[House Report 106-655]
[From the U.S. Government Publishing Office]
106th Congress Report
HOUSE OF REPRESENTATIVES
2d Session 106-655, Part I
======================================================================
INTERNET GAMBLING PROHIBITION ACT OF 2000
_______
June 7, 2000.--Ordered to be printed
_______
Mr. McCollum, from the Committee on the Judiciary, submitted the
following
R E P O R T
together with additional and
DISSENTING VIEWS
[To accompany H.R. 3125]
[Including cost estimate of the Congressional Budget Office]
The Committee on the Judiciary, to whom was referred the
bill (H.R. 3125) to prohibit Internet gambling, and for other
purposes, having considered the same, reports favorably thereon
with an amendment and recommends that the bill as amended do
pass.
TABLE OF CONTENTS
Page
The Amendment.............................................. 2
Purpose and Summary........................................ 10
Background and Need for the Legislation.................... 11
Hearings................................................... 12
Committee Consideration.................................... 12
Votes of the Committee..................................... 12
Committee Oversight Findings............................... 17
Committee on Government Reform Findings.................... 17
New Budget Authority and Tax Expenditures.................. 17
Congressional Budget Office Cost Estimate.................. 17
Constitutional Authority Statement......................... 21
Section-by-Section Analysis and Discussion................. 21
Changes in Existing Law Made by the Bill, as Reported...... 31
Additional Views........................................... 45
Dissenting Views........................................... 47
The amendment is as follows:
Strike out all after the enacting clause and insert in lieu
thereof the following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Internet Gambling Prohibition Act of
2000''.
SEC. 2. PROHIBITION ON INTERNET GAMBLING.
(a) In General.--Chapter 50 of title 18, United States Code, is
amended by adding at the end the following:
``Sec. 1085. Internet gambling
``(a) Definitions.--In this section the following definitions
apply:
``(1) Bets or wagers.--The term `bets or wagers'--
``(A) means the staking or risking by any person of
something of value upon the outcome of a contest of
others, a sporting event, or a game predominantly
subject to chance, upon an agreement or understanding
that the person or another person will receive
something of greater value than the amount staked or
risked in the event of a certain outcome;
``(B) includes the purchase of a chance or
opportunity to win a lottery or other prize (which
opportunity to win is predominantly subject to chance);
``(C) includes any scheme of a type described in
section 3702 of title 28; and
``(D) does not include--
``(i) a bona fide business transaction
governed by the securities laws (as that term
is defined in section 3(a)(47) of the
Securities Exchange Act of 1934 (15 U.S.C.
78c(a)(47))) for the purchase or sale at a
future date of securities (as that term is
defined in section 3(a)(10) of the Securities
Exchange Act of 1934 (15 U.S.C. 78c(a)(10)));
``(ii) a transaction on or subject to the
rules of a contract market designated pursuant
to section 5 of the Commodity Exchange Act (7
U.S.C. 7);
``(iii) a contract of indemnity or
guarantee;
``(iv) a contract for life, health, or
accident insurance; or
``(v) participation in a simulation sports
game or an educational game or contest that--
``(I) is not dependent solely on
the outcome of any single sporting
event or nonparticipant's singular
individual performance in any single
sporting event;
``(II) has an outcome that reflects
the relative knowledge and skill of the
participants with such outcome
determined predominantly by accumulated
statistical results of sporting events
and nonparticipants accumulated
individual performances therein; and
``(III) offers a prize or award to
a participant that is established in
advance of the game or contest and is
not determined by the number of
participants or the amount of any fees
paid by those participants.
``(2) Closed-loop subscriber-based service.--The term
`closed-loop subscriber-based service' means any information
service or system that uses--
``(A) a device or combination of devices--
``(i) expressly authorized and operated in
accordance with the laws of a State,
exclusively for placing, receiving, or
otherwise making a bet or wager described in
subsection (f)(1)(B); and
``(ii) by which a person located within any
State must subscribe and be registered with the
provider of the wagering service by name,
address, and appropriate billing information to
be authorized to place, receive, or otherwise
make a bet or wager, and must be physically
located within that State in order to be
authorized to do so;
``(B) an effective customer verification and age
verification system, expressly authorized and operated
in accordance with the laws of the State in which it is
located, to ensure that all applicable Federal and
State legal and regulatory requirements for lawful
gambling are met; and
``(C) appropriate data security standards to
prevent unauthorized access by any person who has not
subscribed or who is a minor.
``(3) Foreign jurisdiction.--The term `foreign
jurisdiction' means a jurisdiction of a foreign country or
political subdivision thereof.
``(4) Gambling business.--The term `gambling business'
means--
``(A) a business that is conducted at a gambling
establishment, or that--
``(i) involves--
``(I) the placing, receiving, or
otherwise making of bets or wagers; or
``(II) the offering to engage in
the placing, receiving, or otherwise
making of bets or wagers;
``(ii) involves 1 or more persons who
conduct, finance, manage, supervise, direct, or
own all or part of such business; and
``(iii) has been or remains in
substantially continuous operation for a period
in excess of 10 days or has a gross revenue of
$2,000 or more from such business during any
24-hour period; and
``(B) any soliciting agent of a business described
in subparagraph (A).
``(5) Information assisting in the placing of a bet or
wager.--The term `information assisting in the placing of a bet
or wager'--
``(A) means information that is intended by the
sender or recipient to be used by a person engaged in
the business of betting or wagering to place, receive,
or otherwise make a bet or wager; and
``(B) does not include--
``(i) information concerning parimutuel
pools that is exchanged exclusively between or
among 1 or more racetracks or other parimutuel
wagering facilities licensed by the State or
approved by the foreign jurisdiction in which
the facility is located, and 1 or more
parimutuel wagering facilities licensed by the
State or approved by the foreign jurisdiction
in which the facility is located, if that
information is used only to conduct common pool
parimutuel pooling under applicable law;
``(ii) information exchanged exclusively
between or among 1 or more racetracks or other
parimutuel wagering facilities licensed by the
State or approved by the foreign jurisdiction
in which the facility is located, and a support
service located in another State or foreign
jurisdiction, if the information is used only
for processing bets or wagers made with that
facility under applicable law;
``(iii) information exchanged exclusively
between or among 1 or more wagering facilities
that are licensed and regulated by the State in
which each facility is located, and any support
service, wherever located, if the information
is used only for the pooling or processing of
bets or wagers made by or with the facility or
facilities under each State's applicable law;
``(iv) any news reporting or analysis of
wagering activity, including odds, racing or
event results, race and event schedules, or
categories of wagering; or
``(v) any posting or reporting of any
educational information on how to make a bet or
wager or the nature of betting or wagering.
``(6) Interactive computer service.--The term `interactive
computer service' means any information service, system, or
access software provider that operates in, or uses a channel or
instrumentality of, interstate or foreign commerce to provide
or enable access by multiple users to a computer server, which
includes the transmission, storage, retrieval, hosting,
linking, formatting, or translation of a communication made by
another person, and including specifically a service, system,
or access software provider that--
``(A) provides access to the Internet; or
``(B) is engaged in the business of providing an
information location tool (which means a service that
refers or links users to an online location, including
a directory, index, reference, pointer, or hypertext
link).
``(7) Interactive computer service provider.--The term
`interactive computer service provider' means any person that
provides an interactive computer service, to the extent that
such person offers or provides such service.
``(8) Internet.--The term `Internet' means the
international computer network of both Federal and non-Federal
interoperable packet switched data networks.
``(9) Person.--The term `person' means any individual,
association, partnership, joint venture, corporation (or any
affiliate of a corporation), State or political subdivision
thereof, department, agency, or instrumentality of a State or
political subdivision thereof, or any other government,
organization, or entity (including any governmental entity (as
defined in section 3701(2) of title 28)).
``(10) Private network.--The term `private network' means a
communications channel or channels, including voice or computer
data transmission facilities, that use either--
``(A) private dedicated lines; or
``(B) the public communications infrastructure, if
the infrastructure is secured by means of the
appropriate private communications technology to
prevent unauthorized access.
``(11) State.--The term `State' means a State of the United
States, the District of Columbia, the Commonwealth of Puerto
Rico, or a commonwealth, territory, or possession of the United
States.
``(12) Subscriber.--The term `subscriber'--
``(A) means any person with a business relationship
with the interactive computer service provider through
which such person receives access to the system,
service, or network of that provider, even if no formal
subscription agreement exists; and
``(B) includes registrants, students who are
granted access to a university system or network, and
employees or contractors who are granted access to the
system or network of their employer.
``(13) Soliciting agent.--The term `soliciting agent' means
any agent who knowingly solicits for a gambling business
described in paragraph (4)(A) of this subsection.
``(b) Internet Gambling.--
``(1) Prohibition.--Subject to subsection (f), it shall be
unlawful for a person engaged in a gambling business knowingly
to use the Internet or any other interactive computer service--
``(A) to place, receive, or otherwise make a bet or
wager; or
``(B) to send, receive, or invite information
assisting in the placing of a bet or wager.
``(2) Penalties.--A person engaged in a gambling business
who violates this section shall be--
``(A) fined in an amount equal to not more than the
greater of--
``(i) the total amount that such person bet
or wagered, or placed, received, or accepted in
bets or wagers, as a result of engaging in that
business in violation of this section; or
``(ii) $20,000;
``(B) imprisoned not more than 4 years; or
``(C) both.
``(3) Permanent injunctions.--Upon conviction of a person
under this section, the court may enter a permanent injunction
enjoining such person from placing, receiving, or otherwise
making bets or wagers or sending, receiving, or inviting
information assisting in the placing of bets or wagers.
``(c) Civil Remedies.--
``(1) Jurisdiction.--The district courts of the United
States shall have original and exclusive jurisdiction to
prevent and restrain violations of this section by issuing
appropriate orders in accordance with this section, regardless
of whether a prosecution has been initiated under this section.
``(2) Proceedings.--
``(A) Institution by federal government.--
``(i) In general.--The United States may
institute proceedings under this subsection to
prevent or restrain a violation of this
section.
``(ii) Relief.--Upon application of the
United States under this subparagraph, the
district court may enter a temporary
restraining order or an injunction against any
person to prevent or restrain a violation of
this section if the court determines, after
notice and an opportunity for a hearing, that
there is a substantial probability that such
violation has occurred or will occur.
``(B) Institution by state attorney general.--
``(i) In general.--The attorney general of
a State (or other appropriate State official)
in which a violation of this section allegedly
has occurred or will occur, after providing
written notice to the United States, may
institute proceedings under this subsection to
prevent or restrain the violation.
``(ii) Relief.--Upon application of the
attorney general (or other appropriate State
official) of an affected State under this
subparagraph, the district court may enter a
temporary restraining order or an injunction
against any person to prevent or restrain a
violation of this section
if the court determines, after notice and an
opportunity for a hearing, that there is a
substantial probability that such violation has
occurred or will occur.
``(C) Indian lands.--Notwithstanding subparagraphs
(A) and (B), for a violation that is alleged to have
occurred, or may occur, on Indian lands (as that term
is defined in section 4 of the Indian Gaming Regulatory
Act (25 U.S.C. 2703))--
``(i) the United States shall have the
enforcement authority provided under
subparagraph (A); and
``(ii) the enforcement authorities
specified in an applicable Tribal-State compact
negotiated under section 11 of the Indian
Gaming Regulatory Act (25 U.S.C. 2710) shall be
carried out in accordance with that compact.
``(D) Expiration.--Any temporary restraining order
or preliminary injunction entered pursuant to
subparagraph (A) or (B) shall expire if, and as soon
as, the United States, or the attorney general (or
other appropriate State official) of the State, as
applicable, notifies the court that issued the order or
injunction that the United States or the State, as
applicable, will not seek a permanent injunction.
``(3) Expedited proceedings.--
``(A) In general.--In addition to any proceeding
under paragraph (2), a district court may, in exigent
circumstances, enter a temporary restraining order
against a person alleged to be in violation of this
section upon application of the United States under
paragraph (2)(A), or the attorney general (or other
appropriate State official) of an affected State under
paragraph (2)(B), without notice and the opportunity
for a hearing as provided in rule 65(b) of the Federal
Rules of Civil Procedure (except as provided in
subsection (d)(3)), if the United States or the State,
as applicable, demonstrates that there is probable
cause to believe that the use of the Internet or other
interactive computer service at issue violates this
section.
``(B) Hearings.--A hearing requested concerning an
order entered under this paragraph shall be held at the
earliest practicable time.
``(d) Interactive Computer Service Providers.--
``(1) Immunity from liability for use by another.--
``(A) In general.--An interactive computer service
provider described in subparagraph (B) shall not be
liable, under this section or any other provision of
Federal or State law prohibiting or regulating gambling
or gambling-related activities, for the use of its
facilities or services by another person to engage in
Internet gambling activity or advertising or promotion
of Internet gambling activity that violates such law--
``(i) arising out of any transmitting,
routing, or providing of connections for
gambling-related material or activity
(including intermediate and temporary storage
in the course of such transmitting, routing, or
providing connections) by the provider, if--
``(I) the material or activity was
initiated by or at the direction of a
person other than the provider;
``(II) the transmitting, routing,
or providing of connections is carried
out through an automatic process
without selection of the material or
activity by the provider;
``(III) the provider does not
select the recipients of the material
or activity, except as an automatic
response to the request of another
person; and
``(IV) the material or activity is
transmitted through the system or
network of the provider without
modification of its content; or
``(ii) arising out of any gambling-related
material or activity at an online site residing
on a computer server owned, controlled, or
operated by or for the provider, or arising out
of referring or linking users to an online
location containing such material or activity,
if the material or activity was initiated by or
at the direction of a person other than the
provider, unless the provider fails to take
expeditiously, with respect to the particular
material or activity at issue, the actions
described in paragraph (2)(A) following the
receipt by the provider of a notice described
in paragraph (2)(B).
``(B) Eligibility.--An interactive computer service
provider is described in this subparagraph only if the
provider--
``(i) maintains and implements a written or
electronic policy that requires the provider to
terminate the account of a subscriber of its
system or network expeditiously following the
receipt by the provider of a notice described
in paragraph (2)(B) alleging that such
subscriber has violated or is violating this
section; and
``(ii) with respect to the particular
material or activity at issue, has not
knowingly permitted its computer server to be
used to engage in activity that the provider
knows is prohibited by this section, with the
specific intent that such server be used for
such purpose.
``(2) Notice to interactive computer service providers.--
``(A) In general.--If an interactive computer
service provider receives from a Federal or State law
enforcement agency, acting within its authority and
jurisdiction, a written or electronic notice described
in subparagraph (B), that a particular online site
residing on a computer server owned, controlled, or
operated by or for the provider is being used by
another person to violate this section, the provider
shall expeditiously--
``(i) remove or disable access to the
material or activity residing at that online
site that allegedly violates this section; or
``(ii) in any case in which the provider
does not control the site at which the subject
material or activity resides, the provider,
through any agent of the provider designated in
accordance with section 512(c)(2) of title 17,
or other responsible identified employee or
contractor--
``(I) notify the Federal or State
law enforcement agency that the
provider is not the proper recipient of
such notice; and
``(II) upon receipt of a subpoena,
cooperate with the Federal or State law
enforcement agency in identifying the
person or persons who control the site.
``(B) Notice.--A notice is described in this
subparagraph only if it--
``(i) identifies the material or activity
that allegedly violates this section, and
alleges that such material or activity violates
this section;
``(ii) provides information reasonably
sufficient to permit the provider to locate
(and, as appropriate, in a notice issued
pursuant to paragraph (3)(A) to block access
to) the material or activity;
``(iii) is supplied to any agent of a
provider designated in accordance with section
512(c)(2) of title 17, if information regarding
such designation is readily available to the
public;
``(iv) provides information that is
reasonably sufficient to permit the provider to
contact the law enforcement agency that issued
the notice, including the name of the law
enforcement agency, and the name and telephone
number of an individual to contact at the law
enforcement agency (and, if available, the
electronic mail address of that individual);
and
``(v) declares under penalties of perjury
that the person submitting the notice is an
official of the law enforcement agency
described in clause (iv).
``(3) Injunctive relief.--
``(A) In general.--The United States, or a State
law enforcement agency acting within its authority and
jurisdiction, may, not less than 24 hours following the
issuance to an interactive computer service provider of
a notice described in paragraph (2)(B), in a civil
action, obtain a temporary restraining order, or an
injunction to prevent the use of the interactive
computer service by another person in violation of this
section.
``(B) Limitations.--Notwithstanding any other
provision of this section, in the case of any
application for a temporary restraining order or an
injunction against an interactive computer service
provider described in paragraph (1)(B) to prevent a
violation of this section--
``(i) arising out of activity described in
paragraph (1)(A)(i), the injunctive relief is
limited to--
``(I) an order restraining the
provider from providing access to an
identified subscriber of the system or
network of the interactive computer
service provider, if the court
determines that there is probable cause
to believe that such subscriber is
using that access to violate this
section (or to engage with another
person in a communication that violates
this section), by terminating the
specified account of that subscriber;
and
``(II) an order restraining the
provider from providing access, by
taking reasonable steps specified in
the order to block access, to a
specific, identified, foreign online
location;
``(ii) arising out of activity described in
paragraph (1)(A)(ii), the injunctive relief is
limited to--
``(I) the orders described in
clause (i)(I);
``(II) an order restraining the
provider from providing access to the
material or activity that violates this
section at a particular online site
residing on a computer server operated
or controlled by the provider; and
``(III) such other injunctive
remedies as the court considers
necessary to prevent or restrain access
to specified material or activity that
is prohibited by this section at a
particular online location residing on
a computer server operated or
controlled by the provider, that are
the least burdensome to the provider
among the forms of relief that are
comparably effective for that purpose.
``(C) Considerations.--The court, in determining
appropriate injunctive relief under this paragraph,
shall consider--
``(i) whether such an injunction, either
alone or in combination with other such
injunctions issued, and currently operative,
against the same provider would significantly
(and, in the case of relief under subparagraph
(B)(ii), taking into account, among other
factors, the conduct of the provider,
unreasonably) burden either the provider or the
operation of the system or network of the
provider;
``(ii) whether implementation of such an
injunction would be technically feasible and
effective, and would not materially interfere
with access to lawful material at other online
locations;
``(iii) whether other less burdensome and
comparably effective means of preventing or
restraining access to the illegal material or
activity are available; and
``(iv) the magnitude of the harm likely to
be suffered by the community if the injunction
is not granted.
``(D) Notice and ex parte orders.--Injunctive
relief under this paragraph shall not be available
without notice to the service provider and an
opportunity for such provider to appear before the
court, except for orders ensuring the preservation of
evidence or other orders having no material adverse
effect on the operation of the communications network
of the service provider.
``(4) Advertising or promotion of non-internet gambling.--
``(A) Definitions.--In this paragraph:
``(i) Conducted.--With respect to a
gambling activity, that activity is `conducted'
in a State if the State is the State in which
the gambling establishment (as defined in
section 1081) that offers the gambling activity
being advertised or promoted is physically
located.
``(ii) Non-internet gambling activity.--The
term `non-Internet gambling activity' means--
``(I) a gambling activity in which
the placing of the bet or wager is not
conducted by the Internet; or
``(II) a gambling activity to which
the prohibitions of this section do not
apply.
``(B) Immunity from liability for use by another.--
``(i) In general.--An interactive computer
service provider described in clause (ii) shall
not be liable, under any provision of Federal
or State law prohibiting or regulating gambling
or gambling-related activities, or under any
State law prohibiting or regulating advertising
and promotional activities, for--
``(I) content, provided by another
person, that advertises or promotes
non-Internet gambling activity that
violates such law (unless the provider
is engaged in the business of such
gambling), arising out of any of the
activities described in paragraph
(1)(A) (i) or (ii); or
``(II) content, provided by another
person, that advertises or promotes
non-Internet gambling activity that is
lawful under Federal law and the law of
the State in which such gambling
activity is conducted.
