problem gaming;
``(D) experts on individual privacy;
``(E) consumers;
``(F) on-line retailers of other age restricted
materials such as tobacco and alcohol products;
``(G) licensees and other representatives of the
gaming industry;
``(H) software developers with expertise in gaming,
privacy, the payments systems available, and other
relevant areas; and
``(I) such other relevant individuals as the
Secretary may determine to be appropriate.
``(d) List of Persons Self-excluded From Gambling Activities.--
``(1) Establishment.--
``(A) In general.--The Secretary shall provide by
regulation for the establishment of a list of persons
self-excluded from gambling activities at all licensee
sites.
``(B) Placement request.--Any person may request
placement on the list of self-excluded persons by--
``(i) acknowledging in a manner to be
established by the Secretary that the person
wishes to be denied gambling privileges; and
``(ii) agreeing that, during any period of
voluntary exclusion, the person may not collect
any winnings or recover any losses resulting
from any gambling activity at any licensee
sites.
``(2) Placement and removal procedures.--The regulations
prescribed by the Secretary under paragraph (1)(A) shall
establish procedures for placements on, and removals from, the
list of self-excluded persons.
``(3) Limitation on liability.--
``(A) In general.--The United States, the Secretary,
an enforcement agent, or a licensee, or any employee or
agent of the United States, the Secretary, an
enforcement agent, or a licensee, shall not be liable
to any self-excluded person or to any other party in
any judicial or administrative proceeding for any harm,
monetary or otherwise, which may arise as a result of--
``(i) any failure to withhold gambling
privileges from, or to restore gambling
privileges to, a self-excluded person; or
``(ii) otherwise permitting a self-excluded
person to engage in gambling activity while on
the list of self-excluded persons.
``(B) Rule of construction.--No provision of
subparagraph (A) shall be construed as preventing the
Director from assessing any regulatory sanction against
a licensee for failing to comply with the minimum
standards prescribed pursuant to this subsection.
``(4) Disclosure provisions.--
``(A) In general.--Notwithstanding any other
provision of Federal or State law, the list of self-
excluded persons shall not be open to public
inspection.
``(B) Affiliate disclosure.--Any licensees may
disclose the identities of persons on the self-excluded
list to any affiliated company or, where required to
comply with this subsection, any service provider, to
the extent that the licensee ensures that any
affiliated company or service provider maintains such
information under confidentiality provisions comparable
to those in this subsection.
``(5) Limitation on liability for disclosure.--A licensee or
an employee, agent, or affiliate of a licensee shall not be
liable to any self-excluded person or to any other party in any
judicial proceeding for any harm, monetary or otherwise, which
may arise as a result of disclosure or publication in any
manner.
``(e) Gambling by Prohibited Persons.--
``(1) Prohibition benefitting from prohibited gambling
activity.--A person who is prohibited from gambling with a
licensee by law, or by order of the Secretary or any court of
competent jurisdiction, including any person on the self-
exclusion list as established in accordance with subsection
(d), shall not collect, in any manner or proceeding, any
winnings or recover any losses arising as a result of any
prohibited gambling activity.
``(2) Forfeiture.--In addition to any other penalty provided
by law, any money or thing of value that has been obtained by,
or is owed to, any prohibited person by a licensee as a result
of bets or wagers made by a prohibited person shall be subject
to forfeiture by order of the Secretary, following notice to
the prohibited person and opportunity to be heard.
``(3) Deposit of forfeited funds.--Any funds forfeited
pursuant to this subsection shall be deposited into the general
fund of the Treasury.
``(4) Persons self-excluded.--Licensees may not accept bets
or wagers from persons on the list established pursuant to
subsection (d)(1)(A).
``(f) Problem or Compulsive Gamblers Not on the List of Self-
excluded Persons.--
``(1) Public awareness program.--
``(A) In general.--The Secretary and any State or
tribal regulatory body that has been qualified under
subsection 5383(o) shall provide by regulation for the
establishment of a program to alert the public to the
existence, consequences, and availability of the self-
exclusion list, and shall prepare and promulgate
written materials to be used in such a program.
``(B) Licensee-provided publicity.--Regulations
prescribed under subparagraph (A) may require a
licensee to make available literature or screen
displays relating to the existence of the program.
``(2) Rule of construction.--No provision of this subsection
shall be construed as creating a legal duty in the Secretary, a
qualified State or tribal regulatory body, a licensee, or any
representative of a licensee to identify or to exclude problem
or compulsive gamblers not on the list of self-excluded
persons.
``(3) Immunity.--The United States, the Secretary, a
qualified State or tribal regulatory body, a licensee, and any
employee or agent of a licensee, shall not be liable to any
person in any proceeding for losses or other damages of any
kind arising out of that person's gambling activities based on
a claim that the person was a compulsive, problem, or
pathological gambler.

``Sec. 5385. Financial transaction providers

``(a) In General.--No financial transaction provider shall be held
liable for engaging in financial activities and transactions for or on
behalf of a licensee or involving a licensee, including payments
processing activities, unless such provider has knowledge that the
specific financial activities or transactions are conducted in
violation of this subchapter and with applicable Federal and State
laws.
``(b) Definitions.--For purposes of this section, the following
definitions shall apply:
``(1) 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 payment system.
``(2) Other terms.--
``(A) Credit, creditor, credit card, and card
issuer.--The terms `credit', `creditor', `credit card',
and `card issuer' have the meanings given the terms in
section 103 of the Truth in Lending Act.
``(B) Electronic fund transfer.--The term `electronic
fund transfer'--
``(i) has the meaning given the term in
section 903 of the Electronic Fund Transfer
Act, except that the term includes transfers
that would otherwise be excluded under section
903(6)(E) of such 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 meaning given the term 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 meaning given the term in
section 3(c) 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
meanings given the terms in section 5330(d) (determined
without regard to any regulations prescribed by the
Secretary under such section).

``Sec. 5386. List of unlawful Internet gambling enterprises

``(a) Definitions.--For purposes of this section, the following
definitions shall apply:
``(1) Unlawful internet gambling enterprise.--The term
`unlawful Internet gambling enterprise' means any person who,
more than 10 days after the date of the enactment of this
section--
``(A) violates a provision of section 5363;
``(B) knowingly receives or transmits funds intended
primarily for a person described in subparagraph (A);
or
``(C) knowingly assists in the conduct of a person
described in subparagraph (A) or (B).
``(2) Director.--The term `Director' means the Director of
the Financial Crimes Enforcement Network.
``(b) List of Unlawful Internet Gambling Enterprises.--
``(1) In general.--Not later than 120 days after the date of
the enactment of this section, the Director shall submit to the
Secretary a list of unlawful Internet gambling enterprises and
shall regularly update such list in accordance with the
procedures described in paragraph (3).
``(2) Contents of list.--The list prepared under paragraph
(1) shall include the following information for each such
unlawful Internet gambling enterprise:
``(A) All known Internet website addresses of the
enterprise.
``(B) The names of all known owners and operators of
the enterprise.
``(C) To the extent known, information identifying
the financial agents and account numbers of the
enterprise and the persons listed under subparagraph
(B).
``(3) Distribution of list by secretary.--The Secretary shall
make available--
``(A) a copy of the information provided under
subparagraphs (A) and (B) of paragraph (2) on the
Internet website of the Secretary of the Treasury;
``(B) to all persons who are required to comply with
the regulations prescribed under the authority provided
in section 5364 a copy of all the information provided
under paragraph (1) in an electronic format compatible
with the Specially Designated Nationals list maintained
by the Office of Foreign Assets Control; and
``(C) any information required under this paragraph
not later than 10 days after receiving any new or
updated list from the Director.
``(4) Procedures.--The procedures described in this paragraph
are the following:
``(A) Investigation.--The Director shall investigate
entities that appear to be unlawful Internet gambling
enterprises. An initial investigation shall be
completed before the end of the 60-day period beginning
on the date of enactment of this section. After the
initial investigation, the Director shall regularly
investigate entities that appear to be unlawful
Internet gambling enterprises. If the Director
discovers evidence sufficient to prove a prima facie
case that any person is an unlawful Internet gambling
enterprise, the Director shall provide the notice
required under subparagraph (C).
``(B) Requests.--Any Federal, State, tribal, or local
law enforcement official, any affected sports
organization, any person directly harmed by unlawful
Internet gambling, any financial transaction provider,
and any interactive computer service (as such terms are
defined in section 5362) shall have the right, but not
the obligation, to make a written request to the
Director for the addition of any person to the list of
unlawful Internet gambling enterprises. If the Director
determines that the evidence submitted is sufficient to
prove a prima facie case that such person is an
unlawful Internet gambling enterprise, the Director
shall provide the notice required under subparagraph
(C) to each person identified as an alleged unlawful
Internet gambling enterprise. The Director also shall
provide written notice of its decision under this
subparagraph, including a decision not to add a person
to the list required under paragraph (1), to the
requesting party no later than 30 days after the
request is received.
``(C) Notice.--Not fewer than 30 days before adding
an unlawful Internet gambling enterprise, or an owner
or operator thereof, to the list required under
paragraph (1), the Director shall provide written
notice to such enterprise, owner, or operator. Any
enterprise, owner, or operator receiving such notice
may contest the Director's determination by written
appeal to the Director not more than 30 days after
receiving notice.
``(D) Opportunity for hearing.--If a person properly
submits a written appeal under subparagraph (C), the
Director shall not include such person in the list
required under paragraph (1) unless and until the
Director provides such person with an opportunity for a
hearing not more than 30 days after receiving written
notice of appeal. Not more than 10 days after an
opportunity for hearing is afforded, whether or not the
person requesting the hearing appears at such hearing,
the Director shall proceed to add such person to the
list of unlawful Internet gambling enterprises unless
the Director determines, based on a preponderance of
the evidence, that such person is not an unlawful
Internet gambling enterprise.
``(E) Injunctive relief.--Any person that the
Director determines shall be included in the list
required under paragraph (1) after such person appears
at a hearing described in subparagraph (D) and any
person included in such list who did not receive the
notice required under subparagraph (C), may petition
for injunctive relief in the United States District
Court for the District of Columbia, which shall have
exclusive jurisdiction to hear challenges pursuant to
this section. The petitioner shall have the burden of
establishing by a preponderance of the evidence that
such person is not an unlawful Internet gambling
enterprise. Only persons designated by the Director for
inclusion on the list of unlawful Internet gambling
enterprises, and other owners or operators of an
enterprise to be so listed, shall have standing to
contest the Director's determination. The court may
enjoin the Director and the Secretary not to add or
remove the petitioner from the list of unlawful
Internet gambling enterprises, and no other judicial
recourse shall be permitted.
``(c) Effect of List.--A financial transaction provider shall be
deemed to have actual knowledge that a person is an unlawful Internet
gambling enterprise to the extent that such person is identified on the
list available to the public, or on a non-public list made available to
such financial transaction provider, by the Secretary as described in
subsection (b)(2), provided that the list shall not be deemed to be the
sole source of actual knowledge.

``Sec. 5387. Limitation of licenses in States and Indian lands

``(a) State Opt-Out Exercise.--
``(1) Limitations imposed by states.--
``(A) In general.--No licensee may engage, under any
license issued under this subchapter, in the operation
of an Internet gambling facility that knowingly accepts
bets or wagers initiated by persons who reside in any
State which provides notice that it will limit such
bets or wagers, if the Governor or other chief
executive officer of such State informs the Director of
such limitation, in a manner which clearly identifies
the nature and extent of such limitation, before the
end of the period beginning on the date of the
enactment of the Internet Gambling Regulation, Consumer
Protection, and Enforcement Act and ending on the date
on which such State's legislature has conducted one
full general legislative session, where such session
began after the date of the enactment of such Act, or
in accordance with paragraph (2), until such time as
any notice of any amendment or repeal of such specific
limitation becomes effective under paragraph (2).
``(B) Coordination between state and tribal opt-out
exercises.--Any State limitation under subparagraph (A)
shall not apply to the acceptance by a licensee of bets
or wagers from persons located within the tribal lands
of an Indian tribe that--
``(i) has itself opted out pursuant to
subsection (b) (in which case the tribal opt-
out exercise under such subsection shall
apply); or
``(ii) would be entitled pursuant to other
applicable law to permit such bets or wagers to
be initiated and received within its territory
without use of the Internet.
``(C) Coordination with indian gaming regulatory
act.--No decision by a State under this subsection
shall be considered in making any determination with
regard to the ability of an Indian tribe to offer any
class of gambling activity pursuant to section 11 of
the Indian Gaming Regulatory Act.
``(D) Tribal status or category not impacted.--Tribal
operations of Internet gambling facilities under this
subchapter shall not impact an Indian tribe's status or
category or class under its land-based activities.
``(E) New negotiations not required.--Operating under
a license issued pursuant to this subchapter shall not
require, or impose any requirement on, an Indian tribe
to negotiate a new agreement, or renegotiate any
existing agreement, limitation or other provision of a
tribal-State compact, agreement, or other understanding
with respect to gaming or revenue-sharing, with regard
to any Internet bet or wager occurring pursuant to a
license issued by the Secretary under this subchapter.
``(2) Changes to state limitations.--The establishment,
repeal, or amendment by any State of any limitation referred to
in paragraph (1) after the end of the period referred to in
paragraph (1) shall apply, for purposes of this subchapter,
beginning on the first January 1 that occurs after the end of
the 60-day period beginning on the later of--
``(A) the date a notice of such establishment,
repeal, or amendment is provided by the Governor or
other chief executive officer of such State in writing
to the Secretary; or
``(B) the effective date of such establishment,
repeal, or amendment.
``(b) Indian Tribe Opt-Out Exercise.--
``(1) Limitations imposed by indian tribes.--No Internet
gambling licensee knowingly may accept a bet or wager from a
person located in the tribal lands of any Indian tribe which
limits such gambling activities or other contests if the
principal chief or other chief executive officer of such Indian
tribe informs the Secretary of such limitation, in a manner
which clearly identifies the nature and extent of such
limitation, before the end of the 90-day period beginning on
the date of the enactment of the Internet Gambling Regulation,
Consumer Protection, and Enforcement Act, or in accordance with
paragraph (2), until such time as any notice of any amendment
or repeal of such specific limitation becomes effective under
paragraph (2).
``(2) Changes to indian tribe limitations.--The
establishment, repeal, or amendment by any Indian tribe of any
limitation referred to in paragraph (1) after the end of the
90-day period beginning on the date of the enactment of this
subchapter shall apply, for purposes of this subchapter,
beginning on the first January 1 that occurs after the end of
the 60-day period beginning on the later of--
``(A) the date a notice of such establishment,
repeal, or amendment is provided by the principal chief
or other chief executive officer of such Indian tribe
in writing to the Secretary; or
``(B) the effective date of such establishment,
repeal, or amendment.
``(c) Notification and Enforcement of State and Indian Tribe
Limitations.--
``(1) In general.--The Secretary shall notify all licensees
and applicants of all States and Indian tribes that have
provided notice pursuant to paragraph (1) or (2) of subsection
(a) or (b), as the case may be, promptly upon receipt of such
notice and in no event fewer than 30 days before the effective
date of such notice.
``(2) Compliance.--The Secretary shall take effective
measures to ensure that any licensee under this subchapter, as
a condition of the license, complies with any limitation or
prohibition imposed by any State or Indian tribe to which the
licensee is subject under subsection (a) or (b), as the case
may be.
``(3) Violations.--It shall be a violation of this subchapter
for any licensee knowingly to accept bets or wagers initiated
or otherwise made by persons located within any State or in the
tribal lands of any Indian tribe for which a notice is in
effect under subsection (a) or (b), as the case may be.
``(4) State attorney general enforcement.--In any case in
which the attorney general of a State, or any State or local
law enforcement agency authorized by the State attorney general
or by State statute to prosecute violations of consumer
protection law, has reason to believe that an interest of the
residents of that State has been or is threatened or adversely
affected by a violation by a licensee pursuant to paragraph
(2), the State, or the State or local law enforcement agency on
behalf of the residents of the agency's jurisdiction, may bring
a civil action on behalf of the residents of that State or
jurisdiction in a district court of the United States located
therein, to--
``(A) enjoin that practice; or
``(B) enforce compliance with this subchapter.

