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[House Report 108-51]
[From the U.S. Government Publishing Office]

108th Congress                                             Rept. 108-51
                        HOUSE OF REPRESENTATIVES
 1st Session                                                     Part 2

======================================================================

 
                  UNLAWFUL INTERNET GAMBLING FUNDING 
                            PROHIBITION ACT

                                _______
                                

  May 22, 2003.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

 Mr. Sensenbrenner, from the Committee on the Judiciary, submitted the 
                               following

                              R E P O R T

                             together with

                            DISSENTING VIEWS

                         [To accompany H.R. 21]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on the Judiciary, to whom was referred the 
bill (H.R. 21) to prevent the use of certain bank instruments 
for unlawful 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.

                                CONTENTS

                                                                   Page
The Amendment....................................................     2
Purpose and Summary..............................................     7
Background and Need for the Legislation..........................     7
Hearings.........................................................     8
Committee Consideration..........................................     8
Vote of the Committee............................................     9
Committee Oversight Findings.....................................    10
New Budget Authority and Tax Expenditures........................    10
Congressional Budget Office Cost Estimate........................    10
Performance Goals and Objectives.................................    14
Constitutional Authority Statement...............................    14
Section-by-Section Analysis and Discussion.......................    14
Changes in Existing Law Made by the Bill, as Reported............    17
Markup Transcript................................................    18
Dissenting Views.................................................    71
    The amendment is as follows:
    Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Unlawful Internet Gambling Funding 
Prohibition Act''.

SEC. 2. FINDINGS.

    The Congress finds as follows:
            (1) Internet gambling is primarily funded through personal 
        use of bank instruments, including credit cards and wire 
        transfers.
            (2) The National Gambling Impact Study Commission in 1999 
        recommended the passage of legislation to prohibit wire 
        transfers to Internet gambling sites or the banks which 
        represent them.
            (3) Internet gambling is a major cause of debt collection 
        problems for insured depository institutions and the consumer 
        credit industry.
            (4) Internet gambling conducted through offshore 
        jurisdictions has been identified by United States law 
        enforcement officials as a significant money laundering 
        vulnerability.

SEC. 3. PROHIBITION ON ACCEPTANCE OF ANY BANK INSTRUMENT FOR UNLAWFUL 
                    INTERNET GAMBLING.

    (a) In General.--No person engaged in the business of betting or 
wagering may knowingly accept, in connection with the participation of 
another person in unlawful Internet gambling--
            (1) credit, or the proceeds of credit, extended to or on 
        behalf of such other person (including credit extended through 
        the use of a credit card);
            (2) an electronic fund transfer or funds transmitted by or 
        through a money transmitting business, or the proceeds of an 
        electronic fund transfer or money transmitting service, from or 
        on behalf of the other person;
            (3) any check, draft, or similar instrument which is drawn 
        by or on behalf of the other person and is drawn on or payable 
        at or through any financial institution; or
            (4) the proceeds of any other form of financial transaction 
        as the Secretary may prescribe by regulation which involves a 
        financial institution as a payor or financial intermediary on 
        behalf of or for the benefit of the other person.
    (b) Definitions.--For purposes of this Act, the following 
definitions shall 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 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, United States Code;
                    (D) includes any instructions or information 
                pertaining to the establishment or movement of funds in 
                an account by the bettor or customer with the business 
                of betting or wagering; and
                    (E) does not include--
                            (i) any activity governed by the securities 
                        laws (as that term is defined in section 
                        3(a)(47) of the Securities Exchange Act of 
                        1934) for the purchase or sale of securities 
                        (as that term is defined in section 3(a)(10) of 
                        such Act);
                            (ii) any transaction conducted on or 
                        subject to the rules of a registered entity or 
                        exempt board of trade pursuant to the Commodity 
                        Exchange Act;
                            (iii) any over-the-counter derivative 
                        instrument;
                            (iv) any other transaction that--
                                    (I) is excluded or exempt from 
                                regulation under the Commodity Exchange 
                                Act; or
                                    (II) is exempt from State gaming or 
                                bucket shop laws under section 12(e) of 
                                the Commodity Exchange Act or section 
                                28(a) of the Securities Exchange Act of 
                                1934;
                            (v) any contract of indemnity or guarantee;
                            (vi) any contract for insurance;
                            (vii) any deposit or other transaction with 
                        a depository institution (as defined in section 
                        3(c) of the Federal Deposit Insurance Act); and
                            (viii) any 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
                                    (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) Business of betting or wagering.--The term ``business 
        of betting or wagering'' does not include, other than for 
        purposes of subsection (e), any creditor, credit card issuer, 
        insured depository institution, financial institution, operator 
        of a terminal at which an electronic fund transfer may be 
        initiated, money transmitting business, or international, 
        national, regional, or local network utilized to effect a 
        credit transaction, electronic fund transfer, stored value 
        product transaction, or money transmitting service, or any 
        participant in such network, or any interactive computer 
        service or telecommunications service.
            (3) Designated payment system defined.--The term 
        ``designated payment system'' means any system utilized by any 
        creditor, credit card issuer, financial institution, operator 
        of a terminal at which an electronic fund transfer may be 
        initiated, money transmitting business, or international, 
        national, regional, or local network utilized to effect a 
        credit transaction, electronic fund transfer, or money 
        transmitting service, or any participant in such network, that 
        the Secretary, in consultation with the Board of Governors of 
        the Federal Reserve System and the Attorney General, 
        determines, by regulation or order, could be utilized in 
        connection with, or to facilitate, any restricted transaction.
            (4) Internet.--The term ``Internet'' means the 
        international computer network of interoperable packet switched 
        data networks.
            (5) Interactive computer service.--The term ``interactive 
        computer service'' has the same meaning as in section 230(f) of 
        the Communications Act of 1934.
            (6) Restricted transaction.--The term ``restricted 
        transaction'' means any transaction or transmittal involving 
        any credit, funds, instrument, or proceeds described in any 
        paragraph of subsection (a) which the recipient is prohibited 
        from accepting under subsection (a).
            (7) Unlawful internet gambling.--The term ``unlawful 
        Internet gambling'' means to place, receive, or otherwise 
        transmit a bet or wager by any means which involves the use, at 
        least in part, of the Internet where such bet or wager is 
        unlawful under any applicable Federal or State law in the State 
        in which the bet or wager is initiated, received, or otherwise 
        made.
            (8) Other terms.--
                    (A) Credit; creditor; and credit card.--The terms 
                ``credit'', ``creditor'', and ``credit card'' have the 
                meanings given such terms in section 103 of the Truth 
                in Lending Act.
                    (B) Electronic fund transfer.--The term 
                ``electronic fund transfer''--
                            (i) has the meaning given such term in 
                        section 903 of the Electronic Fund Transfer 
                        Act; and
                            (ii) includes any fund transfer covered by 
                        Article 4A of the Uniform Commercial Code, as 
                        in effect in any State.
                    (C) Financial institution.--The term ``financial 
                institution'' has the meaning given such term in 
                section 903 of the Electronic Fund Transfer Act.
                    (D) Money transmitting business and money 
                transmitting service.--The terms ``money transmitting 
                business'' and ``money transmitting service'' have the 
                meanings given such terms in section 5330(d) of title 
                31, United States Code.
                    (E) Secretary.--The term ``Secretary'' means the 
                Secretary of the Treasury.
    (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, acting 
                        through the Attorney General, 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 preliminary 
                        injunction or an injunction against any person 
                        to prevent or restrain a violation of this 
                        section, in accordance with Rule 65 of the 
                        Federal Rules of Civil Procedure.
                    (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 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 
                        preliminary injunction or an injunction against 
                        any person to prevent or restrain a violation 
                        of this section, in accordance with Rule 65 of 
                        the Federal Rules of Civil Procedure.
                    (C) Indian lands.--
                            (i) In general.--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)--
                                    (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 shall 
                                be carried out in accordance with that 
                                compact.
                            (ii) Rule of construction.--No provision of 
                        this section shall be construed as altering, 
                        superseding, or otherwise affecting the 
                        application of the Indian Gaming Regulatory 
                        Act.
            (3) Expedited proceedings.--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), in accordance with Rule 
        65(b) of the Federal Rules of Civil Procedure.
            (4) Limitation relating to interactive computer services.--
                    (A) In general.--Relief granted under this 
                subsection against an interactive computer service 
                shall--
                            (i) be limited to the removal of, or 
                        disabling of access to, an online site 
                        violating this section, or a hypertext link to 
                        an online site violating this section, that 
                        resides on a computer server that such service 
                        controls or operates; except this limitation 
                        shall not apply if the service is subject to 
                        liability under this section pursuant to 
                        subsection (e);
                            (ii) be available only after notice to the 
                        interactive computer service and an opportunity 
                        for the service to appear are provided;
                            (iii) not impose any obligation on an 
                        interactive computer service to monitor its 
                        service or to affirmatively seek facts 
                        indicating activity violating this section;
                            (iv) specify the interactive computer 
                        service to which it applies; and
                            (v) specifically identify the location of 
                        the online site or hypertext link to be removed 
                        or access to which is to be disabled.
                    (B) Coordination with other law.--An interactive 
                computer service that does not violate this section 
                shall not be liable under section 1084 of title 18, 
                except this limitation shall not apply if an 
                interactive computer service has actual knowledge and 
                control of bets and wagers and--
                            (i) operates, manages, supervises, or 
                        directs an Internet website at which unlawful 
                        bets or wagers may be placed, received, or 
                        otherwise made or at which unlawful bets or 
                        wagers are offered to be placed, received, or 
                        otherwise made; or
                            (ii) owns or controls, or is owned or 
                        controlled by, any person who operates, 
                        manages, supervises, or directs an Internet 
                        website at which unlawful bets or wagers may be 
                        placed, received, or otherwise made or at which 
                        unlawful bets or wagers are offered to be 
                        placed, received, or otherwise made.
            (5) Factors to be considered in certain cases.--In 
        considering granting relief under this subsection against any 
        payment system, or any participant in a payment system that is 
        a creditor, credit card issuer, financial institution, operator 
        of a terminal at which an electronic fund transfer may be 
        initiated, money transmitting business, or international, 
        national, regional, or local network utilized to effect a 
        credit transaction, electronic fund transfer, or money 
        transmitting service, or a participant in such network, the 
        court shall consider the following factors:
                    (A) The extent to which such person is extending 
                credit or transmitting funds knowingthe transaction is 
in connection with unlawful Internet gambling.
                    (B) The history of such person in extending credit 
                or transmitting funds knowing the transaction is in 
                connection with unlawful Internet gambling.
                    (C) The extent to which such person has established 
                and is maintaining policies and procedures in 
                compliance with regulations prescribed under subsection 
                (f).
                    (D) The feasibility that any specific remedy 
                prescribed in the order issued under this subsection 
                can be implemented by such person without substantial 
                deviation from normal business practice.
                    (E) The costs and burdens the specific remedy will 
                have on such person.
            (6) Notice to regulators and financial institutions.--
        Before initiating any proceeding under paragraph (2) with 
        respect to a violation or potential violation of this section 
        by any creditor, credit card issuer, financial institution, 
        operator of a terminal at which an electronic fund transfer may 
        be initiated, money transmitting business, or international, 
        national, regional, or local network utilized to effect a 
        credit transaction, electronic fund transfer, or money 
        transmitting service, or any participant in such network, the 
        Attorney General of the United States or an attorney general of 
        a State (or other appropriate State official) shall--
                    (A) notify such person, and the appropriate 
                regulatory agency (as determined in accordance with 
                subsection (f)(5)) for such person, of such violation 
                or potential violation and the remedy to be sought in 
                such proceeding; and
                    (B) allow such person 30 days to implement a 
                reasonable remedy for the violation or potential 
                violation, consistent with the factors described in 
                paragraph (5) and in conjunction with such action as 
                the appropriate regulatory agency may take.
    (d) Criminal Penalty.--
            (1) In general.--Whoever violates this section shall be 
        fined under title 18, United States Code, or imprisoned for not 
        more than 5 years, or both.
            (2) Permanent injunction.--Upon conviction of a person 
        under this subsection, the court may enter a permanent 
        injunction enjoining such person from placing, receiving, or 
        otherwise making illegal bets or wagers or sending, receiving, 
        or inviting information assisting in the placing of bets or 
        wagers.
    (e) Circumventions Prohibited.--Notwithstanding subsection (b)(2), 
a creditor, credit card issuer, financial institution, operator of a 
terminal at which an electronic fund transfer may be initiated, money 
transmitting business, or international, national, regional, or local 
network utilized to effect a credit transaction, electronic fund 
transfer, or money transmitting service, or any participant in such 
network, or any interactive computer service or telecommunications 
service, may be liable under this section if such creditor, issuer, 
institution, operator, business, network, or participant has actual 
knowledge and control of bets and wagers and--
            (1) operates, manages, supervises, or directs an Internet 
        website at which unlawful bets or wagers may be placed, 
        received, or otherwise made or at which unlawful bets or wagers 
        are offered to be placed, received, or otherwise made; or
            (2) owns or controls, or is owned or controlled by, any 
        person who operates, manages, supervises, or directs an 
        Internet website at which unlawful bets or wagers may be 
        placed, received, or otherwise made or at which unlawful bets 
        or wagers are offered to be placed, received, or otherwise 
        made.
    (f) Policies and Procedures To Identify and Prevent Restricted 
Transactions in Payment for Unlawful Internet Gambling.--
            (1) Regulations.--Before the end of the 6-month period 
        beginning on the date of the enactment of this Act, the 
        Secretary of the Treasury, in consultation with the Board of 
        Governors of the Federal Reserve System and the Attorney 
        General, shall prescribe regulations requiring any designated 
        payment system to establish policies and procedures reasonably 
        designed to identify and prevent restricted transactions in any 
        of the following ways:
                    (A) The establishment of policies and procedures 
                that--
                            (i) allow the payment system and any person 
                        involved in the payment system to identify 
                        restricted transactions by means of codes in 
                        authorization messages or by other means; and
                            (ii) block restricted transactions 
                        identified as a result of the policies and 
                        procedures developed pursuant to clause (i).
                    (B) The establishment of policies and procedures 
                that prevent the acceptance of the products or services 
                of the payment system in connection with a restricted 
                transaction.
            (2) Requirements for policies and procedures.--In 
        prescribing regulations pursuant to paragraph (1), the 
        Secretary shall--
                    (A) identify types of policies and procedures, 
                including nonexclusive examples, which would be deemed 
                to be ``reasonably designed to identify'' and 
                ``reasonably designed to block'' or to ``prevent the 
                acceptance of the products or services'' with respect 
                to each type of transaction, such as, should credit 
                card transactions be so designated, identifying 
                transactions by a code or codes in the authorization 
                message and denying authorization of a credit card 
                transaction in response to an authorization message;
                    (B) to the extent practical, permit any participant 
                in a payment system to choose among alternative means 
                of identifying and blocking, or otherwise preventing 
                the acceptance of the products or services of the 
                payment system or participant in connection with, 
                restricted transactions; and
                    (C) consider exempting restricted transactions from 
                any requirement under paragraph (1) if the Secretary 
                finds that it is not reasonably practical to identify 
                and block, or otherwise prevent, such transactions.
            (3) Compliance with payment system policies and 
        procedures.--A creditor, credit card issuer, financial 
        institution, operator of a terminal at which an electronic fund 
        transfer may be initiated, money transmitting business, or 
        international, national, regional, or local network utilized to 
        effect a credit transaction, electronic fund transfer, or money 
        transmitting service, or a participant in such network, meets 
        the requirement of paragraph (1) if--
                    (A) such person relies on and complies with the 
                policies and procedures of a designated payment system 
                of which it is a member or participant to--
                            (i) identify and block restricted 
                        transactions; or
                            (ii) otherwise prevent the acceptance of 
                        the products or services of the payment system, 
                        member, or participant in connection with 
                        restricted transactions; and
                    (B) such policies and procedures of the designated 
                payment system comply with the requirements of 
                regulations prescribed under paragraph (1).
            (4) No liability for blocking or refusing to honor 
        restricted transactions.--A person that is subject to a 
        regulation prescribed or order issued under this subsection and 
        blocks, or otherwise refuses to honor, a restricted 
        transaction, or as a member of a designated payment system 
        relies on the policies and procedures of the payment system, in 
        an effort to comply with this section shall not be liable to 
        any party for such action.
            (5) Enforcement.--This subsection shall be enforced by the 
        Federal functional regulators and the Federal Trade Commission 
        under applicable law in the manner provided in section 505(a) 
        of the Gramm-Leach-Bliley Act.

