Internet Gambling Prohibition and Enforcement Legislation 1999-2006

Issues of States Rights

Summary: Between 1999 and 2006, the Republican-controlled House of Representatives

considered several bills aimed at stopping offshore Internet gambling. Some of these bills
amended the Wire Act (18 U.S.C. 1084) and created enforcement mechanisms against offshore
operators; these were introduced by Rep. Bob Goodlatte (R-VA). Others did not amend the Wire
Act, but simply prohibited the processing of payments for gambling which was illegal under
other statutes; these were introduced by then-Rep. Jim Leach (R-IA) and others. Every
Goodlatte bill would have made state-licensed intrastate bets legal under the Wire Act, and every
Leach-style bill considered by the House exempted from its enforcement mechanism statelicensed intrastate gaming. The Unlawful Internet Gambling Enforcement Act, which pursued
the Leach approach, exempted state-licensed intrastate bets from its enforcement mechanism.
106th Congress: In October of 1999, Rep. Goodlatte introduce H.R. 3125, which was
introduced as a companion bill to then-Sen. Jon Kyls S. 692, which had passed the Senate (and
which also would have amended the Wire Act to make state licensed intrastate bets legal). H.R.
3125 would have made the Wire Act clearly apply to non-sports betting, but it would have
exempted state-licensed intrastate betting. H.R. 3125(f)(1) denotes the exceptions:
(f) APPLICABILITY.
(1) IN GENERAL.Subject to paragraph (2), the prohibition in this section does not apply to
Subparagraph (C) is the exception for state-licensed intrastate bets.
(C) any otherwise lawful bet or wager that is placed, received, or otherwise made wholly
intrastate, or the sending ,receiving, or inviting of information assisting in the placing of such a
bet or wager, if such bet or wager, or the transmission of such information, as applicable is
(i) expressly authorized, and licensed or regulated by the State in which such bet or wager is
initiated and received, under applicable Federal and such States laws; and
(ii) placed on a closed-loop subscriber based service;
107th Congress: Rep. Goodlattes Wire Act bill in the 107th Congress, H.R. 3215, structured the
state-licensed intrastate exemption differently. It would have created a new Section 1084(d):
(d) Nothing in this section prohibits the use of a communication facility for the transmission
of bets or wagers or information assisting in the placing of bets or wagers, if
(1) at the time the transmission occurs, the individual or entity placing the bets or wagers
or in- formation assisting in the placing of bets or wagers, the gambling business, and any
facility or support service processing those bets or wagers is physically located in the same
State, and the State has a se- cure and effective customer verification and age
verification system to assure compliance with age and residence requirements, and for

class II or class III gaming under the Indian Gaming Regulatory Act, are physically
located on Indian lands within that State;
(2) the State or Tribe has explicitly authorized such bets and wagers;
(3) the State has explicitly authorized and licensed the operation of the gambling
business, any facility processing the bets and wagers, and the sup- port service within its
borders or the Tribe has ex- plicitly authorized and licensed the operation of such gambling
business, any facility processing the bets and wagers, and the support service on Indian
lands within its jurisdiction;
(The paragraph goes on with some additional qualifications specific to Indian gaming.)
Rep. Leachs bill in that Congress, H.R. 556, has a very simple exemption for state-licensed
activity as well. H.R. 556 (b)(1) provides the definition of bets or wagers for the purpose of
that statute. (b)(1)(E) lists the various activities the definition should not include, and the last
one is:
ix. any lawful transaction with a business licensed or authorized by a state.
108th Congress: In the 108th Congress, Rep. Goodlatte did not introduce a bill in this area. Rep.
Leach introduced H.R. 21, which was reported by the House Financial Services Committee and
referred sequentially to the House Judiciary Committee. Rep. Chris Cannon (R-UT) offered an
amendment to strike the exemptions for horse racing and state-licensed interstate bets, which was
adopted. In response, Rep. Bachus introduced H.R. 2143, which was identical to H.R. 21, except
it lacked the civil and criminal penalties that caused the referral to the Judiciary Committee.
The state-licensed exception was identical to the one in H.R. 556.
109th Congress: Rep. Goodlatte introduced H.R. 4777, which once again amended the Wire
Act. Its exemption for state-licensed intrastate was virtually identical the one in H.R. 3215 from
the 107th Congress. It created a new 1084(d)
d) Nothing in this section prohibits the use of a communication facility for the transmission of bets or
wagers or information assisting in the placing of bets or wagers, if
(1)at the time the transmission occurs, the individual or entity placing the bets or wagers or
information assisting in the placing of bets or wagers, the gambling business, and any facility or
support service processing those bets or wagers is physically located in the same State, and the
State has a secure and effective customer verification and age verification system to assure
compliance with age and residence requirements, and for class II or class III gaming under the
Indian Gaming Regulatory Act, are physically located on Indian lands within that State;
(2)the State or Tribe has explicitly authorized such bets and wagers;
(3)the State has explicitly authorized and licensed the operation of the gambling business, any
facility processing the bets and wagers, and the support service within its borders or the Tribe has
explicitly authorized and licensed the operation of such gambling business, any facility processing
the bets and wagers, and the support service on Indian lands within its jurisdiction;