``Sec. 5388. Sports betting prohibited on Internet

``No licensee under this subchapter shall accept Internet bets or
wagers on sporting events, with the exception of pari-mutuel racing as
permitted by law.

``Sec. 5389. Prohibition on the use of credit cards for Internet
gambling

``(a) In General.--No licensee, no person operating on behalf of a
licensee, and no person accepting payment for or settlement of a bet or
wager who intends to transmit such payment to a person licensee, may
accept a bet or wager or payment for or settlement of a bet or wager
that is transmitted or otherwise facilitated with a credit card (as
defined in section 5362(11)).
``(b) Exception.--
``(1) Clarification of scope.--For any person licensed to
take bets or wagers in accordance with the Interstate
Horseracing Act of 1978, the prohibition in subsection (a)
shall only apply to those activities conducted pursuant to a
license under this subchapter.
``(2) Intrastate activities.--For any person involved in
legal, land-based or State- or tribal-regulated intrastate
gambling, the prohibition in subsection (a) shall only apply to
those activities conducted pursuant to a license under this
subchapter.

``Sec. 5390. State and tribal lotteries

``(a) In General.--Notwithstanding any other provision of this
subchapter, this subchapter shall not apply to Internet gambling
conducted by any State or tribal lottery authority when conducted in
accordance with subparagraph (B) or (C) of section 5362(10), as
clarified by section 5362(10)(E).
``(b) Rule of Construction.--For purposes of the clarification made
by subparagraph (E) of section 5362(10) to the meaning and intent of
subparagraphs (B) and (C) of such section, Internet gambling described
in subsection (a) is hereby expressly permitted, and operators of any
State or tribal lottery authority conducting Internet gambling
facilities operating in accordance with such subparagraph (B) or (C),
as clarified by such subparagraph (E), and vendors, suppliers and
service providers to such State or tribal lottery authority, shall not
be required to be licensed under this subchapter.
``(c) Applicability of Other Provisions to Lottery Activity.-- To
clarify existing law, section 1084 of title 18 shall not apply to any
of the following that occurs in connection with any Internet gambling
conducted by any State or tribal lottery authority when conducted in
accordance with subparagraph (B) or (C) of section 5362(10), as
clarified by section 5362(10)(E):
``(1) Any Internet bet or wager, including any transmission
thereof.
``(2) Any transmission of information assisting in the
placing of bets or wagers.
``(3) any transmission entitling the recipient to receive
money or credit as a result of bets or wagers, or for
information assisting in the placing of bets or wagers.
``(d) Authorization of Sponsor.--No licensee may offer services
relating to any lottery sponsored by a State, tribal, or other
governmental body without the authorization of the official sponsor.

``Sec. 5391. Safe harbors

``It shall be a complete defense against any prosecution or
enforcement action under any Federal or State law against any person
possessing a valid license under this subchapter that the activity is
authorized under and has been carried out lawfully under the terms of
this subchapter.

``Sec. 5392. Relation to section 1084 of title 18 and the Unlawful
Internet Gambling Enforcement Act

``Section 1084 of title 18 and subchapter IV of this chapter shall
not apply to any Internet bet or wager occurring pursuant to a license
issued in accordance with this subchapter.

``Sec. 5393. Cheating and other fraud

``(a) Electronic Cheating Devices Prohibited.--No person
initiating, receiving, or otherwise making a bet or wager with a
licensee, or sending, receiving, or inviting information assisting with
a bet or wager with a licensee, knowingly shall use, or assist another
in the use of, an electronic, electrical, or mechanical device which is
designed, constructed, or programmed specifically for use in obtaining
an advantage in any game authorized under this subchapter, where such
advantage is prohibited or otherwise violates the rules of play
established by the licensee.
``(b) Additional Offense.--No person initiating, receiving, or
otherwise making a bet or wager with a licensee, or sending, receiving,
or inviting information assisting with a bet or wager with a licensee,
knowingly shall use or possess any cheating device with intent to cheat
or defraud any licensee or other persons placing bets or wagers with
such licensee.
``(c) Permanent Injunction.--Upon conviction of a person for
violation of this section, the court may enter a permanent injunction
enjoining such person from initiating, receiving, or otherwise making
bets or wagers or sending, receiving, or inviting information assisting
in the placing of bets or wagers.
``(d) Criminal Penalty.--Whoever violates subsection (a) or (b) of
this section shall be fined under title 18 or imprisoned for not more
than 5 years, or both.''.
(b) Rules of Construction.--
(1) Technical and conforming amendment.--Section 310(b)(2) of
title 31, United States Code is amended--
(A) by redesignating subparagraph (J) as subparagraph
(K); and
(B) by inserting after subparagraph (I) the following
new subparagraph:
``(J) Administer the requirements of subchapter V of
chapter 53.''.
(c) Clerical Amendment.--The table of sections for chapter 53 of
title 31, United States Code, is amended by adding at the end the
following:

``subchapter v--regulation of lawful internet gambling

``5381. Congressional findings.
``5382. Definitions.
``5383. Establishment and administration of licensing program.
``5384. Problem Gambling, Responsible Gambling, Consumer Safeguards,
and Self-Exclusion Program.
``5385. Financial transaction providers.
``5386. List of unlawful Internet gambling enterprises.
``5387. Limitation of licenses in States and Indian lands.
``5388. Sports betting prohibited on Internet.
``5389. Prohibition on the use of credit cards for Internet gambling.
``5390. State and tribal lotteries.
``5391. Safe harbors.
``5392. Relation to section 1084 of title 18 and the Unlawful Internet
Gambling Enforcement Act.
``5393. Cheating and other fraud.''.

SEC. 3. REPORT REQUIRED.

(a) In General.--Before the end of the 1-year period beginning on
the effective date of the regulations prescribed under section 5(a),
and annually thereafter, the Secretary shall submit a report to the
Congress on the licensing and regulation of Internet gambling
operators.
(b) Information Required.--Each report submitted under subsection
(a) shall include the following information:
(1) A comprehensive statement regarding the prohibitions
notified by the States and Indian tribes pursuant to section
5387 of title 31, United States Code.
(2) Relevant statistical information on applicants and
licenses.
(3) The amount of licensing and user fees collected during
the period covered by the report.
(4) Information on regulatory or enforcement actions
undertaken during the period.
(5) Any other information that may be useful to the Congress
in evaluating the effectiveness of the Act in meeting its
purpose, including the provision of protections against
underage gambling, compulsive gambling, money laundering, and
fraud, and in combating tax avoidance relating to Internet
gambling.

SEC. 4. FEASIBILITY STUDY.

The Secretary of the Treasury, in consultation with appropriate
State or tribal officers or agencies, shall conduct a feasibility study
on safeguards to address gambling while impaired through programs such
as periodic notices, periodic testing of individuals to establish
cognitive competence, and any other similar option that the Secretary
or appropriate State or tribal officers or agencies may determine to be
appropriate.

SEC. 5. EFFECTIVE DATE.

(a) Regulations.--The Secretary of the Treasury shall prescribe
such regulations as the Secretary may determine to be appropriate to
implement subchapter V of chapter 53 of title 31, United States Code
(as added by section 2(a) of this Act) and shall publish such
regulations in final form in the Federal Register before the end of the
180-day period beginning on the date of the enactment of this Act.
(b) Scope of Application.--The amendment made by section 2(a) shall
apply after the end of the 90-day period beginning on the date of the
publication of the regulations in final form in accordance with
subsection (a).

Purpose and Summary

H.R. 2267, the Internet Gambling Regulation, Consumer
Protection, and Enforcement Act, would establish a federal
regulatory and enforcement framework under which Internet
gambling operators could obtain licenses authorizing them to
accept bets and wagers from individuals in the U.S., on the
condition that they maintain effective protections against
underage gambling, compulsive gambling, money laundering and
fraud, and enforce prohibitions or restrictions on types of
gambling prohibited by States, and Indian Tribes.

Background and Need for Legislation

The U.S. government has faced profound difficulties in
preventing people from engaging in online gambling, which the
Justice Department has deemed to be illegal from the earliest
days of the Internet. The Department of Justice has generally
interpreted the 1961 Wire Act to prohibit all online interstate
betting, regardless of type, notwithstanding that the only
federal appellate court to consider the issue has ruled that
the Wire Act prohibits sports gambling online but does not
prohibit non sports online gambling.\1\ The Justice Department
chose not to appeal that case.
---------------------------------------------------------------------------
\1\In re Mastercard, 313 F. 3d 257, 262, 263 & n. 20 (5th cir.
2002) ([A] plain reading of the statutory language [of the Wire Act]
clearly requires that the object of the gambling be a sporting event or
contest).
---------------------------------------------------------------------------
In 2006, Congress enacted the Unlawful Internet Gambling
Enforcement Act (UIGEA), which restricts the use of the
payments system for U.S. citizens who seek to gamble online.
During consideration of the UIGEA, supporters of the
legislation frequently cited the following concerns about
Internet gambling: fraud, money laundering, compulsive
gambling, underage gambling and criminal infiltration, all of
which are better policed in a licensed, regulated system,
rather than an unregulated environment.
In October 2006, the Financial Action Task Force (FATF),
the intergovernmental body whose purpose is the development and
promotion of national and international policies to combat
money laundering and terrorist financing, issued a report on
new Internet payment systems and their vulnerabilities to money
laundering and terrorism financing. The editor of the FATF
report was quoted in Business Week regarding how moving
payments from online gambling away from the regulated credit
card industry and into less regulated realms provides room for
exploitation by money launderers and financiers of terrorism:

According to the report, it would be difficult for
individual countries to compel Internet services based
outside their borders to stop processing transactions
that are legal in the nation from which they operate.
Thus, it would be problematic for U.S. law enforcement
officials to stop Internet payment services from
processing illegal gambling transactions made from U.S.
computers. With this thorny question of Internet
gambling, where the United States has made a decision
on policy that is not unanimous in the world community
there will be ways that these systems will be
exploited, kind of like the old days in prohibition,
says Vincent Schmoll, principal administrator with the
FATF secretariat and editor of the report. Quite
honestly, in the criminal financial world exploiting
differences in jurisdictions has been the key thing all
along.

The UIGEA required the Fed and Treasury to issue
regulations to cover financial institutions. These regulations
have been the source of much controversy and Committee
consideration. On Wednesday, April 2, 2008, the Committee on
Financial Services Subcommittee on Domestic and International
and Monetary Policy held a hearing entitled, ``Proposed UIGEA
Regulations: Burden Without Benefit?'' to examine the proposed
regulations, which garnered more than 200 comment letters. At
that hearing, the testimony of the regulators and the industry
made it clear that the regulations were unworkable.
Subsequently, Chairman Frank introduced legislation, H.R. 6870,
which would transition the rulemaking process to a formal
rulemaking process and clarify the definition of unlawful
Internet gambling. H.R. 6870 was favorably reported out of the
Financial Services Committee on September 16, and a report was
filed October 3, 2008, but the House adjourned before further
action could be taken. The final rules were issued on November
18, 2008, with an effective date of January 19, 2009, and an
implementation date of December 1, 2009. H.R. 2266, The
Reasonable Prudence in Regulation Act, introduced by Chairman
Frank on May 6, 2009, would have extended the compliance
deadline for the regulations to December 1, 2010. On November
27, 2009, in response to a petition filed by the National
Thoroughbred Racing Association, the Poker Players Association
and the American Greyhound Track Operators Association, the
Federal Reserve and Treasury delayed the implementation of
these regulations to June 1, 2010. Many letters were written in
support of this petition for delayed implementation, including:
a letter dated October 1 by 19 bipartisan members of the
Financial Services Committee; a letter headed by Congressman
Cohen and 24 other members on September 26; a letter headed by
Congressmen Sessions and 15 other members on October 26, a
Kentucky delegation letter sent on November 19, and letters
from Senators Reid, McConnell and Menendez. In addition,
letters in support of the petition were sent by the American
Bankers Association, Independent Community Bankers Association,
National Association of Federal Credit Unions, Credit Union
National Association, NACHA-The Electronic Payments
Association, and other financial institutions.
The regulations, like the underlying legislation, fail to
define the term unlawful Internet gambling, leaving it to each
financial institution to reconcile conflicting state and
federal laws, court decisions and inconsistent Department of
Justice interpretations, when determining whether to process a
transaction. Furthermore, some of the information needed to
make this determination would generally be unavailable to banks
because customers or financial institutions in foreign
jurisdictions will likely be unwilling or unable to provide it.
On May 6, 2009, Chairman Frank introduced H.R. 2267, the
Internet Gambling Regulation, Consumer Protection, and
Enforcement Act. The legislation would establish a federal
regulatory and enforcement framework under which Internet
gambling operators could obtain licenses authorizing them to
accept bets and wagers from individuals in the U.S., on the
condition that they maintain effective protections against
underage gambling, compulsive gambling, money laundering and
fraud, and enforce prohibitions or restrictions on types of
gambling prohibited by states, and Indian Tribes. H.R. 2267, as
amended in committee, explicitly prohibits Internet wagers on
professional and amateur sports. This language reaffirms
decades of federal statutory policy against sports betting.
This bill currently has 70 cosponsors.