SEC. 4. INTERNET GAMBLING IN OR THROUGH FOREIGN JURISDICTIONS.

    (a) In General.--In deliberations between the United States 
Government and any other country on money laundering, corruption, and 
crime issues, the United States Government should--
            (1) encourage cooperation by foreign governments and 
        relevant international fora in identifying whether Internet 
        gambling operations are being used for money laundering, 
        corruption, or other crimes;
            (2) advance policies that promote the cooperation of 
        foreign governments, through information sharing or other 
        measures, in the enforcement of this Act; and
            (3) encourage the Financial Action Task Force on Money 
        Laundering, in its annual report on money laundering 
        typologies, to study the extent to which Internet gambling 
        operations are being used for money laundering.
    (b) Report Required.--The Secretary of the Treasury shall submit an 
annual report to the Congress on the deliberations between the United 
States and other countries on issues relating to Internet gambling.

SEC. 5. AMENDMENTS TO GAMBLING PROVISIONS.

    (a) Amendment to Definition.--Section 1081 of title 18, United 
States Code, is amended--
            (1) by designating the five undesignated paragraphs that 
        begin with ``The term'' as paragraphs (1) through (5), 
        respectively; and
            (2) in paragraph (5), as so designated--
                    (A) by striking ``wire communication'' and 
                inserting ``communication'';
                    (B) by inserting ``satellite, microwave,'' after 
                ``cable,''; and
                    (C) by inserting ``(whether fixed or mobile)'' 
                after ``connection''.
    (b) Increase in Penalty for Unlawful Wire Transfers of Wagering 
Information and Conforming Amendment.--Section 1084(a) of title 18, 
United States Code, is amended--
            (1) by striking ``two years'' and inserting ``5 years''; 
        and
            (2) by striking ``wire'' each place it appears.

                          Purpose and Summary

    Under current Federal law, it is unclear that using the 
Internet to operate a gambling business is illegal. H.R. 21, 
the ``Unlawful Internet Gambling Funding Prohibition Act,'' is 
intended to provide State and Federal authorities with the 
means to enforce current statutes and clarify that those 
statutes make gambling over the Internet illegal. This bill 
creates a new crime--accepting financial instruments, such as 
credit cards or electronic fund transfers, for debts incurred 
in illegal Internet gambling. Because the perpetrators of this 
crime are off-shore and beyond the reach of U.S. law 
enforcement tactics, the bill enables State attorneys general 
and Federal enforcement authorities to request that injunctions 
be issued against any party, including financial institutions, 
Internet service providers, and computer software providers, to 
assist in the prevention or restraint of this crime. Finally, 
this bill allows Federal bank regulators to create rules 
requiring financial institutions to use designated methods to 
block or filter illegal Internet gambling transactions.

                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. The 
Internet gambling industry's revenues grew from $445 million in 
1997 \1\ to an estimated $4.2 billion in 2003 \2\. Industry 
analysts estimate that it could soon easily become a $10 
billion a year industry.
---------------------------------------------------------------------------
    \1\ National Gambling Impact Study Commission, Final Report, 5-1, 
(1999).
    \2\ Testimony of Deputy Assistant Attorney General John G. Malcolm 
before the House Subcommittee on Crime, Terrorism, and Homeland 
Security on April 29, 2003, page 2.
---------------------------------------------------------------------------
    On-line casino operators envision the day when the Internet 
will provide access to a ``virtual-strip''--where gamblers who 
are tired of one casino can simply ``walk'' down the virtual 
boardwalk to a different casino. There are currently over 1,800 
gambling sites on the Internet, offering 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.
    This legislation brings the current law up to date with 
Internet technology by clarifying Federal law so that there is 
no question that operating an Internet gambling business is 
illegal. It does not, however, supersede the traditional 
leadership roles of States in enforcing gambling laws 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. 21 is necessary. At the same time, H.R. 21 
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. In 1996, Congress 
created the National Gambling Impact Study Commission (NGISC) 
to examine the issue of gambling in America. The NGISC 
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.\3\
---------------------------------------------------------------------------
    \3\ National Gambling Impact Study Commission, Final Report, 3-1, 
(1999).
---------------------------------------------------------------------------
    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.
    State attorneys general have been frustrated in their 
attempts to prevent Internet gambling from permeating their 
borders. Some have attempted to charge Internet gambling 
providers with violations of State consumer fraud laws, but 
jurisdictional issues and other problems have thwarted these 
efforts. Attorneys general report that citizens often are 
unaware that gambling on the Internet is illegal, even if those 
same persons are aware that their home State does not allow 
gambling.
    In addition, the Department of Justice recently testified 
that Internet gambling serves as a vehicle for money laundering 
activities and can be exploited by terrorists to launder money. 
On-line casinos are a particularly inviting target because, in 
addition to using the gambling that on-line casinos offer as a 
way to hide or transfer money, on-line casinos offer a broad 
array of financial services to their customers, such as 
providing credit accounts, fund transmittal services, check 
cashing services, and currency exchange services.

                                Hearings

    The Committee's Subcommittee on Crime, Terrorism, and 
Homeland Security held a legislative hearing on H.R. 21 on 
April 29, 2003. The Subcommittee also heard testimony on a 
related bill, H.R. 1223, at those hearings. Testimony was 
received from four witnesses. The witnesses were: Rep. James A. 
Leach; Mr. John G. Malcolm, Deputy Assistant Attorney General, 
Criminal Division, U.S. Department of Justice; Mr. Jeffrey A. 
Modisett, former Indiana State Attorney General; and Mr. 
William Hornbuckle, President & Chief Operating Officer, MGM 
Mirage Online.

