The U.S. House of Representatives recently approved a bill that, if enacted, would make most forms of Internet gambling illegal. H.R. 4411, The Internet Gambling Prohibition and Enforcement Act, would clarify that existing gambling laws apply to wagering done over the Internet and would attempt to prevent gambling Web sites from receiving electronic payments for online wagers. The final vote on the bill was 317-93.

Specifically, the Act would:

• Amend the Wire Act (P.L. 87-216), which makes it a federal felony to use wire communication facilities to transmit bets or wagers in Interstate commerce, to apply to all types of “communications facilities,” including the Internet, whether wired or wireless. In addition, the act would clarify that restrictions in the Wire Act apply to all forms of gambling and not just sports-related gambling.
• Increase the maximum penalty for a violation of the Wire Act from two to five years imprisonment.
• Instruct the Treasury Department and the Federal Reserve to promulgate regulations requiring banks, credit card companies and other “financial transaction providers” to identify and prevent or prohibit the processing of financial transactions related to illegal Internet gambling.
• Authorize state and federal law enforcement to seek injunctions against persons who facilitate illegal Internet gambling by, for example, providing advertising space to illegal gambling businesses.
• Encourage the U.S. government, in its dealings with foreign governments, to advance international cooperation in law enforcement efforts against illegal gambling and related money laundering.

The act does, however, recognize and preserve the right of individual states to allow gambling, including wagering online, if properly and adequately regulated within that state. Current technological limitations on a state’s ability to ensure online gambling occurs solely within its borders and among adults, though, makes this exception largely irrelevant with respect to Internet gambling.

While the bipartisan vote in support of the act in the House is notable, it is unclear what type of reception awaits this legislation in the Senate and beyond. At the time of House passage, no Senator had introduced a companion bill, and even the administration, in reacting to the passage of the act, noted “it had some concerns with the bill.”

It is expected that Senator Jon Kyl (R-AZ) will either introduce a stand alone Internet gambling bill or attach language mirroring the act to another piece of legislation, but with the number of legislative days remaining in the 109th Congress dwindling, and with an already clogged legislative calendar, proponents of an online gambling prohibition in the Senate appear to have an uphill battle.

Anthony V. Lupo
202.857.6353
lupo.anthony@arentfox.com

Sarah E. Bruno
202.775.5760
bruno.sarah@arentfox.com

David C. Adkins
202.857.8941
adkins.david@arentfox.com