Net gambling looks grim

A key Senate committee stacks the odds against online gambling by prohibiting states from legalizing Net wagers.

3 min read
A key Senate committee stacked the odds against online gambling today by prohibiting states from legalizing Net wagers.

Upon passing the Internet Gambling Prohibition Act this morning, the Senate Judiciary Committee made major changes to the bill, which now goes before the full Senate for debate and a final vote.

Sen. Jon Kyl's (R-Arizona) bill would completely overhaul the way gambling is currently regulated: that is, at the state level. Indeed, the Net mucks up jurisdictional boundaries when it comes to online wagers, but Kyl's bill would shift control to the federal government.

The amended version of the legislation threw out a provision noting that the federal law would not preempt state law. The original version of Kyl's bill left the door open for Net bets if the act was legal in both the state of origination and the jurisdiction in which the wager was actually accepted.

"That version was bad for Internet commerce as a whole because it meant that states had jurisdiction over the Internet, which is a global medium," said David Safavian, who represents the Interactive Services Association, a group fighting the bill.

He said although the change was good for e-commerce because it basically defines the Net as an interstate medium, it is not good for the gaming industry. If the bill passes as it is now written, states would not be able to legalize online wagering in the future, therefore the act would be illegal throughout the entire United States.

Despite opposition from pro-gaming groups, the committee also tacked on stricter fines for violation of the proposed law. Operators could get a $20,000 fine and four years in prison for accepting just one wager.

Rivals of the bill say it penalizes not only cyber-casinos, but also their patrons. Under the legislation, a "casual bettor" would get a $2,500 fine and six months in prison for betting on the Net.

The federal Wire Act already allows states to prosecute those who "knowingly use a wire communication facility for the transmission in interstate or foreign commerce of bets, wagers, or information assisting in the placing of bets or wagers." Currently it is unclear whether the Wire Act applies to the Internet. But groups such as the National Association for Attorneys General are pushing for Congress to pass the Kyl bill, which would update the act to include computer networks.

Although the senators unanimously consented to pass the bill out of committee today, they didn't actually vote. Even cosponsors of the original bill, such as Sen. Dianne Feinstein (D-California), opposed permanently taking away states' powers when it comes to regulating cyber-casinos. "She thought that was something that infringed on states' rights," said a Feinstein staffer.

Sen. Patrick Leahy (D-Vermont) was against some of the changes as well. "He has concerns about the bill. Now it is a straight prohibition. And for the first time it's making it illegal for individuals to make a bet," said David Carle, the senator's press secretary.

But some of the modifications were praised by proponents of Net gambling, although they still plan to derail the bill.

One amendment says only states' attorneys general or the U.S. attorney general can seek an injunction from a federal district court to shut down gambling sites. In addition, any injunction issued by a federal court will only apply within the state where the court was located. Previously, the bill said any state, local, or federal law agency could go after online casinos.

"This is good because in many of the existing lawsuits [involving Net gambling], the defendants have been trying to get them moved to federal court," said Sue Schneider, editor of Rolling Good Times OnLine.

For example, the president of the Philadelphia-based Interactive Gaming site was indicted in July for allegedly violating the court order banning him from taking bets from Missouri residents. He could face up to five years in prison or a $15,000 fine if found guilty. Under the old Kyl bill, every locality anywhere in the country could file such lawsuits.

Another positive change, Schneider said, is the deletion of a provision that said the gaming law would apply outside U.S. borders. However, the bill does require the Secretary of State and the Secretary of the Treasury to seek an international agreement that would permit global enforcement of the U.S. law.

The House has yet to take up the bill, which is not expected to pass this session. However, Congress is expected to vote on it next year, when the new session begins.