                        Committee Consideration

    On May 6, 2003, the Subcommittee on Crime, Terrorism, and 
Homeland Security met in open session and ordered favorably 
reported the bill H.R. 21, by a voice vote, a quorum being 
present. On May 14, 2003, the Committee met in open session and 
ordered favorably reported the bill H.R. 21 with an amendment 
by a recorded vote of 16 to 15, a quorum being present.

                         Vote of the Committee

    In compliance with clause 3(b) of rule XIII of the Rules of 
the House of Representatives, the Committee notes that the 
following rollcall votes occurred during the Committee's 
consideration of H.R. 21.
    1. An amendment was offered by Mr. Cannon to strike 
language in the bill which states that a bet or wager does not 
include ``any lawful transaction with a business licensed or 
authorized by a State.'' The amendment was agreed to by a 
rollcall vote of 16 to 15.

                                                   ROLLCALL NO. 1
----------------------------------------------------------------------------------------------------------------
                                                                       Ayes            Nays           Present
----------------------------------------------------------------------------------------------------------------
Mr. Hyde........................................................
Mr. Coble.......................................................                              X
Mr. Smith.......................................................                              X
Mr. Gallegly....................................................
Mr. Goodlatte...................................................                              X
Mr. Chabot......................................................                              X
Mr. Jenkins.....................................................              X
Mr. Cannon......................................................              X
Mr. Bachus......................................................                              X
Mr. Hostettler..................................................              X
Mr. Green.......................................................              X
Mr. Keller......................................................                              X
Ms. Hart........................................................                              X
Mr. Flake.......................................................
Mr. Pence.......................................................                              X
Mr. Forbes......................................................
Mr. King........................................................                              X
Mr. Carter......................................................                              X
Mr. Feeney......................................................                              X
Mrs. Blackburn..................................................              X
Mr. Conyers.....................................................              X
Mr. Berman......................................................              X
Mr. Boucher.....................................................
Mr. Nadler......................................................                              X
Mr. Scott.......................................................                              X
Mr. Watt........................................................              X
Ms. Lofgren.....................................................              X
Ms. Jackson Lee.................................................              X
Ms. Waters......................................................              X
Mr. Meehan......................................................              X
Mr. Delahunt....................................................
Mr. Wexler......................................................                              X
Ms. Baldwin.....................................................              X
Mr. Weiner......................................................              X
Mr. Schiff......................................................                              X
Ms. Sanchez.....................................................              X
Mr. Sensenbrenner, Chairman.....................................              X
                                                                 -----------------------------------------------
    Total.......................................................             16              15
----------------------------------------------------------------------------------------------------------------

    2. Final Passage. The motion to report favorably the bill, 
H.R. 21, as amended, was agreed to by a rollcall vote of 16 to 
15.

                                                   ROLLCALL NO. 2
----------------------------------------------------------------------------------------------------------------
                                                                       Ayes            Nays           Present
----------------------------------------------------------------------------------------------------------------
Mr. Hyde........................................................
Mr. Coble.......................................................              X
Mr. Smith.......................................................
Mr. Gallegly....................................................
Mr. Goodlatte...................................................              X
Mr. Chabot......................................................              X
Mr. Jenkins.....................................................              X
Mr. Cannon......................................................                              X
Mr. Bachus......................................................              X
Mr. Hostettler..................................................              X
Mr. Green.......................................................              X
Mr. Keller......................................................              X
Ms. Hart........................................................              X
Mr. Flake.......................................................                              X
Mr. Pence.......................................................              X
Mr. Forbes......................................................
Mr. King........................................................              X
Mr. Carter......................................................              X
Mr. Feeney......................................................              X
Mrs. Blackburn..................................................              X
Mr. Conyers.....................................................                              X
Mr. Berman......................................................                              X
Mr. Boucher.....................................................
Mr. Nadler......................................................                              X
Mr. Scott.......................................................                              X
Mr. Watt........................................................                              X
Ms. Lofgren.....................................................              X
Ms. Jackson Lee.................................................                              X
Ms. Waters......................................................                              X
Mr. Meehan......................................................                              X
Mr. Delahunt....................................................
Mr. Wexler......................................................                              X
Ms. Baldwin.....................................................                              X
Mr. Weiner......................................................                              X
Mr. Schiff......................................................                              X
Ms. Sanchez.....................................................                              X
Mr. Sensenbrenner, Chairman.....................................              X
                                                                 -----------------------------------------------
    Total.......................................................             16
----------------------------------------------------------------------------------------------------------------

                      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.

               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. 21, 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 16, 2003.
Hon. F. James Sensenbrenner, Jr., Chairman,
Committee on the Judiciary,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed revised cost estimate for H.R. 21, the 
Unlawful Internet Gambling Funding Prohibition Act.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contacts are Mark Hadley 
(for Federal costs), who can be reached at 226-2860, and Cecil 
McPherson (for the impact on the private sector), who can be 
reached at 226-2940.
            Sincerely,
                                       Douglas Holtz-Eakin.

Enclosure

cc:
        Honorable John Conyers, Jr.
        Ranking Member
H.R. 21--Unlawful Internet Gambling Funding Prohibition Act.

                                SUMMARY

    H.R. 21 would prohibit gambling businesses from accepting 
credit cards, checks, or other bank instruments from gamblers 
who illegally bet over the Internet. The bill also would 
require financial institutions to take steps to identify and 
block gambling-related transactions that are transmitted 
through their payment systems. The Office of the Comptroller of 
the Currency (OCC), the Board of Governors of the Federal 
Reserve System, the Federal Deposit Insurance Corporation 
(FDIC), the Office of Thrift Supervision (OTS), and the 
National Credit Union Administration (NCUA) would enforce the 
provisions of H.R. 21 as they apply to financial institutions.
    CBO estimates that implementing this legislation would 
result in no significant cost to the Federal Government. The 
bill could affect direct spending and revenues, but CBO 
estimates that any impact on direct spending and revenues would 
not be significant.
    H.R. 21 would create no new intergovernmental mandates as 
defined in the Unfunded Mandates Reform Act (UMRA) and would 
impose no costs on State, local, or tribal governments. The 
bill would impose a private-sector mandate, but CBO estimates 
that the direct costs of the mandate would fall well below the 
annual threshold established in UMRA ($117 million in 2003, 
adjusted annually for inflation) in any of the next 5 years.

                ESTIMATED COST TO THE FEDERAL GOVERNMENT

    CBO estimates that the Government would incur no 
significant costs under H.R. 21. CBO estimates that 
implementing H.R. 21 would increase administrative costs of the 
Department of Justice, but any such costs would be negligible. 
The bill also would have a small effect on the operating costs 
of the FDIC and the Federal Reserve System. Finally, the bill 
would have a negligible effect on the collection and spending 
of criminal penalties.

                           BASIS OF ESTIMATE

    The bill would have only minor budgetary effects, as 
described below.
Spending Subject to Appropriation
    Because H.R. 21 would establish new Federal crimes relating 
to Internet 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 
existing State laws. 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. 21 would require the Department of the Treasury to 
submit an annual report on deliberations with other countries 
on issues related to Internet gambling. CBO estimates that 
preparing and completing the report would cost less than 
$100,000 a year, subject to the availability of appropriated 
funds.
Direct Spending and Revenues
    The NCUA, the OTS, and the OCC charge fees to cover all 
their administrative costs; therefore, any additional spending 
by those agencies to implement the bill would have no net 
budgetary effect. That is not the case with the FDIC, however, 
which uses deposit insurance premiums paid by banks to cover 
the expenses it incurs to supervise State-chartered 
institutions. (Under current law, CBO estimates that the vast 
majority of thrift institutions insured by the FDIC would not 
pay any premiums for most of the 2004-2013 period.)
    The bill would cause a small increase in FDIC spending but 
would not affect its premium income. In total, CBO estimates 
that H.R. 21 would increase direct spending and offsetting 
receipts of the NCUA, OTS, OCC, and FDIC by less than $500,000 
a year over the 2004-2013 period.
    Budgetary effects on the Federal Reserve are recorded as 
changes in revenues (governmental receipts). Based on 
information from the Federal Reserve, CBO estimates that 
enacting H.R. 21 would reduce such revenues by less than 
$500,000 a year.
    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 1 year or more), 
the additional direct spending also would be negligible.

            ESTIMATED IMPACT ON STATE AND LOCAL GOVERNMENTS

    Although H.R. 21 would prohibit gambling businesses from 
accepting credit card payments and other bank instruments from 
gamblers who bet illegally over the Internet, the bill would 
not create a new intergovernmental mandate as defined in UMRA. 
Under current Federal and State law, gambling businesses are 
generally prohibited from accepting bets or wagers over the 
Internet. Thus, H.R. 21 does not contain a new mandate relative 
to current law and would impose no costs on State, local, or 
tribal governments.

                 ESTIMATED IMPACT ON THE PRIVATE SECTOR

    H.R. 21 would impose a new Federal mandate on the private 
sector. The bill would require designated payment systems to 
establish policies and procedures designed to identify and 
prevent transactions in connection with unlawful Internet 
gambling. Designated payment systems are defined in the bill to 
include any system utilized by businesses such as creditors, 
credit card issuers, or financial institutions to effect a 
credit transaction, an electronic fund transfer, or other 
transfer of funds. Information provided by representatives of 
the financial services industry indicates that such 
transactions can currently be identified through the use of 
codes. Most financial institutions are currently able to 
identify and block restricted transactions by using the coding 
system. Thus, CBO estimates that the private sector's cost to 
comply with the mandate would be small. There also could be 
direct savings to those entities subject to the mandate as the 
bill limits their liability arising from their compliance with 
the requirement. CBO estimates that the total direct costs for 
private-sector mandates in this bill would fall well below the 
annual threshold established in UMRA ($117 million in 2003, 
adjusted annually for inflation).
    Although section 3 would prohibit gambling businesses from 
accepting credit card payments and other bank instruments from 
gamblers who bet illegally over the Internet, those provisions 
would not create a new private-sector mandate as defined in 
UMRA. Under current Federal and State law, gambling businesses 
are generally prohibited from accepting bets or wagers over the 
Internet. Thus, those provisions do not contain a new mandate 
relative to current law.

                           PREVIOUS ESTIMATE

    On May 15, 2003, CBO transmitted a cost estimate for H.R. 
21, as reported by the House Committee on Financial Services on 
March 27, 2003. The two versions of the bill are similar, and 
the cost estimates are identical.
    Both versions of the bill contain identical private-sector 
mandates, for which CBO estimates that the total direct costs 
would fall well below the annual threshold for private-sector 
mandates established in UMRA.

                         ESTIMATE PREPARED BY:

Federal Spending: Lanette J. Walker and Mark Hadley (226-2860)
Federal Revenues: Mark Booth (226-2680)
Impact on State, Local, and Tribal Governments: Victoria Heid 
    Hall (225-3220)
Impact on the Private Sector: Cecil McPherson (226-2940)

                         ESTIMATE APPROVED BY:

Peter H. Fontaine
Deputy Assistant Director for Budget Analysis

                    Performance Goals and Objectives

    H.R. 21 does not authorize funding. Therefore, clause 
3(c)(4) of rule XIII of the Rules of the House of 
Representatives is inapplicable.