Hearings

The Committee on Financial Services held a hearing on
``H.R. 2266, the Reasonable Prudence in Regulation Act, and
H.R. 2267, the Internet Gambling Regulation, Consumer
Protection, and Enforcement Act'' on Thursday, December 3,
2009. The following witnesses testified:
The Honorable Robert Martin, Tribal Chairman,
Morongo Band of Mission Indians
Ms. Parry Aftab, Executive Director, WiredSafety
Professor Malcolm K. Sparrow, John F. Kennedy
School of Government, Harvard University
Mr. Keith S. Whyte, Executive Director, National
Council on Problem Gambling
Mr. Jim Dowling, Dowling Advisory Group
Mr. Samuel A. Vallandingham, Chief Information
Officer and Vice President, The First State Bank on behalf of
the Independent Community Bankers of America
Mr. Mike Brodsky, Executive Chairman, Youbet.com
The Committee held an additional hearing on ``H.R. 2267,
the Internet Gambling Regulation, Consumer Protection, and
Enforcement Act'' on Wednesday, July 21, 2010. The following
witnesses testified:
Mr. Edwin Williams, President and Chief Executive
Officer, Discovery Federal Credit Union
Mr. Tom Malkasian, Vice Chairman and Director of
Strategic Planning, Commerce Casino
The Honorable Lynn Malerba, Tribal Chairwoman,
Mohegan Tribe of Connecticut
Mr. Michael K. Fagan, Law Enforcement and Anti-
Terrorism Consultant
Ms. Annie Duke, professional poker player, on
behalf of the Poker Players Alliance

Committee Consideration

The Committee on Financial Services met in open session on
July 28, 2010, and ordered H.R. 2267, Internet Gambling,
Consumer Protection, and Enforcement Act, as amended, favorably
reported to the House by a record vote of 41 yeas, 22 nays, and
1 present.

Committee Votes

Clause 3(b) of rule XIII of the Rules of the House of
Representatives requires the Committee to list the record votes
on the motion to report legislation and amendments thereto. A
motion by Mr. Frank to report the bill, as amended, to the
House with a favorable recommendation was agreed to by a record
vote of 41 yeas, 22 nays, and 1 present (Record vote no. FC-
135). The names of Members voting for, against, and present
follow:

RECORD VOTE NO. FC-135
----------------------------------------------------------------------------------------------------------------
Representative Aye Nay Present Representative Aye Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Frank...................... X ........ ......... Mr. Bachus....... ........ X .........
Mr. Kanjorski.................. X ........ ......... Mr. Castle....... ........ X .........
Ms. Waters..................... X ........ ......... Mr. King (NY).... X ........ .........
Mrs. Maloney................... X ........ ......... Mr. Royce........ ........ X .........
Mr. Gutierrez.................. X ........ ......... Mr. Lucas........ ........ ........ .........
Ms. Velazquez.................. X ........ ......... Mr. Paul......... ........ ........ X
Mr. Watt....................... X ........ ......... Mr. Manzullo..... ........ X .........
Mr. Ackerman................... X ........ ......... Mr. Jones........ ........ X .........
Mr. Sherman.................... ........ ........ ......... Mrs. Biggert..... X ........ .........
Mr. Meeks...................... X ........ ......... Mr. Miller (CA).. ........ ........ .........
Mr. Moore (KS)................. X ........ ......... Mrs. Capito...... ........ ........ .........
Mr. Capuano.................... X ........ ......... Mr. Hensarling... ........ X .........
Mr. Hinojosa................... X ........ ......... Mr. Garrett (NJ). ........ X .........
Mr. Clay....................... X ........ ......... Mr. Barrett (SC). ........ X .........
Mrs. McCarthy.................. X ........ ......... Mr. Gerlach...... X ........ .........
Mr. Baca....................... ........ X ......... Mr. Neugebauer... ........ X .........
Mr. Lynch...................... ........ ........ ......... Mr. Price (GA)... ........ X .........
Mr. Miller (NC)................ X ........ ......... Mr. McHenry...... ........ X .........
Mr. Scott...................... ........ X ......... Mr. Campbell..... X ........ .........
Mr. Green...................... X ........ ......... Mr. Putnam....... ........ X .........
Mr. Cleaver.................... X ........ ......... Mrs. Bachmann.... ........ X .........
Ms. Bean....................... X ........ ......... Mr. Marchant..... X ........ .........
Ms. Moore (WI)................. X ........ ......... Mr. McCotter..... ........ X .........
Mr. Hodes...................... X ........ ......... Mr. McCarthy..... ........ X .........
Mr. Ellison.................... X ........ ......... Mr. Posey........ ........ X .........
Mr. Klein...................... X ........ ......... Ms. Jenkins...... ........ X .........
Mr. Wilson..................... X ........ ......... Mr. Lee.......... X ........ .........
Mr. Perlmutter................. X ........ ......... Mr. Paulsen...... ........ X .........
Mr. Donnelly................... ........ X ......... Mr. Lance........ X ........ .........
Mr. Foster..................... X ........ .........
Mr. Carson..................... X ........ .........
Ms. Speier..................... ........ X .........
Mr. Childers................... ........ ........ .........
Mr. Minnick.................... ........ ........ .........
Mr. Adler...................... X ........ .........
Ms. Kilroy..................... X ........ .........
Mr. Driehaus................... X ........ .........
Ms. Kosmas..................... X ........ .........
Mr. Grayson.................... X ........ .........
Mr. Himes...................... X ........ .........
Mr. Peters..................... X ........ .........
Mr. Maffei..................... X ........ .........
----------------------------------------------------------------------------------------------------------------

During the consideration of the bill, the following
amendments were disposed of by record votes. The names of
Members voting for, against, and present follow:
An amendment by Mr. Baca, no. 7, regarding State and Indian
tribe opt-in, was not agreed to by a record vote of 22 yeas and
37 nays (Record vote no. FC-133):

RECORD VOTE NO. FC-133
----------------------------------------------------------------------------------------------------------------
Representative Aye Nay Present Representative Aye Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Frank...................... ........ X ......... Mr. Bachus....... X ........ .........
Mr. Kanjorski.................. ........ X ......... Mr. Castle....... X ........ .........
Ms. Waters..................... ........ X ......... Mr. King (NY).... ........ ........ .........
Mrs. Maloney................... ........ X ......... Mr. Royce........ X ........ .........
Mr. Gutierrez.................. ........ X ......... Mr. Lucas........ ........ ........ .........
Ms. Velazquez.................. ........ X ......... Mr. Paul......... ........ ........ .........
Mr. Watt....................... ........ ........ ......... Mr. Manzullo..... X ........ .........
Mr. Ackerman................... ........ X ......... Mr. Jones........ X ........ .........
Mr. Sherman.................... X ........ ......... Mrs. Biggert..... ........ X .........
Mr. Meeks...................... ........ X ......... Mr. Miller (CA).. ........ ........ .........
Mr. Moore (KS)................. ........ X ......... Mrs. Capito...... ........ ........ .........
Mr. Capuano.................... ........ X ......... Mr. Hensarling... X ........ .........
Mr. Hinojosa................... ........ X ......... Mr. Garrett (NJ). X ........ .........
Mr. Clay....................... ........ X ......... Mr. Barrett (SC). X ........ .........
Mrs. McCarthy.................. ........ X ......... Mr. Gerlach...... X ........ .........
Mr. Baca....................... X ........ ......... Mr. Neugebauer... X ........ .........
Mr. Lynch...................... ........ ........ ......... Mr. Price (GA)... X ........ .........
Mr. Miller (NC)................ ........ X ......... Mr. McHenry...... ........ ........ .........
Mr. Scott...................... ........ X ......... Mr. Campbell..... ........ X .........
Mr. Green...................... ........ X ......... Mr. Putnam....... X ........ .........
Mr. Cleaver.................... ........ X ......... Mrs. Bachmann.... X ........ .........
Ms. Bean....................... ........ ........ ......... Mr. Marchant..... X ........ .........
Ms. Moore (WI)................. ........ X ......... Mr. McCotter..... X ........ .........
Mr. Hodes...................... ........ X ......... Mr. McCarthy..... X ........ .........
Mr. Ellison.................... ........ X ......... Mr. Posey........ X ........ .........
Mr. Klein...................... ........ X ......... Ms. Jenkins...... X ........ .........
Mr. Wilson..................... ........ X ......... Mr. Lee.......... ........ X .........
Mr. Perlmutter................. ........ X ......... Mr. Paulsen...... X ........ .........
Mr. Donnelly................... X ........ ......... Mr. Lance........ ........ X .........
Mr. Foster..................... ........ X .........
Mr. Carson..................... ........ X .........
Ms. Speier..................... ........ X .........
Mr. Childers................... ........ ........ .........
Mr. Minnick.................... ........ ........ .........
Mr. Adler...................... ........ ........ .........
Ms. Kilroy..................... ........ X .........
Mr. Driehaus................... ........ X .........
Ms. Kosmas..................... ........ X .........
Mr. Grayson.................... ........ X .........
Mr. Himes...................... ........ X .........
Mr. Peters..................... ........ X .........
Mr. Maffei..................... ........ X .........
----------------------------------------------------------------------------------------------------------------

An amendment in the nature of a substitute offered by Mr.
Bachus, no. 18, was not agreed to by a record vote of 22 yeas
and 43 nays (Record vote no. FC-134):

RECORD VOTE NO. FC-134
----------------------------------------------------------------------------------------------------------------
Representative Aye Nay Present Representative Aye Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Frank...................... ........ X ......... Mr. Bachus....... X ........ .........
Mr. Kanjorski.................. ........ X ......... Mr. Castle....... X ........ .........
Ms. Waters..................... ........ X ......... Mr. King (NY).... ........ X .........
Mrs. Maloney................... ........ X ......... Mr. Royce........ X ........ .........
Mr. Gutierrez.................. ........ X ......... Mr. Lucas........ ........ ........ .........
Ms. Velazquez.................. ........ X ......... Mr. Paul......... ........ X .........
Mr. Watt....................... ........ X ......... Mr. Manzullo..... X ........ .........
Mr. Ackerman................... ........ X ......... Mr. Jones........ X ........ .........
Mr. Sherman.................... ........ X ......... Mrs. Biggert..... ........ X .........
Mr. Meeks...................... ........ X ......... Mr. Miller (CA).. ........ ........ .........
Mr. Moore (KS)................. ........ X ......... Mrs. Capito...... ........ ........ .........
Mr. Capuano.................... ........ X ......... Mr. Hensarling... X ........ .........
Mr. Hinojosa................... ........ X ......... Mr. Garrett (NJ). X ........ .........
Mr. Clay....................... ........ X ......... Mr. Barrett (SC). X ........ .........
Mrs. McCarthy.................. ........ X ......... Mr. Gerlach...... ........ X .........
Mr. Baca....................... X ........ ......... Mr. Neugebauer... X ........ .........
Mr. Lynch...................... ........ ........ ......... Mr. Price (GA)... X ........ .........
Mr. Miller (NC)................ ........ X ......... Mr. McHenry...... X ........ .........
Mr. Scott...................... ........ X ......... Mr. Campbell..... ........ X .........
Mr. Green...................... ........ X ......... Mr. Putnam....... X ........ .........
Mr. Cleaver.................... ........ X ......... Mrs. Bachmann.... X ........ .........
Ms. Bean....................... ........ X ......... Mr. Marchant..... X ........ .........
Ms. Moore (WI)................. ........ X ......... Mr. McCotter..... X ........ .........
Mr. Hodes...................... ........ X ......... Mr. McCarthy..... X ........ .........
Mr. Ellison.................... ........ X ......... Mr. Posey........ X ........ .........
Mr. Klein...................... ........ X ......... Ms. Jenkins...... X ........ .........
Mr. Wilson..................... ........ X ......... Mr. Lee.......... ........ X .........
Mr. Perlmutter................. ........ X ......... Mr. Paulsen...... X ........ .........
Mr. Donnelly................... X ........ ......... Mr. Lance........ ........ X .........
Mr. Foster..................... ........ X .........
Mr. Carson..................... ........ X .........
Ms. Speier..................... X ........ .........
Mr. Childers................... ........ ........ .........
Mr. Minnick.................... ........ ........ .........
Mr. Adler...................... ........ X .........
Ms. Kilroy..................... ........ X .........
Mr. Driehaus................... ........ X .........
Ms. Kosmas..................... ........ X .........
Mr. Grayson.................... ........ X .........
Mr. Himes...................... ........ X .........
Mr. Peters..................... ........ X .........
Mr. Maffei..................... ........ X .........
----------------------------------------------------------------------------------------------------------------

The following other amendments were also considered:
An amendment by Mr. Frank, no. 1, a manager's amendment,
was offered and withdrawn. The amendment was subsequently re-
offered as amendment no. 12, and was agreed to by a voice vote.
An amendment by Mr. Sherman, no. 2, regarding ``bad
actors'', was agreed to by a voice vote.
An amendment by Mr. King (and Mr. Meeks), no. 3,
prohibiting sports betting on the Internet, was agreed to by a
voice vote.
An amendment by Ms. Kilroy, no. 4, prohibiting
inappropriate advertising, was agreed to by a voice vote.
An amendment by Mr. Bachus (and Mrs. Bachmann), no. 5,
regarding licensing requirements, was offered and withdrawn.
An amendment by Mr. Baca, no. 6, regarding relation to the
Act of January 2, 1951, was ruled out of order as not germane.
An amendment by Mr. Campbell, no. 8, dealing with
miscellaneous subjects, was agreed to, as modified, by a voice
vote.
An amendment by Mr. Sherman, no. 9, regarding opt-out
timing, was agreed to by a voice vote.
An amendment by Mrs. Bachmann, no. 10, regarding legal age
requirement for marketing and advertising material, was agreed
to by a voice vote.
An amendment by Ms. Bean (and Ms. Kilroy), no. 11,
regarding prevention of minors from placing bets or wagers, was
agreed to by a voice vote.
An amendment by Mrs. Bachmann, no. 13, regarding screening
for child support delinquents, as amended by the amendment by
Mr. Frank, no. 13a (as modified), to the amendment, was agreed
to by a voice vote.
An amendment by Mr. Peters (and Mr. Hodes), no. 14,
regarding State and tribal lotteries, was agreed to by a voice
vote.
An amendment by Mr. Bachus (and Mrs. Bachmann), no. 15,
regarding licensing requirements, was agreed to by voice vote.
An amendment by Mr. Sherman, no. 16, regarding U.S.
presence, was agreed to by a voice vote.
An amendment by Ms. Kilroy, no. 17, regarding compilation
of datasets on player behavior, was agreed to by a voice vote.