``(ii) Eligibility.--An interactive
computer service is described in this clause
only if the provider--
``(I) maintains and implements a
written or electronic policy that
requires the provider to terminate the
account of a subscriber of its system
or network expeditiously following the
receipt by the provider of a notice
described in paragraph (2)(B) alleging
that such subscriber maintains a
website on a computer server controlled
or operated by the provider for the
purpose of engaging in advertising or
promotion of non-Internet gambling
activity prohibited by a Federal law or
a law of the State in which such
activity is conducted;
``(II) with respect to the
particular material or activity at
issue, has not knowingly permitted its
computer server to be used to engage in
the advertising or promotion of non-
Internet gambling activity that the
provider knows is prohibited by a
Federal law or a law of the State in
which the activity is conducted, with
the specific intent that such server be
used for such purpose; and
``(III) at reasonable cost, offers
residential customers of the provider's
Internet access service, if the
provider provides Internet access
service to such customers, computer
software, or another filtering or
blocking system that includes the
capability of filtering or blocking
access by minors to online Internet
gambling sites that violate this
section.
``(C) Notice to interactive computer service
providers.--
``(i) Notice from federal law enforcement
agency.--If an interactive computer service
provider receives from a Federal law
enforcement agency, acting within its authority
and jurisdiction, a written or electronic
notice described in paragraph (2)(B), that a
particular online site residing on a computer
server owned, controlled, or operated by or for
the provider is being used by another person to
advertise or promote non-Internet gambling
activity that violates a Federal law
prohibiting or regulating gambling or gambling-
related activities, the provider shall
expeditiously take the actions described in
paragraph (2)(A) (i) or (ii) with respect to
the advertising or promotion identified in the
notice.
``(ii) Notice from state law enforcement
agency.--If an interactive computer service
provider receives from a State law enforcement
agency, acting within its authority and
jurisdiction, a written or electronic notice
described in paragraph (2)(B), that a
particular online site residing on a computer
server owned, controlled, or operated by or for
the provider is being used by another person to
advertise or promote non-Internet gambling
activity that is conducted in that State and
that violates a law of that State prohibiting
or regulating gambling or gambling-related
activities, the provider shall expeditiously
take the actions described in paragraph (2)(A)
(i) or (ii) with respect to the advertising or
promotion identified in the notice.
``(D) Injunctive relief.--The United States, or a
State law enforcement agency, acting within its
authority and jurisdiction, may, not less than 24 hours
following the issuance to an interactive computer
service provider of a notice described in paragraph
(2)(B), in a civil action, obtain a temporary
restraining order, or an injunction, to prevent the use
of the interactive computer service by another person
to advertise or promote non-Internet gambling activity
that violates a Federal law, or a law of the State in
which such activity is conducted that prohibits or
regulates gambling or gambling-related activities, as
applicable. The procedures described in paragraph
(3)(D) shall apply to actions brought under this
subparagraph, and the relief in such actions shall be
limited to--
``(i) an order requiring the provider to
remove or disable access to the advertising or
promotion of non-Internet gambling activity
that violates Federal law, or the law of the
State in which such activity is conducted, as
applicable, at a particular online site
residing on a computer server controlled or
operated by the provider;
``(ii) an order restraining the provider
from providing access to an identified
subscriber of the system or network of the
provider, if the court determines that such
subscriber maintains a website on a computer
server controlled or operated by the provider
that the subscriber is knowingly using or
knowingly permitting to be used to advertise or
promote non-Internet gambling activity that
violates Federal law or the law of the State in
which such activity is conducted; and
``(iii) an order restraining the provider
of the content of the advertising or promotion
of such illegal gambling activity from
disseminating such advertising or promotion on
the computer server controlled or operated by
the provider of such interactive computer
service.
``(E) Applicability.--The provisions of
subparagraphs (C) and (D) do not apply to the content
described in subparagraph (B)(i)(II).
``(5) Effect on other law.--
``(A) Immunity from liability for compliance.--An
interactive computer service provider shall not be
liable for any damages, penalty, or forfeiture, civil
or criminal, under Federal or State law for taking in
good faith any action described in paragraphs (2)(A),
(4)(B)(ii)(I), or (4)(C) to comply with a notice
described in paragraph (2)(B), or complying with any
court order issued under paragraph (3) or (4)(D).
``(B) Disclaimer of obligations.--Nothing in this
section may be construed to impose or authorize an
obligation on an interactive computer service provider
described in paragraph (1)(B)--
``(i) to monitor material or use of its
service; or
``(ii) except as required by a notice or an
order of a court under this subsection, to gain
access to, to remove, or to disable access to
material.
``(C) Rights of subscribers.--Nothing in this
section may be construed to prejudice the right of a
subscriber to secure an appropriate determination, as
otherwise provided by law, in a Federal court or in a
State or local tribunal or agency, that the account of
such subscriber should not be terminated pursuant to
this subsection, or should be restored.
``(e) Availability of Relief.--The availability of relief under
subsections (c) and (d) shall not depend on, or be affected by, the
initiation or resolution of any action under subsection (b), or under
any other provision of Federal or State law.
``(f) Applicability.--
``(1) In general.--Subject to paragraph (2), the
prohibition in this section does not apply to--
``(A) any otherwise lawful bet or wager that is
placed and received, or otherwise made wholly
intrastate for a State lottery, or for a multi-State
lottery operated jointly between 2 or more States in
conjunction with State lotteries if--
``(i) each such lottery is expressly
authorized, and licensed or regulated, under
applicable State law;
``(ii) the bet or wager is placed on an
interactive computer service that uses a
private network or a closed-loop subscriber
based service regulated and operated by the
State lottery or its expressly designated agent
for such activity;
``(iii) each person placing or otherwise
making that bet or wager is physically located
when such bet or water is placed at a facility
that is open to the general public; and
``(iv) each such lottery complies with
sections 1301 through 1304, and other
applicable provisions of Federal law;
``(B) any otherwise lawful bet or wager that is
placed, received, or otherwise made on an interstate or
intrastate basis on a live horse or a live dog race or
on jai alai, 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 received, under applicable Federal and
such State's laws;
``(ii) placed on a closed-loop subscriber-
based service;
``(iii) initiated from a State in which
betting or wagering on that same type of live
horse or live dog racing or on jai alai is
lawful and received in a State in which such
betting or wagering is lawful;
``(iv) subject to the regulatory oversight
of the State in which the bet or wager is
received and subject by such State to minimum
control standards for the accounting,
regulatory inspection, and auditing of all such
bets or wagers transmitted from 1 State to
another; and
``(v) in the case of--
``(I) live horse racing, made in
accordance with the Interstate Horse
Racing Act of 1978 (15 U.S.C. 3001 et
seq.) and the requirements, if any,
established by an appropriate
legislative or regulatory body of the
State in which the bet or wager
originates;
``(II) live dog racing, subject to
regulatory consent agreements that are
comparable to those required by the
Interstate Horse Racing Act of 1978,
and the requirements, if any,
established by an appropriate
legislative or regulatory body of the
State in which the bet or wager
originates; or
``(III) live jai alai, subject to
regulatory consent agreements that are
comparable to those required by the
Interstate Horse Racing Act of 1978,
and the requirements, if any,
established by an appropriate
legislative or regulatory body of the
State in which the bet or wager
originates;
``(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 State's laws; and
``(ii) placed on a closed-loop subscriber
based service; or
``(D) any otherwise lawful bet or wager that is--
``(i) placed on a closed-loop subscriber
based service or a private network; and
``(ii) is lawfully received by a federally
recognized Indian tribe, or the sending,
receiving, or inviting of information assisting
in the placing of any such bet or wager, if the
game is permitted under and conducted in
accordance with the Indian Gaming Regulatory
Act, so long as each person placing, receiving,
or otherwise making such a bet or wager, or
transmitting such information, is physically
located on Indian lands (as that term is
defined in section 4 of the Indian Gaming
Regulatory Act) when such person places,
receives, or otherwise makes the bet or wager.
``(2) Bets or wagers made by agents or proxies.--
``(A) In general.--Paragraph (1) does not apply in
any case in which a bet or wager is placed, received,
or otherwise made by the use of an agent or proxy using
the Internet or an interactive computer service.
``(B) Qualification.--Nothing in this paragraph may
be construed to prohibit the owner operator of a
parimutuel wagering facility that is licensed by a
State from employing an agent in the operation of the
account wagering system owned or operated by the
parimutuel facility.
``(3) Advertising and promotion.--The prohibition of
subsection (b)(1)(B) does not apply to advertising, promotion,
or other communication by, or authorized by, anyone licensed to
operate a gambling business in a State.
``(g) Rule of Construction.--Nothing in this section may be
construed to affect any prohibition or remedy applicable to a person
engaged in a gambling business under any other provision of Federal or
State law.''.
(b) Technical Amendment.--The analysis for chapter 50 of title 18,
United States Code, is amended by adding at the end the following:
``1085. Internet gambling.''.
SEC. 3. REPORT ON ENFORCEMENT.
Not later than 3 years after the date of enactment of this Act, the
Attorney General shall submit to Congress a report, which shall
include--
(1) an analysis of the problems, if any, associated with
enforcing section 1085 of title 18, United States Code, as
added by section 2 of this Act;
(2) recommendations for the best use of the resources of
the Department of Justice to enforce that section; and
(3) an estimate of the amount of activity and money being
used to gamble on the Internet.
SEC. 4. SEVERABILITY.
If any provision of this Act, an amendment made by this Act, or the
application of such provision or amendment to any person or
circumstance is held to be unconstitutional, the remainder of this Act,
the amendments made by this Act, and the application of this Act and
the provisions of such amendments to any other person or circumstance
shall not be affected thereby.
Purpose and Summary
Under current Federal law, it is unclear that using the
Internet to operate a gambling business is illegal. H.R. 3125,
the ``Internet Gambling Prohibition Act of 2000,'' would
prohibit persons engaged in a gambling business from using the
Internet or any other interactive computer service to place,
receive, or otherwise make a bet or wager, or send, receive, or
invite information assisting in the placing of a bet or wager.
This legislation also contains mechanisms intended to
facilitate enforcement through a ``notice and takedown'' civil
remedy program involving interactive computer service providers
and illegal gambling websites. The authorized penalties are
imprisonment up to 4 years and fines as much as $20,000.
Background and Need for the Legislation
Over the last few years, gambling websites have
proliferated on the Internet. What was once a cottage industry
has become an extremely lucrative and large business. Numerous
studies have charted the explosive growth of this industry,
both by the increases in gambling websites available, and via
industry revenues. Earlier this year, an FBI study reported
growth from $300 million in 1998 to $651 million in 1999. More
recently Bear, Stearns & Co. Inc. reported that there were then
at least 650 Internet gambling websites, and that total
revenues for 1999 had been $1.2 billion (an 80% increase from
1998) and would grow to $3 billion by 2002.
On-line casino operators have created ``virtual strip''--
where gamblers who are tired of one casino can simply ``walk''
down the virtual Internet boardwalk into a different casino.
Internet gambling sites offer everything from sports betting to
blackjack. Most of these virtual casinos are organized and
operated from tropical off-shore locations, where the operators
feel free from both State and Federal interference. Among the
most popular locales are Antigua, St. Martin and Costa Rica.
The bill brings the law up to date with Internet technology
by clarifying Federal law that operating an Internet gambling
business is illegal. It does not, however, supersede the
traditional leadership roles of States in enforcing gambling
border within their borders. It addresses a growing problem
that no single State, or collection of States, can adequately
address. Because of the uniquely interstate and international
nature of the Internet, H.R. 3125 is necessary. The bill sets
forth an effective Internet gambling regulatory framework that
recognizes States' leadership role is regulating gambling, and
avoids intruding the Federal Government into regulating legal
gaming industries already regulated by the States. At the same
time H.R. 3125 provides the States and the Federal Government
with the needed tools to limit and regulate Internet gambling.
Since the founding of our country, the Federal Government
has left gambling regulation to the States. The last two
Federal commissions Congress created to look into gambling have
concluded that States are best equipped to regulate gambling
within their own borders, and recommended that Congress
continue to defer to the States in this respect. The Federal
Government has largely deferred to the authority of States to
determine the type and amount of gambling permitted. For over
100 years, Congress has acted to assist States in enforcing
their respective policies on gambling when development in
technology, such as the Internet, have compromised the
effectiveness of State gambling laws.
Hearings
In the 105th Congress, the Committee's Subcommittee on
Crime held two day's of hearing on legislation to ban Internet
gambling businesses. In the 106th Congress, one day of hearings
on H.R. 3125 was held, on March 9, 2000. Testimony was received
from the following witnesses: ``John Doe,'' Internet Gambling
Addict, San Diego, California; The Honorable Jon Kyl, U. S.
Senator, Arizona; The Honorable Robert W. Goodlatte, 6th
District, Virginia; Mr. Kevin DiGregory, Deputy Assistant
Attorney General, Criminal Division, United States Department
of Justice; Mr. Robert Minnix, Associate Athletics Director,
Florida State University; The Honorable James E. Doyle,
Attorney General, State of Wisconsin; Mr. Stephen Walters,
Chairman, Oregon Racing Commission; Mr. Keith Whyte, Executive
Director, National Council on Problem Gambling; Bartlett
Cleland, Policy Director, Center for Technology and Freedom.
Additional material was submitted by: Jeffrey Pash, Executive
Vice President and General Counsel, National Football League;
and, the Honorable Montie Deere, Chairman, National Indian
Gaming Commission.
Committee Consideration
On November 3, 1999, the Subcommittee on Crime met in open
session and ordered favorably reported the bill H.R.3125, by a
vote of 5 to 3, a quorum being present. On April 6, 2000, the
committee met in open session and ordered favorably reported
the bill H.R. 3125 with amendment by a recorded vote of 21 to
8, a quorum being present.
Votes of the Committee
The committee considered the following amendments with
recorded votes:
Mr. Goodlatte offered an amendment making largely technical
amendments to the bill, and providing a limited exemption for
certain Indian gaming activities. Mr. Watt made a request for a
division of the question on the technical amendments and the
limited Indian gaming exemption, which Chairman Hyde granted.
Part I of the amendment offered by Mr. Goodlatte to H.R.
3125. By a rollcall vote of 24 yeas to 0 nays, the amendment
was agreed to.
ROLLCALL NO. 1
----------------------------------------------------------------------------------------------------------------
Ayes Nays Present
----------------------------------------------------------------------------------------------------------------
Mr. Sensenbrenner............................................... X .............. ..............
Mr. McCollum.................................................... X .............. ..............
Mr. Gekas....................................................... X .............. ..............
Mr. Coble....................................................... X .............. ..............
Mr. Smith (TX).................................................. X .............. ..............
Mr. Gallegly.................................................... .............. .............. ..............
Mr. Canady...................................................... .............. .............. ..............
Mr. Goodlatte................................................... X .............. ..............
Mr. Chabot...................................................... X .............. ..............
Mr. Barr........................................................ X .............. ..............
Mr. Jenkins..................................................... X .............. ..............
Mr. Hutchinson.................................................. .............. .............. ..............
Mr. Pease....................................................... X .............. ..............
Mr. Cannon...................................................... X .............. ..............
Mr. Rogan....................................................... X .............. ..............
Mr. Graham...................................................... X .............. ..............
Ms. Bono........................................................ X .............. ..............
Mr. Bachus...................................................... X .............. ..............
Mr. Scarborough................................................. .............. .............. ..............
Mr. Vitter...................................................... X .............. ..............
Mr. Conyers..................................................... X .............. ..............
Mr. Frank....................................................... .............. .............. ..............
Mr. Berman...................................................... .............. .............. ..............
Mr. Boucher..................................................... .............. .............. ..............
Mr. Nadler...................................................... .............. .............. ..............
Mr. Scott....................................................... X .............. ..............
Mr. Watt........................................................ X .............. ..............
Ms. Lofgren..................................................... .............. .............. ..............
Ms. Jackson Lee................................................. .............. .............. ..............
Ms. Waters...................................................... X .............. ..............
Mr. Meehan...................................................... .............. .............. ..............
Mr. Delahunt.................................................... .............. .............. ..............
Mr. Wexler...................................................... X .............. ..............
Mr. Rothman..................................................... X .............. ..............
Ms. Baldwin..................................................... .............. .............. ..............
Mr. Weiner...................................................... X .............. ..............
Mr. Hyde, Chairman.............................................. X .............. ..............
-----------------------------------------------
Total....................................................... 24 0 ..............
----------------------------------------------------------------------------------------------------------------
Part II of the Goodlatte amendment, providing a limited
exemption for certain Indian gaming activities, was agreed to
by a rollcall vote of 19 yeas to 5 nays.
ROLLCALL NO. 2
----------------------------------------------------------------------------------------------------------------
Ayes Nays Present
----------------------------------------------------------------------------------------------------------------
Mr. Sensenbrenner............................................... .............. X ..............
Mr. McCollum.................................................... X .............. ..............
Mr. Gekas....................................................... X .............. ..............
Mr. Coble....................................................... X .............. ..............
Mr. Smith (TX).................................................. X .............. ..............
Mr. Gallegly.................................................... .............. .............. ..............
Mr. Canady...................................................... .............. .............. ..............
Mr. Goodlatte................................................... X .............. ..............
Mr. Chabot...................................................... X .............. ..............
Mr. Barr........................................................ X .............. ..............
Mr. Jenkins..................................................... X .............. ..............
Mr. Hutchinson.................................................. .............. .............. ..............
Mr. Pease....................................................... X .............. ..............
Mr. Cannon...................................................... X .............. ..............
Mr. Rogan....................................................... X .............. ..............
Mr. Graham...................................................... X .............. ..............
Ms. Bono........................................................ X .............. ..............
Mr. Bachus...................................................... X .............. ..............
Mr. Scarborough................................................. .............. .............. ..............
Mr. Vitter...................................................... X .............. ..............
Mr. Conyers..................................................... .............. X ..............
Mr. Frank....................................................... .............. .............. ..............
Mr. Berman...................................................... .............. .............. ..............
Mr. Boucher..................................................... .............. .............. ..............
Mr. Nadler...................................................... .............. .............. ..............
Mr. Scott....................................................... .............. X ..............
Mr. Watt........................................................ .............. X ..............
Ms. Lofgren..................................................... .............. .............. ..............
Ms. Jackson Lee................................................. .............. .............. ..............
Ms. Waters...................................................... .............. X ..............
Mr. Meehan...................................................... .............. .............. ..............
Mr. Delahunt.................................................... .............. .............. ..............
Mr. Wexler...................................................... X .............. ..............
Mr. Rothman..................................................... X .............. ..............
Ms. Baldwin..................................................... .............. .............. ..............
Mr. Weiner...................................................... X .............. ..............
Mr. Hyde, Chairman.............................................. X .............. ..............
-----------------------------------------------
Total....................................................... 19 5 ..............
----------------------------------------------------------------------------------------------------------------
Mr. Pease offered an amendment to strike the portion of the
State lottery exemption that would allow the sale of State
lottery tickets over the Internet at home. By a vote of 24 to
11, the amendment was agreed to.
ROLLCALL NO. 3
----------------------------------------------------------------------------------------------------------------
Ayes Nays Present
----------------------------------------------------------------------------------------------------------------
Mr. Sensenbrenner............................................... X .............. ..............
Mr. McCollum.................................................... X .............. ..............
Mr. Gekas....................................................... X .............. ..............
Mr. Coble....................................................... X .............. ..............
Mr. Smith (TX).................................................. X .............. ..............
Mr. Gallegly.................................................... X .............. ..............
Mr. Canady...................................................... X .............. ..............