                   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
    This Act may be cited as the `Unlawful Internet Gambling 
Funding Prohibition Act.''
Section 2. Findings
    The Congressional findings note that: (1) Internet gambling 
is primarily funded through the use of personal banking 
instruments and plays a large role in the creation of 
ultimately uncollectible personal debt; and (2) Internet 
gambling is susceptible to abuse by money launderers.
Section 3. Prohibition on acceptance of any bank instrument for 
        Internet gambling
    Subsection (a) creates a new crime that prohibits a 
gambling business from accepting bank instruments in connection 
with unlawful Internet gambling. Covered instruments include 
credit cards, electronic fund transfers, and checks.
    Subsection (b)(1) defines the term ``bets or wagers'' as 
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 
subject to chance with the agreement that the winner will 
receive something of greater value than the amount staked or 
risked. This subsection clarifies that the term ``bets or 
wagers'' does not include a bona fide business transaction 
governed by the securities laws; a transaction subject to the 
Commodity Exchange Act; an over-the-counter derivative 
instrument and any other transaction exempt from State gaming 
or bucket shop laws pursuant to the Commodity Exchange Act or 
Securities Exchange Act; a contract of indemnity or guarantee; 
a contract for life, health, or accident insurance; a deposit 
with a depository institution; or certain participation in a 
simulation sports game or education game.
    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 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.
    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.'' Also, such computer and video games, including 
those that feature real sports teams and/or teams that are 
members of an amateur or professional sports organization, do 
not involve the staking or risking by any person of something 
of value. The Committee intends that the courts will continue 
to perform their traditional functions in determining whether 
games are ``bets or wagers.''
    It is the view of the Committee that the definition of 
``bets or wagers'' does not include: (1) 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; (2) news 
reporting or analysis of wagering activity; and (3) posting or 
reporting of educational information on how to make a bet or 
wager or the nature of betting or wagering. Furthermore, it is 
the view of the Committee that information exchanged via a 
linked progressive game accounting system that does not accept 
bets or wagers and that does not affect game outcome is not 
included in the definition of the term ``bets or wagers.''
    Subsection (b)(2) excludes from the term ``business of 
betting or wagering'' any creditor, credit card issuer, insured 
depository institution, financial institution, operator of a 
terminal at which an electronic fund transfer may be initiated, 
money transmitting business, or international, national, 
regional, or local network utilized to effect a credit 
transaction, electronic fund transfer, stored value product 
transaction, or money transmitting service, or any participant 
in such network, or any interactive computer service or 
telecommunications service, unless such entity has actual 
knowledge and control of bets and wagers and operates or is 
controlled by an entity that operates an unlawful Internet 
gambling site. Subsection (b) also defines the terms 
``designated payment system,'' ``Internet,'' ``interactive 
computer service,'' ``restricted transaction'' and ``unlawful 
Internet gambling.''
    Subsection (c) authorizes the Attorney General of the 
United States and State Attorneys General to pursue civil 
remedies, including a preliminary injunction or permanent 
injunction against any person to prevent or restrain a 
violation of this Act. It clarifies that the Act does not 
alter, supersede, or otherwise affect the Indian Gaming 
Regulatory Act; generally limits the liability of an 
interactive computer service to the removal or disabling of 
access to an online site violating this section, upon proper 
notice; clarifies that an interactive computer service not 
liable under this Act is not liable under the Wire Act unless 
it has actual knowledge and control of bets and wagers, and 
operates or is controlled by an entity that operates, an 
unlawful Internet gambling site; sets out factors to be 
considered by a court in deciding whether to issue an 
injunction against any payment system; and provides for notice 
to bank regulators and institutions to allow violations to be 
addressed through the bank regulatory process before the 
injunction process is triggered.
    Subsection (d) authorizes criminal penalties, including 
fines or imprisonment for not more than 5 years or both.
    Subsection (e) provides that, notwithstanding the safe 
harbor provided in subsection (b)(2), a financial intermediary 
(creditor, credit card issuer, financial institution, operator 
of a terminal at which an electronic fund transfer may be 
initiated, money transmitting business, or national, regional, 
or local network), or interactive computer service or 
telecommunications service that has actual knowledge and 
control of bets and wagers, and operates or is controlled by an 
entity that operates, an unlawful Internet gambling site can be 
held liable under this section.
    Subsection (f) requires the Secretary of the Treasury, in 
conjunction with the Federal Reserve and the U.S. Attorney 
General, to prescribe regulations within 6 months requiring any 
payment system to establish policies and procedures reasonably 
designed to identify restricted transactions, block restricted 
transactions, or prevent restricted transactions from entering 
its system; and provides that a payment system is not liable 
for blocking or refusing a restricted transaction in an attempt 
to comply with the Act's enforcement. The Federal functional 
regulators and the Federal Trade Commission are given the 
authority to enforce this subsection.
Section 4. Internet gambling in or through foreign jurisdictions
    Section 4 provides that, in deliberations between the U.S. 
Government and any other country on money laundering, 
corruption, and crime issues, the U.S. Government should 
encourage cooperation by foreign governments in identifying 
whether Internet gambling operations are being used for money 
laundering, corruption, or other crimes, advance policies that 
promote the cooperation by foreign governments in the 
enforcement of this Act, and encourage the Financial Action 
Task Force on Money Laundering to study the extent to which 
Internet gambling operations are being used for money 
laundering. It also requires the Secretary of the Treasury to 
submit an annual report to Congress on the deliberations 
between the United States and other countries on issues 
relating to Internet gambling.
Section 5. Amendments to gambling provisions
    Section 5 makes certain amendments to definitions under 
sections 1081 and 1084 of title 18, the Federal Wire Act, and 
increases the penalty for unlawful transfers of wagering 
information. The term ``wire communication facility'' under the 
current law would now read ``communication facility'' and 
includes transmissions by satellite and microwave as covered 
means of communication. The Committee intends that this 
definition will cover all present and future forms of 
communication.

         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 (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italics, 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

    As used in this chapter:
            (1) The term ``gambling ship'' means a vessel used 
        principally for the operation of one or more gambling 
        establishments. Such term does not include a vessel 
        with respect to gambling aboard such vessel beyond the 
        territorial waters of the United States during a 
        covered voyage (as defined in section 4472 of the 
        Internal Revenue Code of 1986 as in effect on January 
        1, 1994).
            (2) The term ``gambling establishment'' means any 
        common gaming or gambling establishment operated for 
        the purpose of gaming or gambling, including accepting, 
        recording, or registering bets, or carrying on a policy 
        game or any other lottery, or playing any game of 
        chance, for money or other thing of value.
            (3) The term ``vessel'' includes every kind of 
        water and air craft or other contrivance used or 
        capable of being used as a means of transportation on 
        water, or on water and in the air, as well as any ship, 
        boat, barge, or other water craft or any structure 
        capable of floating on the water.
            (4) The term ``American vessel'' means any vessel 
        documented or numbered under the laws of the United 
        States; and includes any vessel which is neither 
        documented or numbered under the laws of the United 
        States nor documented under the laws of any foreign 
        country, if such vessel is owned by, chartered to, or 
        otherwise controlled by one or more citizens or 
        residents of the United States or corporations 
        organized under the laws of the United States or of any 
        State.
            (5) The term ``[wire] communication facility'' 
        means any and all instrumentalities, personnel, and 
        services (among other things, the receipt, forwarding, 
        or delivery of communications) used or useful in the 
        transmission of writings, signs, pictures, and sounds 
        of all kinds by aid of wire, cable, satellite, 
        microwave, or other like connection (whether fixed or 
        mobile) between the points of origin and reception of 
        such transmission.

           *       *       *       *       *       *       *

Sec. 1084. Transmission of wagering information; penalties

    (a) Whoever being engaged in the business of betting or 
wagering knowingly uses 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 on any sporting event or contest, or for the 
transmission of a [wire] communication which entitles the 
recipient to receive money or credit as a result of bets or 
wagers, or for information assisting in the placing of bets or 
wagers, shall be fined under this title or imprisoned not more 
than [two] 5 years, or both.

           *       *       *       *       *       *       *

                           Markup Transcript

                            BUSINESS MEETING

                        WEDNESDAY, MAY 14, 2003

                  House of Representatives,
                                Committee on the Judiciary,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10:01 a.m., in 
Room 2141, Rayburn House Office Building, Hon. F. James 
Sensenbrenner, Jr. [Chairman of the Committee] presiding.
    [Intervening business.]
    Chairman Sensenbrenner. The second item on the agenda is 
the adoption of H.R. 21, the ``Unlawful Internet Gambling 
Funding Prohibition Act.''
    The Chair recognizes the gentleman from North Carolina, Mr. 
Coble, the Chairman of the Subcommittee on Crime, Terrorism, 
and Homeland Security, for a motion.
    Mr. Coble. Mr. Chairman, the Subcommittee on Crime, 
Terrorism, and Homeland Security reports in favor of the bill 
H.R. 21, and moves its favorable recommendation to the full 
House.
    Chairman Sensenbrenner. Without objection, H.R. 21 will be 
considered as read, and open for amendment at any point.
    [The bill, H.R. 21, follows:]
      
      

  

