Internet Gambling Legislation in the US

There have been 3 bills presented that would restrict Internet Gambling in the US. Each one of these legislations focuses on different aspects of online gaming, which we’ll discuss. The proposed US legislative bills are:

S 692 (Bill 474) Internet Gambling Prohibition Act of 1999 (Kyl).
HR 3125, Internet Gambling Prohibition Act of 1999 (Goodlatte).
HR 4419, Internet Gambling Funding Prohibition Act (Leach).

S 692 (Bill 474) Internet Gambling Prohibition Act of 1999 (Kyl)

Senate Bill 474, the Internet Gambling Prohibition Act . Proposed legislation to prohibit internet gambling presented by Sen. Jon Kyl, R-Ariz, Mrs. FEINSTEIN, Mr. GRAHAM, Mr. HUTCHINSON, Mr. GRASSLEY, Mr. JOHNSON, Mr. LIEBERMAN, Mr. GORTON, Mr. BRYAN, Mr. REID, Mr. ASHCROFT, and Mr. BOND).

S692 and Bill 474 were designed to change the Wire Act to include Internet gambling as an illegal communication activity, unless allowed by individual states. Because the gambling activity took place over wired communications systems, Kyl reasoned that it should fall under the Wire Act. The reasons given for the bill’s introduction were to prevent children from gambling, and to make it more difficult for addicted gamblers to have access to gambling opportunities.

The intent of these bills was said to make it illegal for a person to engage in the business of betting or wagering, or to place a bet or wager via the Internet. If found guilty of conducting this type of business, the person could imprisoned for up to four years, or fined no more than the greater of the amount received from bets or wagers or $20,000, or receive both penalties. The consumer or person who places a bet or wager could face imprisonment for up to six months, fined no more than the greater of the amount wagered or $2,500, or could receive both punishments.

The weakness of this line of thinking is obvious. First, children don’t have credit cards or access to computer equipment unless an adult or parent provides it. Credit card agreements make it an offense to allow a minor to use the credit card so the use of the credit card is a breach of the credit card agreement. Addicted gamblers may be a problem but they can visit any one of thousands of land based gambling casinos or racetracks any time they want. Do you ban all of these businesses as well? The bill is still hanging around the legislature looking for takers but opposing attitudes from prominent politicians is helping to get it dropped it.

HR 3125, Internet Gambling Prohibition Act of 1999 (Goodlatte)

Representative Bob Goodlatte (R-VA) presented this bill (the Internet Gambling Prohibition Act of 2000) to prohibit Internet gambling in the US. The bill identifies wagers or bets to mean the staking or risking by any person, of something of value upon the outcome of a contest. It includes the purchase of a chance or opportunity to win a lottery or other prize.

Interestingly, it specifically excludes securities transactions performed online, via the Internet such as speculative futures contracts, penny stocks, International currency exchanges and stock options regardless of the amount of money or the risk involved.

Consider the risk involved in stock and currency speculation and the collective and individual harm it may produce. You can speculate on any stock you like and buy as much as you can afford, or can’t afford, even on credit in a margin account. The stock market itself is a digital market of chance and many people have won or lost huge amounts of money in speculative transactions. If it’s okay to lose millions of dollars on speculation in money markets, why is betting a hundred dollars at an online casino any worse? Are their laws for the economic elite and a separate set of laws for the average working stiff?

It was also said the bill would allow online lottery ticket sales by state governments even though statistics show that tickets are purchased by poor people who really can’t afford that type of gambling.

This bill was basically a reiteration of the Wire Act of 1961, which prohibited any form of gaming activity over an electronic communications line. It has never been certain that Internet gaming was an infraction on that Act. This rework though, set aside specific groups who would be exempt from the law. The law also put the onus on Internet service providers to monitor and control any gaming related activity conducted on their servers. Would the monitoring of site activities by ISP’s violate privacy laws or be considered wire-tapping? Do ISPs even have the ability to monitor digital activity that is often encrypted?

Apparently, even the major credit card companies have suggested the bill would be a restraint of trade infraction and would likely not support it. The American Gaming Association is taking a wait and see approach to it and that doesn’t say much for its legal or ethical credibility.