Mr. Goodlatte................................................... X .............. ..............
Mr. Chabot...................................................... .............. X ..............
Mr. Barr........................................................ X .............. ..............
Mr. Jenkins..................................................... X .............. ..............
Mr. Hutchinson.................................................. X .............. ..............
Mr. Pease....................................................... X .............. ..............
Mr. Cannon...................................................... .............. X ..............
Mr. Rogan....................................................... X .............. ..............
Mr. Graham...................................................... X .............. ..............
Ms. Bono........................................................ X .............. ..............
Mr. Bachus...................................................... X .............. ..............
Mr. Scarborough................................................. X .............. ..............
Mr. Vitter...................................................... X .............. ..............
Mr. Conyers..................................................... .............. X ..............
Mr. Frank....................................................... .............. X ..............
Mr. Berman...................................................... .............. X ..............
Mr. Boucher..................................................... X .............. ..............
Mr. Nadler...................................................... .............. X ..............
Mr. Scott....................................................... .............. X ..............
Mr. Watt........................................................ .............. X ..............
Ms. Lofgren..................................................... .............. .............. ..............
Ms. Jackson Lee................................................. X .............. ..............
Ms. Waters...................................................... .............. X ..............
Mr. Meehan...................................................... .............. .............. ..............
Mr. Delahunt.................................................... .............. X ..............
Mr. Wexler...................................................... X .............. ..............
Mr. Rothman..................................................... X .............. ..............
Ms. Baldwin..................................................... X .............. ..............
Mr. Weiner...................................................... .............. X ..............
Mr. Hyde, Chairman.............................................. X .............. ..............
-----------------------------------------------
Total....................................................... 24 11 ..............
----------------------------------------------------------------------------------------------------------------
Mr. Scott offered an amendment that would extend criminal
liability under the bill to individuals.
The amendment was defeated 7-24.
ROLLCALL NO. 4
----------------------------------------------------------------------------------------------------------------
Ayes Nays Present
----------------------------------------------------------------------------------------------------------------
Mr. Sensenbrenner............................................... .............. X ..............
Mr. McCollum.................................................... .............. X ..............
Mr. Gekas....................................................... .............. X ..............
Mr. Coble....................................................... .............. X ..............
Mr. Smith (TX).................................................. .............. X ..............
Mr. Gallegly.................................................... X .............. ..............
Mr. Canady...................................................... .............. X ..............
Mr. Goodlatte................................................... .............. X ..............
Mr. Chabot...................................................... .............. X ..............
Mr. Barr........................................................ .............. X ..............
Mr. Jenkins..................................................... .............. X ..............
Mr. Hutchinson.................................................. .............. X ..............
Mr. Pease....................................................... .............. .............. ..............
Mr. Cannon...................................................... .............. X ..............
Mr. Rogan....................................................... .............. X ..............
Mr. Graham...................................................... .............. .............. ..............
Ms. Bono........................................................ .............. X ..............
Mr. Bachus...................................................... .............. .............. ..............
Mr. Scarborough................................................. X .............. ..............
Mr. Vitter...................................................... X .............. ..............
Mr. Conyers..................................................... .............. X ..............
Mr. Frank....................................................... .............. X ..............
Mr. Berman...................................................... .............. X ..............
Mr. Boucher..................................................... .............. X ..............
Mr. Nadler...................................................... .............. X ..............
Mr. Scott....................................................... X .............. ..............
Mr. Watt........................................................ .............. X ..............
Ms. Lofgren..................................................... .............. .............. ..............
Ms. Jackson Lee................................................. X .............. ..............
Ms. Waters...................................................... X .............. ..............
Mr. Meehan...................................................... .............. .............. ..............
Mr. Delahunt.................................................... .............. X ..............
Mr. Wexler...................................................... .............. X ..............
Mr. Rothman..................................................... .............. .............. ..............
Ms. Baldwin..................................................... X .............. ..............
Mr. Weiner...................................................... .............. X ..............
Mr. Hyde, Chairman.............................................. .............. X ..............
-----------------------------------------------
Total....................................................... 7 24 ..............
----------------------------------------------------------------------------------------------------------------
Ms. Waters offered an amendment restating that the bill
would not diminish any rights available to Indian tribes under
the Indian Gaming Regulatory Act. The amendment was defeated 7-
17.
ROLLCALL NO. 5
----------------------------------------------------------------------------------------------------------------
Ayes Nays Present
----------------------------------------------------------------------------------------------------------------
Mr. Sensenbrenner............................................... .............. .............. ..............
Mr. McCollum.................................................... .............. .............. ..............
Mr. Gekas....................................................... .............. X ..............
Mr. Coble....................................................... .............. X ..............
Mr. Smith (TX).................................................. .............. X ..............
Mr. Gallegly.................................................... .............. .............. ..............
Mr. Canady...................................................... .............. X ..............
Mr. Goodlatte................................................... .............. X ..............
Mr. Chabot...................................................... .............. X ..............
Mr. Barr........................................................ .............. X ..............
Mr. Jenkins..................................................... .............. X ..............
Mr. Hutchinson.................................................. .............. X ..............
Mr. Pease....................................................... .............. .............. ..............
Mr. Cannon...................................................... .............. X ..............
Mr. Rogan....................................................... .............. X ..............
Mr. Graham...................................................... .............. .............. ..............
Ms. Bono........................................................ .............. X ..............
Mr. Bachus...................................................... .............. X ..............
Mr. Scarborough................................................. .............. X ..............
Mr. Vitter...................................................... .............. X ..............
Mr. Conyers..................................................... .............. .............. ..............
Mr. Frank....................................................... .............. .............. ..............
Mr. Berman...................................................... .............. .............. ..............
Mr. Boucher..................................................... .............. .............. ..............
Mr. Nadler...................................................... X .............. ..............
Mr. Scott....................................................... X .............. ..............
Mr. Watt........................................................ X .............. ..............
Ms. Lofgren..................................................... .............. .............. ..............
Ms. Jackson Lee................................................. .............. .............. ..............
Ms. Waters...................................................... X .............. ..............
Mr. Meehan...................................................... .............. .............. ..............
Mr. Delahunt.................................................... .............. .............. ..............
Mr. Wexler...................................................... .............. X ..............
Mr. Rothman..................................................... X .............. ..............
Ms. Baldwin..................................................... X .............. ..............
Mr. Weiner...................................................... X .............. ..............
Mr. Hyde, Chairman.............................................. .............. X ..............
-----------------------------------------------
Total....................................................... 7 17 ..............
----------------------------------------------------------------------------------------------------------------
Final passage motion to report H.R. 3125 favorably, as
amended. The motion passed 21-8.
ROLLCALL NO. 6
----------------------------------------------------------------------------------------------------------------
Ayes Nays Present
----------------------------------------------------------------------------------------------------------------
Mr. Sensenbrenner............................................... X .............. ..............
Mr. McCollum.................................................... X .............. ..............
Mr. Gekas....................................................... X .............. ..............
Mr. Coble....................................................... .............. .............. ..............
Mr. Smith (TX).................................................. X .............. ..............
Mr. Gallegly.................................................... .............. .............. ..............
Mr. Canady...................................................... X .............. ..............
Mr. Goodlatte................................................... X .............. ..............
Mr. Chabot...................................................... X .............. ..............
Mr. Barr........................................................ X .............. ..............
Mr. Jenkins..................................................... X .............. ..............
Mr. Hutchinson.................................................. X .............. ..............
Mr. Pease....................................................... .............. .............. ..............
Mr. Cannon...................................................... .............. X ..............
Mr. Rogan....................................................... X .............. ..............
Mr. Graham...................................................... X .............. ..............
Ms. Bono........................................................ X .............. ..............
Mr. Bachus...................................................... .............. .............. ..............
Mr. Scarborough................................................. X .............. ..............
Mr. Vitter...................................................... X .............. ..............
Mr. Conyers..................................................... .............. X ..............
Mr. Frank....................................................... .............. X ..............
Mr. Berman...................................................... .............. X ..............
Mr. Boucher..................................................... .............. .............. ..............
Mr. Nadler...................................................... X .............. ..............
Mr. Scott....................................................... .............. X ..............
Mr. Watt........................................................ .............. X ..............
Ms. Lofgren..................................................... .............. .............. ..............
Ms. Jackson Lee................................................. X .............. ..............
Ms. Waters...................................................... X .............. ..............
Mr. Meehan...................................................... .............. .............. ..............
Mr. Delahunt.................................................... .............. .............. ..............
Mr. Wexler...................................................... X .............. ..............
Mr. Rothman..................................................... X .............. ..............
Ms. Baldwin..................................................... .............. X ..............
Mr. Weiner...................................................... .............. X ..............
Mr. Hyde, Chairman.............................................. X .............. ..............
-----------------------------------------------
Total....................................................... 21 8 ..............
----------------------------------------------------------------------------------------------------------------
Committee Oversight Findings
In compliance with clause 3(c)(1) of rule XIII of the Rules
of the House of Representatives, the committee reports that the
findings and recommendations of the committee, based on
oversight activities under clause 2(b)(1) of rule X of the
Rules of the House of Representatives, are incorporated in the
descriptive portions of this report.
Committee on Government Reform Findings
No findings or recommendations of the Committee on
Government Reform were received as referred to in clause
3(c)(4) of rule XIII of the Rules of the House of
Representatives.
New Budget Authority and Tax Expenditures
Clause 3(c)(2) of House Rule XIII is inapplicable because
this legislation does not provide new budgetary authority or
increased tax expenditures.
Congressional Budget Office Cost Estimate
In compliance with clause 3(c)(3) of rule XIII of the Rules
of the House of Representatives, the Committee sets forth, with
respect to the bill, H.R. 3125, the following estimate and
comparison prepared by the Director of the Congressional Budget
Office under section 402 of the Congressional Budget Act of
1974:
U.S. Congress,
Congressional Budget Office,
Washington, DC, May 1, 2000.
Hon. Henry J. Hyde, Chairman,
Committee on the Judiciary,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 3125, the Internet
Gambling Prohibition Act of 2000.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contacts are Susanne S.
Mehlman (for federal costs), who can be reached at 226-2860,
Shelley Finlayson (for the state and local impact), who can be
reached at 225-3220, and John Harris (for the private-sector
impact), who can be reached at 226-2618.
Sincerely,
Dan L. Crippen, Director.
Enclosure
cc:
Honorable John Conyers Jr.
Ranking Democratic Member
H.R. 3125--Internet Gambling Prohibition Act of 2000.
SUMMARY
H.R. 3125 would prohibit gambling conducted over the
Internet or an interactive computer service. CBO estimates that
implementing this legislation would not result in any
significant cost to the federal government. Because enactment
of H.R. 3125 could affect direct spending and receipts, pay-as-
you-go procedures would apply to the bill. However, CBO
estimates that any impact on direct spending and receipts would
not be significant.
H.R. 3125 contains intergovernmental mandates as defined in
the Unfunded Mandates Reform Act (UMRA) because it would
preempt certain state liability laws and prohibit certain state
and local lottery activities. However, CBO estimates that these
mandates would currently impose no costs on state, local, or
tribal governments and that future costs, if any, would not
exceed the threshold established by the act during the next
five years ($55 million in 2000, adjusted annually for
inflation).
H.R. 3125 would impose new private-sector mandates, as
defined in UMRA, on operators of Internet sweepstakes and
contests, certain gambling businesses that would use wireless
communication systems to transfer data, and providers of
Internet service. CBO expects that the costs of those mandates
would not exceed the threshold in UMRA for private-sector
mandates ($109 million in 2000, adjusted annually for
inflation).
ESTIMATED COST TO THE FEDERAL GOVERNMENT
Because H.R. 3125 would establish a new federal crime
relating to gambling, the federal government would be able to
pursue cases that it otherwise would not be able to prosecute.
CBO expects, however, that most cases would be pursued under
state law. Therefore, we estimate that any increase in federal
costs for law enforcement, court proceedings, or prison
operations would not be significant. Any such additional costs
would be subject to the availability of appropriated funds.
H.R. 3125 would require the Department of Justice, not
later than three years after enactment, to submit a report on
the enforcement of the bill's provisions and on the extent of
Internet gambling. CBO estimates that preparing and completing
the report would cost less than $500,000, subject to the
availability of appropriated funds.
Because those prosecuted and convicted under the bill could
be subject to criminal fines, the federal government might
collect additional fines if the bill is enacted. Collections of
such fines are recorded in the budget as governmental receipts
(i.e., revenues), which are deposited in the Crime Victims Fund
and spent in subsequent years. Any additional collections are
likely to be negligible because of the small number of cases
involved. Because any increase in direct spending would equal
the amount of fines collected (with a lag of one year or more),
the additional direct spending also would be negligible.
PAY-AS-YOU-GO CONSIDERATIONS
The Balanced Budget and Emergency Deficit Control Act sets
up pay-as-you-go procedures for legislation affecting direct
spending or receipts. Enacting H.R. 3125 could affect both
direct spending and receipts, but CBO estimates that any such
effects would be negligible.
ESTIMATED IMPACT ON STATE, LOCAL, AND TRIBAL GOVERNMENTS
H.R. 3125 contains intergovernmental mandates as defined by
UMRA. CBO estimates that these mandates would currently impose
no costs on state, local, or tribal governments and that future
costs, if any, would not exceed the threshold established by
the act in the next five years ($55 million in 2000, adjusted
annually for inflation).
The bill would impose two types of mandates on the state
and local governments. First, it would preempt state liability
laws by granting immunity to providers of interactive computer
services if third parties use their facilities in ways that
violate federal and state laws regulating gambling. CBO
estimates that states would incur no direct costs to comply
with this mandate.
H.R. 3125 also would prohibit state and local governments
that conduct lotteries from using the Internet or other
technology covered by the bill to provide access to the lottery
in any place that is not public. While no governments currently
use or plan to use the Internet for these purposes, as
technology expands and becomes more widely used in the home (a
nonpublic place), it is possible that, in the absence of this
bill, some would offer such options. CBO cannot estimate the
future loss of income from this prohibition because it is not
clear if or when such access to lotteries would be provided by
state and local governments. However, we do not expect that
such losses would exceed the threshold established by UMRA ($55
million in 2000, adjusted annually for inflation) in the next
five years.
ESTIMATED IMPACT ON THE PRIVATE SECTOR
H.R. 3125 would have only a limited effect on the private
sector because the Federal Interstate Wire Act (``Wire Act'')
currently prohibits the use of wire communication facilities to
place or receive bets or wagers or to transmit information that
assists persons who place bets or wagers on sporting events and
certain contests. The Wire Act applies to all wires and cables
used to transmit information across state lines, including
telephone lines, cable television systems, and the Internet,
and effectively prohibits many forms of Internet gambling.
Other federal statutes, such as racketeering laws, also apply
to Internet gambling. It is not clear, however, that existing
federal law prohibits all forms of Internet gambling. The
status of some Internet contests, particularly lotteries or
raffles that require entry fees, is ambiguous.
H.R. 3125 would impose new private-sector mandates, as
defined in UMRA, on operators of Internet sweepstakes and
contests, certain gambling businesses that use wireless
communication systems to transfer data, and providers of
Internet service. CBO expects that the costs of these mandates
would not exceed the threshold in UMRA for private-sector
mandates ($109 million in 2000, adjusted annually for
inflation).
First, the bill would prohibit persons engaged in a
gambling business from conducting lotteries, raffles, or other,
similar contests over the Internet. Specifically, the bill
would forbid any Internet contest in which participants stake
or risk ``something of value'' and the ``opportunity to win is
predominantly subject to chance.'' According to the National
Gambling Impact Study Commission Report, no known privately-
operated Internet lotteries are located in the United States.
Privately-operated lotteries are generally illegal under state
laws, and most businesses that would be affected by the
prohibition are located in foreign countries. Domestic
lotteries are generally run by states and Indian tribes.
Further, the prohibition would not affect privately-operated
Internet contests that do not require entry fees. The
prohibition would also not apply to certain other popular legal
games that charge fees, including sports and educational
contests, such as the popular fantasy sports leagues.
Consequently, CBO expects that the costs of this mandate would
not be significant.
Second, H.R. 3125 would impose a new mandate on some
gambling businesses. The bill would prohibit the use of certain
interactive computer services ``to place, receive, or otherwise
make a bet or wager.'' Under H.R. 3125 it would be illegal for
gambling businesses to operate electronic gaming devices linked
together by a wireless means of communication that do not meet
certain technical requirements. Devices of this type are legal
in some states, but are not popular with gambling businesses.
Linked electronic gaming devices, such as progressive slot
machines, typically use dedicated phone lines rather than
wireless systems, which are susceptible to interference from
other signals. The bill, moreover, would not prohibit wireless
systems that are regulated by the states and meet the technical
requirements. For these reasons, CBO estimates that the costs
of the mandate would be low.
Finally, the bill would impose new mandates on Internet
service providers (ISPs). H.R. 3125 would require Internet
service providers to terminate the accounts of customers who
run gambling businesses or promote illegal gambling and to
block specific foreign gambling Internet sites when given an
official notice of noncompliance by state or federal law
enforcement agencies. Based on information from the Department
of Justice, CBO estimates that the number of Internet service
providers that would receive such notices would be low. Because
such notices would apply to specific subscriber accounts (or
foreign sites), the cost per order would also be low.
Consequently, CBO estimates that the costs to Internet service
providers of complying with this mandate would be small.
H.R. 3125 would impose an additional mandate on Internet
service providers by requiring them to offer their residential
customers filtering software (or equivalent systems) that would
block access by children to gambling Internet sites. CBO
estimates that the cost of complying with the mandate would be
small because such software is commonly available. The bill
would permit providers to charge reasonable fees for the use of
the software, allowing them to pass the cost on to their
customers.
PREVIOUS CBO ESTIMATE
On July 15, 1999, CBO transmitted a cost estimate for S.
692, a similar bill reported by the Senate Committee on the
Judiciary on June 17, 1999. Both bills would prohibit gambling
conducted over the Internet or an interactive computer service,
but would provide for different exemptions from this
prohibition. H.R. 3125, unlike S. 692, would not prohibit
tribal governments from operating certain games of chance and
therefore would not impose intergovernmental mandates with
costs exceeding the threshold specified in UMRA.
ESTIMATE PREPARED BY:
Federal Costs: Susanne S. Mehlman (226-2860)
Impact on State, Local, and Tribal Governments: Shelley
Finlayson (225-3220)
Impact on the Private Sector: John Harris (226-2618)
ESTIMATE APPROVED BY:
Robert A. Sunshine
Assistant Director for Budget Analysis
Constitutional Authority Statement
Pursuant to clause 3(d)(1) of rule XIII of the Rules of the
House of Representatives, the Committee finds the authority for
this legislation in Article I, section 8, of the Constitution.
Section-by-Section Analysis and Discussion
Section 1. Short Title.
Section 1 states the short title as the ``Internet Gambling
Prohibition Act of 2000.''
Section 2. Prohibition on Internet Gambling.
Section 2(a) adds a new Section 1085 to title 18 of the
United States Code.
Section 1085(a). Definitions.
Subsection 1085(a)(1) defines ``bets or wagers'' as the
staking or risking, by any person, of something of value upon
the outcome of either: (1) a contest of others; (2) a sporting
event; or (3) a game predominantly subject to chance, upon an
agreement or understanding that such person or another person
will receive something of value based on that outcome. It is
important to note that the term includes the purchase of a
chance or opportunity to win a lottery or other prize (if the
opportunity is predominantly subject to chance) and any scheme
of a type prohibited by Federal laws prohibiting betting on
professional and amateur sports. The term ``bets or wagers''
does not include bona fide business transactions governed by
Federal securities law; certain specified transactions governed
by Federal commodities law; contracts of indemnity or
guarantee; or, contracts for life, health, or accident
insurance.