    Chairman Sensenbrenner. And the Chair recognizes the 
gentleman from North Carolina to strike the last word.
    Mr. Coble. I thank the Chairman.
    Mr. Chairman, H.R. 21, the ``Unlawful Internet Gambling 
Funding Prohibition Act,'' introduced by Congressman Jim Leach, 
addresses a serious concern for many Americans; that is, the 
problem of Internet gambling.
    It is now estimated that 4.2 billion is wagered over the 
Internet each year. This is an increase from $445 million just 
6 years ago. There are currently more than 1,800 Internet 
gambling sites, and the total dollar amount wagered worldwide 
is expected to reach 10 billion in the near future.
    The most troubling aspect of Internet gambling is the 
relative ease of accessibility for our Nation's children. The 
anonymous nature of the Internet makes it almost impossible to 
prevent underage gamblers from using their parents' credit 
cards, or even their own in some cases, to log on to a Web 
site.
    Another group of people particularly susceptible to 
Internet gambling are America's problem gamblers. The National 
Council of Problem Gambling estimates that there are currently 
11 million Americans directly suffering from gambling problems. 
High rates of financial debt, unemployment, bankruptcy, 
divorce, homelessness, and suicide are all associated with 
problem gambling. Virtual casinos and their video game 
structure have been labeled the crack cocaine of gambling. 
These facilities are open 24 hours a day, 7 days a week, all 
within a person's own home. By making gambling more convenient, 
it can do nothing but make the problem worse, it seems to me.
    In addition to the social problems associated with Internet 
gambling, these Internet sites also offer organized crime 
groups a very simple opportunity to launder the proceeds of 
their criminal activities. Because of the lack of oversight or 
regulations and the high degree of anonymity, money laundering 
through Internet gambling sites is already a major concern to 
our Nation's law enforcement agencies.
    Federal law is currently unclear as to whether or not all 
types of Internet gambling is illegal. H.R. 21 is intended to 
make it crystal clear that operating a gambling business on the 
Internet is, in fact, illegal.
    This bill creates a new crime of accepting financial 
instruments such as credit cards or electronic fund transfers 
for debts incurred in illegal Internet gambling.
    Also, because the perpetrators of this crime are offshore 
and beyond the reach of U.S. law enforcement tactics, the bill 
enables State and Federal attorneys general to request that 
injunctions be issued to any party, such as financial 
institutions and Internet service providers, to assist in the 
prevention or restraint of this crime.
    Finally, the bill allows Federal bank regulators to create 
rules requiring financial institutions to use designated 
methods to block or filter illegal Internet gambling 
transactions.
    Mr. Speaker, I urge my colleagues to support this 
legislation, and I yield back the balance of my time.
    Chairman Sensenbrenner. The gentleman from Michigan.
    Mr. Conyers. Thank you, Mr. Chairman.
    This is our annual Internet gambling bill that we have to 
deal with on a yearly basis. And in this ritual, the Congress 
considers a bill that is supposed to prohibit Internet 
gambling, but actually expands it.
    By the way, to my friend from Carolina, Mr. Coble, didn't 
the Department of Justice have some reservations about this 
bill? I yield.
    Mr. Coble. Not known to me, Mr. Conyers. Perhaps they did, 
but I am not aware of it.
    Mr. Conyers. Did they testify before this Subcommittee? 
They testified, and they pointed out it would permit more 
gambling.
    Now, the bill has a different name, but it is the same 
game. While proponents--you know, we talk about the evils of 
gambling. Did Bennett testify before your Subcommittee, Mr. 
Chairman--Subcommittee Chairman? Did Bill Bennett testify 
before your Subcommittee?
    Mr. Coble. He did not.
    Mr. Conyers. He didn't. Okay. Proponents talk about the 
evils of gambling, and they expand it yet for horse racing, dog 
racing. And the bill explicitly carves out for any lawful 
transaction within a business license or authorized by the 
State--that translates into horse racing, dog racing, on 
Internet sites--it doesn't require that these businesses be 
licensed for Internet gambling, just any kind of license will 
do.
    Now, we dealt with this last year, and it is back again in 
a new form.
    Now, what about lotteries? Boy, there I am proud to join 
with the Free Congress Foundation, the Traditional Values 
Coalition, that say that this bill will expand gambling. And so 
this is a critical issue here. Either at the hearings, which we 
are so happy to have at the Subcommittee level, either supports 
that it expands gambling or it doesn't. The United States 
Department of Justice suggested that in its present form, it 
would. So all we are saying is this: Instead of imposing an 
Internet gambling prohibition that will drive many Internet 
gambling operations offshore--that is the problem we have 
here--into the hands of the unscrupulous, why don't we in the 
Committee set an example by examining the feasibility of 
strictly licensing and regulating the on-line gaming industry? 
A gambling industry will ensure that gaming companies play fair 
and drive out the disreputable operators in the field. It also, 
incidentally--if anybody cares anymore--it preserves States 
rights.
    The rules should be simple. If the State does not want to 
allow gambling in its borders, a licensed operator should 
exclude the State's residents from being able to gamble on its 
Web site. That is why we have another bill, 1223, that will 
create a national Internet gambling licensing regulation study 
commission to go into this.
    Now, the R's and the D's in this Committee have stood 
together against those who wanted to regulate the Internet and 
restrict its boundaries, and so I hope we don't head down that 
road to break up this bipartisan opposition that we have 
enjoyed in the previous years.
    Thank you, Mr. Chairman.
    Chairman Sensenbrenner. The gentleman's time has expired. 
Are there other amendments? The gentleman from Utah, Mr. 
Cannon.
    Mr. Cannon. Thank you, Mr. Chairman. I have an amendment at 
the desk.
    Chairman Sensenbrenner. The clerk will report the 
amendment.
    The Clerk. Amendment to H.R. 21 offered by Mr. Cannon:
    Page 6, strike line 15 and all that follows through line 
16.
    Make appropriate clerical and technical changes.
    [The amendment follows:]
    
    
    Chairman Sensenbrenner. The gentleman from Utah is 
recognized for 5 minutes.
    Mr. Cannon. Thank you, Mr. Chairman.
    I would like to start off by just pointing out that I am 
against gambling, I don't like gambling, and agree with the 
expression of the Chairman of the Crime Subcommittee as to the 
vices that are associated with gambling, including youth 
gambling, people who get addicted and carried away. Did I hear 
that this bill was called the Bennett bill earlier today 
somewhere, Mr. Chairman?
    There are all kinds of problems with gambling. Utah is one 
of only two States left in the Union that prohibits all forms 
of gambling. Hawaii is the only one. We are feeling a little 
bit in the minority in Utah, and it is my determination to 
protect Utah from the invasion of gambling outside and in 
particular on the Internet.
    It is my view that whatever we do in this body should limit 
gambling. There are some disagreements on that, I understand, 
but in my view is that we ought to be limiting gambling. And, 
secondly, where we can't limit it, we ought to be thinking in 
terms of regulation. And, in fact, while there are difficulties 
in regulating offshore entities, there are entities offshore 
that want to be regulated and therefore subject themselves to 
the jurisdiction of the United States and, therefore, 
prosecution of illegality and crime.
    Now, there are a couple problems with this bill, and I 
don't want to mix them up in my amendment. I have passed out 
letters from several people that I will come to in a moment, 
but the opposition to the bill breaks down to a couple of 
things.
    The first is the burden that this bill would create on the 
Internet. I agree with that, and the statements of people that 
believe that this bill would be a burden on the Internet. I 
encourage you to read the letters that we passed out and that I 
will make part of the record shortly. That is very important to 
me, so I oppose the underlying bill.
    But, secondly, as I read this bill and several other people 
read it, this bill--the section that I am striking, 
III(b)(1)(e)(ix), on page 6, lines 15 and 16, specifically 
exempt from the definition of bets or wagers any lawful 
transaction with a business license or authorized by the State. 
This would exempt, in my view, horse racing, dog racing, 
lotteries, and in some cases casino-style wagers.
    In support of that view--actually, in support of the bill 
we have, the New York Thoroughbred Breeders, Inc., which would 
like this bill because they view it as, I believe--in fact, Mr. 
Chairman, I would like to make four letters part of the record.
    Chairman Sensenbrenner. Without objection.
    [The material referred to follows:]
    