Committee Oversight Findings

Pursuant to clause 3(c)(1) of rule XIII of the Rules of the
House of Representatives, the Committee held a hearing and made
findings that are reflected in this report.

Performance Goals and Objectives

Pursuant to clause 3(c)(4) of rule XIII of the Rules of the
House of Representatives, the Committee establishes the
following performance related goals and objectives for this
legislation:
H.R. 2267 would establish a federal regulatory and
enforcement framework under which Internet gambling operators
could obtain licenses authorizing them to accept bets and
wagers from individuals in the U.S., on the condition that they
maintain effective protections against underage gambling,
compulsive gambling, money laundering and fraud, and enforce
prohibitions or restrictions on types of gambling prohibited by
states, and Indian Tribes.

New Budget Authority, Entitlement Authority, and Tax Expenditures

In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee adopts as its
own the estimate of new budget authority, entitlement
authority, or tax expenditures or revenues contained in the
cost estimate prepared by the Director of the Congressional
Budget Office pursuant to section 402 of the Congressional
Budget Act of 1974.

Committee Cost Estimate

The Committee adopts as its own the cost estimate prepared
by the Director of the Congressional Budget Office pursuant to
section 402 of the Congressional Budget Act of 1974.

Congressional Budget Office Estimate

Pursuant to clause 3(c)(3) of rule XIII of the Rules of the
House of Representatives, the following is the cost estimate
provided by the Congressional Budget Office pursuant to section
402 of the Congressional Budget Act of 1974:
September 22, 2010.
Hon. Barney Frank,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 2267, the Internet
Gambling Regulation, Consumer Protection, and Enforcement Act.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Matthew
Pickford.
Sincerely,
Douglas W. Elmendorf.
Enclosure.

H.R. 2267--Internet Gambling Regulation, Consumer Protection, and
Enforcement Act

Summary: H.R. 2267 would amend existing law that regulates
Internet gambling. The legislation would establish a framework
for federal regulations and enforcement and would require
Internet gambling operators to obtain licenses to accept wagers
from individuals in the United States.
CBO and the staff of the Joint Committee on Taxation (JCT)
estimate that enacting H.R. 2267 would increase revenues by
$971 million and direct spending by $688 million over the 2011-
2020 period. Those changes in revenues and direct spending
would reduce future budget deficits by $283 million over the
same period. Because the legislation would affect direct
spending and revenues, pay-as-you-go procedures apply.
H.R. 2267 contains no intergovernmental mandates as defined
in the Unfunded Mandates Reform Act (UMRA) and would not affect
the budgets of state, local, or tribal governments.
By requiring all Internet gambling facilities to be
licensed by the federal government, H.R. 2267 would impose a
private-sector mandate, as defined in UMRA, on businesses that
are currently authorized to offer online gambling services.
Based on information from industry sources and the Department
of the Treasury, CBO estimates that the aggregate cost of the
mandate would fall below the annual threshold established in
UMRA for private-sector mandates ($141 million in 2010,
adjusted annually for inflation).
Estimated cost to the Federal Government: The estimated
budgetary impact of H.R. 2267 is shown in the following table.
The costs of this legislation fall within budget function 800
(general government).

--------------------------------------------------------------------------------------------------------------------------------------------------------
By fiscal year, in millions of dollars--
----------------------------------------------------------------------------------------------------
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2011-2015 2011-2020
--------------------------------------------------------------------------------------------------------------------------------------------------------
CHANGES IN DIRECT SPENDINGEstimated Budget Authority......................... 20 40 60 80 82 83 85 87 88 90 282 715
Estimated Outlays.................................. 14 34 54 74 81 83 84 86 88 90 257 688 CHANGES IN REVENUESTreasury User Fees................................. 15 30 45 60 61 62 64 65 66 68 211 536
Taxes on Increased Gambling Income................. 1 17 25 34 41 47 54 62 72 82 118 435
Total Changes in Revenues...................... 16 47 70 94 102 109 118 127 138 150 329 971 NET INCREASE OR DECREASE (-) IN THE BUDGET DEFICIT FROM CHANGES IN DIRECT SPENDING AND REVENUESNet Deficit Impact................................. -2 -13 -16 -20 -21 -27 -33 -41 -50 -60 -72 -283
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Amounts may not sum to totals because of rounding.

Basis of estimate: For this estimate, CBO assumes that the
legislation will be enacted in 2010. Enacting the bill would
increase both direct spending and revenues, but have no
significant impact on spending subject to appropriation.

Direct spending

CBO expects that enacting H.R. 2267 would increase the
workload of the U.S. Treasury because the department would be
required to establish regulations and to issue licenses to
operators of Internet gambling sites. The department would be
required to review an applicant's financial condition and
corporate structure, business experience, suitability, and
stability and conduct a background check before issuing those
license. The legislation also would allow the Treasury to
revoke or terminate the license of any operator.
Under the legislation, the department would be authorized
to collect a fee to offset the costs of regulating the Internet
gambling industry. Amounts collected would be available for the
Treasury's use without further appropriation. Based on
information from the department and the cost of similar
programs, such as the Financial Crimes Enforcement Network,
CBO, estimates that when fully implemented, H.R. 2267 would
cost about $85 million annually, mostly for salaries, benefits,
expenses, and training of additional lawyers, accountants, and
computer specialists. We expect that it would take about four
years to reach that level of effort; over the 2011-2020 period,
CBO estimates that costs would total about $670 million.

Revenues

Because the fees that would be collected under this bill
would be compulsory payments arising from an exercise of the
government's sovereign authority, CBO believes that those
amounts should appear in the budget as revenues. Furthermore,
because fees paid to the Treasury would reduce the based income
and payroll taxes, those new fees would lead to reductions in
revenues from income and payroll taxes. As a result, the fees
collected by the Treasury from gambling operators would be
partially offset by a loss of receipts from income and payroll
taxes estimated to total 25 percent of the fees. CBO estimates
that net receipts would total $536 million over the next 10
years.
Staff of the JCT expects that enacting this bill would
increase taxable income and federal revenues. Those increases
would occur because gambling winnings and losses would both
increase under this legislation and are treated differently in
the tax system. For nonprofessional gamblers, winnings are
taxable under the individual income tax, and such winnings can
be offset by gambling losses only for taxpayers who itemize
their deductions. In addition, gambling losses that exceed
gambling winnings are not deductible from income for such
taxpayers. Staff of the JCT estimates that additional revenues
would total $435 million over the 2011-2020 period.
H.R. 2267 also would establish new federal crimes related
to Internet gambling, enacting the bill thus could increase
civil and criminal penalties. CBo estimates that any additional
collections would not be significant because of the small
number of cases likely to result. Civil crimes are recorded in
the budget as revenues. Criminal fines also are recorded as
revenues, deposited in the Crime Victims Fund, and subsequently
spend without further appropriation.
Pay-as-you-go considerations: The Statutory Pay-As-You-Go
Act of 2010 establishes budget-reporting and enforcement
procedures for legislation affecting direct spending or
revenues. The changes in outlays and revenues that are subject
to those pay-as-you-go procedures are shown in the following
table.

CBO ESTIMATE OF PAY-AS-YOU-GO EFFECTS FOR H.R. 2267 AS ORDERED REPORTED BY THE HOUSE COMMITTEE ON FINANCIAL SERVICES ON JULY 27, 2010
--------------------------------------------------------------------------------------------------------------------------------------------------------
By fiscal year, in millions of dollars--
-----------------------------------------------------------------------------------------------------------
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2010-2015 2010-2020
--------------------------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE OR DECREASE (-) IN THE DEFICITStatutory Pay-As-You-Go Impact.............. 0 -2 -13 -16 -20 -21 -27 -33 -41 -50 -60 -72 -283
--------------------------------------------------------------------------------------------------------------------------------------------------------

Estimated impact on State, local, and tribal governments:
H.R. 2267 contains no intergovernmental mandates as defined in
UMRA and would not affect the budgets of state, local, or
tribal governments.
Estimated impact on the private sector: By requiring all
Internet gambling facilities to be licensed by the federal
government, H.R. 2267 contains a private-sector mandate, as
defined in UMRA, on businesses that are currently authorized to
offer online gambling services. Online services, for example,
facilities that offer gambling where permitted by state or
tribal law and facilities that offer gambling on horse races,
would have to comply with new federal standards for Internet
gambling. According to information from industry sources,
approximately 20 facilities offer online gambling on horse
races, earning about $100 million in annual revenues, and no
Web sites currently offer other types of gambling either within
a state or on tribal land.
The cost of the mandate would include redesigning Web
sites, changing business operations to meet the new federal
standards, and paying user fees to the Department of the
Treasury. Based on the current number of online gambling sites
and information from industry sources on the costs of adhering
to licensing requirements, CBO estimates that the cost of the
mandate would fall below the annual threshold established in
UMRA for private-sector mandates ($141 million in 2010,
adjusted annually for inflation).
Estimate prepared by: Federal Spending: Matthew Pickford;
Federal Revenues: Pamela Greene; Impact on State, Local, and
Tribal Governments: Elizabeth Cove Delisle; Impact on the
Private Sector: Samuel Wice.
Estimate approved by: Theresa Gullo, Deputy Assistant
Director for Budget Analysis.

Federal Mandates Statement

The Committee adopts as its own the estimate of Federal
mandates prepared by the Director of the Congressional Budget
Office pursuant to section 423 of the Unfunded Mandates Reform
Act.

Advisory Committee Statement

No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
legislation

Constitutional Authority Statement

Pursuant to clause 3(d)(1) of rule XIII of the Rules of the
House of Representatives, the Committee finds that the
Constitutional Authority of Congress to enact this legislation
is provided by Article 1, section 8, clause 1 (relating to the
general welfare of the United States) and clause 3 (relating to
the power to regulate interstate commerce).

Applicability to Legislative Branch

The Committee finds that the legislation does not relate to
the terms and conditions of employment or access to public
services or accommodations within the meaning of section
102(b)(3) of the Congressional Accountability Act.

Earmark Identification

H.R. 2267 does not contain any congressional earmarks,
limited tax benefits, or limited tariff benefits as defined in
clause 9 of rule XXI.

Exchange of Committee Correspondence

Section-by-Section Analysis of the Legislation

Section 1. Short title

This section establishes the short title of the bill, the
``Internet Gambling Regulation, Consumer Protection, and
Enforcement Act.''

Section 2. Federal licensing requirement for Internet gambling
operations

This section includes Congressional findings; definitions;
provides for the administration of a licensing program;
establishes suitability qualification and disqualification
standards for the issuance of a license, and for service
providers; permits reliance on qualified state and tribal
regulatory body certifications of suitability for applicants;
provides for a problem gambling, responsible gambling, and
self-exclusion program; prohibits sports betting; prohibits the
use of credit cards for Internet gambling; requires Treasury to
create and maintain of a list of unlawful Internet gambling
enterprises; provides procedures for states and tribes to opt
out; provides an exemption for state and tribal lotteries;
provides a safe harbor from prosecution for activities carried
out lawfully, under a valid license authorized under this
subchapter; prohibits the use of electronic cheating devices,
and authorizes criminal penalties including permanent
injunction for anyone convicted of such use.

Section 3. Report required

Provides for an annual Report to Congress regarding the
licensing and regulation of Internet gambling operators.

Section 4. Feasibility study

Requires Treasury to conduct a study regarding safeguards
to address gambling while impaired.

Section 5. Effective date

Authorizes the Secretary to issue implementing regulations
which shall be published within 180 days after enactment, which
shall be applicable 90 days after publication.

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 (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, existing law in which no change is
proposed is shown in roman):

TITLE 31, UNITED STATES CODE

* * * * * * *

SUBTITLE I--GENERAL

* * * * * * *

CHAPTER 3--DEPARTMENT OF THE TREASURY

* * * * * * *

SUBCHAPTER I--ORGANIZATION

* * * * * * *

Sec. 310. Financial Crimes Enforcement Network

(a) * * *
(b) Director.--
(1) * * *
(2) Duties and powers.--The duties and powers of the
Director are as follows:
(A) * * *

* * * * * * *

(J) Administer the requirements of subchapter
V of chapter 53.
[(J)] (K) Such other duties and powers as the
Secretary of the Treasury may delegate or
prescribe.

* * * * * * *

SUBTITLE IV--MONEY

* * * * * * *

CHAPTER 53--MONETARY TRANSACTIONS

SUBCHAPTER I--CREDIT AND MONETARY EXPANSION

Sec.
5301. Buying obligations of the United States Government.
* * * * * * *

SUBCHAPTER V--REGULATION OF LAWFUL INTERNET GAMBLING

5381. Congressional findings.
5382. Definitions.
5383. Establishment and administration of licensing program.
5384. Problem Gambling, Responsible Gambling, Consumer Safeguards, and
Self-Exclusion Program.
5385. Financial transaction providers.
5386. List of unlawful Internet gambling enterprises.
5387. Limitation of licenses in States and Indian lands.
5388. Sports betting prohibited on Internet.
5389. Prohibition on the use of credit cards for Internet gambling.
5390. State and tribal lotteries.
5391. Safe harbors.
5392. Relation to section 1084 of title 18 and the Unlawful Internet
Gambling Enforcement Act.
5393. Cheating and other fraud.

* * * * * * *

SUBCHAPTER V--REGULATION OF LAWFUL INTERNET GAMBLING

Sec. 5381. Congressional findings

The Congress finds the following:
(1) Since the development of the Internet, millions
of people have chosen to gamble online, and today
Internet gambling is offered by operators located in
many different countries under a variety of licensing
and regulatory regimes.
(2) Despite the increasing use of the Internet for
gambling by persons in the United States, there is no
Federal or State regulatory regime in place to protect
United States citizens who choose to engage in this
interstate activity, or to oversee operators to
establish and enforce standards of integrity and
fairness.
(3) In the United States, gambling activities,
equipment, and operations have been subject to various
forms of Federal and State control, regulation, and
enforcement, with some form of gambling being permitted
in nearly every State and by many Indian tribes.
(4) Internet gambling in the United States should be
controlled by a strict Federal, State, and tribal
licensing and regulatory framework to protect underage
and otherwise vulnerable individuals, to ensure the
games are fair, to address the concerns of law
enforcement, and to enforce any limitations on the
activity established by the States and Indian tribes.
(5) An effective Federal, State, and tribal licensing
system would ensure that licenses are issued only to
Internet gambling operators which meet strict criteria
to protect consumers, and which--
(A) are in good financial and legal standing,
and of good character, honesty, and integrity;
(B) utilize appropriate technology to
determine the age and location of users;
(C) adopt and implement systems to protect
minors and problem gamblers;
(D) adopt and implement systems to enforce
any applicable Federal, State, and Indian tribe
limitations on Internet gambling; and
(E) have in place risk-based methods to
identify and combat money laundering and fraud
relating to Internet gambling, and to protect
the privacy and security of users.
(6) There is a need to extend the regulatory
provisions of this Act to all persons, locations,
equipment, practices, and associations related to
Internet gambling, with each State and Indian tribe
having the ability to limit Internet gambling operators
from offering Internet gambling to persons located
within its territory by opting out of the provisions of
this Act.