It is the view of the committee that the term ``bets or
wagers'' does not include participation in a simulation sports
game or educational game or contest that: (1) is not dependent
solely on the outcome of any single sporting event or
nonparticipant's singular individual performance in any single
sporting event; (2) has an outcome that reflects the knowledge
and skill of the participants, with an outcome determined
predominantly by accumulated statistical results of sporting
events; and, (3) offers a prize or award established in advance
of the game and not determined by the number of participants.
This exclusion is intended to cover ``fantasy sports league
games'' which are simulation sports games in which the outcome
is determined using the results of actual sporting events, and
the outcome reflects the relative knowledge and skill of the
participants in determining those results. It is the view of
the committee that fantasy sport leagues operated in this
manner are not gambling. It is important to note, however, that
this exclusion from the definition of a bet or wager for the
purposes of 18 U.S.C. Sec. 1085 is not intended to change the
legality of fantasy sports league games or contests under the
laws of any State, or under any other applicable Federal law.
It is the view of the committee that not all games offered
on the Internet are ``games of chance'' for purposes of this
definition. The committee recognizes that many computer and
video games played on the Internet are based predominantly on
skill, and are not intended to be included within the
definition of ``bets or wagers.'' The committee intends that
the courts will continue to perform their traditional functions
in determining whether games are ``games of chance.''
Subsection 1085(a)(2) defines a ``closed-loop subscriber-
based service'' as an information service or system meeting
specified conditions restricting use, including: 1) express
State authorization of the particular customer and age
verification system proposed to be used by the service,
requiring a person within that State to subscribe and be
registered with the provider of the wagering service by name,
address, appropriate billing information, and the physical
location of that subscribing person within that State; and 2)
an effective customer and age verification system, expressly
authorized under State law; and, 3) that appropriate date
security standards to prevent unauthorized access by any person
who has not lawfully subscribed or who is a minor. The
committee intends that this term be narrowly construed to
include only a closed-loop service that cannot be circumvented,
or disabled, and is effective in preventing use by unauthorized
persons, especially minors. The committee expects the States,
in ensuring that any such system is truly effective in
preventing unauthorized use, to consult with information
security experts who are not current or prospective employees
of or consultants to, and who have no financial relationship,
direct or indirect, with any gambling business or closed-loop
subscriber-based service.
Subsection 1085(a)(3) defines ``foreign jurisdiction'' as a
foreign country or political subdivision thereof.
Subsection 1085(a)(4) defines a ``gambling business'' as
(i) a business that is conducted at a gambling establishment,
or that involves the placing, receiving, or otherwise making
bets or wagers, or the offering to engage in doing so, and that
either has been in substantially continuous operation for more
than 10 days or has a gross revenue of $2,000 or more from such
business during any 24-hour period; and (ii) any soliciting
agent of such a business.
This subsection contains a further qualification that a
gambling business ``involves 1 or more persons who conduct,
finance, manage, supervise, direct, or own all or part of such
business.'' With respect to this qualification, it is the view
of the committee that, in enforcing this section, it is
appropriate for law enforcement agencies to pierce the
corporate veil and prosecute individuals less directly involved
in illegal Internet gambling business operations, such as
silent financiers of illegal gambling businesses. However, the
definition of ``gambling business'' is not intended to include
credit card companies, or their cardholders, based only on the
use of such credit cards for prohibited Internet gambling
activities.
Subsection 1085(a)(5) defines ``information assisting in
the placing of a bet or wager'' to include information intended
by the sender or recipient to be used by a gambling business to
place, receive, or otherwise make a bet or wager. It is the
view of the committee that the definition does not include: (1)
information concerning parimutuel pools exchanged exclusively
between or among parimutuel wagering facilities, if the
information is used only to conduct common pool parimutuel
pooling; (2) information exchanged exclusively between or among
parimutuel wagering facilities and a support service, if the
information is used only for processing bets or wagers; (3)
information exchanged exclusively between or among wagering
facilities in the same State and a support service, if the
information is used only for the pooling or processing of bets
or wagers made by or with the facility or facilities; (4)
information exchanged via private network if the information is
used only to monitor gaming device play, display prize amounts,
provide security information, and provide other accounting
information; (5) news reporting or analysis of wagering
activity; and (6) posting or reporting of educational
information on how to make a bet or wager or the nature of
betting or wagering. The exclusion of items (1) through (3)
from the definition means that parimutuel wagering facilities
and other wagering facilities will not be prohibited by Section
1085 from transmitting a narrow category of specified
information in the course of conducting their parimutuel or
wagering activity, subject to the laws of the States in which
they operate. Additionally, the committee notes, and Section
1085(f) makes explicit, that H.R. 3125 does not prohibit
advertising or promotion of gambling opportunities at casinos,
at racetracks, or at other ``brick-and-mortar'' establishments.
Subsection 1085(a)(6) defines an ``interactive computer
service'' as any information service, system, or access
software provider that operates in, or uses a channel or
instrumentality of, interstate or foreign commerce to provide
or enable access by multiple users to a computer server. The
definition of the term ``interactive computer service'' is
intended to encompass all the interactive computer service
functions defined elsewhere in Federal law, including functions
such as Internet access and transmission, storage, hosting web
sites, providing online services such as chatrooms and online
bulletin boards in which users communicate with each other, and
offering online links or directories of online content. The
definition applies to interactive computer services performing
these functions. It does not apply to these entities to the
extent that they are operating a gambling business that
violates H.R. 3125.
Subsection 1085(a)(7) defines ``interactive computer
service provider'' as any person that provides an interactive
computer service, to the extent that such person offers or
provides such service. This term encompasses persons who
provide an interactive computer service as defined in
subsection (6). A person is treated as an interactive computer
service provider only to the extent that the person provides an
interactive computer service. To the extent that a person is
engaged in a gambling business or otherwise violating
Subsection (b), that person (to the extent of engaging in those
activities) is not an interactive computer service provider
and, therefore, is fully subject to the provisions of Section
1085 and other applicable Federal and State laws that apply to
persons other than interactive computer service providers.
Subsection 1085(a)(8) defines ``Internet'' as the
international computer network of both Federal and non-Federal
interoperable packet switched data networks. The committee
intends the terms ``Internet'' and ``interactive computer
service'' to encompass technologies that in the future may
perform functions similar or analogous to those that the
Internet and interactive computer services perform today.
Subsection 1085(a)(9) defines ``person'' as any individual,
association, partnership, joint venture, corporation (or any
affiliate of a corporation), State or political subdivision
thereof, department, agency, or instrumentality of a State or
political subdivision thereof, or any other government,
organization, or entity.
Subsection 1085(a)(10) defines ``private network'' as a
communications channel meeting specified conditions restricting
use, such as either private dedicated lines, or, the public
communications infrastructure, if the infrastructure is secured
by means of the appropriate private communications technology
to prevent unauthorized access. It is the view of the committee
that this term be narrowly construed to include only services
that are (a) effective in preventing use by unauthorized
persons and (b) specifically authorized by statute or
regulation by the States involved.
Subsection 1085(a)(11) defines ``State'' as a State of the
United States, the District of Columbia, the Commonwealth of
Puerto Rico, or a commonwealth, territory, or possession of the
United States.
Subsection 1085(a)(12) defines ``subscriber'' as any person
with a business relationship with the interactive computer
service provider through which such person receives access to
the system, service, or network of that provider, even if no
formal subscription agreement exists, and, includes
registrants, students who are granted access to a university
system or network, and employees or contractors who are granted
access to the system or network of their employer.
Subsection 1085(a)(13) defines ``soliciting agent'' as a
person who knowingly solicits for a gambling business, as
described in subsection 1085(a)(4). It is the view of the
committee that a soliciting agent is an agent of such business
who has actual knowledge of the illegal aspect of such a
gambling business. However, the term would not include those
parties lacking knowledge and who merely accept and/or run
advertisements for such a business.
Section 1085(b). Prohibitions and Penalties.
Subsection 1085(b)(1) sets forth the prohibitions regarding
Internet gambling. The subsection provides that it shall be
unlawful for a person engaged in a gambling business to use the
Internet or any other interactive computer service: (A) to
place, receive, or otherwise make a bet or wager; or (B) to
send, receive, or invite information assisting in the placing
of a bet or wager. Paragraph (2) sets forth the penalties.
These include a fine equal to, but not more than the greater
of: (A) the total amount bet or wagered, or placed, received,
or accepted in bets or wagers, by the person, or (B) $20,000.
The subsection also provides for imprisonment of not more than
4 years, in lieu of or in addition to any fine. Paragraph (3)
authorizes the court, upon conviction, to enter a permanent
injunction enjoining such person from placing, receiving, or
otherwise making bets or wagers or sending, receiving, or
inviting information assisting in the placing of bets or
wagers. It is important to note that the prohibitions of
Section 1085(b) apply only to persons engaged in the gambling
business, and not to individual bettors or communication
services not engaged in a gambling business, but simply used by
illegal gambling businesses to offer such activity. However,
individual bettors who engage in Internet gambling (as well as
persons engaged in a gambling business using the Internet)
continue to be fully subject to prosecution under other laws,
if applicable.
Section 1085(c). Civil Remedies.
Subsection 1085(c)(1) provides the district courts of the
United States with jurisdiction to prevent and restrain
violations of section 1085. Subsection (c)(2)(A) authorizes the
United States to apply to a district court for a temporary
restraining order or an injunction against any person to
prevent or restrain a violation. Subsection (c)(2)(B) provides
similar authority to the Attorney General or other appropriate
State official of a State in which a violation allegedly has
occurred or will occur. The court is authorized to grant relief
upon determining, after notice and an opportunity for hearing,
that there is a substantial probability that a violation has
occurred or will occur. Subsections (c)(2)(C) and (D) cover
proceedings on Indian lands and expiration of temporary
restraining orders issued. Subsection (c)(3) permits temporary
relief to be obtained on an expedited basis.
Section 1085(d). Interactive Computer Service Providers.
Section 1085(d) establishes a mechanism through which
interactive computer service providers (``providers '') may be
required to terminate accounts, and/or remove, disable, or
block access to material or activity that violates Section
1085. This scheme provides limitations on liability for
qualifying providers, subject to providers meeting conditions
for eligibility which involve certain responsibilities with
regard to material that violates this section.
The Internet is a communications medium of great importance
for both national and international commerce and human
communication. Although illegal content, including illegal
gambling sites, exist on the Internet, it is a very small
percentage of content on the Internet. The committee does not
intend to create remedies for illegal activity that burden the
operation of online networks for lawful purposes, or that
impose unreasonable burdens on interactive computer services
who are not active participants in, and do not profit from, the
illegal gambling activity.
Subsection 1085(d)(1)(A) clarifies that providers shall not
be held liable for the use of their services by others to
violate laws prohibiting gambling. It is important to note that
the intent of this limitation is to avoid unintended criminal
prosecution of interactive service providers under this new
section 1085. Subsection 1085(d)(1)(A) limits liability under
this section or ``any other provision of Federal or State law
prohibiting or regulating gambling or gambling-related
activities for the use of its facilities or services by another
person to engage in Internet gambling activity or advertising
or promotion of Internet gambling activity.'' It is important
to clarify the committee's view that this limitation of
liability extends only to criminal offenses and penalties.
This liability limitation applies to providers with regard
to gambling-related material for functions described in
subsections 1085(d)(1)(i) & (ii), and it applies only to
content provided by another person. For example, the provider
of a hyperlink or Internet directory service would not be
liable for links to a site containing an illegal gambling
business run by a third party, if the directory service met the
conditions for eligibility set forth in subsection (d)(1)(B).
The committee intends that content provided by another person
include content provided by third parties, including users,
volunteers, or a different content provider. Qualifying
providers also receive immunity with regard to conduit and
server caching functions, such as those described in 17 U.S.C.
Sec. 512(a) & (b), to the extent that those functions are not
initiated by the provider so as to evade the requirements of
Section 1085. With regard to material that violates this
section (as well as links to such material) posted to an online
site controlled by the provider, a provider has
responsibilities if it receives appropriate notice from a law
enforcement official under subsection 1085(d)(2)(B).
Subsection 1085(d)(1)(B) sets forth the conditions of
eligibility that a provider must meet to qualify for these
criminal liability limitations. The provider must adopt and
implement, in a reasonable fashion, a policy of terminating the
accounts of subscribers whom the provider is notified (in
accordance with subsection 1085(d)(2)(B)) are using their
accounts to engage in an Internet gambling business prohibited
by this bill. The provider also must not knowingly permit its
computer server to be used to engage in the particular
violation at issue with the specific intent that its server be
used for such purpose.
Subsection 1085(d)(2)(A) establishes a ``notice and
takedown'' regime under which certain law enforcement officials
and providers will cooperate in removing or disabling access to
online sites that violate Sec. 1085(b). A provider receiving a
notice that conforms to the requirements of subsection
(d)(2)(B), and that relates to gambling material that violates
Sec. 1085(b), should expeditiously remove or disable access to
the material described in the notice. If the notice relates to
an online reference or hypertext link, then the provider should
remove or disable access to the reference or the link to the
illegal material. One of the purposes of this provision is to
create an orderly process for the notice and take down of
illegal materials. To ensure proper take down, notice must come
from the law enforcement officials specified in subsection
(d)(2)(A) and follow the procedures set forth in subsection
(d)(2)(B). Therefore, it is the view of the committee that any
notice that does not conform to the requirements of this
subsection may not be considered as evidence bearing on whether
a provider has met the conditions of eligibility in subsection
(d)(1)(B).
It is the view of the committee that H.R. 3125 does not
require a provider to take down content on any computer server
that the provider does not control. For example, subsection
(d)(2)(A)(ii) provides that if a provider receives notice from
a law enforcement official regarding the site at which the
illegal material or activity resides, but which is not under
the control of such provider, then the provider should notify
the law enforcement official that the provider is not the
proper recipient of the notice and upon receipt of lawful
process cooperate in identifying the entity that is the proper
recipient of the notice. With respect to subsection (d)(1)(B),
the committee intends that an interactive computer service
provider not be deemed to fail to satisfy this specific intent
condition unless at least one of the employees of such service
had the requisite intent and the provider knowingly permitted
the violation, or engaged in deliberate acts constituting a
purposeful effort to avoid learning the true and accurate basis
of such information. It is the view of the committee that the
``collective knowledge'' doctrine employed in some Federal
circuit courts of appeals should not apply to aggregate the
knowledge of intent of various employees of an interactive
service provider.
Subsection 1085(d)(3) allows Federal or State law
enforcement agencies to seek an injunction not less than 24
hours after providing notice under subsection (d)(2)(B).
However, it limits injunctions that may be issued against
providers in subsection (d)(3)(B) to orders restraining
providers to terminate specified accounts of subscribers
engaging in an activity that violates this section, to remove
or disable access to material on a site residing on a computer
server that the provider controls, and, in rare circumstances,
to foreign online locations, as well as other injunctive
remedies regarding material residing on a computer server that
the provider controls that the court considers necessary and
that are the least burdensome to the provider among comparably
effective forms of relief.
It also requires that prior to issuing any injunction
against an interactive computer service provider, a court weigh
each of the considerations set forth in subsection (d)(3)(C).
Subsection 1085(d)(3)(c) sets forth the factors a court shall
consider in determining whether injunctive relief is
appropriate, including: (i) whether the injunction would
significantly burden the provider, or the operation that
provider's system or network; (ii) that the injunction in
question is technically feasible and effective and that it will
not materially interfere with access to lawful material at
other online locations; (iii) whether less burdensome
preventative means are available; and, (iv) the magnitude of
the harm likely to be suffered by the community. With respect
to subsection (d)(3)(C)(iii), in many cases remedies against
other entities or industries may be equally, or more, effective
than an injunction against an interactive computer service. In
such cases, it is the view of the committee that an injunction
against the interactive computer service is not appropriate and
that the court may instead issue other injunctions available
under Sec. 1085(c) against other persons.
Subsection 1085(d)(4) creates a notice and take down regime
for advertising of non-Internet gambling activity, and preempts
all other liability for such content under any Federal or State
criminal law. The section applies to gambling activity that
either is not conducted via the Internet, or is not prohibited
by Section 1085. It is important to note that subsection (d)(4)
concerns the advertising of criminal activity which is not
protected by the first amendment, and that it does not regulate
or restrict content of any commercial advertising of lawful
activity. Subsection (d)(4)(E) clarifies that providers have no
obligation to take down non-Internet gambling activity that is
lawful where the gambling business is physically located and
not prohibited by Federal law.
The injunctive relief available under this subsection is
also different than under subsection 1085(d)(3). Providers are
subject to an injunction: (1) to take down illegal advertising
of gambling; or (2) to terminate the account of a subscriber of
the provider who is knowingly using the site or permitting it
to be used to engage in advertising of non-Internet gambling
activity that violates Federal law, or the law of the State in
which the gambling establishment is physically located. In
addition, Federal or State law enforcement officials acting
within their authority and jurisdiction may obtain an order
against the provider of the illegal advertising content
enjoining that provider from disseminating the illegal
advertising in question on the provider's computer server.
Subsection 1085(d)(5)(A) makes clear that providers are not
liable under any Federal, State or local law for good faith
efforts to comply with the take down requests and injunctions
authorized by this section. Subsection (d)(5)(B) makes clear
that providers have no obligation to monitor particular
material or use of their networks, or to take down illegal
gambling material except pursuant to a notice or court order
under this section. Subsection (d)(5)(C) provides that this
section does not in any way interfere with the right of a
subscriber to secure under other provisions of law, a
determination that his or her account should not be terminated
or that it should be restored, notwithstanding the account
termination procedures set forth in this section.
To be eligible for this provision, the provider must abide
by conditions for eligibility similar to those set forth in
Sec. (d)(1)(B), as well as an additional condition of
eligibility for providers of residential access service,
offering residential customers at reasonable cost software that
has some capability of filtering or blocking access by minors
to online Internet gambling sites that violate Sec. 1085. The
committee understands that such user empowerment software deals
with a wide array of objectionable content on the Internet and
may not be fully effective in blocking access to illegal sites.
The committee notes that section 1085(d) is not a form of
Internet regulation. It does not establish mandatory regulatory
requirements for providers. The committee notes that subsection
(d)(2)(A) is simply a law enforcement mechanism, conditioning a
provider's eligibility for limitations on liability under
existing laws on certain actions described in that subsection.
This mechanism is conceptually modeled after the ``Wire Act,''
18 U.S.C. Sec. 1084, which prohibits gambling businesses from
using a ``wire communication facility'' (such as a telephone or
the Internet) to place or receive bets or wagers. Specifically,
Sec. 1084(d) protects common carriers from ``civil or
criminal'' liability if they ``discontinue or refuse, the
leasing, furnishing, or maintaining of such facility,'' upon
proper notice from a law enforcement agency that ``any facility
furnished by it is being used or will be used for the purpose
of transmitting or receiving gambling information in interstate
or foreign commerce in violation of Federal, State, or local
law.'' The committee notes that Sec. 1084 was adopted by
Congress in 1961 (Public Law 87-216). The 1961 legislation,
which later was enacted as the Wire Act, was referred to and
reported by the Committee on the Judiciary (House Report 87-
967), and was not referred to any other committee.
Additionally, the liability immunity provisions in H.R.
3125 are similar to those within the ``Electronic
Communications Privacy Act of 1986,'' 18 U.S.C. Sec. 3124(d),
which immunize communications service providers that assist
State and Federal law enforcement authorities to install pen
registers or trap and trace devices. Specifically, Sec. 3124(d)
provides that ``no cause of action shall lie in any court
against any provider of a wire or electronic communications
service, its officers, employees, agents, or other specified
persons for providing information, facilities, or assistance in
accordance with the terms of a court order under this chapter.