    
    Mr. Cannon. And request to do that.
    The second letter is from the Conservative Free Congress 
Foundation. And the gist of this letter is that, first of all, 
there are--this section creates carveouts for horse racing, dog 
racing, and jai alai; and, secondly, that it is not good to 
regulate commerce on the Internet. The Chamber of Commerce 
focuses on the enforcement mechanism, and points out that 
electronic checks or electronic debt transactions don't have 
the same system that credit cards have today, and that the 
current bill would encumber the development of those 
transactions.
    The Traditional Values Coalition focuses with clarity on 
the carveouts.
    And then, finally, a letter from the Americans for Tax 
Reform opposes this on the basis that it creates additional 
costs on financial institutions, and also that it chooses 
winners and losers in Internet commerce.
    The U.S. Department of Justice and the National Association 
of Attorneys General have concerns about the carveout. In 
testimony before the Senate Banking Committee, John Malcomb of 
the U.S. Department of Justice testified that the 
aforementioned section was one of the reasons DOJ could not 
endorse Senate 627, which is nearly identical to H.R. 21. 
Testifying on behalf of the National Association of Attorneys 
General, Richard Blumenthal, the Attorney General of 
Connecticut, warned that under that bill the exceptions could 
swallow the rule. In testimony before the House Judiciary 
Committee, when asked if that section of H.R. 21 would allow 
lotteries to go on-line, Malcomb responded: Absolutely.
    H.R. 21 is not really an Internet gambling prohibition 
bill. In fact, it is an Internet gambling industrial policy 
bill, defining a favored class of State-sponsored Internet 
gambling. Last year, during consideration of a similar bill in 
the 107th Congress, the Judiciary Committee voted 
overwhelmingly against allowing carveouts in Internet gaming 
legislation.
    Chairman. Sensenbrenner. The gentleman's time has expired.
    Mr. Cannon. Thank you, Mr. Chairman. I yield back.
    Chairman Sensenbrenner. The gentleman from Florida, Mr. 
Keller.
    Mr. Keller. Thank you, Mr. Chairman. I move to strike the 
last word.
    Chairman Sensenbrenner. The gentleman is recognized for 5 
minutes.
    Mr. Keller. Mr. Cannon's amendment I believe is very well-
intentioned. In fact, the last time around, I tell you that I 
voted in favor of it. This time, however, I am going to vote 
against it, and I will tell you why.
    First, I think it makes this bill unnecessarily 
controversial. Second, it interferes with States' rights. And, 
third, most importantly--for me anyway--is that this bill will 
have the effect, albeit unintentionally, of killing this 
legislation. And we don't have to guess, because last year 
after we put this in the bill, the legislation was never even 
brought to a floor vote based on its controversial nature.
    I want to see this legislation pass. I am a big fan of Mr. 
Cannon both personally and in terms of his legislative prowess, 
and I am certain that his heart is in the right place. But as a 
practical matter, because I want to see this pass, I am going 
to vote no, and I would urge other people to consider doing the 
same.
    Mr. Cannon. Would the gentleman yield?
    Mr. Keller. I will.
    Mr. Cannon. I thank the gentleman. I don't know if this 
will kill the legislation or not. Last year, the sponsor, in 
the Judiciary Committee, of the bill congratulated me for 
making the bill more conservative. I think that that is clearly 
the case.
    There is an alternative to the bill and the way we are 
doing it. And, if it can't be passed without the carveouts, 
then it probably shouldn't be passed. I think the only thing we 
can really do that makes a difference is to regulate. And I 
don't know how to did that yet. And so Mr. Conyers and I have 
introduced a bill that would propose a study for doing that. I 
think the weight of the problems of this bill are greater than 
any good that might come out of it, and I will tell you that 
from my perspective and from the State of Utah--we don't have 
anyone here from Hawaii, but I suspect the feeling would be the 
same there--this is insidious. The section that I am moving to 
strike is either irrelevant--in other words, it won't kill the 
bill to take it out--or it is insidious. If it is insidious, 
then it ought to come out for the sake of Utah and Hawaii and 
all the other States that want to limit gambling around the 
country.
    Thank you, And I yield back.
    Mr. Keller. Mr. Cannon, and just to reclaim my time. I 
certainly respect what you have to say. I guess it just comes 
down to the fact that ultimately I would rather have 90 percent 
of a loaf of bread than no loaf, frankly. And, with that, I 
will yield back.
    Chairman Sensenbrenner. The gentleman from Florida, Mr. 
Wexler.
    Mr. Wexler. Thank you, Mr. Chairman. And I move to strike 
the last word.
    Chairman Sensenbrenner. The gentleman is recognized for 5 
minutes.
    Mr. Wexler. Thank you.
    I, too, am a big fan of Mr. Cannon, and I very much 
appreciate his candor at the beginning of the explanation of 
his amendment, which is, he very rightfully says he does not 
like gambling.
    [11:00 a.m.]
    Mr. Wexler. And Mr. Cannon rightfully points out that the 
State which he represents is apparently one of two, as I 
understand it, that specifically prohibit gambling in the 
context that he speaks of. The issue is not whether Mr. Cannon 
or any one of us likes or doesn't like gambling. If I 
understand Mr. Cannon's amendment correctly, the issue is 
whether we are going to make a policy that says Americans 
cannot use credit cards for behavior that is entirely legal. 
That is the question.
    I think smoking is awful, but I would never suggest that 
Americans shouldn't be able to use credit cards to purchase 
cigarettes because I happen to think it is a bad thing. Or I 
wouldn't argue that somebody shouldn't be able to use a credit 
card to purchase alcohol because I may think alcohol may not be 
the right thing or there is a list, God knows, we could all 
come up with of behaviors that people may find objectionable.
    The issue here is whether or not Congress is going to make 
a policy that says Americans cannot use credit cards to engage 
in a behavior which in their State is legal. That is the only 
issue. And Mr. Cannon, very honestly and deliberately, says he 
believes that because gambling is bad we as a national 
legislature should prohibit Americans from using credit cards 
for a----
    Mr. Cannon. Would the gentleman yield? That is not exactly 
what I am saying. The underlying bill prohibits using credit 
cards, and I agree with everything the gentleman has said up to 
this point. I am only suggesting--I don't like that. I would 
associate myself with your comments up to this point. In my 
amendment, all we are doing is limiting the extension of this 
bill to the State of Utah. In other words, the amendment I am 
making either removes an irrelevant piece of this bill or 
removes a piece of this bill which is insidious.
    Mr. Keller's comment that this amendment makes the bill 
controversial. If the gentleman doesn't want to limit credit 
card access to gambling, then he would want to support my bill 
if he believes that Mr. Keller is correct that my amendment 
would make the bill more controversial.
    I yield back.
    Mr. Wexler. If I may retake my time for just a quick 
moment. As I understand the bill, if any State prohibits a 
behavior or activity, then this bill would not give people the 
right to engage in it. Only activity which is legal under a 
State's law, that is the activity in which that an individual 
can engage in. In Utah, if it is already illegal, it would seem 
to me already under this bill, Mr. Cannon, you and the people 
of Utah have nothing to worry about.
    Mr. Goodlatte. Would the gentleman yield? I thank the 
gentleman for yielding. The gentleman from Florida is exactly 
right. This has no impact on the people of the State of Utah 
because the State of Utah, as the gentleman correctly notes, is 
one of two States that don't allow any type of gambling. So the 
language he seeks to strike, which says any lawful transaction 
with a business licensed or authorized by a State, clearly does 
not affect the State of Utah.
    Mr. Wexler. I yield to Mr. Cannon. He wanted time.
    Mr. Cannon. Thank you. If that was the case then there 
wouldn't be a question about making the bill more controversial 
with my amendment.
    Mr. Wexler. Retaking my time, yes, because it seems that 
your amendment would make it so that in other States where 
there is, in fact, legal activity it would prohibit the use of 
credit cards by those citizens.
    Mr. Cannon. No, no. That is the underlying bill that does 
that.
    Mr. Wexler. No. The underlying bill allows credit card use 
if it is for a legal activity already sanctioned in the State. 
If it is not sanctioned, then you can't do it anyway.
    Mr. Conyers. Could I ask my friend, have you seen page 3 of 
this bill in which casinos can't use credit cards? And I will 
read it to you just in case you may not have seen it. Means the 
staking or risking by any person or something of value upon the 
outcome of a contest, a sporting event, now catch this, or a 
game subject to chance. And so you are absolutely right, Mr. 
Cannon, that what we are doing for one we are now not doing for 
the others. We are saying that casinos where it is lawful can't 
use credit cards. Now so much for people smoking and not being 
able to use credit cards and gamblers not being able to----
    Chairman Sensenbrenner. Gentleman's time has expired.
    Mr. Conyers.--what is wrong with casinos? Why do casinos 
get discriminated?
    Chairman Sensenbrenner. The gentleman from North Carolina, 
Mr. Coble.
    Mr. Coble. Mr. Chairman, I want to associate myself with 
the glowing comments that have been directed in the direction 
of Mr. Cannon. I also am an avid fan of Mr. Cannon, however, I 
oppose this amendment. Not unlike much legislation that comes 
before us, Mr. Chairman, conclusions are oftentimes subject to 
interpretation. It is my belief that Mr. Wexler and Mr. 
Goodlatte are on the money. It is my belief--no pun intended--
maybe I should strike that.
    Chairman Sensenbrenner. Would the gentleman yield? Do you 
have a license from North Carolina for that?
    Mr. Coble. We will strike that previous word. I believe Mr. 
Wexler and Mr. Goodlatte are correct in that if this bill 
passes in its present form, I believe that gambling would still 
be unlawful in Utah. Now I think Mr. Cannon probably does not 
agree with that, but I oppose the amendment further because it 
would strike the provision of the bill that states that the 
term ``bets or wages'' does not include any lawful transaction 
with a business licensed or authorized by a State. This 
provision is duplicative of the actual definition of unlawful 
Internet gambling as it appears on page 8 of the bill which is 
defined as a bet or wager that is unlawful under any applicable 
Federal or State law.
    I am told that some groups feel that this is a carve-out in 
their favor from the prohibition set forth in the bill. I 
believe that those groups are misinterpreting current law and 
with or without this provision will have to contend with the 
prohibitions of the Wire Act. Contrary to what some have said, 
this subsection does not serve as a loophole for the expansion 
of gambling.
    First, the provision requires a State to authorize or 
license the business. This requires action by the States so 
that Internet gambling sites do not justify their existence 
with the fact that a State does not specifically forbid that 
activity.
    Second, the transaction must be lawful to fall under the 
exemption. In other words, the authorization or license must be 
consistent with State and Federal law. For example, in order 
not to violate the Wire Act, a State that wants to sell lottery 
tickets online would have to show that nobody outside of that 
State is able to purchase those tickets online. And I believe, 
Mr. Chairman, with current technology this is practically 
impossible. I believe the language that the gentleman seeks to 
strike simply preserves the ability of States to regulate 
gambling. Because of this I would ask my colleagues to oppose 
the amendment.
    Mr. Cannon. Mr. Coble, would you yield for a question? We 
had testimony the other day that indicated that MGM could limit 
the place from which people were placing bets, at least with 
current technology. Are you suggesting by your comments that no 
State lottery could go online because of the prohibition--
because they would have an almost impossible time proving that 
no one in Utah could place a bet on a lottery from, say, 
Tennessee?
    Mr. Coble. With current technology, yeah.
    Mr. Cannon. In other words, you are saying that Tennessee 
will not go online with its lottery because Tennessee cannot 
prove that it cannot prohibit people in Utah from betting?
    Mr. Coble. That is my belief.
    Mr. Cannon. With all due respect, I don't want this law to 
turn on technology or the lack thereof. I don't think that we 
can rely on that. I think if this is duplicative, as you just 
said, then it ought to come out. I don't see a purpose for it 
if it is duplicative. If it is not duplicative then we are 
going to have judges and appeals courts determining what this 
actually means from their own light instead of the light we are 
trying to shine here. If this does what I believe it does, 
which is create carveouts, it ought to go, or at least we want 
to be clear about that as they vote. If it is duplicative then 
it ought to go.
    Mr. Coble. Let me reclaim. I think what I have tried to 
make clear is the fact that I think this bill in its present 
form preserves the right for States to regulate gambling. And 
with that I yield back.
    Chairman Sensenbrenner. The question is on the adoption----
    Mr. Goodlatte. Mr. Chairman.
    Chairman Sensenbrenner. Gentleman from Virginia, Mr. 
Goodlatte.
    Mr. Goodlatte. Mr. Chairman, I move to strike the last 
word.
    Chairman Sensenbrenner. The gentleman is recognized for 5 
minutes.
    Mr. Goodlatte. Thank you, Mr. Chairman. I will be brief. I 
want to associate myself with the remarks of the Chairman of 
the Subcommittee, the gentleman from Florida, in opposition to 
this amendment. Now it is noteworthy that both gentlemen from 
Florida voted for a Cannon amendment when a different bill came 
before this Committee last year, but therein lies the key. This 
is a very different piece of legislation than the legislation 
that I brought before the Committee last year. This is the 
legislation that came from the Financial Services Committee 
passed by Mr. Oxley and Mr. Leach. They strongly opposed this 
amendment because they know that it gets back to the problems 
everybody told me they had with my bill last time.
    We don't need to jump back into that thicket. We need to 
address this legislation. It has an incredibly wide basis of 
support. The gentleman cited some letters he made a part of the 
record which were conflicting. Some of those folks like Free 
Congress don't want any regulation on the Internet. Others like 
the Traditional Values want total regulation on the Internet. 
These are the groups, however, who support this specific bill 
and not the Cannon amendment: The National Collegiate Athletic 
Association, Major League Baseball, the Family Research 
Council, the United Methodist Church, the American Family 
Association, SBC, the United States Telephone Association, 
American Express, Morgan Stanley, Citigroup, Securities 
Industries Association, Christian Coalition, the National 
Football League, the Federal Law Enforcement Officers 
Association, the Family Foundation, Focus on the Family, 
Southern Baptist Convention, Presbyterian Church, Net 
Coalition.com, Qwest, Allegiance Telecom, the AARP, Household 
Finance, eBay, MBNA and Concerned Women for America. That is an 
amazingly broad based support for this legislation.
    Don't spoil it by throwing it back into the thicket that I 
had you in in the last Congress. And believe me, I have learned 
from that. If you do, then suddenly you have this whole issue 
of whether or not certain groups, whether it is horses or dogs 
or jai alai or State lotteries
    Or casinos or Indians, you name it, whatever the group is, 
if they think that their current view of the law is affected by 
removing the right of the States to regulate gambling, which 
this bill preserves, they are going to be off of the sidelines 
and again involved in this thicket. We don't need to go there 
with this kind of broad based support for the current bill.
    I urge my colleagues to oppose the amendment and support 
the underlying bill.
    Chairman Sensenbrenner. Question is on the amendment 
offered by the gentleman from Utah, Mr. Cannon. Those in favor 
will say aye. Opposed no. The ayes appear to have it.
    Mr. Cannon. I ask for a rollcall.
    Chairman Sensenbrenner. The question is on the Cannon 
amendment. Those in favor will as your name is called, answer 
aye. Those opposed no, and the Clerk will call the roll.
    The Clerk. Mr. Hyde.
    [no response.]
    The Clerk. Mr. Coble.
    Mr. Coble. No.
    The Clerk. Mr. Coble votes no.
    Mr. Smith.
    Mr. Smith. No.
    The Clerk. Mr. Smith votes no.
    Mr. Gallegly.
    [no response.]
    The Clerk. Mr. Goodlatte.
    Mr. Goodlatte. No.
    The Clerk. Mr. Goodlatte votes no.
    Mr. Chabot.
    [no response.]
    The Clerk. Mr. Jenkins.
    [no response.]
    The Clerk. Mr. Cannon.
    Mr. Cannon. Aye.
    The Clerk. Mr. Cannon votes aye.
    Mr. Bachus.
    Mr. Bachus. No.
    The Clerk. Mr. Bachus votes no.
    Mr. Hostettler.
    Mr. Hostettler. Aye.
    The Clerk. Mr. Hostettler votes aye.
    Mr. Green.
    Mr. Green. Aye.
    The Clerk. Mr. Green votes aye.
    Mr. Keller.
    Mr. Keller. No.
    The Clerk. Mr. Keller votes no.
    Ms. Hart.
    [no response.]
    The Clerk. Mr. Flake.
    [no response.]
    The Clerk. Mr. Pence.
    Mr. Pence. No.
    The Clerk. Mr. Pence votes no.
    Mr. Forbes.
    [No response.]
    The Clerk. Mr. King.
    Mr. King. No.
    The Clerk. Mr. King votes no.
    Mr. Carter.
    Mr. Carter. No.
    The Clerk. Mr. Carter votes no.
    Mr. Feeney.
    Mr. Feeney. No.
    The Clerk. Mr. Feeney votes no.
    Mrs. Blackburn.
    Mrs. Blackburn. Aye.
    The Clerk. Mrs. Blackburn votes aye.
    Mr. Conyers.
    Mr. Conyers. Aye.
    The Clerk. Mr. Conyers votes aye.
    Mr. Berman.
    [no response.]
    The Clerk. Mr. Boucher.
    [no response.]
    The Clerk. Mr. Nadler.
    Mr. Nadler. No.
    The Clerk. Mr. Nadler votes no.
    Mr. Scott.
    Mr. Scott. No.
    The Clerk. Mr. Scott votes no.
    Mr. Watt.
    Mr. Watt. Aye.
    The Clerk. Mr. Watt votes aye.
    Ms. Lofgren.
    Ms. Lofgren. Aye.
    The Clerk. Ms. Lofgren votes aye.
    Ms. Jackson Lee.
    Ms. Jackson Lee. Aye.
    The Clerk. Ms. Jackson Lee votes aye.
    Ms. Waters.
    [no response.]
    The Clerk. Mr. Meehan.
    Mr. Meehan. Aye.
    The Clerk. Mr. Meehan votes aye.
    Mr. Delahunt.
    [no response.]
    The Clerk. Mr. Wexler.
    Mr. Wexler. No.
    The Clerk. Mr. Wexler votes no.
    Ms. Baldwin.
    Ms. Baldwin. Aye.
    The Clerk. Ms. Baldwin votes aye.
    Mr. Weiner.
    Mr. Weiner. Aye.
    The Clerk. Mr. Weiner votes aye.
    Mr. Schiff.
    Mr. Schiff. No.
    The Clerk. Mr. Schiff votes no.
    Ms. Sanchez.
    Ms. Sanchez. Aye.
    The Clerk. Ms. Sanchez votes aye.
    Mr. Chairman.
    Chairman Sensenbrenner. Aye.
    The Clerk. Mr. Chairman votes aye.
    Chairman Sensenbrenner. Additional Members wish to cast or 
change their vote?
    Gentleman from Ohio, Mr. Chabot.
    Mr. Chabot. No.
    The Clerk. Mr. Chabot, no.
    Chairman Sensenbrenner. Gentleman from Tennessee, Mr. 
Jenkins.
    Mr. Jenkins. Aye.
    The Clerk. Mr. Jenkins, aye.
    The Clerk. Gentlewoman from Pennsylvania, Ms. Hart.
    Ms. Hart. No.
    The Clerk. Ms. Hart, no.
    Chairman Sensenbrenner. Gentleman from California, Mr. 
Berman.
    Mr. Berman. Aye.
    The Clerk. Mr. Berman, aye.
    Chairman Sensenbrenner. Further Members who wish to cast or 
change their votes? If not, the Clerk will report.
    Gentlewoman from California, Ms. Waters.
    Mr. Nadler. Mr. Chairman.
    Chairman Sensenbrenner. Are there further Members? 
Gentlewoman from California, Ms. Waters.
    Ms. Waters. Aye.
    The Clerk. Ms. Waters, aye.
    Chairman Sensenbrenner. Further Members wish to cast or 
change their vote? If not, the Clerk will report.
    The Clerk. Mr. Chairman, there are 16 ayes and 15 nays.
    Chairman Sensenbrenner. And the amendment is agreed to. Are 
there further amendments?
    Ms. Jackson Lee. Mr. Chairman, I have an amendment at the 
desk. Amendment No. 1.
    Chairman Sensenbrenner. The Clerk will report the 
amendment.
    The Clerk. Amendment to H.R. 21 offered by Ms. Jackson Lee. 
Unlawful Internet gambling, strike section 3.
    [The amendment follows:]
    