Sec. 5382. Definitions

For purposes of this subchapter, the following definitions
shall apply:
(1) Applicant.--The term ``applicant'' means any
person who has applied for a license pursuant to this
subchapter.
(2) Bet or wager.--The term ``bet or wager'' has the
same meaning as in section 5362(1).
(3) Enforcement agent.--The term ``enforcement
agent'' means any individual authorized by the
Secretary to enforce the provisions of this subchapter
and regulations prescribed under this subchapter.
(4) Indian lands and indian tribe.--The terms
``Indian lands'' and ``Indian tribe'' have the same
meanings as in section 4 of the Indian Gaming
Regulatory Act.
(5) Internet.--The term ``Internet'' has the same
meaning as in section 5362(5).
(6) Licensee.--The term ``licensee'' means an entity
authorized to operate an Internet gambling facility in
accordance with this subchapter.
(7) Operate an internet gambling facility.--The term
``operate an Internet gambling facility'' or
``operation of an Internet gambling facility'' means
the direction, management, supervision, or control of
an Internet site through which bets or wagers are
initiated, received, or otherwise made, whether by
telephone, Internet, satellite, or other wire or
wireless communication.
(8) Secretary.--The term ``Secretary'' means the
Secretary of the Treasury, or any person designated by
the Secretary.
(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) Sporting event.--The term ``sporting event''
means any athletic competition, whether professional,
scholastic, or amateur.