Despite Goodlatte’s optimism, most onlookers saw HR3125 as flawed. As it turned out, the Wire Act could not be applied to Internet Gambling and HR3125 failed as it fell into disfavor in the US Senate.

HR 4419, Internet Gambling Funding Prohibition Act (Leach)

Bill HR 4419, the Internet Gambling Funding Prohibition Act launched a different attack on Internet gaming. It sought to make the use of financial services illegal with respect to Internet gaming activities. Since this type of gambling uses credit cards, wire transfers and other bank products and services, prohibiting their use could cripple online gaming for a while. Another feature of Bill HR4419 was to make collection of Internet gambling debts unenforceable.

However, as you know, Internet entrepreneurs are creative and many alternate Internet currencies are presently being produced. The connection between the banks, transaction providers credit card companies and these new digital cash providers is said to be easy, so players would be back to their favorite online casinos in no time. The financial services industry today is International in scope and would not likely stand for excessive manipulation by individual countries or politicians for what they would see as trivial arguments

Australian Gambling Legislation – The Interactive Gambling Bill 2001

A stranger but equally poor piece of legislation has passed in Australia. The Internet Industry Association have warned of the flaws of the proposed Interactive Gambling Bill, which could lead to million dollar charges being laid against licensed operators in Australia.

The Interactive Gambling Bill 2001 makes it an offense for Australian online casinos to provide gambling services to Australians. For foreign gaming operators, Internet protocol addresses cannot always be reliably determined, so it would be very difficult to know whether a player registering at their casino was in Australia or New Zealand for instance. The Bill actually makes it possible for every online gaming operator in the world to be charged and prosecuted. However, Australians are free to solicit and accept gamblers from overseas to play in Australian owned and operated gaming houses.

The legislation brought forth by the Federal Government of Australia, makes Australian online betting sites appear to be International predators not playing on a fair trading basis in the International community and promotes irresponsible and unlawful activity by Australian citizens. The legislation makes it legal for Australian banks to renege on their customer’s gambling debts but allows them to collect their winnings. Does that sound like a good plan for Australian business development?

Similar to the US, Aussie political pundits have suggested that problem gambling among Australians is the reason for prohibition. It is said that in Australia, “pokies” or video poker machines almost outnumber people and have become a social problem.

The poor management of the “pokies” then becomes an excuse for Aussie politicians to throw a ban on foreign online gaming enterprise and use propaganda for their own political gain. There is no mention of banning the “pokie” machines. Australian land based gaming and sports betting operations are unrestricted in their growth and have no liability for the nature of their business. The legislation places no prohibition on Australian land-based gambling enterprises, who, after all were cited as the generators of the original social gambling problem. Foreigners are being blamed and would be prosecuted for an Australian based problem. This doesn’t bring Australia closer to the rest of the world.

The net effect of the misnamed and hypocritical Interactive Gambling Bill 2001, is resentment against Australians and a distrust of Australian politicians. The bill is more about preventing foreign business from tapping into Australia’s gambling market.

Trying to enforce the law internationally is likely to evolve into a headache for diplomats and produce a lot of red tape and administrative costs for Australian business, which could then creep into other areas of Australia’s economy. After all, if banning foreign competitors in one economic area works, Aussie politicians may see it working in other areas of trade as well. Banning is always an insidious political process that gets out of control. Australia should have more empowerment and confidence in itself than to resort to such a weak piece of legislation.

Conclusion on Internet Gambling Law

Politicians around the world see law and the Internet as an easy opportunity or forum for posturing and political self-promotion. Some wish to override personal rights and international trade agreements, and apply restrictive laws across a nation, its states, territories, provinces or even beyond its national borders. Blind prohibition is never wise, especially not in an age of electronic communication and services, where open trade is necessary. Portraying foreign business people as criminals without conscience or integrity while allowing domestic citizens to carry on trade in the same trade is hypocritical and will lead to greater economic problems.

Fortunately, the proposed legislation in the US and Australia are full of legal holes, irritate business people and consumers alike. Flawed legislation won’t have the legs to make it to the finish line so we can see personal and economic freedom coming from behind to win this race.

Contributing Writer: Gord Collins

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