    
    Chairman Sensenbrenner. Gentlewoman is recognized for 5 
minutes.
    Ms. Jackson Lee. Specifically, Mr. Chairman, thank you very 
much. And might I say that I am in support of understanding the 
impact of Internet gambling and would encourage this Committee 
at the appropriate time to support the Conyers-Cannon 
legislation that would allow us to do so. I think it is 
appropriate to note that I have been on record in supporting 
the concept and this bill in the past. I have no, if you will, 
skepticism of now approaching it from a different perspective 
and to also ask to move this bill or this theory along by 
supporting the legislation of Conyers-Cannon, but because I 
think we will gain a further understanding.
    But this amendment in particular strikes all of section 3.
    [The prepared statement of Ms. Jackson Lee follows:]
       Prepared Statement of the Honorable Sheila Jackson Lee, a 
           Representative in Congress From the State of Texas
    Mr. Chairman and Mr. Ranking Member, I have serious reservations 
about H.R. 21, the ``Unlawful Internet Gambling Funding Act'' because I 
believe that this legislation is premature, should be opposed by all of 
my colleague, or in the alternative, should be subjected to copious 
amendments.
    I have reservations about H.R. 21 because while I believe very 
strongly that internet gambling should be heavily regulated, I am not 
convinced that the bans proposed in H.R. 21 are the most prudent course 
of action at this time.
    We have several options that we should consider before imposing 
bans. For example, I believe the legislative option proposed by my 
distinguished colleague, and Ranking Member of the full Judiciary 
Committee, John Conyers in H.R. 1223 should be given our full 
consideration before imposing the bans in H.R. 21. Congressman Conyers 
recommend that we conduct further inquiries into the best ways to 
regulate the Internet gambling issue instead of rushing to ban portions 
of it.
    H.R. 21 prohibits Internet gambling businesses from accepting bets 
from credit cards, electronic fund transfers, money transmitting 
business transfers, and instruments or transactions drawn through 
financial institutions. It also grants Federal district courts 
jurisdiction over violations of bill, requires the Secretary of the 
Treasury to prescribe regulations on payment systems and policies to 
prevent restricted transactions, and calls for U.S. and foreign 
governments to cooperate to prevent money laundering and other crimes.
    The issue of Internet gambling is always debated vigorously. The 
Internet gambling industry receives wagers amounting to an estimated 
$4.2 billion dollars per year through 1,800 internet gambling sites. 
Internet gambling has a high likelihood of causing personal bankruptcy, 
provides a fertile ground for fraud and money laundering, is difficult 
for states to regulate, and offers an addictive and appealing gambling 
outlet for children.
    I was an original co-sponsor of H.R. 3215, an internet gambling 
bill considered in the last Congress, because of my grave concern that 
children and teenage gamblers, who have wide access to the Internet, 
will abuse the Internet for gambling. A study released by the American 
Psychological Association finds that pathological gambling is more 
prevalent among youths than adults. Between five and eight percent of 
young Americans and Canadians have a serious gambling problem, compared 
with one to three percent of adults. The study went on to say that with 
gambling becoming more accessible in U.S. society, it will be important 
to be able to intervene in children's and adolescent's lives before the 
activity can develop into a problem behavior.
    Many Internet gambling sites require bare minimum information from 
gamblers to participate. Security on bets placed over the Internet has 
proven ineffective. And unlike traditional regulated casinos, Internet 
operators have no demonstrated ability or requirement to verify a 
participant's age or identification. Also, an Internet gambling site 
can easily take a person's money, shut down their sites, and move on.
    Gambling over the Internet, particularly because of the danger it 
poses to our children, is an industry that I feel is in dire need of 
heavy regulation. Particularly, given the fact that the majority of our 
citizens and children have access to computers and the Internet, we 
must ensure that laws are in place to eliminate the potential harm of 
Internet gambling.
    I will propose two amendments to H.R. 21 specifically geared toward 
protecting children from the dangers of internet gambling.
    While I am concerned about the impact of Internet gambling and 
support rigorous regulation, I am also concerned that we have 
insufficient data to reach a conclusion at this time. For example, I 
recently met with representatives of Sure Fire Commerce, an on-line 
payment processing company that represents Internet gaming merchants. 
According to Sure Fire's records, they receive approximately 60,000 
complaints yearly from customers who found unrecognized charges on 
their credit cards. Of those 60,000 unrecognized charges an average of 
only 5 have been for underage gambling. While I find one incident of 
underage gambling unacceptable, Sure Fire's statistics suggest that 
more study into the impact of Internet gambling is necessary.
    Additionally, there is also evidence that passing H.R. 21, and 
banning certain Internet gambling funding mechanisms, will worsen the 
problems of underage internet gambling. If U.S. financial institutions 
are prohibited from processing Internet gambling bets, habitual 
gamblers and children will be forced to make the bets through foreign 
financial institutions that are far less regulated. The global scope of 
the Internet makes these foreign financial institutions readily 
accessible. By passing H.R. 21 prematurely, we may not reduce the 
incidence of underage gambling or habitual gambling at all. We may 
simply force children and gambling addicts to use less credible betting 
outlets.
    Mr. Chairman and Mr. Ranking Member, I strongly believe that 
gambling is a protected individual freedom and personal choice. I also 
believe that the Congress should pass legislation that strictly 
regulates the gambling industry to prevent underage gambling, habitual 
gambling, and also money laundering. However, I feel that regulating 
such as massive industry should not be done without a comprehensive 
analysis to determine the most prudent regulations. For, these reasons 
I believe that H.R. 21 is premature, and I encourage my colleagues 
reconsider passing this legislation without ample amendment.