. . .'' Moreover, Sec. 3124(e) provides that a ``good faith
reliance on a court order under this chapter . . . is a
complete defense against any civil or criminal action brought
under this chapter or any other law.'' The Electronic
Communications Privacy Act (Public Law 99-508) originated as
H.R. 4952, a bill referred to and reported out by the Committee
on the Judiciary, and which was not referred to any other
committee.
Section 1085(e). Availability of Relief.
This section clarifies that the availability of relief
under sections (c) and (d), which is civil in nature, is
independent of any criminal action under section (b) or any
other Federal or State law.
Section 1085(f). Applicability.
It is the view of the committee that, if otherwise lawful,
certain regulated gaming activities within this section are not
subject to the prohibition of Sec. 1085(b).
Subsection (f)(1)(A) clarifies that the prohibitions of
Sec. 1085 do not apply to any otherwise lawful bets or wagers
placed, received, or otherwise made wholly intrastate for a
State lottery, or for a multi-State lottery operated jointly
between two or more States in conjunction with State lotteries,
subject to four conditions: (i) express authorization, and
licensing or regulation, under applicable State law; (ii) use
of a ``private network''; (iii) use of facilities open to the
general public to place the bet or wager, where each person
placing or otherwise making the bet or wager must be physically
located when such bet or wager is placed; and (iv) compliance
with applicable Federal lottery laws (18 U.S.C. Sec. Sec. 1301-
1304) and other applicable Federal laws.
Subsection (f)(1)(B) clarifies that the prohibitions of
Sec. 1085 do not apply to any otherwise lawful bet or wager
placed, received, or otherwise made on an interstate or
intrastate basis on a live horse or a live dog race, or on jai
alai, or the sending, receiving, or inviting of information
assisting in the placing of such a bet or wager, subject to
five specified conditions, which require: (i) express
authorization, and licensing or regulation, by the State in
which the bet or wager is received, under applicable Federal
and such State's laws; (ii) use of a ``closed-loop subscriber-
based service''; (iii) initiation from a State in which betting
or wagering on that same type of live horse racing, or on that
same type of live dog racing, or jai alai, as applicable, is
lawful, and receipt in a State in which such betting or
wagering is lawful; (iv) specified regulatory oversight by the
State in which the bet or wager is received; and (v) compliance
with the Interstate Horse Racing Act of 1978 (15 U.S.C.
Sec. 3001 et seq.), or with comparable consent agreements
between the participating States applicable to dog racing and
jai alai.
Subsection (f)(1)(C) clarifies that the prohibitions of
Sec. 1085 do not apply to any otherwise lawful bet or wager,
placed and received wholly intrastate on a closed-loop
subscriber based service, and subject to the express
authorization, licensing, and regulation by that State.
Subsection (f)(1)(D) clarifies that the prohibitions of
Sec. 1085 do not apply to any otherwise lawful bet or wager,
placed on a closed-loop subscriber based service, and lawfully
received by a federally recognized Indian tribe, subject to
being permitted under and conducted in accordance with the
Indian Gaming Regulatory Act (``IGRA''), and, so long as each
person placing, receiving, or otherwise making such a bet or
wager is physically located on Indian lands (as that term is
defined in section 4 of IGRA) when such person places,
receives, or otherwise makes the bet or wager.
Section 1085(g). Rule of Construction.
Section 1085(g) specifies that Sec. 1085 is not to be
construed to affect any prohibition or remedy applicable to a
person engaged in a gambling business under any other provision
of Federal or State law. This means that a person engaged in a
gambling business who is subject to prosecution or the
imposition of civil remedies under Sec. 1085 continues to be
subject to any other prohibitions or remedies applicable under
any other provision of Federal or State law. Section 2(b) of
the bill concerns codification of Sec. 1085.
Section 3. Report on Enforcement.
Section 3 directs the Attorney General, not later than 3
years after the date of enactment, to submit to Congress a
report including (1) an analysis of the problems, if any,
associated with enforcing Sec. 1085; (2) recommendations for
the best use of Department of Justice resources to enforce
Sec. 1085; and (3) an estimate of the amount of activity and
money being used to gamble on the Internet.
Section 4. Severability.
Section 4 is a severability provision that provides that
any provisions within the act found to be unconstitutional
shall not affect any other provisions within the act.
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 (new matter is
printed in italics and existing law in which no change is
proposed is shown in roman):
CHAPTER 50 OF TITLE 18, UNITED STATES CODE
CHAPTER 50--GAMBLING
Sec.
1081. Definitions.
* * * * * * *
1085. Internet gambling.
* * * * * * *
Sec. 1085. Internet gambling
(a) Definitions.--In this section the following definitions
apply:
(1) Bets or wagers.--The term ``bets or wagers''--
(A) means the staking or risking by any
person of something of value upon the outcome
of a contest of others, a sporting event, or a
game predominantly subject to chance, upon an
agreement or understanding that the person or
another person will receive something of
greater value than the amount staked or risked
in the event of a certain outcome;
(B) includes the purchase of a chance or
opportunity to win a lottery or other prize
(which opportunity to win is predominantly
subject to chance);
(C) includes any scheme of a type described
in section 3702 of title 28; and
(D) does not include--
(i) a bona fide business
transaction governed by the securities
laws (as that term is defined in
section 3(a)(47) of the Securities
Exchange Act of 1934 (15 U.S.C.
78c(a)(47))) for the purchase or sale
at a future date of securities (as that
term is defined in section 3(a)(10) of
the Securities Exchange Act of 1934 (15
U.S.C. 78c(a)(10)));
(ii) a transaction on or subject to
the rules of a contract market
designated pursuant to section 5 of the
Commodity Exchange Act (7 U.S.C. 7);
(iii) a contract of indemnity or
guarantee;
(iv) a contract for life, health,
or accident insurance; or
(v) participation in a simulation
sports game or an educational game or
contest that--
(I) is not dependent solely
on the outcome of any single
sporting event or
nonparticipant's singular
individual performance in any
single sporting event;
(II) has an outcome that
reflects the relative knowledge
and skill of the participants
with such outcome determined
predominantly by accumulated
statistical results of sporting
events and nonparticipants
accumulated individual
performances therein; and
(III) offers a prize or
award to a participant that is
established in advance of the
game or contest and is not
determined by the number of
participants or the amount of
any fees paid by those
participants.
(2) Closed-loop subscriber-based service.--The term
``closed-loop subscriber-based service'' means any
information service or system that uses--
(A) a device or combination of devices--
(i) expressly authorized and
operated in accordance with the laws of
a State, exclusively for placing,
receiving, or otherwise making a bet or
wager described in subsection
(f)(1)(B); and
(ii) by which a person located
within any State must subscribe and be
registered with the provider of the
wagering service by name, address, and
appropriate billing information to be
authorized to place, receive, or
otherwise make a bet or wager, and must
be physically located within that State
in order to be authorized to do so;
(B) an effective customer verification and
age verification system, expressly authorized
and operated in accordance with the laws of the
State in which it is located, to ensure that
all applicable Federal and State legal and
regulatory requirements for lawful gambling are
met; and
(C) appropriate data security standards to
prevent unauthorized access by any person who
has not subscribed or who is a minor.
(3) Foreign jurisdiction.--The term ``foreign
jurisdiction'' means a jurisdiction of a foreign
country or political subdivision thereof.
(4) Gambling business.--The term ``gambling
business'' means--
(A) a business that is conducted at a
gambling establishment, or that--
(i) involves--
(I) the placing, receiving,
or otherwise making of bets or
wagers; or
(II) the offering to engage
in the placing, receiving, or
otherwise making of bets or
wagers;
(ii) involves 1 or more persons who
conduct, finance, manage, supervise,
direct, or own all or part of such
business; and
(iii) has been or remains in
substantially continuous operation for
a period in excess of 10 days or has a
gross revenue of $2,000 or more from
such business during any 24-hour
period; and
(B) any soliciting agent of a business
described in subparagraph (A).
(5) Information assisting in the placing of a bet
or wager.--The term ``information assisting in the
placing of a bet or wager''--
(A) means information that is intended by
the sender or recipient to be used by a person
engaged in the business of betting or wagering
to place, receive, or otherwise make a bet or
wager; and
(B) does not include--
(i) information concerning
parimutuel pools that is exchanged
exclusively between or among 1 or more
racetracks or other parimutuel wagering
facilities licensed by the State or
approved by the foreign jurisdiction in
which the facility is located, and 1 or
more parimutuel wagering facilities
licensed by the State or approved by
the foreign jurisdiction in which the
facility is located, if that
information is used only to conduct
common pool parimutuel pooling under
applicable law;
(ii) information exchanged
exclusively between or among 1 or more
racetracks or other parimutuel wagering
facilities licensed by the State or
approved by the foreign jurisdiction in
which the facility is located, and a
support service located in another
State or foreign jurisdiction, if the
information is used only for processing
bets or wagers made with that facility
under applicable law;
(iii) information exchanged
exclusively between or among 1 or more
wagering facilities that are licensed
and regulated by the State in which
each facility is located, and any
support service, wherever located, if
the information is used only for the
pooling or processing of bets or wagers
made by or with the facility or
facilities under each State's
applicable law;
(iv) any news reporting or analysis
of wagering activity, including odds,
racing or event results, race and event
schedules, or categories of wagering;
or
(v) any posting or reporting of any
educational information on how to make
a bet or wager or the nature of betting
or wagering.
(6) Interactive computer service.--The term
``interactive computer service'' means any information
service, system, or access software provider that
operates in, or uses a channel or instrumentality of,
interstate or foreign commerce to provide or enable
access by multiple users to a computer server, which
includes the transmission, storage, retrieval, hosting,
linking, formatting, or translation of a communication
made by another person, and including specifically a
service, system, or access software provider that--
(A) provides access to the Internet; or
(B) is engaged in the business of providing
an information location tool (which means a
service that refers or links users to an online
location, including a directory, index,
reference, pointer, or hypertext link).
(7) Interactive computer service provider.--The
term ``interactive computer service provider'' means
any person that provides an interactive computer
service, to the extent that such person offers or
provides such service.
(8) Internet.--The term ``Internet'' means the
international computer network of both Federal and non-
Federal interoperable packet switched data networks.
(9) Person.--The term ``person'' means any
individual, association, partnership, joint venture,
corporation (or any affiliate of a corporation), State
or political subdivision thereof, department, agency,
or instrumentality of a State or political subdivision
thereof, or any other government, organization, or
entity (including any governmental entity (as defined
in section 3701(2) of title 28)).
(10) Private network.--The term ``private network''
means a communications channel or channels, including
voice or computer data transmission facilities, that
use either--
(A) private dedicated lines; or
(B) the public communications
infrastructure, if the infrastructure is
secured by means of the appropriate private
communications technology to prevent
unauthorized access.
(11) State.--The term ``State'' means a State of
the United States, the District of Columbia, the
Commonwealth of Puerto Rico, or a commonwealth,
territory, or possession of the United States.
(12) Subscriber.--The term ``subscriber''--
(A) means any person with a business
relationship with the interactive computer
service provider through which such person
receives access to the system, service, or
network of that provider, even if no formal
subscription agreement exists; and
(B) includes registrants, students who are
granted access to a university system or
network, and employees or contractors who are
granted access to the system or network of
their employer.
(13) Soliciting agent.--The term ``soliciting
agent'' means any agent who knowingly solicits for a
gambling business described in paragraph (4)(A) of this
subsection.
(b) Internet Gambling.--
(1) Prohibition.--Subject to subsection (f), it
shall be unlawful for a person engaged in a gambling
business knowingly to use the Internet or any other
interactive computer service--
(A) to place, receive, or otherwise make a
bet or wager; or
(B) to send, receive, or invite information
assisting in the placing of a bet or wager.
(2) Penalties.--A person engaged in a gambling
business who violates this section shall be--
(A) fined in an amount equal to not more
than the greater of--
(i) the total amount that such
person bet or wagered, or placed,
received, or accepted in bets or
wagers, as a result of engaging in that
business in violation of this section;
or
(ii) $20,000;
(B) imprisoned not more than 4 years; or
(C) both.
(3) Permanent injunctions.--Upon conviction of a
person under this section, the court may enter a
permanent injunction enjoining such person from
placing, receiving, or otherwise making bets or wagers
or sending, receiving, or inviting information
assisting in the placing of bets or wagers.
(c) Civil Remedies.--
(1) Jurisdiction.--The district courts of the
United States shall have original and exclusive
jurisdiction to prevent and restrain violations of this
section by issuing appropriate orders in accordance
with this section, regardless of whether a prosecution
has been initiated under this section.
(2) Proceedings.--
(A) Institution by federal government.--
(i) In general.--The United States
may institute proceedings under this
subsection to prevent or restrain a
violation of this section.
(ii) Relief.--Upon application of
the United States under this
subparagraph, the district court may
enter a temporary restraining order or
an injunction against any person to
prevent or restrain a violation of this
section if the court determines, after
notice and an opportunity for a
hearing, that there is a substantial
probability that such violation has
occurred or will occur.
(B) Institution by state attorney
general.--
(i) In general.--The attorney
general of a State (or other
appropriate State official) in which a
violation of this section allegedly has
occurred or will occur, after providing
written notice to the United States,
may institute proceedings under this
subsection to prevent or restrain the
violation.
(ii) Relief.--Upon application of
the attorney general (or other
appropriate State official) of an
affected State under this subparagraph,
the district court may enter a
temporary restraining order or an
injunction against any person to
prevent or restrain a violation of this
section if the court determines, after
notice and an opportunity for a
hearing, that there is a substantial
probability that such violation has
occurred or will occur.
(C) Indian lands.--Notwithstanding
subparagraphs (A) and (B), for a violation that
is alleged to have occurred, or may occur, on
Indian lands (as that term is defined in
section 4 of the Indian Gaming Regulatory Act
(25 U.S.C. 2703))--
(i) the United States shall have
the enforcement authority provided
under subparagraph (A); and
(ii) the enforcement authorities
specified in an applicable Tribal-State
compact negotiated under section 11 of
the Indian Gaming Regulatory Act (25
U.S.C. 2710) shall be carried out in
accordance with that compact.
(D) Expiration.--Any temporary restraining
order or preliminary injunction entered
pursuant to subparagraph (A) or (B) shall
expire if, and as soon as, the United States,
or the attorney general (or other appropriate
State official) of the State, as applicable,
notifies the court that issued the order or
injunction that the United States or the State,
as applicable, will not seek a permanent
injunction.
(3) Expedited proceedings.--
(A) In general.--In addition to any
proceeding under paragraph (2), a district
court may, in exigent circumstances, enter a
temporary restraining order against a person
alleged to be in violation of this section upon
application of the United States under
paragraph (2)(A), or the attorney general (or
other appropriate State official) of an
affected State under paragraph (2)(B), without
notice and the opportunity for a hearing as
provided in rule 65(b) of the Federal Rules of
Civil Procedure (except as provided in
subsection (d)(3)), if the United States or the
State, as applicable, demonstrates that there
is probable cause to believe that the use of
the Internet or other interactive computer
service at issue violates this section.
(B) Hearings.--A hearing requested
concerning an order entered under this
paragraph shall be held at the earliest
practicable time.
(d) Interactive Computer Service Providers.--
(1) Immunity from liability for use by another.--
(A) In general.--An interactive computer
service provider described in subparagraph (B)
shall not be liable, under this section or any
other provision of Federal or State law
prohibiting or regulating gambling or gambling-
related activities, for the use of its
facilities or services by another person to
engage in Internet gambling activity or
advertising or promotion of Internet gambling
activity that violates such law--
(i) arising out of any
transmitting, routing, or providing of
connections for gambling-related
material or activity (including
intermediate and temporary storage in
the course of such transmitting,
routing, or providing connections) by
the provider, if--
(I) the material or
activity was initiated by or at
the direction of a person other
than the provider;
(II) the transmitting,
routing, or providing of
connections is carried out
through an automatic process
without selection of the
material or activity by the
provider;
(III) the provider does not
select the recipients of the
material or activity, except as
an automatic response to the
request of another person; and
(IV) the material or
activity is transmitted through
the system or network of the
provider without modification
of its content; or
(ii) arising out of any gambling-
related material or activity at an
online site residing on a computer
server owned, controlled, or operated
by or for the provider, or arising out
of referring or linking users to an
online location containing such
material or activity, if the material
or activity was initiated by or at the
direction of a person other than the
provider, unless the provider fails to
take expeditiously, with respect to the
particular material or activity at
issue, the actions described in
paragraph (2)(A) following the receipt
by the provider of a notice described
in paragraph (2)(B).
(B) Eligibility.--An interactive computer
service provider is described in this
subparagraph only if the provider--
(i) maintains and implements a
written or electronic policy that
requires the provider to terminate the
account of a subscriber of its system
or network expeditiously following the
receipt by the provider of a notice
described in paragraph (2)(B) alleging
that such subscriber has violated or is
violating this section; and
(ii) with respect to the particular
material or activity at issue, has not
knowingly permitted its computer server
to be used to engage in activity that
the provider knows is prohibited by
this section, with the specific intent
that such server be used for such
purpose.
(2) Notice to interactive computer service
providers.--
(A) In general.--If an interactive computer
service provider receives from a Federal or
State law enforcement agency, acting within its
authority and jurisdiction, a written or
electronic notice described in subparagraph
(B), that a particular online site residing on
a computer server owned, controlled, or
operated by or for the provider is being used
by another person to violate this section, the
provider shall expeditiously--
(i) remove or disable access to the
material or activity residing at that
online site that allegedly violates
this section; or
(ii) in any case in which the
provider does not control the site at
which the subject material or activity
resides, the provider, through any
agent of the provider designated in
accordance with section 512(c)(2) of
title 17, or other responsible
identified employee or contractor--
(I) notify the Federal or
State law enforcement agency
that the provider is not the
proper recipient of such
notice; and
(II) upon receipt of a
subpoena, cooperate with the
Federal or State law
enforcement agency in
identifying the person or
persons who control the site.
(B) Notice.--A notice is described in this
subparagraph only if it--
(i) identifies the material or
activity that allegedly violates this
section, and alleges that such material
or activity violates this section;
(ii) provides information
reasonably sufficient to permit the
provider to locate (and, as
appropriate, in a notice issued
pursuant to paragraph (3)(A) to block
access to) the material or activity;
(iii) is supplied to any agent of a
provider designated in accordance with
section 512(c)(2) of title 17, if
information regarding such designation
is readily available to the public;
(iv) provides information that is
reasonably sufficient to permit the
provider to contact the law enforcement
agency that issued the notice,
including the name of the law
enforcement agency, and the name and
telephone number of an individual to
contact at the law enforcement agency
(and, if available, the electronic mail
address of that individual); and
(v) declares under penalties of
perjury that the person submitting the
notice is an official of the law
enforcement agency described in clause
(iv).
(3) Injunctive relief.--
(A) In general.--The United States, or a
State law enforcement agency acting within its
authority and jurisdiction, may, not less than
24 hours following the issuance to an
interactive computer service provider of a
notice described in paragraph (2)(B), in a
civil action, obtain a temporary restraining
order, or an injunction to prevent the use of
the interactive computer service by another
person in violation of this section.