(Again the Section has additional provisions related to Indian Gaming.)

Rep. Leach also introduced H.R. 4411, which this time contained a more comprehensive
exemption for state licensed intrastate bets. H.R. 4411 would have created a new 5362 and
paragraph (10) defines unlawful internet gambling. In that definition is:
(B) INTRASTATE TRANSACTIONS.The term unlawful Internet gambling shall not include
placing, receiving, or otherwise transmitting a bet or wager where
(i) the bet or wager is initiated and received or otherwise made exclusively with in a single
State;
(ii) the bet or wager and the method by which the bet or wager is initiated and received or
otherwise made is expressly authorized by and placed in accordance with the laws of such
State, and the State law or regulations include
(I) age and location verification requirements reasonably designed to block access to
minors and persons located out of such State; and
(II) appropriate data security standards to prevent unauthorized access by any person
whose age and current location has not been verified in accordance with such States
law or regulations; and
(iii) the bet or wager does not violate any provision of the
(I) Interstate Horseracing Act;
(II) Professional and Amateur Sports Protection Act;
(III) Gambling Devices Transportation Act; or
(IV) Indian Gaming Regulatory Act.
Ultimately, the two bills were married into one bill (H.R. 4411) that combined the Goodlatte
Wire Act Language with the Leach enforcement provisions. The state-licensed intrastate
exemption from the Goodlatte bill was included. H.R. 4411 passed the House.
At the end of the 109th Congress, President Bush signed into law the Unlawful Internet Gambling
Enforcement Act, which was nearly identical to H.R. 4411 as reported by the committee. That
law did not amend the Wire Act, but it contained the same 5362(10) definition of unlawful
internet gambling and it exempted from that definition state-licensed intrastate wagers.
(B) Intrastate transactions. The term unlawful Internet gambling does not include placing,
receiving, or otherwise transmitting a bet or wager where
(i)the bet or wager is initiated and received or otherwise made exclusively within a single
State;
(ii)the bet or wager and the method by which the bet or wager is initiated and received or
otherwise made is expressly authorized by and placed in accordance with the laws of such
State, and the State law or regulations include
(I)age and location verification requirements reasonably designed to block access to
minors and persons located out of such State; and
(II)appropriate data security standards to prevent unauthorized access by any person
whose age and current location has not been verified in accordance with such States law
or regulations; and

(iii)the bet or wager does not violate any provision of

(I)the Interstate Horseracing Act of 1978 (15 U.S.C. 3001 et seq.);
(II)chapter 178 of title 28 (commonly known as the Professional and Amateur Sports
Protection Act);
(III)the Gambling Devices Transportation Act (15 U.S.C. 1171 et seq.); or
(IV)the Indian Gaming Regulatory Act (25 U.S.C. 2701 et seq.).
The House passed many different variations of Internet gambling prohibitions, but every one that
received serious consideration in the House respected states rights by exempting from its
prohibition or enforcement mechanism state-licensed intrastate bets.