May 6, 2003 4:42 PM PDT

House bets against online gambling

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September 30, 2002
WASHINGTON--The U.S. House of Representatives is betting it can prevent Americans from gambling online.

A bill that a House panel approved on Tuesday afternoon takes a two-pronged approach toward curbing Internet wagers. It could require Internet service providers (ISPs) to delete hyperlinks to offshore gambling sites and would order credit cards and online payment systems such as PayPal to identify unlawful transactions that might be related to gambling.

The measure, called the Unlawful Internet Gambling Funding Prohibition Act, was approved by the House Judiciary crime subcommittee by voice vote late Tuesday. A subcommittee representative said no amendments had been added to the bill, which now goes to the full Judiciary committee.

It's a safe bet that Republican-controlled House of Representatives will approve the bill, which has already been voted on favorably by the Financial Services committee. Its prospects in the Senate are less certain; during the last Congress, the House approved this bill but the Senate did not.

"The very characteristics that make the Internet such a valuable resource are also the reasons why it has such a huge potential to impinge on the stability of the American family, American financial institutions and our national security," Rep. Jim Leach, R-Iowa, said when re-introducing the measure earlier this year. "Those who become addictive gamblers frequently find themselves contemplating divorce and in some cases suicide."

A report prepared in March by the Financial Services committee states: "Because Internet gambling is generally held to be illegal under federal and state law, most of the estimated 2,000 Internet gambling sites today operate from offshore locations" and are "effectively beyond the reach of U.S. regulators and law enforcement."

The legislation gives the Treasury Department six months to enact regulations covering "payment systems" including banks, Visa, Mastercard, American Express, PayPal and various gold currency services. Most of the details will be left up to the Treasury Department, but the companies will be required to "establish policies and procedures reasonably designed to identify and prevent restricted transactions."

The Justice Department and state attorneys general may ask a court for an injunction against ISPs. They can be required to disable "access to an online site violating this section, or a hypertext link to an online site violating this section."

In March, the U.S. Attorney for the Eastern District of Missouri alleged that PayPal violated laws regarding the processing of online gambling payments and demanded that parent company eBay hand over nine months of the gambling-related earnings in settlement.

A dissenting view came from Rep. Ron Paul, R-Texas, who said: "History, from the failed experiment of prohibition to today's futile 'war on drugs,' shows that the government cannot eliminate demand for something like Internet gambling simply by passing a law. Instead, (the bill) will force those who wish to gamble over the Internet to patronize suppliers willing to flout the ban."

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