(B) Limitations.--Notwithstanding any other
provision of this section, in the case of any
application for a temporary restraining order
or an injunction against an interactive
computer service provider described in
paragraph (1)(B) to prevent a violation of this
section--
(i) arising out of activity
described in paragraph (1)(A)(i), the
injunctive relief is limited to--
(I) an order restraining
the provider from providing
access to an identified
subscriber of the system or
network of the interactive
computer service provider, if
the court determines that there
is probable cause to believe
that such subscriber is using
that access to violate this
section (or to engage with
another person in a
communication that violates
this section), by terminating
the specified account of that
subscriber; and
(II) an order restraining
the provider from providing
access, by taking reasonable
steps specified in the order to
block access, to a specific,
identified, foreign online
location;
(ii) arising out of activity
described in paragraph (1)(A)(ii), the
injunctive relief is limited to--
(I) the orders described in
clause (i)(I);
(II) an order restraining
the provider from providing
access to the material or
activity that violates this
section at a particular online
site residing on a computer
server operated or controlled
by the provider; and
(III) such other injunctive
remedies as the court considers
necessary to prevent or
restrain access to specified
material or activity that is
prohibited by this section at a
particular online location
residing on a computer server
operated or controlled by the
provider, that are the least
burdensome to the provider
among the forms of relief that
are comparably effective for
that purpose.
(C) Considerations.--The court, in
determining appropriate injunctive relief under
this paragraph, shall consider--
(i) whether such an injunction,
either alone or in combination with
other such injunctions issued, and
currently operative, against the same
provider would significantly (and, in
the case of relief under subparagraph
(B)(ii), taking into account, among
other factors, the conduct of the
provider, unreasonably) burden either
the provider or the operation of the
system or network of the provider;
(ii) whether implementation of such
an injunction would be technically
feasible and effective, and would not
materially interfere with access to
lawful material at other online
locations;
(iii) whether other less burdensome
and comparably effective means of
preventing or restraining access to the
illegal material or activity are
available; and
(iv) the magnitude of the harm
likely to be suffered by the community
if the injunction is not granted.
(D) Notice and ex parte orders.--Injunctive
relief under this paragraph shall not be
available without notice to the service
provider and an opportunity for such provider
to appear before the court, except for orders
ensuring the preservation of evidence or other
orders having no material adverse effect on the
operation of the communications network of the
service provider.
(4) Advertising or promotion of non-internet
gambling.--
(A) Definitions.--In this paragraph:
(i) Conducted.--With respect to a
gambling activity, that activity is
``conducted'' in a State if the State
is the State in which the gambling
establishment (as defined in section
1081) that offers the gambling activity
being advertised or promoted is
physically located.
(ii) Non-internet gambling
activity.--The term ``non-Internet
gambling activity'' means--
(I) a gambling activity in
which the placing of the bet or
wager is not conducted by the
Internet; or
(II) a gambling activity to
which the prohibitions of this
section do not apply.
(B) Immunity from liability for use by
another.--
(i) In general.--An interactive
computer service provider described in
clause (ii) shall not be liable, under
any provision of Federal or State law
prohibiting or regulating gambling or
gambling-related activities, or under
any State law prohibiting or regulating
advertising and promotional activities,
for--
(I) content, provided by
another person, that advertises
or promotes non-Internet
gambling activity that violates
such law (unless the provider
is engaged in the business of
such gambling), arising out of
any of the activities described
in paragraph (1)(A) (i) or
(ii); or
(II) content, provided by
another person, that advertises
or promotes non-Internet
gambling activity that is
lawful under Federal law and
the law of the State in which
such gambling activity is
conducted.
(ii) Eligibility.--An interactive
computer service is described in this
clause only if the provider--
(I) maintains and
implements a written or
electronic policy that requires
the provider to terminate the
account of a subscriber of its
system or network expeditiously
following the receipt by the
provider of a notice described
in paragraph (2)(B) alleging
that such subscriber maintains
a website on a computer server
controlled or operated by the
provider for the purpose of
engaging in advertising or
promotion of non-Internet
gambling activity prohibited by
a Federal law or a law of the
State in which such activity is
conducted;
(II) with respect to the
particular material or activity
at issue, has not knowingly
permitted its computer server
to be used to engage in the
advertising or promotion of
non-Internet gambling activity
that the provider knows is
prohibited by a Federal law or
a law of the State in which the
activity is conducted, with the
specific intent that such
server be used for such
purpose; and
(III) at reasonable cost,
offers residential customers of
the provider's Internet access
service, if the provider
provides Internet access
service to such customers,
computer software, or another
filtering or blocking system
that includes the capability of
filtering or blocking access by
minors to online Internet
gambling sites that violate
this section.
(C) Notice to interactive computer service
providers.--
(i) Notice from federal law
enforcement agency.--If an interactive
computer service provider receives from
a Federal law enforcement agency,
acting within its authority and
jurisdiction, a written or electronic
notice described in paragraph (2)(B),
that a particular online site residing
on a computer server owned, controlled,
or operated by or for the provider is
being used by another person to
advertise or promote non-Internet
gambling activity that violates a
Federal law prohibiting or regulating
gambling or gambling-related
activities, the provider shall
expeditiously take the actions
described in paragraph (2)(A) (i) or
(ii) with respect to the advertising or
promotion identified in the notice.
(ii) Notice from state law
enforcement agency.--If an interactive
computer service provider receives from
a State law enforcement agency, acting
within its authority and jurisdiction,
a written or electronic notice
described in paragraph (2)(B), that a
particular online site residing on a
computer server owned, controlled, or
operated by or for the provider is
being used by another person to
advertise or promote non-Internet
gambling activity that is conducted in
that State and that violates a law of
that State prohibiting or regulating
gambling or gambling-related
activities, the provider shall
expeditiously take the actions
described in paragraph (2)(A) (i) or
(ii) with respect to the advertising or
promotion identified in the notice.
(D) Injunctive relief.--The United States,
or a State law enforcement agency, acting
within its authority and jurisdiction, may, not
less than 24 hours following the issuance to an
interactive computer service provider of a
notice described in paragraph (2)(B), in a
civil action, obtain a temporary restraining
order, or an injunction, to prevent the use of
the interactive computer service by another
person to advertise or promote non-Internet
gambling activity that violates a Federal law,
or a law of the State in which such activity is
conducted that prohibits or regulates gambling
or gambling-related activities, as applicable.
The procedures described in paragraph (3)(D)
shall apply to actions brought under this
subparagraph, and the relief in such actions
shall be limited to--
(i) an order requiring the provider
to remove or disable access to the
advertising or promotion of non-
Internet gambling activity that
violates Federal law, or the law of the
State in which such activity is
conducted, as applicable, at a
particular online site residing on a
computer server controlled or operated
by the provider;
(ii) an order restraining the
provider from providing access to an
identified subscriber of the system or
network of the provider, if the court
determines that such subscriber
maintains a website on a computer
server controlled or operated by the
provider that the subscriber is
knowingly using or knowingly permitting
to be used to advertise or promote non-
Internet gambling activity that
violates Federal law or the law of the
State in which such activity is
conducted; and
(iii) an order restraining the
provider of the content of the
advertising or promotion of such
illegal gambling activity from
disseminating such advertising or
promotion on the computer server
controlled or operated by the provider
of such interactive computer service.
(E) Applicability.--The provisions of
subparagraphs (C) and (D) do not apply to the
content described in subparagraph (B)(i)(II).
(5) Effect on other law.--
(A) Immunity from liability for
compliance.--An interactive computer service
provider shall not be liable for any damages,
penalty, or forfeiture, civil or criminal,
under Federal or State law for taking in good
faith any action described in paragraphs
(2)(A), (4)(B)(ii)(I), or (4)(C) to comply with
a notice described in paragraph (2)(B), or
complying with any court order issued under
paragraph (3) or (4)(D).
(B) Disclaimer of obligations.--Nothing in
this section may be construed to impose or
authorize an obligation on an interactive
computer service provider described in
paragraph (1)(B)--
(i) to monitor material or use of
its service; or
(ii) except as required by a notice
or an order of a court under this
subsection, to gain access to, to
remove, or to disable access to
material.
(C) Rights of subscribers.--Nothing in this
section may be construed to prejudice the right
of a subscriber to secure an appropriate
determination, as otherwise provided by law, in
a Federal court or in a State or local tribunal
or agency, that the account of such subscriber
should not be terminated pursuant to this
subsection, or should be restored.
(e) Availability of Relief.--The availability of relief
under subsections (c) and (d) shall not depend on, or be
affected by, the initiation or resolution of any action under
subsection (b), or under any other provision of Federal or
State law.
(f) Applicability.--
(1) In general.--Subject to paragraph (2), the
prohibition in this section does not apply to--
(A) any otherwise lawful bet or wager that
is placed and received, or otherwise made
wholly intrastate for a State lottery, or for a
multi-State lottery operated jointly between 2
or more States in conjunction with State
lotteries if--
(i) each such lottery is expressly
authorized, and licensed or regulated,
under applicable State law;
(ii) the bet or wager is placed on
an interactive computer service that
uses a private network or a closed-loop
subscriber based service regulated and
operated by the State lottery or its
expressly designated agent for such
activity;
(iii) each person placing or
otherwise making that bet or wager is
physically located when such bet or
water is placed at a facility that is
open to the general public; and
(iv) each such lottery complies
with sections 1301 through 1304, and
other applicable provisions of Federal
law;
(B) any otherwise lawful bet or wager that
is placed, received, or otherwise made on an
interstate or intrastate basis on a live horse
or a live dog race or on jai alai, 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 received,
under applicable Federal and such
State's laws;
(ii) placed on a closed-loop
subscriber-based service;
(iii) initiated from a State in
which betting or wagering on that same
type of live horse or live dog racing
or on jai alai is lawful and received
in a State in which such betting or
wagering is lawful;
(iv) subject to the regulatory
oversight of the State in which the bet
or wager is received and subject by
such State to minimum control standards
for the accounting, regulatory
inspection, and auditing of all such
bets or wagers transmitted from 1 State
to another; and
(v) in the case of--
(I) live horse racing, made
in accordance with the
Interstate Horse Racing Act of
1978 (15 U.S.C. 3001 et seq.)
and the requirements, if any,
established by an appropriate
legislative or regulatory body
of the State in which the bet
or wager originates;
(II) live dog racing,
subject to regulatory consent
agreements that are comparable
to those required by the
Interstate Horse Racing Act of
1978, and the requirements, if
any, established by an
appropriate legislative or
regulatory body of the State in
which the bet or wager
originates; or
(III) live jai alai,
subject to regulatory consent
agreements that are comparable
to those required by the
Interstate Horse Racing Act of
1978, and the requirements, if
any, established by an
appropriate legislative or
regulatory body of the State in
which the bet or wager
originates;
(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 State's laws; and
(ii) placed on a closed-loop
subscriber based service; or
(D) any otherwise lawful bet or wager that
is--
(i) placed on a closed-loop
subscriber based service or a private
network; and
(ii) is lawfully received by a
federally recognized Indian tribe, or
the sending, receiving, or inviting of
information assisting in the placing of
any such bet or wager, if the game is
permitted under and conducted in
accordance with the Indian Gaming
Regulatory Act, so long as each person
placing, receiving, or otherwise making
such a bet or wager, or transmitting
such information, is physically located
on Indian lands (as that term is
defined in section 4 of the Indian
Gaming Regulatory Act) when such person
places, receives, or otherwise makes
the bet or wager.
(2) Bets or wagers made by agents or proxies.--
(A) In general.--Paragraph (1) does not
apply in any case in which a bet or wager is
placed, received, or otherwise made by the use
of an agent or proxy using the Internet or an
interactive computer service.
(B) Qualification.--Nothing in this
paragraph may be construed to prohibit the
owner operator of a parimutuel wagering
facility that is licensed by a State from
employing an agent in the operation of the
account wagering system owned or operated by
the parimutuel facility.
(3) Advertising and promotion.--The prohibition of
subsection (b)(1)(B) does not apply to advertising,
promotion, or other communication by, or authorized by,
anyone licensed to operate a gambling business in a
State.
(g) Rule of Construction.--Nothing in this section may be
construed to affect any prohibition or remedy applicable to a
person engaged in a gambling business under any other provision
of Federal or State law.
Additional Views
While I support the overall thrust of H.R. 3125, the
Internet Gambling Prohibition Act, I have serious concerns
relating to the tribal gaming exemption provided by Section 2:
(f)(1)(D).
The provision exempts gambling on a closed loop system, as
the term is defined in H.R. 3125. It requires both the sender
and the receiver to be on Indian lands. This is not limited to
the Indian lands on which the game is conducted, therefore, it
would allow linking of all Indian lands nationwide.
Because the language is broad enough to authorize just
about any type of wagering on a closed loop system between
tribal lands, language must also be added to ensure that no
Class III gaming activity can occur without the explicit
authorization of a Tribal/State compact.
The language that a bet be ``lawfully received'' by a tribe
is ambiguous, because it is unclear if the Act itself will make
the receipt of the wager ``lawful,'' independent of any
Compact. The requirement that the ``game is permitted under and
conducted in accordance with IGRA'' is ambiguous, because if
the underlying game (i.e. slot machines) is authorized by a
Compact, without specific authorization for a closed loop
system, the requirement would appear to be met.
Let me provide an example: If State A's compact allows for
slots, and State B's compact allows for blackjack and slots,
absent clarification, the tribe in State A would argue it can
now participate in blackjack.
In conclusion, the ambiguous provision, combined with the
rules of statutory construction, require that the language be
clarified so that the carefully negotiated Tribal/State
compacts are not at risk.
F. James Sensenbrenner, Jr.
Dissenting Views
Although we are opposed to illegal gambling, whether done
over the Internet or otherwise, we cannot support the
legislation reported by the Judiciary Committee. H.R. 3125 not
only expands gambling over the Internet, it arbitrarily favors
certain forms of gambling over others. In addition, the bill
inappropriately requires Internet service providers and others
to police websites, threatens the privacy and civil liberty of
all Americans, and creates a patchwork of inconsistent laws. By
approving this legislation, the Majority reveals its
insensitivity to the growth of the Internet and the interests
of our citizens in the information age.
Concerns or outright opposition with regard to the
legislation (or similar predecessor versions of it) have been
expressed by the Justice Department and a wide variety of
groups. These include Internet and telecommunications concerns
such as the Computer & Communications Industry Association
(CCIA), Covad Communications, and AT&T; civil liberties groups
such as the Center for Democracy and Technology (CDT) and the
ACLU; and groups harmed by the bill's arbitrary preference for
pari-mutuel betting \1\ and its equally arbitrary dismissal of
other forms of gambling,\2\ including State lotteries,
charitable gaming, and gambling on Indian reservations.
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\1\ The Christian Coalition, Family Research Council, and Madison
Project oppose the expansion of gambling in the bill.
\2\ These groups include the National Governors Association,
lottery.com, the Association of Lottery Retailers, and the Lac Vieux
Band of Lake Superior Chippewa Indians.
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H.R. 3125 would make it unlawful for a person \3\ engaged
in a gambling business \4\ knowingly to use the Internet to
place, receive or otherwise make a bet or wager or to send,
receive or invite information assisting in the placing of a bet
or wager.\5\ At the same time the bill vitiates the existing
Federal wire statute prohibition \6\ on certain bets from the
home by making it legal to place a bet or wager at home over
the Internet on a horse race, dog race or jai alai match,\7\
the bill also discriminates against regulated gambling by
church and non-profit organizations,\8\ in-State lottery
sales,\9\ and Native American tribes \10\ by severely
restricting their legality over the Internet. The bill excludes
fantasy sports leagues from its coverage by defining a ``bet or
wager'' to exclude such activities.\11\
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\3\ Subsection (a)(9) of H.R. 3125 would broadly define ``person''
to include individuals and entities with indirect or highly attenuated
connections to the activity in question, such as shareholders of a
corporation or officers of a holding company.
\4\ Subsection (a)(4) of H.R. 3125 would define a person engaged
gambling business to include those persons who place or receive bets
and is in continuous operation for more than 10 days or has a gross
revenue of at least $2,000. This definition could be construed to apply
to an individual gambler.
\5\ H.R. 3125, subsection (b)(1). The bill would institute new
civil and criminal penalties for violating its provisions. Civil
penalties would include the greater of the amount of bets and wagers
placed or received by the defendant or $20,000. Criminal penalties
would include imprisonment up to 4 years. A defendant could be subject
to both the civil and criminal penalties. H.R. 3125, subsection (b)(2).
\6\ The Wire Communications Act, 18 U.S.C. Sec. 1084, prohibits
persons who are ``engaged in the business of betting or wagering
knowingly [to] use[ ] a wire communication facility for the
transmission in interstate or foreign commerce of bets or wagers or
information assisting in the placing of bets or wagers.'' As defined by
18 U.S.C. Sec. 1081, a ``wire communication facility'' includes the
Internet.
\7\ H.R. 3125, subsection (f). Such bets would be permitted if
allowed by the State and placed on a closed-loop subscriber service,
broadly defined, which would include the purchase of a diskette with a
credit card which could be used to access the system.
\8\ Charitable donations that are placed through bets are neither
excluded from definition of ``bet or wager,'' nor from the prohibition
on Internet gambling.
\9\ Subsection (f)(1)(A) of H.R. 3125 would permit the purchase of
lottery tickets on the Internet only by a person who ``is physically
located when such bet or water [sic] is physically located when such
bet or water [sic] is placed at a facility that is open to the general
public.''
\10\ Subsection (f)(1)(D) of H.R. 3125 would restrict the placement
and receipt of Indian gambling bets over the Internet to situations in
which the person is ``physically located on Indian lands.'' The 1988
Indian Gambling Regulatory Act currently permits Native Americans to
use the Internet and telecommunications technologies to link Bingo that
is played on different Reservations. This legislation expressly
encouraged tribes to deploy the latest technology and communications
for Bingo. Like its treatment of State lotteries, H.R. 3125 would
eliminate the ability of tribes to conduct lawful Bingo games at the
same time that it opens the floodgates for currently unlawful horse
races, dog races, and jai alai.
\11\ H.R. 3125, subsection (a)(1)(D)(v). The bill defines fantasy
sports leagues as contests that do not depend on the outcome of any
single sporting event or a singular individual performance, that have
an outcome reflecting the skill and knowledge of contestants, and that
offer a prize that is determined in advance of the event and do not
depend on the number of participants or the fees paid by those
participants.
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The bill's enforcement scheme is premised on several broad
``notice and take down,'' blocking, and injunctive
requirements, which principally rely on so-called ``interactive
computer service'' (ICS) providers to act as surrogates for law
enforcement (presumably, this would include Internet service
providers, such as AOL or the Microsoft Network (MSN), but
potentially include a far broader range of companies such as
search engines and portals \12\). With regard to ``notice-and-
takedown,'' the bill specifies that after notice from a law
enforcement agency, an ICS is required to ``take down'' any web
site, customer account, or other offending material which is
seen as facilitating illegal Internet gambling or advertising
thereof.\13\ This requirement would attach merely upon a court
order based on probable cause and is written so broadly that
even individual consumers engaging in a form of gambling which
is not illegal for them can lose their accounts without any
advance notice.\14\ In terms of blocking, H.R. 3125 would
require any ICS to mandatorily block an individual's access to
specified foreign websites.\15\ Again, this provision is not
premised on the individual whose access is being blocked having
violated any Federal or State gambling law. (In nominal
exchange for these new burdens, the bill immunizes qualifying
ICSs from liability under Federal or State law for the use of
its facilities to violate the Act.) \16\
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\12\ Subsection (a)(7) of H.R. 3125 would define an ``interactive
computer service provider'' to be ``any person that provides an
interactive computer service, to the extent that such person offers or
provides such service.'' Since the essence of the Internet is to
provide its users with interactive computer services, the definition
would encompass not only Internet Service Providers like AOL, but also
on any search engine, portal, website, or even a website
infrastructure, all of which provide interactive services to users.
\13\ Two subsections of H.R. 3125 establish the notice and takedown
requirements. First, subsection (b)(2) of H.R. 3125 provides that an
ICS, upon receipt of a notice that a website is violating the
prohibitions on Internet gambling, must ``expeditiously remove or
disable'' access to the material or notify law enforcement that it
incorrectly received the notice. If the ICS fails to take either of
these steps within 24 hours of receiving the notice, law enforcement
may seek a temporary restraining order or an injunction preventing the
ICS from being used to violate this section. Parallel provisions apply
to online advertising of Internet gambling websites. Subsection (3)(D)
of H.R. 3125.