Sec. 5383. Establishment and administration of licensing program

(a) Treasury Responsibilities.--The Secretary shall have
responsibility for the following activities:
(1) Exercising full regulatory jurisdiction over--
(A) the operation of Internet gambling
facilities by licensees; and
(B) the licensure and regulation of all
applicants, except to the extent that powers
have been delegated to qualified State and
tribal regulatory bodies pursuant to this
subchapter.
(2) Prescribing such regulations as may be necessary
to administer and enforce the requirements of this
subchapter.
(3) Employing enforcement agents with sufficient
training and experience to administer the requirements
of this subchapter and the regulations prescribed under
this subchapter.
(4) Enforcing the requirements of this subchapter
through all appropriate means provided under this
subchapter and other provisions of law.
(b) Internet Gambling Licensing Program.--
(1) Licensing required for certain internet
gambling.--No person may operate an Internet gambling
facility that knowingly accepts bets or wagers from
persons located in the United States without a license
issued by the Secretary in accordance with this
subchapter.
(2) Authority under valid license.--A licensee may
accept bets or wagers from persons located in the
United States, subject to the limitations set forth in
this subchapter, so long as its license remains in good
standing.
(c) Application for License.--
(1) In general.--Any person seeking authority to
operate an Internet gambling facility offering services
to persons in the United States may apply for a license
issued by the Secretary.
(2) Information required.--Any application for a
license under this subchapter shall contain such
information as may be required by the Secretary,
including the following:
(A) The criminal and credit history of the
applicant, any senior executive and director of
the applicant, and any person deemed to be in
control of the applicant.
(B) The financial statements of the
applicant.
(C) Documentation showing the corporate
structure of the applicant and all related
businesses and affiliates.
(D) Documentation containing detailed
evidence of the applicant's plan for complying
with all applicable regulations should a
license be issued, with particular emphasis on
the applicant's ability to--
(i) protect underage and problem
gamblers;
(ii) ensure games are being operated
fairly; and
(iii) comply with and address the
concerns of law enforcement.
(E) Certification that the applicant agrees
to submit to United States jurisdiction and all
applicable United States laws relating to
acceptance by the applicant of bets or wagers
over the Internet from persons located in the
United States and all associated activities.
(F) Certification that the applicant has
established a corporate entity or other
separate business entity in the United States,
a majority of whose officers are United States
persons and, if there is a board of directors,
that the board is majority-controlled by
directors who are United States persons.
(d) Standards for License Issuance; Suitability
Qualifications and Disqualification Standards.--
(1) Suitability for licensing standards.--
(A) In general.--No person shall be eligible
to obtain a license unless the Secretary or an
appropriate State officer or agency has
determined, upon completion of a background
check and investigation, that the applicant,
and any person deemed to be in control of the
applicant, is suitable for licensing.
(B) Associates of applicants.--If the
applicant is a corporation, partnership, or
other business entity, a background check and
investigation shall occur with respect to the
president or other chief executive of the
corporation, partnership, or other business
entity and other partners or senior executives
and directors of the corporation, partnership,
or entity, as determined appropriate by the
Secretary or any appropriate State or tribal
officer or agency.
(C) Background check and investigation.--The
Secretary shall establish standards and
procedures for conducting background checks and
investigations for purposes of this subsection.
(2) Suitability for licensing standards described.--
For purposes of this subchapter, an applicant and any
other person associated with the applicant, as
applicable, is suitable for licensing if the applicant
demonstrates to the Secretary or appropriate State or
tribal officer or agency by clear and convincing
evidence that the applicant (or individual associated
with the applicant, as applicable)--
(A) is a person of good character, honesty,
and integrity;
(B) is a person whose prior activities,
reputation, habits, and associations do not--
(i) pose a threat to the public
interest or to the effective regulation
and control of the licensed activities;
or
(ii) create or enhance the dangers of
unsuitable, unfair, or illegal
practices, methods, and activities in
the conduct of the licensed activities
or the carrying on of the business and
financial arrangements incidental to
such activities;
(C) is capable of and likely to conduct the
activities for which the applicant is licensed
in accordance with the provisions of this
subchapter and any regulations prescribed under
this subchapter;
(D) has or guarantees acquisition of adequate
business competence and experience in the
operation of Internet gambling facilities; and
(E) has or will obtain sufficient financing
for the nature of the proposed operation and
from a suitable source.
(3) Unsuitable for licensing.--An applicant or any
other person may not be determined to be suitable for
licensing within the meaning of this subchapter if the
applicant or such person--
(A) has failed to provide information and
documentation material to a determination of
suitability for licensing under paragraph (1);
(B) has supplied information which is untrue
or misleading as to a material fact pertaining
to any such determination;
(C) has been convicted of an offense
punishable by imprisonment of more than 1 year;
(D) is delinquent in filing any applicable
Federal or State tax returns or in the payment
of any taxes, penalties, additions to tax, or
interest owed to a State or the United States;
(E) has, on or after the date of the
enactment of the Unlawful Internet Gambling
Enforcement Act of 2006--
(i) knowingly participated in, or
should have known they were
participating in, any illegal Internet
gambling activity, including the taking
of an illegal Internet wager, the
payment of winnings on an illegal
Internet wager, the promotion through
advertising of any illegal Internet
gambling website or service, or the
collection of any payments to an entity
operating an illegal Internet gambling
website; or
(ii) knowingly been owned, operated,
managed, or employed by, or should have
known they were owned, operated,
managed, or employed by, any person who
was knowingly participating in, or
should have known they were
participating in, any illegal Internet
gambling activity, including the taking
of an illegal Internet wager, the
payment of winnings on an illegal
Internet wager, the promotion through
advertising of any illegal Internet
gambling website or service, or the
collection of any payments to an entity
operating an illegal Internet gambling
website;
(F) has--
(i) received any assistance,
financial or otherwise, from any person
who has, before the date of the
enactment of the Internet Gambling
Regulation, Consumer Protection, and
Enforcement Act, knowingly accepted
bets or wagers from a person located in
the United States in violation of
Federal or State law; or
(ii) provided any assistance,
financial or otherwise, to any person
who has, before the date of the
enactment of the Internet Gambling
Regulation, Consumer Protection, and
Enforcement Act, knowingly accepted
bets or wagers from a person located in
the United States in violation of
Federal or State law;
(G) with respect to another entity that has
accepted a bet or wager from any individual in
violation of United States law, has purchased
or otherwise obtained--
(i) such entity;
(ii) a list of the customers of such
entity; or
(iii) any other part of the equipment
or operations of such entity;
(H) is listed on a State gambling excluded
persons list; or
(I) fails to certify in writing, under
penalty of perjury, that the applicant or other
such person, and all affiliated business
entities (including all entities under common
control), has through its entire history--
(i) not committed an intentional
felony violation of Federal or State
gambling laws; and
(ii) used diligence to prevent any
United States person from placing a bet
on an Internet site in violation of
Federal or State gambling laws.
(4) Appeal of determination.--With respect to any
applicant or other person that the Secretary determines
is not suitable for licensing within the meaning of
this subchapter by reason of subparagraph (E) or (F) of
paragraph (3), and where the Secretary has not
determined that such applicant or person was acting in
their capacity as a managerial employee of an Internet
gambling website, the Secretary shall establish an
appeals process by which such applicant or person may
appeal the Secretary's determination.
(5) Ongoing requirement.--A licensee (and any other
person who is required to be determined to be suitable
for licensing in connection with such licensee) shall
meet the standards necessary to be suitable for
licensing throughout the term of the license.
(6) Protection of the public trust.--The Secretary
may take such action as is necessary to protect the
public trust, including the implementation of such
safeguards as may be necessary to ensure the operation
of an Internet gambling facility licensed under this
subchapter is controlled only by persons who are
suitable for licensing.
(7) Enforcement actions.--
(A) Determination of unsuitability for
continued licensure.--If the Secretary finds
that an individual owner or holder of a
security of a licensee, or of a holding or
intermediary company of a licensee or any
person with an economic interest in a licensee
or a director, partner, or officer of a
licensee is not suitable for licensing, the
Secretary may determine that the licensee is
not qualified to continue as a licensee.
(B) Action to protect the public interest,
including suspension.--If the Secretary may
determine that the licensee is not qualified to
continue as a licensee, the Secretary shall
propose action necessary to protect the public
interest, including, if deemed necessary, the
suspension of the authority of the licensee to
engage in licensed activities.
(C) Imposition of conditions including
removal of parties.--Notwithstanding a
determination under subparagraph (A), the
Secretary may allow a licensee to continue
engaging in licensed activities by imposing
conditions on the licensee under penalty of
revocation or suspension of the authority of
the licensee to engage in licensed activities,
including--
(i) the identification of any person
determined to be unsuitable for
licensing; and
(ii) the establishment of appropriate
safeguards to ensure such person is
excluded from any interest in the
licensed activities.
(e) Assessments for Administrative Expenses.--
(1) User fees.--
(A) In general.--The cost of administering
this subchapter with respect to each licensee,
including the cost of any review or examination
of a licensee to ensure compliance with the
terms of the license and this subchapter, shall
be assessed by the Secretary against the
licensee institution by written notice in an
amount appropriate to meet the Secretary's
expenses in carrying out such administration,
review, or examination.
(B) Disposition.--Amounts assessed by the
Secretary as user fees under subparagraph (A)
shall--
(i) be maintained by the Secretary
solely for use in accordance with
clause (ii);
(ii) be available to the Secretary to
cover all expenses incurred by the
Secretary in carrying out this
subchapter; and
(iii) not be construed to be
Government funds or appropriated
monies, or subject to apportionment for
the purposes of chapter 15 or any other
authority.
(C) Hearing.--Any licensee against whom an
assessment is assessed under this paragraph
shall be afforded an agency hearing if such
person submits a request for such hearing
within 20 days after the issuance of the notice
of assessment.
(D) Collection.--
(i) Referral.--If any licensee fails
to pay an assessment under this
paragraph after the assessment has
become final, the Secretary shall
recover the amount assessed by action
in the appropriate United States
district court.
(ii) Appropriateness of assessment
not reviewable.--In any civil action
under clause (i), the validity and
appropriateness of the assessment shall
not be subject to review.
(2) Direct and exclusive obligation of licensee.--The
user fee shall be the direct and exclusive obligation
of the licensee and may not be deducted from amounts
available as deposits to any person placing a bet.
(f) Approval of License.--The Secretary shall grant licenses
under this subchapter if the applicant meets the criteria set
by the Secretary set forth in this subchapter and in any
regulations promulgated thereunder.
(g) Safeguards Required of Licensee.--No person may operate
an Internet gambling facility in accordance with this
subchapter unless the person maintains or requires mechanisms
so that the following requirements, and the standards
established under section 5384, are met with respect to any
Internet bet or wager:
(1) Legal age.--Appropriate safeguards to ensure that
the individual placing a bet or wager is of legal age
as defined by the law of the State or tribal area in
which the individual is located at the time the bet or
wager is placed.
(2) Permissible location.--Appropriate safeguards to
ensure that the individual placing a bet or wager is
physically located in a jurisdiction that permits
Internet gambling at the time the bet or wager is
placed.
(3) Collection of customer taxes.--Appropriate
mechanisms to ensure that all taxes relating to
Internet gambling from persons engaged in Internet
gambling are collected at the time of any payment of
any proceeds of Internet gambling.
(4) Collection of taxes of licensee.--Appropriate
mechanisms to ensure that all taxes relating to
Internet gambling from any licensee are collected and
disbursed as required by law, and that adequate records
to enable later audit or verification are maintained.
(5) Safeguards against financial crime.--Appropriate
safeguards to combat fraud, money laundering, and
terrorist finance.
(6) Safeguards against compulsive gambling.--
Appropriate safeguards to combat compulsive Internet
gambling.
(7) Privacy safeguards.--Appropriate safeguards to
protect the privacy and security of any person engaged
in Internet gambling.
(8) Payment of assessments.--Appropriate mechanisms
to ensure that any assessment under subsection (e) is
paid to the Secretary.
(9) Other requirements.--Such other requirements as
the Secretary may establish by regulation or order.
(h) Term and Renewal of License.--
(1) Term.--Any license issued under this section
shall be issued for a 5-year term beginning on the date
of issuance.
(2) Renewal.--Licenses may be renewed in accordance
with the requirements prescribed by the Secretary
pursuant to this subchapter.
(i) Revocation of License.--
(1) In general.--Any license granted under this
subchapter may be revoked by the Secretary if--
(A) the licensee fails to comply with any
provision of this subchapter;
(B) the licensee is determined to be
unsuitable for licensing, within the meaning of
this subchapter; or
(C) the licensee is determined to be
targeting marketing or advertising materials at
individuals who are not of legal age to place a
bet or wager, as defined by the law of the
State or tribal area in which the individuals
are located.
(2) Final action.--Any revocation of a license under
paragraph (1) shall be treated as a final action by the
Secretary.
(j) Regulations.--The regulations prescribed by the Secretary
under this subchapter shall include regulations to fully
implement--
(1) safeguards required for licensees under
subsection (g); and
(2) the requirements for programs relating to the
Problem Gambling, Responsible Gambling, and Self-
Exclusion Program under section 5384.
(k) Administrative Provisions.--
(1) General powers of secretary.--
(A) In general.--The Secretary shall have the
authority to engage in the following:
(i) Investigate the suitability of
each licensee to ensure compliance with
this subchapter and regulations
prescribed under this subchapter.
(ii) Require licensees to maintain
appropriate procedures to ensure
compliance with this subchapter and
regulations prescribed under this
subchapter.
(iii) Require licensees to maintain
substantial facilities involved with
the processing of bets or wagers from
the United States within the United
States.
(iv) Require that a majority of all
of the employees of the applicant or
licensee, and of its affiliated
business entities, be residents or
citizens of the United States. All
entities under common control shall be
considered affiliated business entities
for the purposes of this subparagraph.
(v) Require licensees to maintain in
the United States all facilities that
are essential to the regulation of bets
or wagers placed from the United States
at a location that is accessible to the
appropriate regulatory personnel at all
times.
(vi) Examine any licensee and any
books, papers, records, or other data
of licensees relevant to any
recordkeeping or reporting requirements
imposed by the Secretary under this
subchapter.
(vii) Require licensees to maintain
all facilities within the United States
for processing of bets or wagers made
or placed from the United States.
(viii) When determined by the
Secretary to be necessary, summon a
licensee or an applicant for a license,
an officer or employee of a licensee or
any such applicant (including a former
officer or employee), or any person
having possession, custody, or care of
the reports and records required by the
Secretary under this subchapter, to
appear before the Secretary or a
designee of the Secretary at a time and
place named in the summons and to
produce such books, papers, records, or
other data, and to give testimony,
under oath, as may be relevant or
material to any investigation in
connection with the enforcement of this
subchapter or any application for a
license under this subchapter.
(ix) Investigate any violation of
this subchapter and any regulation
under this subchapter and any other
violation of law relating to the
operation of an Internet gambling
facility.
(x) Conduct continuing reviews of
applicants and licensees and the
operation of Internet gambling
facilities by use of technological
means, onsite observation of
facilities, including servers, or other
reasonable means to assure compliance
with this subchapter and any
regulations promulgated hereunder.
(xi) Prohibit inappropriate
advertising practices by licensees,
including unsolicited emails targeting
members of vulnerable populations,
including problem gamblers and minors,
or Internet advertising linked to
search terms associated with children,
problem gamblers, or other topics
deemed inappropriate.
(B) Effect of wto ruling.--Clauses (iii) and
(iv) of subparagraph (A) shall cease to have
effect if a tribunal of the World Trade
Organization of final arbitration rules that
the implementation of such clauses would
violate the trade commitments of the United
States under the World Trade Organization.
(2) Consultation with indian tribes.--In implementing
this subchapter, the Secretary shall conduct meaningful
consultation with Indian tribes regarding all aspects
of this subchapter which affect Indian tribes, both as
potential licensing entities or operating entities.
(3) Administrative aspects of summons.--
(A) Production at designated site.--A summons
issued pursuant to this subsection may require
that books, papers, records, or other data
stored or maintained at any place be produced
at any business location of a licensee or
applicant for a license or any designated
location in any State or in any territory or
other place subject to the jurisdiction of the
United States not more than 500 miles distant
from any place where the licensee or applicant
for a license operates or conducts business in
the United States.
(B) No liability for expenses.--The United
States shall not be liable for any expense
incurred in connection with the production of
books, papers, records, or other data under
this subsection.
(C) Service of summons.--Service of a summons
issued under this subsection may be by
registered mail or in such other manner
calculated to give actual notice as the
Secretary may prescribe by regulation.
(4) Contumacy or refusal.--
(A) Referral to attorney general.--In case of
contumacy by a person issued a summons under
this subsection or a refusal by such person to
obey such summons or to allow the Secretary to
conduct an examination, the Secretary shall
refer the matter to the Secretary of the
Treasury for referral to the Attorney General.
(B) Jurisdiction of court.--The Attorney
General may invoke the aid of any court of the
United States to compel compliance with the
summons within the jurisdiction of which--
(i) the investigation which gave rise
to the summons or the examination is
being or has been carried on;
(ii) the person summoned is an
inhabitant; or
(iii) the person summoned carries on
business or may be found.
(C) Court order.--The court may issue an
order requiring the person summoned to appear
before the Secretary or a delegate of the
Secretary to produce books, papers, records,
and other data, to give testimony as may be
necessary to explain how such material was
compiled and maintained, to allow the Secretary
to examine the business of a licensee, and to
pay the costs of the proceeding.
(D) Failure to comply with order.--Any
failure to obey the order of the court may be
punished by the court as a contempt thereof.
(E) Service of process.--All process in any
case under this subsection may be served in any
judicial district in which such person may be
found.
(5) Compilation of datasets on player behavior.--
(A) In general.--The Secretary shall compile
and make available to the public, on the
website of the Secretary, datasets on player
behavior.
(B) Regulations requiring submission of
information.--The Secretary shall prescribe
regulations to require licensees under this
subchapter to provide information on player
behavior that the Secretary determines is
appropriate for the datasets under subparagraph
(A).
(C) Information required to be included.--
Datasets prepared under this paragraph shall
include information on any individual player,
if requested by the Secretary, including but
not limited to information concerning gambling
frequency, gaming duration, the amount wagered,
the number of bets placed, and net losses,
provided that such request complies with the
provisions of subparagraph (D).
(D) Protection of privacy.--All information
provided pursuant to this paragraph shall be
aggregated and anonymized, and shall not
contain information that either alone or in
combination with other data elements would
permit identification of any individual player.
(l) Civil Money Penalties.--
(1) In general.--The Secretary may assess upon any
licensee or other person subject to the requirements of
this subchapter for any willful violation of this
subchapter or any regulation prescribed or order issued
under this subchapter, a civil penalty of not more than
the greater of--
(A) the amount (not to exceed $100,000)
involved in the violation, if any; or
(B) $25,000.
(2) Assessment.--
(A) Written notice.--Any penalty imposed
under paragraph (1) may be assessed and
collected by the Secretary by written notice.
(B) Finality of assessment.--If, with respect
to any assessment under paragraph (1), a
hearing is not requested pursuant to
subparagraph (E) within the period of time
allowed under such subparagraph, the assessment
shall constitute a final and unappealable
order.
(C) Authority to modify or remit penalty.--
The Secretary may compromise, modify, or remit
any penalty which the Secretary may assess or
has already assessed under paragraph (1).
(D) Mitigating factors.--In determining the
amount of any penalty imposed under paragraph
(1), the Secretary shall take into account the
appropriateness of the penalty with respect
to--
(i) the size of the financial
resources and the good faith of the
person against whom the penalty is
assessed;
(ii) the gravity of the violation;
(iii) the history of previous
violations; and
(iv) such other matters as justice
may require.
(E) Hearing.--The person against whom any
penalty is assessed under paragraph (1) shall
be afforded an agency hearing if such person
submits a request for such hearing within 20
days after the issuance of the notice of
assessment.
(F) Collection.--
(i) Referral.--If any person fails to
pay an assessment after any penalty
assessed under this paragraph has
become final, the Secretary shall
recover the amount assessed by action
in the appropriate United States
district court.
(ii) Appropriateness of penalty not
reviewable.--In any civil action under
clause (i), the validity and
appropriateness of the penalty shall
not be subject to review.
(G) Disbursement.--All penalties collected
under authority of this subsection shall be
deposited into the Treasury.
(3) Condition for licensure.--Payment by a licensee
of any civil penalty assessed under this subsection
that has become final shall be a requirement for the
retention of its license.
(m) Treatment of Records.--In light of business competition,
confidentiality, and privacy concerns, the Secretary shall
protect from disclosure information submitted in support of a
license application under this subchapter and information
collected in the course of regulating licensees to the full
extent permitted by sections 552 and 552a of title 5.
(n) Suitability for Licensing Requirements for Certain
Service Providers.--
(1) In general.--Any person that knowingly--
(A) manages, administers, or controls bets or
wagers that are initiated, received, or
otherwise made within the United States,
(B) otherwise manages or administers the
games with which such bets or wagers are
associated, or
(C) develops, maintains or operates, or
distributes or makes available for downloading
software, other system programs or hardware
that create, operate, or otherwise affect the
outcome of a game,
shall meet all of the suitability for licensing
criteria established under this section in the same
manner and to the same extent as if that person were
itself a licensee.
(2) Suitability for licensing requirements for
certain service providers.--Any failure on the part of
person described in any subparagraph of paragraph (1)
to remain suitable for licensing shall be grounds for
revocation of the authority of the licensee for whom
such service is provided to operate an Internet
gambling facility, in the same manner and in accordance
with subsection (i).
(o) Reliance on State and Tribal Regulatory Body
Certifications of Suitability for Applicants.--
(1) Qualification of state and tribal regulatory
bodies.--
(A) Application for determination.--Any State
or tribal regulatory body with expertise in
regulating gambling may--
(i) notify the Secretary of its
willingness to review prospective
applicants to certify whether any such
applicant meets the qualifications
established under this subchapter; and
(ii) provide the Secretary with such
documentation as the Secretary
determines necessary for the Secretary
to determine whether such State or
tribal regulatory body is qualified to
conduct such review and may be relied
upon by the Secretary to make any such
certification.
(B) Determination and notice.--Within 60 days
after receiving any notice under
subparagraph(A)(i), the Secretary shall--
(i) make the determination as to
whether a State or tribal regulatory
body is qualified to conduct a review
of prospective applicants and may be
relied upon to certify whether any such
applicant meets the qualifications
established under this subchapter; and
(ii) notify the State or tribal
regulatory body of such determination.
(2) Actions by qualified authorities.--During the
period that any determination of qualification under
paragraph (1)(B) is in effect with respect to any such
State or tribal regulatory body, the State or tribal
regulatory body--
(A) may undertake reviews of any applicant to
determine whether the applicant or any person
associated with the applicant meets the
criteria for suitability for licensing
established under this subchapter;
(B) may impose on each such applicant an
administrative fee or assessment for conducting
such review in an amount the regulatory body
determines to be necessary to meet its expenses
in the conduct of such review; and
(C) shall process and assess each applicant
fairly and equally based on objective criteria,
regardless of any prior licensing of an
applicant by the State or tribal regulatory
body.
(3) Reliance on state or tribal certification.--Any
applicant may provide a certification of suitability
for licensing made by any State or tribal regulatory
body under paragraph (2), together with all
documentation the applicant has submitted to any such
State or tribal regulatory body, to the Secretary, and
any such certification and documentation shall be
relied on by the Secretary as evidence that an
applicant has met the suitability for licensing
requirements under this section.
(4) Authority of secretary to review.--
Notwithstanding any certification of suitability for
licensing made by any State or tribal regulatory body,
the Secretary retains the authority to review,
withhold, or revoke any license if the Secretary has
reason to believe that any applicant or licensee does
not meet the suitability requirements for licensing
established under this section, or any other
requirement of a licensee.
(5) Reliance on qualified regulatory body for other
purposes, including examination and enforcement.--The
Secretary shall rely on any State and tribal regulatory
body found qualified under this subsection for such
other regulatory and enforcement activities as the
Secretary finds to be useful and appropriate to carry
out the purposes of this subchapter, including
authority under paragraph (6).
(6) Additional authority of qualified state or tribal
authorities.--The qualified state or tribal authorities
may--
(A) examine licensees who are licensed under
a State or tribal program referred to in
paragraph (1);
(B) employ enforcement agents with sufficient
training and experience to administer the
requirements of this subchapter; and
(C) enforce any requirement of this
subchapter that is within the jurisdiction of
the qualified state or tribal authority through
all appropriate means provided under this
subchapter and other provisions of law.
(7) Revocation of qualification.--The Secretary may
revoke, at any time and for any reason, the
qualification of any State or tribal regulatory body to
certify or to conduct any other regulatory or
enforcement activity to carry out the purposes of this
subchapter.
(p) Prevention of Minors From Placing Bets or Wagers.--The
Secretary shall--
(1) frequently monitor, evaluate, and measure
compliance effectiveness of each licensee's software,
mechanisms, and other systems for preventing minors
from placing bets or wagers through the Internet site
of the licensee; and
(2) impose a sanction of either a fine, a revocation
of license, or both, on a licensee whose minor
protection software, mechanisms, and other systems are
found to be insufficiently effective.
(q) Requirements With Respect to Child Support Delinquents.--
(1) In general.--When it is made known to the
Secretary by a Federal or State court or a competent
State agency involved with the administration or
enforcement of a court-ordered child support payment
that a particular individual is delinquent with respect
to court-ordered child support payments, the Secretary
shall include that individual on the list established
under section 5384(c)(1)(A).
(2) Removal from list.--Individuals placed on the
list pursuant to paragraph (1) shall be removed from
such list if the court or agency that made such
individual's delinquency known to the Secretary
notifies the Secretary that such individual is no
longer delinquent.

