Internet Gaming Bill Receives Resistance in House Subcommittee Hearing - Tuesday 11th of April 2006

By Aaron Todd

Rep. Bob Goodlatte (R-Va.) brought legislation proposing restrictive measures on Internet gambling before the U.S. House of Representatives Judiciary Committee's Subcommittee on Crime, Terrorism, and Homeland Security on Wednesday afternoon.

H.R. 4777 would amend the Wire Act, modifying the wording in the law to include provisions for Internet gambling. It also prohibits gambling businesses from accepting credit card and electronic transfer deposits, and would require banks to deny customer payments to Internet gaming sites.

The bill received some support from the committee, but several members had tough questions for the congressman, who has brought the legislation up for the fourth time after failed attempts in 1997, 1999 and 2002.

"This bill will create a nightmare for financial institutions and enforcement efforts will easily be thwarted," said Rep. Robert C. Scott (D-Va.).

Since no Internet gambling sites are based in the United States, Scott wondered how this legislation would be effective. Instead, Scott suggested regulating the industry, allowing companies to base their operations in the U.S. so that customers who made the decision to gamble online would be assured that they would be paid if they won.

"These companies would be subject to U.S. law and could be taxed," said Congressman Scott, who suggested that a committee be formed to look into legalizing and regulating online casinos in the U.S. "I believe we should regulate Internet gambling, but we should do so effectively."

Rep. John Conyers, Jr. (D-Mich.), who is a member of the full Judiciary Committee but not the subcommittee, joined Scott in calling for regulation of the industry. He asked Goodlatte and Bruce Ohr, the Chief of the Organized Crime and Racketeering Section of the U.S. Department of Justice, tough questions about the bill, particularly regarding carve outs for the horse racing and state lottery industries.

"We're picking and choosing which gambling act to sanction and which won't be sanctioned," Congressman Conyers said. "Let's be real my friends. If we really want to control gambling, we must regulate it."

Ohr addressed the issue of carve out provisions in his opening statement, saying that the Justice Department generally supported the bill, but was concerned that those sections might weaken current law.

"The Department questions why, under the provisions of H.R. 4777, one industry will be able to accept interstate wagers while other industries that are also regulated by the states cannot," said Ohr.

But while being questioned by Conyers, Ohr changed his opinion, saying he believed that the bill did not create carve outs for the horse racing industry. Instead, he repeated Goodlatte's assertion that the bill does nothing to change the current legislation regarding interstate wagers on horse racing, though he was still concerned that the legislation might be construed as weakening the Justice Department's stance on the issue.

"We've got the Department of Justice representative telling us that what he's submitted is not accurate because he's talked to Representative Goodlatte and they've worked out the problem," Congressman Conyers said. "The Reno Justice Department believed that this bill had carve outs. The Ashcroft Justice Department believed that this bill had carve outs. The Gonzales Justice Department believed this bill had carve outs. And now the Ohr Justice Department does not?"

The question was never clearly answered, though it was clear that the Justice Department would prefer that the sections regarding horse racing and e-lotteries be eliminated from the language of the bill.

The record will be held open for seven days, as members of the subcommittee will have the opportunity to request additional information from the witnesses. After weighing the merits of the legislation, they may decide to vote on whether to recommend the bill to the entire Judiciary Committee, or they may choose not to act on the legislation. No second hearing on the legislation has been scheduled.

While the bill received resistance during the hearing, only three of the 15 members of the subcommittee were in attendance. Nine of the 10 republicans on the subcommittee, including Chairman Howard Coble (R-N.C.), have cosponsored the bill, while none of the six democrats appear as cosponsors.

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