\14\ See infra.
\15\ Subsection (d)(3)(B)(II) of H.R. 3125 would authorize law
enforcement to go into court to obtain an order requiring the ICS to
block access to ``specific, foreign online location[s].''
\16\ Subsection (d)(1) of H.R. 3125. The immunity would apply under
the following conditions: (1) the violating material or activity was
not initiated by or at the direction of the interactive computer
service providers; (2) the material or activity was automatically
processed without selection by the interactive computer service
providers; and (3) the interactive computer service providers played no
role in modifying the content of the site. The bill would further
immunize qualifying interactive computer service providers from
liability under Federal or State gambling law if another person
advertised legal or illegal gambling activity.
Interactive computer service providers would only qualify for these
immunities, however, if they: (1) maintain a written or electronic
policy that requires them to terminate a subscriber's account
expeditiously following the receipt of a notice; (2) prevent their
server from being used to engage in activity which violates the Act,
with the specific intent that the server be used for that purpose; (3)
do not knowingly permit their server to be used to advertise non-
Internet gambling activity that violates the law; and (4) offer
blocking software that would assist in blocking minors' access to
Internet gambling sites.
---------------------------------------------------------------------------
Finally, the legislation includes a very broad court-
ordered injunction provision. This relief can be obtained upon
a mere showing of ``probable cause.'' The authorization for an
injunction can be brought against any person other than an ICS
to prevent or restrain a violation of the law.\17\ A summary of
our concerns with the legislation follows.
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\17\ Subsection (d)(3) of H.R. 3125. This provision, by its own
terms, would authorize injunctive relief ``to prevent the use of the
interactive computer service by another person'' (emphasis supplied).
Since ``person'' is broadly defined in subsection (a)(9) to include
``any individual,'' the bill plainly would authorize a court to enjoin
any person that is in violation of the bill without notice or an
opportunity to be heard.
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I. H.R. 3125 Expands Gambling Over the Internet, and Arbitrarily Favors
Certain Forms of Gambling Over Other Forms
Amazingly, a bill that purportedly originated as an anti-
gambling initiative would significantly expand the availability
of gambling over the Internet. Rather then calling the bill the
``Internet Gambling Prohibition Act of 2000,'' the bill more
appropriately should be referred to as the ``Internet Gambling
Expansion Act of 2000.'' The sponsors of H.R. 3125 have catered
to special interests by ripping gaping loopholes in a bill
originally drafted to prohibit Internet gambling. At the same
time, perhaps in a transparent effort to innoculate the bill
against charges that it opens up more loopholes than it closes,
the bill's sponsors have effectively barred State lotteries,
charitable organizations, and Tribes from merging onto the
information superhighway.
This result, though denied or ignored by the legislation's
proponents, is indisputable. In testimony before the
Subcommittee on Crime, the Department of Justice described how
the bill prohibits Internet gambling in name only:
[T]he Department is concerned that the bill does not
really prohibit Internet gambling, but rather
facilitates certain types of gambling from the home
and, therefore, arguably expands gambling
opportunities. Specifically, the Department recognizes
that H.R. 3125 exempts pari-mutuel wagering from the
prohibition against Internet gambling. The result is
that people will be able to bet on horse racing, dog
racing, and jai alai from their living rooms. While the
bill provides that such gambling must be done on a
``closed loop subscriber based service,'' the
definition of that term is extremely broad. I could
receive a free disk in the mail, load it on my
computer, connect through my regular Internet service
provider, and start betting on horse racing from my
living room. Additionally, if my children have access
to that same computer, they may also be able to get
online and bet and wager on pari-mutual activities.
Simply stated, the Department does not understand why
the pari-mutuel wagering industry should be allowed to
accept bets from people in their homes, when other
forms of gambling have rightly been prohibited from
doing so.\18\
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\18\ Hearing on H.R. 3125 Before the House Comm. on the Judiciary,
Subcomm. on Crime, 106th Cong., 2d Sess. (March 9, 2000) (testimony by
Deputy Assistant Attorney General Kevin DiGregory).
Federal law enforcement is not alone in expressing its
concerns regarding a bill that expands Internet gambling.
Socially conservative advocacy groups pleaded with the bill's
sponsors to eliminate the bill's exemptions--to no avail. The
Christian Coalition declared that ``it cannot support any
legislation that purports to restrict gambling on the Internet
and at the same time expands gambling opportunities on the
Internet.'' \19\ The Family Research Council found ``the
`exemptions' in the bill unnecessary.'' \20\ In a letter signed
by Paul Weyrich, the Free Congress Foundation wrote to voice
its ``strong opposition'':
---------------------------------------------------------------------------
\19\ Letter to Judiciary Chairman Hyde from Jeffrey K. Taylor,
Director of Government Relations, the Christian Coalition (March 22,
2000).
\20\ Letter to Judiciary Chairman Hyde from Michael D. Bowman,
Director of State & Local Affairs, the Family Research Council (March
22, 2000).
The bill seems to fly in the face of a number of core
principles of conservatism. It turns federalism on its
head by taking the power away from the States to
regulate their own State lotteries . . . There are also
substantive concerns about even achieving the goal of
regulating gambling on the Internet. . . . But are we
going to create a national police force to monitor
individuals or the server industry? \21\
---------------------------------------------------------------------------
\21\ Letter to House Majority Leader Armey and Majority Whip DeLay
from Paul M. Weyrich, President, the Free Congress Foundation (May 11,
2000).
Finally, the Madison Project noted that ``this bill contains
loop-holes that actually expand [Internet gambling]. . . . Why
would Congress want to pass a law that encourages the expansion
of a problem that already affects 15.4 million Americans. . . .
Please do not allow this bill to be used as a vehicle for
expanding the scope of gambling in America.'' \22\
---------------------------------------------------------------------------
\22\ Letter to Judiciary Chairman Hyde from Michael P. Farris,
Chairman, the Madison Project (April 3, 2000).
---------------------------------------------------------------------------
Recognizing that the prohibition on Internet gambling in
H.R. 3125 has become a proxy for the expansion of Internet
gambling, the Legal Times of Washington described the bill's
posture:
Thanks to some swift lobbying, the proposed ban carves
out some big exemptions for online gambling by any
State-regulated industry. . . . Translation: The bill
that aims to rein in online gambling would nonetheless
allow online versions of some of the most popular
gaming attractions--horse racing, dog tracks, . . . and
jai alai.\23\
---------------------------------------------------------------------------
\23\ Ron Eckstein, ``Rolling the Dice,'' Legal Times, at 1 (March
13, 2000). See also, Thomas E. Weber, ``Playing the Ponies In Your
Underwear,'' The Wall Street Journal Interactive Edition, http://
interactive.wsj.com/archive/retrieve.cgi?id=SB957138139977057683.djm
(May 1, 2000).
The result of this expansion of Internet gambling could
carry with it potentially devastating results for those
Americans who are at risk for gambling addiction or are
compulsive gamblers. This is completely contrary to the
findings of the congressionally created National Gambling
Impact Study Commission, which issued a report to President
Clinton and found that gambling is a widespread problem, and
criticized the carve-outs and exemptions contained in H.R.
---------------------------------------------------------------------------
3125:
The Commission recommends to the President, Congress,
and the Department of Justice (DOJ) that the Federal
Government should prohibit, without allowing new
exemptions or the expansion of existing Federal
exemptions to other jurisdictions, Internet gambling
not already authorized within the United States.\24\
---------------------------------------------------------------------------
\24\ National Gambling Impact Study Commission, Final Report,
Recommendation 5.1 (June 18, 1999).
At the Crime Subcommittee hearing on the bill, a self-
described gambling addict described the allure of gambling on
---------------------------------------------------------------------------
the Internet:
Mr. Weiner: Now, if there were other types of
gambling that were available, for example, we
particularly take note in this legislation of horse
racing and dog racing, and I guess jai alai is also
included, if there were other types of gambling
available, would you simply move? Do you have a desire
to gamble or is it just a desire to play blackjack?
Mr. Doe: It is mainly a desire to gamble. My game of
choice--well, it is my desire and win money, so it is
my passion for gambling that was driven uncontrollably
with the ease of the Internet.
Mr. Weiner: So if you had a sure shot on a 25 to 1
horse that you thought for sure was going to win, you
would have a desire to gamble on that horse race, just
like you would have a desire to double down on 11?
Mr. Doe: I would consider that.\25\
---------------------------------------------------------------------------
\25\ Hearing on H.R. 3125 Before the House Comm. on the Judiciary,
Subcomm. on Crime, 106th Cong., 2d Sess. (March 9, 2000) (testimony by
John Doe).
In addition to gambling addicts, the bill also could open
the way for children, who are prohibited by law from gambling
in ``bricks and mortar'' casinos, to become gambling addicts
using the Internet. Although the supporters of H.R. 3125 assert
that by requiring permitted Internet gambling to be carried out
on a closed-loop subscriber-based system, website operators can
effectively screen out minors, a closed-loop system does not,
by itself, adequately ensure that minors will be unable to
access gambling sites. In fact, the nation's largest Internet
Service Provider, AOL, available in tens of millions of
American homes, would fit the definition of a closed-loop,
subscriber-based system.
Just as disturbing, from a policy perspective, is the fact
that the bill arbitrarily discriminates against certain forms
of gambling as it elevates the legality of some types of
gambling over others. The victims of this discrimination are
State lotteries, charitable contests, and gambling on Indian
reservations. Ironically, the very entities that one would
expect Congress to protect in a bill to regulate Internet
gambling--those that have the greatest overall benefit to
society, State lotteries, charitable giving, and those that are
essential to the livelihood of Native Americans--have been
disregarded in H.R. 3125.
H.R. 3125 would prevent State lotteries from entering the
Internet age. Lotteries are the only form of gaming that return
profits directly to the public.\26\ H.R. 3125 does this by
allowing the online purchase of in-state lottery tickets only
in facilities ``open to the general public.'' In other words,
States may not allow their own residents to purchase lottery
tickets over the Internet from the convenience of their homes.
As a result, whether online gaming activities supplant or
supplement physical gaming activities, State lotteries stand to
lose even more ground to other forms of gaming that provide no
direct return to the public whatsoever. The Association of
Lottery Retailers noted that the real beneficiaries of the
bill's restrictions on State lotteries would be the offshore
operators of Internet lotteries, and pointed out the irony that
the professed opponents of Internet gambling have only
benefitted ``a handful of offshore, illegal operators of
unregulated and unregulatable internet lotteries [who] could
not be happier.'' \27\
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\26\ In fiscal year 1999 alone, lotteries generated more than $12
billion nationwide for essential public education, seniors, and
environmental programs, as well as for local governments, State general
coffers, and a variety of other programs. Since 1964, thirty-seven
States, the District of Columbia, and Puerto Rico have opted to offer
their citizens lotteries, and use the proceeds to fund critical
programs and projects.
\27\ Letter to Judiciary Chairman Hyde from Mark F. Jones,
Executive Director, the Association of Lottery Retailers (May 16,
2000). The Free Congress Foundation reached the same conclusion: ``The
only thing that will be accomplished [by H.R. 3125] is that money will
be sent abroad as foreign governments and companies set up their own
online lottery games for American consumers.'' Letter to House Majority
Leader Armey and Majority Whip DeLay from Paul M. Weyrich, President,
the Free Congress Foundation (May 11, 2000).
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The anti-lottery provision has also drawn the ire of the
National Governors Association, which wrote:
States possess the authority to regulate gambling
within their own borders and must continue to be
allowed to do so. An incursion into this area with
respect to online gambling would establish a dangerous
precedent with respect to gambling in general as well
as broader principles of State sovereignty.\28\
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\28\ Letter to Judiciary Chairman Henry Hyde and Ranking Member
John Conyers from Governors Michael O. Leavitt and Parris N.
Glendening, National Governors Association (April 4, 2000). In addition
to the Governors, representatives of the lottery industry wrote that
permitting States to determine the format of their lotteries is
fundamental to States' rights. The North American Association of State
& Provincial Lotteries asserted:
[G]aming is a States-rights issue. . . . Lottery profits
support much needed programs and services, and each State
must maintain the right to decide the best ways to raise
revenue so that these programs and services do not suffer.
. . . We strongly believe that the States determination to
provide gaming is appropriately left at the State
---------------------------------------------------------------------------
legislative and gubernatorial levels.
Letter to Representative Robert Goodlatte from David B. Gale, Executive
Director of the North American Association of State & Provincial
Lotteries (March 29, 2000). See also, Letter to Judiciary Chairman Hyde
from Mark F. Jones, Executive Director, the Association of Lottery
Retailers (May 16, 2000) (noting the ``heavy-handed effort by some in
Congress to take a Federal slap at State lotteries''); Letter to
Judiciary Chairman Hyde from Steven M. Saferin, President & Chief
Executive Officer, MDI Entertainment, Inc. (May 12, 2000) (``The
consequences of this Bill may be extreme . . . To continue to provide
valuable revenues to the good causes they serve, lotteries must be able
to compete on a level playing field and the use of the Internet as a
distribution method for existing and future games should clearly be a
decision left to each individual State and the lottery it operates.'');
Letter to Judiciary Ranking Member Conyers from Roger W. Ach, II,
President & Chief Executive Officer, lottery.com (May 12, 2000) (``By
eliminating the ability of State lotteries to sell lottery tickets on-
line, Congress will cause a detrimental impact on lottery revenues and
on lottery.com business.'').
H.R. 3125 also would discriminate against charities (as
compared to pari-mutuel gambling), completely preventing non-
profits from raising funds through Internet lotteries and
bingo. Although section 1955 of title 18 and most State laws
permit charitable gaming, H.R. 3125 would block charities from
raising funds through online games. Despite the fact that
charitable gaming accounts for a mere 1.5% of all wagering in
the United States and is not the game of choice for compulsive
gamblers, H.R. 3125 deprives charitable organizations of
conducting activities in cyberspace which are perfectly legal
in the physical world. Such an exclusion will place charitable
organizations at a competitive disadvantage as the Internet
becomes an increasingly important tool of commerce and
communication in our society. Individuals who wish to
participate in games of chance that have social value will have
no ability to do so on-line.
Finally, H.R. 3125 discriminates against Native-Americans
by requiring that the player of a game be ``physically located
on Indian lands.'' This would outlaw a form of online gambling
in which a Tribe conducts a Class II Bingo game and the player
need not be physically on the Reservation. This type of Bingo
was developed at great expense to some tribes, in reliance on
the letter and spirit of the Indian Gambling Regulatory Act
(IGRA).\29\ Indeed, in testimony before a Senate Committee on
Indian Affairs Oversight Hearing on Internet Gaming, one Tribe
acknowledged its expenditure of ``millions of dollars and
countless hours developing a Bingo game that utilizes Internet
technology to expand its participation levels.'' \30\ The Lac
Vieux Desert Band of Lake Superior Chippewa Indians of Michigan
wrote:
---------------------------------------------------------------------------
\29\ 25 U.S.C. Sec. 2703(7)(A)(i). This provision of the IGRA
applies to ``Class II'' games, such as Bingo, but does not include
other forms of gambling such as parimutuel wagering, slot machines,
blackjack, and other ``casino'' type games.
\30\ Oversight Hearing on Internet Gaming, Before the Senate
Committee on Indian Affairs, on Crime, 106th Cong., 1st Sess. (June 9,
1999) (testimony by Richard Williams, Chairman, Lac Vieux Desert Band
of Lake Superior Chippewa Indians).
[T]he Tribe opposes passage of this legislation . . .
[because] such a broad-sweeping prohibition runs
counter to the letter and spirit of the 1988 Indian
Gambling Regulatory Act (IGRA) and deals a serious blow
to tribal sovereign rights to enter into legal Class II
gaming activities, via the Internet. . . . In essence,
H.R. 3125 takes away existing legal rights of tribes
authorized under the IGRA, while expanding more
privileges to non-Indian gaming interests.\31\
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\31\ Letter to Judiciary Ranking Member Conyers from the Lac Vieux
Desert Band of Lake Superior Chippewa Indians of Michigan (April 3,
2000). See also, Letter to Judiciary Ranking Member Conyers from
Anthony C. Minthorn, Chairman of the Board of Trustees, Confederated
Tribes of the Umatilla Reservation of Oregon (March 23, 2000)
(``Without a tribal gaming exemption, H.R. 3125 will bear the dubious
distinction of not only treating tribal governments in an arbitrary--if
not discriminatory--fashion, but of stifling one of the few successful
economic engines available to our communities within memory.'')
The Tribe also noted that H.R. 3125 has been universally
condemned by tribes and national tribal organization throughout
the country. These include the National Congress of American
Indians, the United South and Eastern Tribes, the Midwest
Alliance of Sovereign Tribes, and the National Indian Gaming
Association.
II. The Notice and Takedown Provisions Violate the Rights and Liberties
of Website Operators and Individual Customers
The notice and takedown provisions in H.R. 3125 operate to
allow any local or Federal law enforcement official to require
ICSs and ISPs to take down a supposedly offending sight with no
prior notice or any semblance of due process. This
inappropriately deputizes these parties to serve as law
enforcement authorities. As the Computer and Communications
Industry Association wrote:
[R]equiring ISPs to `take down' websites based solely
on the request of a law enforcement official from the
Federal Government or any of the fifty States is a
dangerously broad new grant of censorship power to
Federal and State governments. . . . The provision sets
forth a flawed precedent. . . . We believe it is more
appropriate to adhere to well-established procedures of
notice and opportunity to be heard, court review, and
judicially imposed injunctions.'' \32\
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\32\ Letter to Judiciary Ranking Member Conyers from Ed Black,
President and CEO, the Computer & Communications Industry Association
(April 3, 2000).
These concerns were echoed by the Center for Democracy and
Technology (CDT), perhaps the nation's leading authority on
rights and liberties on the Internet, which observed that the
bill's takedown provisions place ``too much discretion in the
hands of government officials, who get to decide in the first
instance, without any independent review, what is legal and
what is illegal.'' \33\ CDT noted further that it is not those
government officials, but the ISPs, which are required to
deliver the notice or face injunctive relief:
---------------------------------------------------------------------------
\33\ Position Paper, Center for Democracy and Technology.
This approach, were it to serve as a precedent for
other similar burdens on ISPs to cooperate with mere
requests that they take down other illegal or
undesirable content, would fundamentally change the
nature of the Internet. While ISPs can decide what to
host and what not to host, they should not be required
to police their systems, nor should the government,
through immunity provisions, dictate their terms of
service with their customers.\34\
---------------------------------------------------------------------------
\34\ Id.
We also have a separate concern that H.R. 3125 will operate
to allow individual Internet users who have not violated the
statute to have their accounts taken down, also without any
prior warning. Under the bill, if a government actor notifies
an ISP that a ``subscriber'' is in violation of the Act's
provisions, the ISP must take action against the offending
``subscriber.'' As reported by the committee, the definition of
``subscribers'' includes both the operators of gambling
websites, as well as the individual consumers who log on to the
targeted websites.\35\ This is because the definition of
``subscriber'' would cover anyone with a business relationship
with the ICS through which the person receives access to the
system.\36\
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\35\ The plain language of H.R. 3125 cannot fairly construed to
limit the definition of ``subscriber.'' H.R. 3125 defines
``subscriber'' in section 1085(a)(12)(A) to mean (emphasis supplied):
any person with a business relationship with the
interactive computer service provider through which such
person receives access to the system, service, or network
of that provider, even if no formal subscription agreement
exists.