Sec. 5384. Problem Gambling, Responsible Gambling, Consumer Safeguards,
and Self-Exclusion Program

(a) Regulations Required.--The Secretary and any State or
tribal regulatory body that has been qualified under subsection
5383(o) shall prescribe regulations for the development of a
Problem Gambling, Responsible Gambling, Consumer Safeguards,
and Self-Exclusion Program on the basis of standards that each
licensee shall implement as a condition of licensure.
(b) Minimum Requirements.--
(1) In general.--Any application for a license shall
include a submission to the Secretary or qualified
State or tribal regulatory body setting forth a
comprehensive program that is intended--
(A) to verify the identity and age of each
customer through the use of commercially
available data sources or any approved
government database that is available for
access in real-time through an automated
process;
(B) to ensure that no customers under the
legal age 21 may initiate or otherwise make any
bets or wagers for real money;
(C) to verify the State or tribal land in
which the customer is located at the time the
customer attempts to initiate a bet or wager;
(D) to ensure that no customer who is located
in a State or tribal land that opts out
pursuant to section 5387 can initiate or
otherwise make a bet or wager prohibited by
such opt-out;
(E) to ensure that responsible gambling
materials including materials on problem
gambling, services and resources to address
problem gambling, descriptions of games offered
by the licensee, and when appropriate, odds of
winning or payout rates of games, and any other
materials that the Secretary or qualified State
or tribal regulatory body may deem appropriate
are made available to customers;
(F) to make available player-selectable
responsible gambling options that may include,
as appropriate to specific gambling games, a
stake limit, loss limit, time-based loss
limits, deposit limit, session time limit,
time-based exclusion from all gambling and
other similar options that the Secretary or
qualified State or tribal regulatory body may
deem appropriate and require to be made
available;
(G) to require each customer, before making
or placing any bet or wager, to establish
personal limits as a condition of play that
apply across all betting sites, which may be in
hourly, daily, weekly or monthly increments, at
the discretion of the customer;
(H) to protect the privacy and security of
any customer in connection with any lawful
Internet gambling activity;
(I) to protect against fraud and to provide
for dispute resolution relating to internet
gambling activity through programs to insure
the integrity and fairness of the games; and
(J) to protect against money laundering
relating to Internet gambling activities.
(2) Requirements for programs ensuring integrity and
fairness.--The programs referred to in paragraph (1)(I)
to insure the integrity and fairness of the games shall
include requirements for--
(A) real-time, multiparty cryptographic
protocols for random number generation where 1
of the parties is the player;
(B) secure audit trails;
(C) detailed player betting logs that record
and store each wager placed by the player;
(D) real time confirmation of high value bets
or wagers, where appropriate; or
(E) equally effective options that the
Secretary or qualified State or tribal
regulatory officer or agency may determine to
be appropriate.
(c) Periodic Review.--
(1) In general.--The Secretary shall, on a regular
basis, review the minimum requirements under this
section and may, based on the best available
technology, update the standards that each licensee
shall implement as a condition of licensure.
(2) Consultation.--In conducting the review required
under paragraph (1), the Secretary shall consult with--
(A) State and tribal gaming regulatory
officials;
(B) law enforcement officials;
(C) experts in underage and problem gaming;
(D) experts on individual privacy;
(E) consumers;
(F) on-line retailers of other age restricted
materials such as tobacco and alcohol products;
(G) licensees and other representatives of
the gaming industry;
(H) software developers with expertise in
gaming, privacy, the payments systems
available, and other relevant areas; and
(I) such other relevant individuals as the
Secretary may determine to be appropriate.
(d) List of Persons Self-Excluded From Gambling Activities.--
(1) Establishment.--
(A) In general.--The Secretary shall provide
by regulation for the establishment of a list
of persons self-excluded from gambling
activities at all licensee sites.
(B) Placement request.--Any person may
request placement on the list of self-excluded
persons by--
(i) acknowledging in a manner to be
established by the Secretary that the
person wishes to be denied gambling
privileges; and
(ii) agreeing that, during any period
of voluntary exclusion, the person may
not collect any winnings or recover any
losses resulting from any gambling
activity at any licensee sites.
(2) Placement and removal procedures.--The
regulations prescribed by the Secretary under paragraph
(1)(A) shall establish procedures for placements on,
and removals from, the list of self-excluded persons.
(3) Limitation on liability.--
(A) In general.--The United States, the
Secretary, an enforcement agent, or a licensee,
or any employee or agent of the United States,
the Secretary, an enforcement agent, or a
licensee, shall not be liable to any self-
excluded person or to any other party in any
judicial or administrative proceeding for any
harm, monetary or otherwise, which may arise as
a result of--
(i) any failure to withhold gambling
privileges from, or to restore gambling
privileges to, a self-excluded person;
or
(ii) otherwise permitting a self-
excluded person to engage in gambling
activity while on the list of self-
excluded persons.
(B) Rule of construction.--No provision of
subparagraph (A) shall be construed as
preventing the Director from assessing any
regulatory sanction against a licensee for
failing to comply with the minimum standards
prescribed pursuant to this subsection.
(4) Disclosure provisions.--
(A) In general.--Notwithstanding any other
provision of Federal or State law, the list of
self-excluded persons shall not be open to
public inspection.
(B) Affiliate disclosure.--Any licensees may
disclose the identities of persons on the self-
excluded list to any affiliated company or,
where required to comply with this subsection,
any service provider, to the extent that the
licensee ensures that any affiliated company or
service provider maintains such information
under confidentiality provisions comparable to
those in this subsection.
(5) Limitation on liability for disclosure.--A
licensee or an employee, agent, or affiliate of a
licensee shall not be liable to any self-excluded
person or to any other party in any judicial proceeding
for any harm, monetary or otherwise, which may arise as
a result of disclosure or publication in any manner.
(e) Gambling by Prohibited Persons.--
(1) Prohibition benefitting from prohibited gambling
activity.--A person who is prohibited from gambling
with a licensee by law, or by order of the Secretary or
any court of competent jurisdiction, including any
person on the self-exclusion list as established in
accordance with subsection (d), shall not collect, in
any manner or proceeding, any winnings or recover any
losses arising as a result of any prohibited gambling
activity.
(2) Forfeiture.--In addition to any other penalty
provided by law, any money or thing of value that has
been obtained by, or is owed to, any prohibited person
by a licensee as a result of bets or wagers made by a
prohibited person shall be subject to forfeiture by
order of the Secretary, following notice to the
prohibited person and opportunity to be heard.
(3) Deposit of forfeited funds.--Any funds forfeited
pursuant to this subsection shall be deposited into the
general fund of the Treasury.
(4) Persons self-excluded.--Licensees may not accept
bets or wagers from persons on the list established
pursuant to subsection (d)(1)(A).
(f) Problem or Compulsive Gamblers Not on the List of Self-
Excluded Persons.--
(1) Public awareness program.--
(A) In general.--The Secretary and any State
or tribal regulatory body that has been
qualified under subsection 5383(o) shall
provide by regulation for the establishment of
a program to alert the public to the existence,
consequences, and availability of the self-
exclusion list, and shall prepare and
promulgate written materials to be used in such
a program.
(B) Licensee-provided publicity.--Regulations
prescribed under subparagraph (A) may require a
licensee to make available literature or screen
displays relating to the existence of the
program.
(2) Rule of construction.--No provision of this
subsection shall be construed as creating a legal duty
in the Secretary, a qualified State or tribal
regulatory body, a licensee, or any representative of a
licensee to identify or to exclude problem or
compulsive gamblers not on the list of self-excluded
persons.
(3) Immunity.--The United States, the Secretary, a
qualified State or tribal regulatory body, a licensee,
and any employee or agent of a licensee, shall not be
liable to any person in any proceeding for losses or
other damages of any kind arising out of that person's
gambling activities based on a claim that the person
was a compulsive, problem, or pathological gambler.

Sec. 5385. Financial transaction providers

(a) In General.--No financial transaction provider shall be
held liable for engaging in financial activities and
transactions for or on behalf of a licensee or involving a
licensee, including payments processing activities, unless such
provider has knowledge that the specific financial activities
or transactions are conducted in violation of this subchapter
and with applicable Federal and State laws.
(b) Definitions.--For purposes of this section, the following
definitions shall apply:
(1) 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
payment system.
(2) Other terms.--
(A) Credit, creditor, credit card, and card
issuer.--The terms ``credit'', ``creditor'',
``credit card'', and ``card issuer'' have the
meanings given the terms in section 103 of the
Truth in Lending Act.
(B) Electronic fund transfer.--The term
``electronic fund transfer''--
(i) has the meaning given the term in
section 903 of the Electronic Fund
Transfer Act, except that the term
includes transfers that would otherwise
be excluded under section 903(6)(E) of
such 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 meaning given
the term 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 meaning given the term in
section 3(c) 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 meanings given
the terms in section 5330(d) (determined
without regard to any regulations prescribed by
the Secretary under such section).

Sec. 5386. List of unlawful Internet gambling enterprises

(a) Definitions.--For purposes of this section, the following
definitions shall apply:
(1) Unlawful internet gambling enterprise.--The term
``unlawful Internet gambling enterprise'' means any
person who, more than 10 days after the date of the
enactment of this section--
(A) violates a provision of section 5363;
(B) knowingly receives or transmits funds
intended primarily for a person described in
subparagraph (A); or
(C) knowingly assists in the conduct of a
person described in subparagraph (A) or (B).
(2) Director.--The term ``Director'' means the
Director of the Financial Crimes Enforcement Network.
(b) List of Unlawful Internet Gambling Enterprises.--
(1) In general.--Not later than 120 days after the
date of the enactment of this section, the Director
shall submit to the Secretary a list of unlawful
Internet gambling enterprises and shall regularly
update such list in accordance with the procedures
described in paragraph (3).
(2) Contents of list.--The list prepared under
paragraph (1) shall include the following information
for each such unlawful Internet gambling enterprise:
(A) All known Internet website addresses of
the enterprise.
(B) The names of all known owners and
operators of the enterprise.
(C) To the extent known, information
identifying the financial agents and account
numbers of the enterprise and the persons
listed under subparagraph (B).
(3) Distribution of list by secretary.--The Secretary
shall make available--
(A) a copy of the information provided under
subparagraphs (A) and (B) of paragraph (2) on
the Internet website of the Secretary of the
Treasury;
(B) to all persons who are required to comply
with the regulations prescribed under the
authority provided in section 5364 a copy of
all the information provided under paragraph
(1) in an electronic format compatible with the
Specially Designated Nationals list maintained
by the Office of Foreign Assets Control; and
(C) any information required under this
paragraph not later than 10 days after
receiving any new or updated list from the
Director.
(4) Procedures.--The procedures described in this
paragraph are the following:
(A) Investigation.--The Director shall
investigate entities that appear to be unlawful
Internet gambling enterprises. An initial
investigation shall be completed before the end
of the 60-day period beginning on the date of
enactment of this section. After the initial
investigation, the Director shall regularly
investigate entities that appear to be unlawful
Internet gambling enterprises. If the Director
discovers evidence sufficient to prove a prima
facie case that any person is an unlawful
Internet gambling enterprise, the Director
shall provide the notice required under
subparagraph (C).
(B) Requests.--Any Federal, State, tribal, or
local law enforcement official, any affected
sports organization, any person directly harmed
by unlawful Internet gambling, any financial
transaction provider, and any interactive
computer service (as such terms are defined in
section 5362) shall have the right, but not the
obligation, to make a written request to the
Director for the addition of any person to the
list of unlawful Internet gambling enterprises.
If the Director determines that the evidence
submitted is sufficient to prove a prima facie
case that such person is an unlawful Internet
gambling enterprise, the Director shall provide
the notice required under subparagraph (C) to
each person identified as an alleged unlawful
Internet gambling enterprise. The Director also
shall provide written notice of its decision
under this subparagraph, including a decision
not to add a person to the list required under
paragraph (1), to the requesting party no later
than 30 days after the request is received.
(C) Notice.--Not fewer than 30 days before
adding an unlawful Internet gambling
enterprise, or an owner or operator thereof, to
the list required under paragraph (1), the
Director shall provide written notice to such
enterprise, owner, or operator. Any enterprise,
owner, or operator receiving such notice may
contest the Director's determination by written
appeal to the Director not more than 30 days
after receiving notice.
(D) Opportunity for hearing.--If a person
properly submits a written appeal under
subparagraph (C), the Director shall not
include such person in the list required under
paragraph (1) unless and until the Director
provides such person with an opportunity for a
hearing not more than 30 days after receiving
written notice of appeal. Not more than 10 days
after an opportunity for hearing is afforded,
whether or not the person requesting the
hearing appears at such hearing, the Director
shall proceed to add such person to the list of
unlawful Internet gambling enterprises unless
the Director determines, based on a
preponderance of the evidence, that such person
is not an unlawful Internet gambling
enterprise.
(E) Injunctive relief.--Any person that the
Director determines shall be included in the
list required under paragraph (1) after such
person appears at a hearing described in
subparagraph (D) and any person included in
such list who did not receive the notice
required under subparagraph (C), may petition
for injunctive relief in the United States
District Court for the District of Columbia,
which shall have exclusive jurisdiction to hear
challenges pursuant to this section. The
petitioner shall have the burden of
establishing by a preponderance of the evidence
that such person is not an unlawful Internet
gambling enterprise. Only persons designated by
the Director for inclusion on the list of
unlawful Internet gambling enterprises, and
other owners or operators of an enterprise to
be so listed, shall have standing to contest
the Director's determination. The court may
enjoin the Director and the Secretary not to
add or remove the petitioner from the list of
unlawful Internet gambling enterprises, and no
other judicial recourse shall be permitted.
(c) Effect of List.--A financial transaction provider shall
be deemed to have actual knowledge that a person is an unlawful
Internet gambling enterprise to the extent that such person is
identified on the list available to the public, or on a non-
public list made available to such financial transaction
provider, by the Secretary as described in subsection (b)(2),
provided that the list shall not be deemed to be the sole
source of actual knowledge.

Sec. 5387. Limitation of licenses in States and Indian lands

(a) State Opt-Out Exercise.--
(1) Limitations imposed by states.--
(A) In general.--No licensee may engage,
under any license issued under this subchapter,
in the operation of an Internet gambling
facility that knowingly accepts bets or wagers
initiated by persons who reside in any State
which provides notice that it will limit such
bets or wagers, if the Governor or other chief
executive officer of such State informs the
Director of such limitation, in a manner which
clearly identifies the nature and extent of
such limitation, before the end of the period
beginning on the date of the enactment of the
Internet Gambling Regulation, Consumer
Protection, and Enforcement Act and ending on
the date on which such State's legislature has
conducted one full general legislative session,
where such session began after the date of the
enactment of such Act, or in accordance with
paragraph (2), until such time as any notice of
any amendment or repeal of such specific
limitation becomes effective under paragraph
(2).
(B) Coordination between state and tribal
opt-out exercises.--Any State limitation under
subparagraph (A) shall not apply to the
acceptance by a licensee of bets or wagers from
persons located within the tribal lands of an
Indian tribe that--
(i) has itself opted out pursuant to
subsection (b) (in which case the
tribal opt-out exercise under such
subsection shall apply); or
(ii) would be entitled pursuant to
other applicable law to permit such
bets or wagers to be initiated and
received within its territory without
use of the Internet.
(C) Coordination with indian gaming
regulatory act.--No decision by a State under
this subsection shall be considered in making
any determination with regard to the ability of
an Indian tribe to offer any class of gambling
activity pursuant to section 11 of the Indian
Gaming Regulatory Act.
(D) Tribal status or category not impacted.--
Tribal operations of Internet gambling
facilities under this subchapter shall not
impact an Indian tribe's status or category or
class under its land-based activities.
(E) New negotiations not required.--Operating
under a license issued pursuant to this
subchapter shall not require, or impose any
requirement on, an Indian tribe to negotiate a
new agreement, or renegotiate any existing
agreement, limitation or other provision of a
tribal-State compact, agreement, or other
understanding with respect to gaming or
revenue-sharing, with regard to any Internet
bet or wager occurring pursuant to a license
issued by the Secretary under this subchapter.
(2) Changes to state limitations.--The establishment,
repeal, or amendment by any State of any limitation
referred to in paragraph (1) after the end of the
period referred to in paragraph (1) shall apply, for
purposes of this subchapter, beginning on the first
January 1 that occurs after the end of the 60-day
period beginning on the later of--
(A) the date a notice of such establishment,
repeal, or amendment is provided by the
Governor or other chief executive officer of
such State in writing to the Secretary; or
(B) the effective date of such establishment,
repeal, or amendment.
(b) Indian Tribe Opt-Out Exercise.--
(1) Limitations imposed by indian tribes.--No
Internet gambling licensee knowingly may accept a bet
or wager from a person located in the tribal lands of
any Indian tribe which limits such gambling activities
or other contests if the principal chief or other chief
executive officer of such Indian tribe informs the
Secretary of such limitation, in a manner which clearly
identifies the nature and extent of such limitation,
before the end of the 90-day period beginning on the
date of the enactment of the Internet Gambling
Regulation, Consumer Protection, and Enforcement Act,
or in accordance with paragraph (2), until such time as
any notice of any amendment or repeal of such specific
limitation becomes effective under paragraph (2).
(2) Changes to indian tribe limitations.--The
establishment, repeal, or amendment by any Indian tribe
of any limitation referred to in paragraph (1) after
the end of the 90-day period beginning on the date of
the enactment of this subchapter shall apply, for
purposes of this subchapter, beginning on the first
January 1 that occurs after the end of the 60-day
period beginning on the later of--
(A) the date a notice of such establishment,
repeal, or amendment is provided by the
principal chief or other chief executive
officer of such Indian tribe in writing to the
Secretary; or
(B) the effective date of such establishment,
repeal, or amendment.
(c) Notification and Enforcement of State and Indian Tribe
Limitations.--
(1) In general.--The Secretary shall notify all
licensees and applicants of all States and Indian
tribes that have provided notice pursuant to paragraph
(1) or (2) of subsection (a) or (b), as the case may
be, promptly upon receipt of such notice and in no
event fewer than 30 days before the effective date of
such notice.
(2) Compliance.--The Secretary shall take effective
measures to ensure that any licensee under this
subchapter, as a condition of the license, complies
with any limitation or prohibition imposed by any State
or Indian tribe to which the licensee is subject under
subsection (a) or (b), as the case may be.
(3) Violations.--It shall be a violation of this
subchapter for any licensee knowingly to accept bets or
wagers initiated or otherwise made by persons located
within any State or in the tribal lands of any Indian
tribe for which a notice is in effect under subsection
(a) or (b), as the case may be.
(4) State attorney general enforcement.--In any case
in which the attorney general of a State, or any State
or local law enforcement agency authorized by the State
attorney general or by State statute to prosecute
violations of consumer protection law, has reason to
believe that an interest of the residents of that State
has been or is threatened or adversely affected by a
violation by a licensee pursuant to paragraph (2), the
State, or the State or local law enforcement agency on
behalf of the residents of the agency's jurisdiction,
may bring a civil action on behalf of the residents of
that State or jurisdiction in a district court of the
United States located therein, to--
(A) enjoin that practice; or
(B) enforce compliance with this subchapter.

Sec. 5388. Sports betting prohibited on Internet

No licensee under this subchapter shall accept Internet bets
or wagers on sporting events, with the exception of pari-mutuel
racing as permitted by law.

Sec. 5389. Prohibition on the use of credit cards for Internet gambling

(a) In General.--No licensee, no person operating on behalf
of a licensee, and no person accepting payment for or
settlement of a bet or wager who intends to transmit such
payment to a person licensee, may accept a bet or wager or
payment for or settlement of a bet or wager that is transmitted
or otherwise facilitated with a credit card (as defined in
section 5362(11)).
(b) Exception.--
(1) Clarification of scope.--For any person licensed
to take bets or wagers in accordance with the
Interstate Horseracing Act of 1978, the prohibition in
subsection (a) shall only apply to those activities
conducted pursuant to a license under this subchapter.
(2) Intrastate activities.--For any person involved
in legal, land-based or State- or tribal-regulated
intrastate gambling, the prohibition in subsection (a)
shall only apply to those activities conducted pursuant
to a license under this subchapter.

Sec. 5390. State and tribal lotteries

(a) In General.--Notwithstanding any other provision of this
subchapter, this subchapter shall not apply to Internet
gambling conducted by any State or tribal lottery authority
when conducted in accordance with subparagraph (B) or (C) of
section 5362(10), as clarified by section 5362(10)(E).
(b) Rule of Construction.--For purposes of the clarification
made by subparagraph (E) of section 5362(10) to the meaning and
intent of subparagraphs (B) and (C) of such section, Internet
gambling described in subsection (a) is hereby expressly
permitted, and operators of any State or tribal lottery
authority conducting Internet gambling facilities operating in
accordance with such subparagraph (B) or (C), as clarified by
such subparagraph (E), and vendors, suppliers and service
providers to such State or tribal lottery authority, shall not
be required to be licensed under this subchapter.
(c) Applicability of Other Provisions to Lottery Activity.--
To clarify existing law, section 1084 of title 18 shall not
apply to any of the following that occurs in connection with
any Internet gambling conducted by any State or tribal lottery
authority when conducted in accordance with subparagraph (B) or
(C) of section 5362(10), as clarified by section 5362(10)(E):
(1) Any Internet bet or wager, including any
transmission thereof.
(2) Any transmission of information assisting in the
placing of bets or wagers.
(3) any transmission entitling the recipient to
receive money or credit as a result of bets or wagers,
or for information assisting in the placing of bets or
wagers.
(d) Authorization of Sponsor.--No licensee may offer services
relating to any lottery sponsored by a State, tribal, or other
governmental body without the authorization of the official
sponsor.

Sec. 5391. Safe harbors

It shall be a complete defense against any prosecution or
enforcement action under any Federal or State law against any
person possessing a valid license under this subchapter that
the activity is authorized under and has been carried out
lawfully under the terms of this subchapter.

Sec. 5392. Relation to section 1084 of title 18 and the Unlawful
Internet Gambling Enforcement Act

Section 1084 of title 18 and subchapter IV of this chapter
shall not apply to any Internet bet or wager occurring pursuant
to a license issued in accordance with this subchapter.

Sec. 5393. Cheating and other fraud

(a) Electronic Cheating Devices Prohibited.--No person
initiating, receiving, or otherwise making a bet or wager with
a licensee, or sending, receiving, or inviting information
assisting with a bet or wager with a licensee, knowingly shall
use, or assist another in the use of, an electronic,
electrical, or mechanical device which is designed,
constructed, or programmed specifically for use in obtaining an
advantage in any game authorized under this subchapter, where
such advantage is prohibited or otherwise violates the rules of
play established by the licensee.
(b) Additional Offense.--No person initiating, receiving, or
otherwise making a bet or wager with a licensee, or sending,
receiving, or inviting information assisting with a bet or
wager with a licensee, knowingly shall use or possess any
cheating device with intent to cheat or defraud any licensee or
other persons placing bets or wagers with such licensee.
(c) Permanent Injunction.--Upon conviction of a person for
violation of this section, the court may enter a permanent
injunction enjoining such person from initiating, receiving, or
otherwise making bets or wagers or sending, receiving, or
inviting information assisting in the placing of bets or
wagers.
(d) Criminal Penalty.--Whoever violates subsection (a) or (b)
of this section shall be fined under title 18 or imprisoned for
not more than 5 years, or both.

* * * * * * *

DISSENTING VIEWS

In spite of significant bipartisan opposition, the
Committee majority passed H.R. 2267, ``The Internet Gambling
Regulation, Consumer Protection, and Enforcement Act,'' to
establish a federal licensing program under which Internet
gambling companies may lawfully operate and accept bets or
wagers from individuals located in the United States. In doing
so, H.R. 2267 reverses the longstanding national policy against
gambling by establishing a presumption in favor of legalized
online betting.
Internet gambling's characteristics are unique: online
players can gamble 24 hours a day from home; children may play
without sufficient age verification; and betting with a credit
card can undercut a player's perception of the value of cash,
leading to addiction, bankruptcy and crime. Young people are
particularly at risk. John Kindt, Professor of Business
Administration at the University of Illinois says: ``It's
`click the mouse, lose your house.' It puts gambling at every
work desk and every school desk and in every living room. It
would increase problem gambling rates exponentially.''
By approving this bill, the largest expansion of gambling
in history, the Committee has taken steps to open casinos in
every home, dorm room, library, iPod, Blackberry, iPad and
computer in America. Since this Congress took action in 2006 to
address the spread of Internet gambling by passing the Unlawful
Internet Gambling Enforcement Act (UIGEA), offshore gaming
interests have campaigned to repeal the law, or at least, to
undermine it. These are large corporate interests that are
protecting their bottom line at the expanse of addiction and
destruction to our homes and communities. Supporters of H.R.
2267 argue that by licensing and taxing online wagering and
implicitly repealing the Wire Act, the Federal government could
better prevent fraud, limit compulsive gambling and protect
minors. At the same time, they argue it would create a new
multi-billion dollar revenue source for the Federal government.
It is true that to obtain a license to conduct Internet
gambling operations under this bill, applicants must
demonstrate a variety of online safeguards to ensure safe and
proper use of a licensee's Web site. But recent developments
have cast doubt on whether the intended protections are viable.
For example, the bill requires protective mechanisms that
combat fraud. But the Federal Bureau of Investigation (FBI) has
identified several ways to cheat at online poker, none of which
are illegal or banned by the bill. The FBI has also said that
not only does technology exist to manipulate online poker
games, but that advanced technology to cheat is not even
necessary because ``it would only take two or three players
working in unison to defeat the other players who are not part
of the team.''\1\
---------------------------------------------------------------------------
\1\Letter from Shawn Henry, Assistant Director, Cyber Division,
Federal Bureau of Investigation, to Spencer Bachus, November 13, 2009.
---------------------------------------------------------------------------
Perhaps even more significant than the potential
undetectable theft of money from one participant in an online
peer-to-peer game like poker, the FBI fears that cheaters will
use online poker rooms to ``virtually wash money.''\2\ It has
described a simple money laundering scheme involving private
games with ``mules'' or ciphers. In this scenario, an
individual could create a private game or tournament (available
on almost every online poker site) with a number of phony
players guaranteed to win. In any given hand, the individual
could raise the pot to the maximum amount allowed and
subsequently fold before the hand is finished, allowing the
individual to transfer the money from his account to the mule
account (potentially several times). In other words, under the
guise of innocent participation in a friendly poker game with
friends, an individual could launder limitless sums of money.
---------------------------------------------------------------------------
\2\Id.
---------------------------------------------------------------------------
Just as there is considerable doubt whether H.R. 2267 will
prevent cheating or money laundering, there are questions
whether H.R. 2267's age and location verification mandates will
prevent minors from gambling online or ensure that bettors only
bet in jurisdictions that permit gambling. First, the FBI has
dismissed assertions by online vendors who say they have
technology solutions to validate the age or location of
potential players.\3\ Second, a federal district court judge
has found age and identity verification procedures either
unavailable or ineffective.\4\ Third, experts in the field of
online protection and identity verification mechanisms.\5\ And
fourth, evidence indicates that such safeguards, even when
implemented, do a poor job of preventing web site access to
restricted parties such as children.
---------------------------------------------------------------------------
\3\Id.
\4\See ACLU v. Gonzales, 478 F. Supp. 2d 775 (E.D. Pa. 2007).
\5\Fagan, Michael. Statement to the House Committee on Financial
Services. H.R. 2267, Internet Gambling Regulation, Consumer Protection,
and Enforcement Act, Hearing, July 21, 2010.
---------------------------------------------------------------------------
Even though the bill would inadequately guard against
cheating, money laundering and underage betting, some have said
that this bill could raise significant revenues to fund other
policy priorities. But that claim is specious too. Although it
is our view that the Federal government should not take
advantage of the young, the weak and the vulnerable in the name
of growing government, we learned during the legislative
hearing on this bill that the estimates of the revenues that
legalizing Internet gambling would supposedly generate are
significantly overstated. To raise the revenues that its
supporters tout ($42 billion over ten years), H.R. 2267 would
need to require complete federal preemption. The Joint
Committee on Taxation's most expansive of four different
estimates--$42 billion--is based on an assumption that ``no
State or tribal government will be permitted to limit federally
licensed Internet gambling operators from providing online
gambling services in their jurisdictions'' In other words,
legalizing Internet gambling will generate $42 billion only if
H.R. 2267's opt-out procedure--its principal State-protective
provision--is eviscerated. The Joint Committee on Taxation
estimate that is most closely based on the texts of H.R. 2267
and its companion tax measure, H.R. 4976, indicates that the
bills will generate just $10 billion in Federal revenue. This
estimate appears to assume that many States will choose to opt-
out in order to prevent the expansion of gambling on the
Internet. Ultimately though, given that this bill fails to
enforce laws against illegal sites, there will be little
incentive for gaming interests to set up a legal and taxed
site. In that case, the promised ``revenues'' are likely to be
illusory.
Considering that the social and economic harm done to
America's families and to young people from unlawful Internet
gambling is well-documented, we ask: is passing new legislation
to create a Federal right to gamble that has never existed in
our country's history--and addicting the Federal government to
Internet gambling taxes for more spending in the process--
really worth it? We urge our colleagues to see H.R. 2267 for
what it really represents--the largest expansion of gambling
ever proposed in Congress. We oppose its passage.
Spencer Bachus.
Randy Neugebauer.
J. Gresham Barrett.
Thaddeus G. McCotter.
Michael N. Castle.
Walter B. Jones.
Michele Bachmann.