---------------------------------------------------------------------------
\36\ In addition, in discussing the scope of injunctive relief
available, the bill states that the relief is limited to:
an order restraining the provider from providing access to
an identified subscriber of the system or network of the
interactive computer service provider, if the court
determines that there is probable cause to believe that
such subscriber is using that access to violate this
section (or to engage with another person in a
communication that violates this section), by terminating
---------------------------------------------------------------------------
the specified account of that subscriber.
H.R. 3125, subsection (d)(3)(B)(i)(I).
The notice and takedown provisions fail to include the
process and legal safeguards specified in the Digital
Millennium Copyright Act (DMCA), which the legislation
purportedly uses as a model.\37\ The DMCA included language to
protect people from becoming the subject of wrongful or
erroneous takedowns. This is because the DMCA includes a
requirement that the ISP give notice to the website operator
and gives the website the opportunity to file a counter-
notification.\38\ This ensures that the website operator at
least has the opportunity to register its objections to the
action by the ISP if the website believes that the allegation
of copyright infringement is not supported by the law. By
contrast, under H.R. 3125, without the ability to file a
counter-notification, the website will have no protection from
a takedown by an ICS or ISP that incorrectly believes that the
site facilitates or promotes illegal gambling or that is acting
in response to an overzealous prosecutor.\39\
---------------------------------------------------------------------------
\37\ Pub. L. 105-304 (105th Cong., 2d Sess.).
\38\ The counter-notification provisions appear in section
512(g)(3) of the DMCA and in section 202(a) of Pub. L. 105-34, 112
Stat. 2282 (105th Congress, 2d Sess.). An effective counter-
notification must ``substantially'' include a physical or electronic
signature of the subscriber; information that enables the
identification and location of the material in question; a statement of
the subscriber's good-faith belief that the material was removed or
disabled due to mistake or misidentification; and identifying
information about the subscriber along with the subscriber's consent to
Federal jurisdiction.
\39\ Subsection (e) of H.R. 3125 also departs from the DMCA by
allowing takedowns and injunctions without any accompanying prosecution
for violations of the prohibition on Internet gambling:
The availability of relief . . . shall not depend on, or be
affected by, the initiation or resolution of any action
under subsection (b), or under any other provision of
Federal or State law.
III. The Blocking Provisions Will Harm the Operation of the Internet
and Constitute a Threat to Individual Privacy Rights
The legislation's provisions mandating blocking of foreign
websites are also far broader than any existing law. The
requirement not only represents a real and viable threat to our
own privacy and our nation's birthright as an exemplar of
individual liberty, but it will have the likely effect of
slowing down and interfering with the operation of the
Internet.
Not only is it inappropriate to place ICSs in the position
of becoming Internet hall monitors, it would have the effect of
chilling unfettered expression on the Internet. For example,
H.R. 3125 authorizes court orders to shut off subscriber
accounts based merely on a showing of probable cause that the
subscriber is betting at a prohibited website, even if the
subscriber's activities are lawful under Federal and State
laws. In a letter filed with the Senate during the debate on
Senator Kyl's version of the Internet gambling bill, the ACLU
noted the threat to privacy that arises from ill-conceived
measures to regulate the Internet:
[R]espect for issues of personal privacy and content
freedom should be central to this and any other debate
on Internet policy. We oppose any effort by States to
regulate content on the internet, a national and global
communications medium that the Supreme Court has found
to be especially valuable because of the breadth and
diversity of the speech found there. We also oppose all
attempts to turn internet service providers into de
facto government agents.\40\
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\40\ Letter to Senate Judiciary Chairman Hatch from the American
Civil Liberties Union, Americans for Tax Reform, the Association of
Concerned Taxpayers, Citizens for a Sound Economy, the Competitive
Enterprise Institute, the First Amendment Coalition for Expression, the
Interactive Services Association, the Small Business Survival
Committee, and the United States Internet Council (October 8, 1997).
The CCIA also has explained that the blocking obligation
---------------------------------------------------------------------------
imposed under H.R. 3125 is inappropriate and discriminatory:
It is not appropriate for Congress to mandate that ISPs
police the content of the millions of websites
accessible through their facilities, but the risk of
criminal sanctions would clearly force any responsible
ISP to do so. . . . [L]ike many new content
regulations, these requirements unfairly discriminate
against the Internet as a medium of communication.
Newspapers, magazines, telephone companies, and mail
delivery services need not fear criminal prosecution
for facilitating illegal gambling, although undoubtedly
these media are much more central to illegal gambling
activities.\41\
---------------------------------------------------------------------------
\41\ Letter to Judiciary Ranking Member Conyers from Ed Black,
President and CEO, CCIA (May 5, 2000).
Similar concerns were echoed by the Center for Democracy
---------------------------------------------------------------------------
and Technology:
[T]his mandatory filtering approach is fundamentally
incompatible with the user empowerment vision of the
Internet: filtering is appropriate at the user level
[when voluntary], but it is inappropriate at the ISP or
server level, particularly when mandated by the
government. The Internet's power stems from its
decentralized, user-controlled nature. Installing ISPs
as chokepoints or gatekeepers turns the Internet into
something different, akin to the broadcast media.\42\
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\42\ Position Paper, Center for Democracy and Technology.
Intruding on individual privacy by denying individual
Internet users access to websites of their own choosing
establishes a very poor precedent for other nations that look
to the United States as the leader in safeguarding individual
liberty. It would be ironic indeed if Congress passed
legislation that required private parties to act as censorship
agents for government officials in a medium that virtually
everyone agrees should be left alone. There is a national
consensus that the Internet is the singlemost significant force
driving this nation's unprecedented economic expansion and
corresponding explosion of information and communication. H.R.
3125 would represent a dramatic departure from that
objective.\43\
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\43\ See, e.g., the DMCA, Pub. L. 105-304 (105th Cong., 2d Sess.);
the Internet Tax Freedom Act, Pub. L. 105-277 (105th Cong., 2d Sess.).
---------------------------------------------------------------------------
By requiring ISPs to block individual access to specified
Internet locations, H.R. 3125 would send an unintended signal
to China, Cuba, and other autocratic regimes, that they too may
block their citizens access to the Internet. As Time Digital
editor Joshua Quittner has observed, ``I find it objectionable
that the government would feel the need to act as a proxy in
this way [mandating blocking of foreign websites]. . . . This
is exactly the kind of thing a totalitarian regime would
undertake--in fact, it's exactly what the Chinese government
has already done.'' \44\
---------------------------------------------------------------------------
\44\ Time.com Digital Daily Edition, http://www.time.com/time/
daily/0,2960,42462-101000405,00.html (April 9, 2000).
---------------------------------------------------------------------------
As the ACLU noted in its analysis of similar blockage
provisions in the Senate version of the Internet gambling bill,
efforts to require ISPs to block overseas websites ``would
attempt to segment the Internet--in effect, placing an
electronic wall around the United States--to `protect us from
ourselves' much like China and Singapore have tried to do. The
idea of making U.S. ISPs responsible for policing the content
of offshore Internet sites is clearly unworkable.'' \45\ For
example, in China, the Ministry of Education recently took
steps to police content on the Internet by requiring distance
learning websites to register. The Ministry is expected to have
direct supervision of a website's content. In addition, the
State Council Information Office created the Internet
Information Management Bureau, which is responsible for
overseeing the Internet news industry and is requiring pre-
approval of all news that is published on the Internet.
---------------------------------------------------------------------------
\45\ Letter to Senate Judiciary Chairman Orrin Hatch from the ACLU,
Americans for Tax Reform, the Association of Concerned Taxpayers,
Citizens for a Sound Economy, the Competitive Enterprise Institute, the
First Amendment Coalition for Expression, the Interactive Services
Association, the Small Business Survival Committee, and the United
States Internet Council (October 8, 1997).
---------------------------------------------------------------------------
Turkey, a country whose leadership has repeatedly cracked
down on dissenting political views, is considering requirements
for patrolling Internet content that is strikingly similar to
the framework proposed in H.R. 3125. The Turkish government is
considering creating a watchdog body of government officials
who could order ``registered Internet corporations, public and
private, to take any measures the watchdog body may request''
against Internet communications by those with ``evil
intentions.'' \46\
---------------------------------------------------------------------------
\46\ Elif Unal, ``Turkey Debates Cyberspace Controls,''
Reuters.com, http://dailynews.yahoo.com/h/nm/20000416/wr/turkey--
internet--1.html (April 18, 2000).
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Finally, the potential for blocking to become a tool for
government censorship is demonstrated by Saudi Arabia, which
requires all ISPs to be linked through a central node in
Riyadh. This enables the Saudi government to block all
pornographic websites as well as access to any site that the
government believes could stir up religious hatred.\47\ These
are not precedents this country or this Congress should
support.
---------------------------------------------------------------------------
\47\ Frank Gardner, ``Saudi censors say they're winning the war
against porn,'' POLITECH, http://www.politech.bot.com (May 10, 2000).
---------------------------------------------------------------------------
Another concern that we have stems from the harm that H.R.
3125's mandatory blockage provisions will cause to the Internet
in general and to smaller ISPs in particular. The burdens on
smaller ISPs could prove particularly devastating. It is one
thing to ask a multi-billion dollar company such as AOL to
institute complex blocking requirements; it is quite another to
ask a fledgling ISP provider or a new technology firm to change
his or her business to conform to the blocking requirements of
this bill. Thus, for the thousands of small start-up ISPs and
other telecommunications firms, compliance with the blockage
provisions would be expensive and invasive. Either the small
ISP would have to dedicate personnel and resources to
repeatedly reprogram its computer systems to block an ever-
changing list of online locations where the gambling sites are
located--resources that could have been spent on innovation and
growth--or the ISP would have to spend funds that otherwise
could be used for capital investment on paying lawyers to
defend against a temporary restraining order or an injunction.
Supporters of the bill would argue that much of its
framework was drawn from the Digital Millennium Copyright Act
(DMCA),\48\ which contains a similar blocking provision.
However, there are important differences between the DMCA and
H.R. 3125. Unlike H.R. 3125, the DMCA's blocking provisions
require that the ISP be in violation of the law before a
blocking injunction can issue. Under H.R. 3125, a blocking
injunction can issue regardless of whether the ISP has any
complicity in illegal activity. And, as discussed below, the
threshold for issuing an injunction under the DMCA appears to
be substantially higher than under H.R. 3125.
---------------------------------------------------------------------------
\48\ Section 512(c) of the DMCA, Pub. L. 105-304, 112 Stat. 2879-
2881 (105th Cong. 2d Sess.).
---------------------------------------------------------------------------
We are also concerned that despite all of the threats this
bill poses to civil liberties and privacy, it will all be for
naught, as the provisions are likely to carry little real
enforcement value. As one representative of the ISP industry
noted in testimony during consideration of a substantially
similar bill that was considered in the last Congress:
If an ISP receives a court order specifying a list of
sites to be blocked, it can attempt to block access to
these sites. However, as soon as the targeted site
moves to another IP (Internet Protocol) address, as it
inevitably will do, the block is worthless. Sites can
change addresses within hours. Efforts to keep the
blocks updated would require hundreds of thousands of
employee hours, while employees attempt, with dubious
likelihood of timely success, to track down the new
location of the targeted site.\49\
---------------------------------------------------------------------------
\49\ Testimony of David G. Jemmett, President, WinStar GoodNet,
Hearing on H.R. 2380 before the House Comm. on the Judiciary, Subcomm.
On Crime, 105th Cong., 2d Sess. (June 24, 1998).
---------------------------------------------------------------------------
IV. The General Injunction Provisions are Overbroad
It is also important to note that H.R. 3125 includes a
broad general injunction provision which applies to anyone
other than an ISP or Interactive Computer Service Provider.\50\
Although this provision does require a court order, its scope
is incredibly broad, and it could well burden all sorts of
unsuspecting parties with little obvious relationship to
illegal gambling. As talking points provided by AT&T explained,
the injunctive relief provisions ``would give courts sweeping
power to issue injunctions against `any person to prevent a
violation' of the statute, regardless of whether that person
had any involvement in criminal activity.''
---------------------------------------------------------------------------
\50\ Subsections (d)(3) and (d)(4)(D) of H.R. 3125.
---------------------------------------------------------------------------
These general injunction provisions could allow a State
attorney general to launch a ``fishing expedition'' in which it
enlists the help of an e-mail service to review all of its
subscriber accounts for gambling references, seeking to prevent
search engines from accessing any website with any gambling in
it (no matter how benign, such as Gamblers Anonymous), and to
limit advertising for these websites in newspapers, television,
radio and other outlets, to cite but a few possible examples.
Moreover, it is not a stretch to realize that this provision
could authorize a State attorney general to search through
millions of credit card receipts or to prohibit extending
credit to users of certain specified websites, legitimate or
otherwise. In this regard, the Department of Justice has
previously noted that the Internet gambling prohibition ``may
have serious economic and societal consequences for Internet
usage generally'' and ``is likely to promote a spate of
litigation over what solutions are feasible.''
The standard for issuing injunctive relief under the bill
may well encourage law enforcement officials to abuse this
authority. Not only would H.R. 3125 authorize injunctive relief
against any person, the bill would empower a court to issue
such relief if there is ``probable cause to believe that such
subscriber is using that access to violate this section.'' It
is inappropriate to import the probable cause standard from
fourth amendment search and seizure criminal law jurisprudence
to the injunctive relief criteria under H.R. 3125. It is
arguably lower--and certainly different--from the criteria for
preliminary injunctive relief under rule 65 of Federal Rules of
Civil Procedure, which requires a court to find a reasonable
likelihood of success on the merits, no adequate remedy at law,
irreparable injury, and a balance of hardships weighing in the
moving party's favor; or the DMCA, which also requires a court
to weigh the burdens and balance the hardships.\51\ Not only is
the standard itself easier to satisfy than that which is in
place under rule 65 or the DMCA, H.R. 3125 would authorize its
issuance against a party without any requirement that law
enforcement give the enjoined party notice and an opportunity
to be heard.
---------------------------------------------------------------------------
\51\ F.R.C.P. Rule 65. The criteria for injunctive relief under
Sec. 512(j) of the DMCA, Pub. L. 105-304, 112 Stat. 2885 (Oct. 28,
1998), require the court to consider:
(A) whether such an injunction, either alone or in
combination with other such injunctions issued against the
same service provider under this subsection, would
significantly burden either the provider or the operation
of the provider's system or network;
(B) the magnitude of the harm likely to be suffered by
the copyright owner in the digital network environment if
steps are not taken to prevent or restrain the
infringement;
(C) whether implementation of such an injunction would be
technically feasible and effective, and would not interfere
with access to noninfringing material at other online
locations; and
(D) whether other less burdensome and comparably
effective means of preventing or restraining access to the
infringing material are available.
V. H.R. 3125 Creates a Confusing Patchwork of Inconsistent Laws that
Regulate the Internet
H.R. 3125 sets up the wrong model for how to regulate the
Internet because it creates a patchwork of inconsistent
Internet laws that conflict with existing laws that govern the
physical world. The Wire Communications Act, 18 U.S.C.
Sec. 1084, already governs Internet gambling in that the
Internet is a ``wire communications facility'' under the Act.
Rather than amending this statute to clarify its applicability
to new types of Internet communications, H.R. 3125 would create
a new section of the code, 18 U.S.C. Sec. 1085, that would
overlap with--and be inconsistent with--existing law.
The proposed section 1085 would conflict with existing laws
on gambling. Whereas the Wire Communications Act outlaws all
interstate bets or wagers that use a ``wire communications
facility'' (including those that use the Internet), H.R. 3125
would create a special set of rules and exceptions that apply
to Internet activity only. Thus, some activity would be legal
under the proposed Section 1085, but illegal under the existing
Section 1084. One sure way to spur litigation and quelch
innovation is to create a patchwork of laws that conflict with
each other. Yet that is exactly what H.R. 3125 does.
If we are going to regulate content on the Internet--as
supporters of the bill are intent on doing--we should not
create a hodge-podge of Internet-specific laws that layer on
top of and conflict with existing law. Legislation should treat
physical activity and cyber-activity the same way. As the
Department of Justice has stated, ``If activity is prohibited
in the physical world but not on the Internet, then the
Internet becomes a safe haven for that criminal activity.''
\52\ It is hard to understand why conduct previously deemed
unacceptable in the physical world and over the telephone
should now be legal when carried out in cyberspace.
---------------------------------------------------------------------------
\52\ Department of Justice Letter, at 1.
---------------------------------------------------------------------------
The distinction between ``Internet'' activity and other
types of ``wire communications'' activity is a false one.
Indeed, any effort to distinguish Internet transmissions from
other methods of communication will likely create artificial
and unworkable distinctions. For example, many expect digital
Internet telephony to grow in popularity over the next few
years. How would we deal with gambling that occurred over this
technology, which would use the Internet for voice
communications? Would the applicable law be the proposed
Section 1085, which is designed specifically for the Internet,
or under Section 1084, which deals with wire communications in
general, but also includes the Internet? \53\
---------------------------------------------------------------------------
\53\ DiGregory Testimony, at 2.
---------------------------------------------------------------------------
Finally, we note the inconsistency that is created by H.R.
3125's treatment of individual Internet subscribers. Although
individuals come within the definition of ``subscribers'' who
may be the target of a notice and takedown, and are
``person[s]'' who may be enjoined, the criminal penalties of
H.R. 3125 would apply only to a ``person engaged in a gambling
business.'' \54\ This term is not defined in current law by 18
U.S.C. Sec. 1081, but it has been interpreted by courts to mean
persons who facilitate or accept bets,\55\ and to exclude the
individual bettors.\56\ Thus, individuals not engaged in
gambling businesses are subject to sanctions under H.R. 3125,
but not under current law.
---------------------------------------------------------------------------
\54\ Subsections (b)(1) and (b)(2) of H.R. 3125.
\55\ See, e.g., United States v. Reeder, 614 F.2d 1179 (8th Cir.
1980); Cohen v. United States, 378 F.2d 751 (7th Cir. 1967); 5th
Circuit Pattern Jury Instruction (Instructing jurors to find that a
person is engaged in a gambling business when the ``defendant was
prepared on a regular basis to accept bets placed by others, that is,
the defendant was a `bookie'.'').
\56\ See, e.g., United States v. Anderson, 542 F.2d 428, 436 (7th
Cir. 1976); United States v. Baborian, 528 F. Supp. 324 (D.R.I. 1981).
---------------------------------------------------------------------------
Conclusion
H.R. 3125 will establish an unfortunate and dangerous
precedent for selective regulation of content on the Internet.
The exemptions in the bill eliminate the ability of the bill's
sponsors to claim that they are taking a principled or coherent
approach to the regulation of Internet gambling. With respect
to the purported policy goals of the bill's sponsors and the
concern for regulating the Internet, the bill represents the
worst of both worlds. The bill would legalize the use of the
Internet for the most addictive types of gambling, while
excluding the use of the Internet for more benign activities,
like State lotteries, charitable gaming, or Bingo. And to carry
out its goals, the bill would conscript anyone who provides
computer services into serving as a handmaiden for law
enforcement officials who want to remove sites that law
enforcement deems unlawful.
As more and more activity--both commercial and criminal--
migrates to the Internet, we should resist the urge to create
Internet-specific legislation that sets a different standard
for cyber-activity as compared to activity in the physical
world. A checkerboard of inconsistent and overlapping laws will
only create legal uncertainty and will not benefit Internet
providers or Internet users. It is hardly surprising that this
scattershot and unprincipled approach to content-based
regulation of the Internet would give rise to an enforcement
scheme that disregards the due process and privacy rights of
website operators and individual subscribers. Given the
significant concerns that have been voiced concerning privacy
rights and effective law enforcement on the Internet, we must
oppose H.R. 3125.
John Conyers, Jr.
Robert C. Scott.
Melvin L. Watt.
Anthony D. Weiner.