    Mr. Chairman, the Committee is not in order.
    Chairman Sensenbrenner. The gentlewoman is correct. The 
meeting will be in order.
    Ms. Jackson Lee. The amendment strikes all of section 3. It 
leaves section 4, Internet gambling in or through foreign 
jurisdictions, United States and international countries 
cooperate to prevent money laundering. It leaves section 5, 
amendments to gambling provisions, increases penalty for 
unlawful wire transfers. This amendment removes the loophole 
riddled portion of the bill that creates significant new 
hardships on financial institutions, has troubling implications 
for Internet privacy and is probably unworkable.
    It leaves in place a simple amendment to the Wire Act, 
which is the current law banning the interstate transmission of 
bets or wages that makes clear that any bet that is illegal 
under current law over the telephone is also illegal on the 
Internet regardless of whether Internet wage passes through a 
wire, is wireless, satellite based on whatever. But what this 
does is of course manages to get us to where we would like to 
be, and that is to get a better understanding of this problem 
of Internet gambling and to allow this bill not to be shackled, 
if you will, with some of the aspects that have been 
controversial in the bill.
    I ask my colleagues to support it.
    [The prepared statement of Ms. Jackson Lee follows:]
       Prepared Statement of the Honorable Sheila Jackson Lee, a 
           Representative in Congress From the State of Texas
    Mr. Chairman, I propose this amendment to H.R. 21 to strike Section 
3 of the bill which contains the provisions prohibiting persons engaged 
in betting or wagering businesses from accepting credit, the proceeds 
of credit, electronic funds transfers, checks, drafts, or similar 
instruments, in connection with the participation of another person in 
unlawful Internet gambling.
    With Section 3 stricken, the bill would be streamlined to include 
only the provisions in Sections 4 and 5 dealing with encouraging 
cooperation between the United States and foreign countries in 
investigating Internet gambling operations as a possible avenue for 
money laundering, corruption, and other crimes. The amended bill would 
also advance policies to promote international cooperation, and 
encourage annual reports from the Financial Action Task Force on Money 
Laundering, and the Secretary of the Treasury to address international 
efforts to prevent money laundering through Internet gambling sites. 
Finally, the amended bill will amend the gambling provisions and 
increase the penalty for unlawful wire transfers of wagering 
information from two years to five years.
    I propose this amendment because the provisions of Section 3 of the 
bill have not been adequately researched. There remains substantial 
disagreement and debate about whether the bans proposed in H.R. 21 will 
actually do more to encourage unlawful Internet gambling than to 
prevent it. There is ample evidence that if H.R. 21 is passed, Internet 
gamblers will be forced to place bets on websites based overseas. The 
overseas websites are fertile ground for unscrupulous businesses and 
may result in higher incidence of gambling addiction, gambling by 
minors, and money laundering. The provisions in Section 3 should be 
stricken and the most prudent means of regulating Internet gambling 
should be researched before an outright ban on the use of instruments 
from financial institutions is passed.
    For these reasons, Mr. Speaker, I propose this amendment to H.R. 
21.

    Chairman Sensenbrenner. Gentlewoman yields back. The Chair 
recognizes himself for 5 minutes in opposition to the 
amendment. This amendment basically strikes the guts of the 
bill, which is the prohibition on the use of credit cards for 
unlawful Internet gambling. I don't think we wish to have 
credit cards being used willy-nilly for any kind of gambling, 
whether it is lawful or unlawful. I would hope that this 
amendment would be defeated.
    I yield back the balance of my time.
    The question is on the Jackson Lee amendment. Those in 
favor will say aye. Opposed no. Noes appear to have it. The 
noes have it.
    Ms. Jackson Lee. I have another amendment at the desk.
    Chairman Sensenbrenner. The Clerk will report the second 
amendment.
    The Clerk. Amendment to H.R. 21 offered by Ms. Jackson Lee. 
Delete all language in section 3, subpart (a)(1). The deleted 
language reads one, credit or the proceeds of credit extended 
to or on behalf of such other person, including credit extended 
through the use of a credit card. Strike this language in full.
    [The amendment follows:]
    
    
    Chairman Sensenbrenner. Gentlewoman is recognized for 5 
minutes.
    Ms. Jackson Lee. Mr. Chairman, this amendment specifically 
goes to what I think is the crux of the problem of this 
particular bill, and it removes credit cards from the scope of 
H.R. 21 because it does not make sense when credit cards can be 
an effective tool of age verification if minors are using it. 
It does not make sense in essence to utilize or have the bill 
structured as it is. In the Children's Online Privacy 
Protection Act Congress allowed credit cards as a method of age 
verification to restrict access by minors to adult Web sites. 
Clearly I believe--I am not sure the intent to allegedly bring 
down the utilization of financial structures such as a credit 
card system to decrease access to gambling. You are also 
decreasing the access to information, to tracking, to utilizing 
financial products that might actually help solve the problem 
as opposed to enhance the problem. Certainly what you do is you 
keep us from being able to track overusage, abuse and certainly 
the use by minors.
    I think it is important for this aspect of the bill to be 
stricken, and I ask my colleagues to support it.
    [The prepared statement of Ms. Jackson Lee follows:]
       Prepared Statement of the Honorable Sheila Jackson Lee, a 
           Representative in Congress From the State of Texas
    Mr. Chairman, I propose this amendment to H.R. 21 to protect minors 
from the dangers of Internet gambling. This amendment removes credit 
card transactions from the scope of the bill.
    As H.R. 21 is presently drafted, no betting or wagering businesses 
may knowingly accept credit cards, proceeds of credit, electronic fund 
transfers, monies transmitted through a money-transmitting business, or 
a check or similar draft, in connection with another person's 
participation in unlawful Internet gambling.
    Allowing credit cards to be used in Internet gambling transactions 
helps to protect minors. Credit cards, unlike the other methods of 
payment prohibited in H.R. 21, provide safeguards that help to insure 
that minors do not engage in Internet gambling. For example, acquiring 
a credit card requires the individual to verify he or she has reached 
the age of 18. Credit cards are an effective method of verifying age 
because minors are not issued their own accounts. Credit card companies 
may also conduct a background or credit check to confirm the individual 
is of age. The procedures help to deter minors from using credit cards 
to gamble.
    In fact, in previous legislation passed by Congress to protect 
children from harmful Internet sites, credit cards were used as a 
deterrent. In the Children's Online Privacy Protection Act (``COPPA'') 
Congress specifically allowed the use of credit cards as a method of 
age verification in order to restrict access by minors to websites 
containing adult material. By prohibiting the use of credit cards, H.R. 
21 ties the hands of law enforcement agencies and federal regulatory 
agencies like the FTC to ensure sufficient controls to identify minors 
who may attempt to gamble online.
    There are also transactional safeguards available from credit card 
companies that will help prevent Internet gambling by minors. For 
example, several of the major credit card companies have a coding 
system that tracks the type of merchandise that is being sold by a 
merchant.
    Mr. Speaker, Mr. Ranking Member, the age verification and 
merchandise tracking safeguards provided by credit cards are not 
sufficient alone to cure the problem of minors engaging in Internet 
gambling. However, these safeguards are a step in the right direction 
and they will prevent some minors from using Internet gambling 
websites. If we pass this legislation without amendment, H.R. 21 will 
eliminate the one proven method of effectively preventing children from 
accessing Internet gambling websites. For these reasons, I propose that 
H.R. 21 be amended so that credit cards can be used by betting and 
wagering businesses.

    Chairman Sensenbrenner. Gentlewoman yields back.
    Ms. Jackson Lee. I yield back.
    Chairman Sensenbrenner. The Chair recognizes himself for 5 
minutes in opposition of the amendment. This amendment is 
narrower but just as bad as her previous amendment. It allows 
for the use of credit cards to pay for unlawful gambling. I 
don't think we should encourage that and I would really 
encourage my people on my left to complain about credit card 
companies passing out too many credit cards when the bankruptcy 
bill came up, to at least restrict the use of credit cards so 
they can't be used to run up unlawful gambling debt.
    Yield back the balance of my time and urge a no vote on the 
amendment.
    The question is on the amendment by the gentlewoman from 
Texas, Ms. Jackson Lee. Those in favor will say aye. Opposed 
no. Noes appear to have it. The noes have it. The amendment is 
not agreed to.
    Are there further amendments? Gentleman from Virginia, Mr. 
Scott.
    Mr. Scott. Mr. Chairman, I have an amendment at the desk.
    Chairman Sensenbrenner. The Clerk will report the 
amendment.
    [The amendment follows:]
    
    
    Mr. Scott. Mr. Chairman, the amendment was drawn to the 
previous version of the bill. I ask unanimous consent that line 
18 be changed to line 20.
    Chairman Sensenbrenner. Without objection. The gentleman is 
recognized for 5 minutes.
    Mr. Scott. Did the Clerk report the amendment, Mr. 
Chairman?
    Chairman Sensenbrenner. The Clerk will report the 
amendment.
    The Clerk. Amendment to H.R. 21 offered by Mr. Scott of 
Virginia. Page 2, line 20, after ``person'' insert ``may 
knowingly offer and no person.''
    Chairman Sensenbrenner. The gentleman is recognized for 5 
minutes.
    Mr. Scott. Thank you, Mr. Chairman, and I appreciate you 
convening the markup. Mr. Chairman, I believe that gambling 
should be tightly regulated. It has traditionally been 
primarily a State regulatory responsibility. It should continue 
to be so in my judgment, although I think it is also 
appropriate for the Federal Government to have a role to assist 
the States in the total regulatory scheme.
    While I can appreciate the need to update the ability of 
the Department of Justice to address illegal gambling in 
today's context, I am concerned that this bill, similar to the 
bills in the last several Congresses which have attempted to 
control Internet gambling, will not be likely to be effective 
in doing so.
    Mr. Chairman, this bill is not about prohibiting Internet 
gambling, it is only about regulating how you can bet on the 
Internet and then it is only affected in the United States 
Internet gambling market. It is not about reducing Internet 
gambling because foreign sites are not affected.
    Regulating anything on the Internet is problematic even 
when it is desirable. Most law enforcement is jurisdiction 
dependent. The Internet has no specific jurisdiction. As a 
result, I suspect that even if we are successful in closing 
down businesses physically located in the United States or even 
in countries we can get to cooperate, because of the nature of 
the Internet and electronic funds transfers we have no way to 
control the activities physically located in other countries. 
Therefore, the approach in H.R. 21 will be ultimately 
ineffective.
    Furthermore, a gambling Web site can simply code an 
Internet gambling transaction as another type of transaction 
and thereby evade the primary enforcement mechanism in this 
bill. Or an eCash or electronic payment system can relocate to 
another country and thereby evade any enforcement of the 
provisions of the bill.
    Mr. Chairman, I fear that the illegal Internet gambling, 
money laundering, fraud and other problems will only be 
encouraged by removing the transparent credit card process. 
This will bring about the development of less transparent 
processes where such illegal activities can flourish.
    Mr. Chairman, we should not overestimate the cooperation we 
will get from other countries. Presently over 50 nations allow 
some form of gambling online and that number is likely to grow. 
So even if we are successful in getting cooperation from most 
countries, we would be simply increasing profit opportunities 
for uncooperative countries, especially those without 
diplomatic relations with the United States. The net result 
will be flourishing Internet gambling exclusively run by 
businesses over which the Department of Justice has no control.
    To have any chance to be effective in prosecuting illegal 
gambling over the Internet, you have to prosecute individuals. 
This bill does not. Prosecuting individuals for illegal 
Internet gambling would be effective because the technology of 
the Internet would be in the Government's favor since 
activities of illegal gambling would lead a trail leading 
directly back to the gambler. So long as individuals can gamble 
over the Internet with impunity a market will be provided for 
them, which the regulatory scheme in this bill will not be able 
to stop. If we prohibit domestic firms from supplying this 
demand, it will be supplied by foreign companies who are 
totally unregulated beyond any consumer protections and beyond 
the reach of the United States taxing authorities.
    Accordingly, Mr. Chairman, I offer an amendment to make 
individuals subject to the prohibitions of the bill as well as 
gambling businesses to ensure that the bill has some chance of 
accomplishing its goal of restricting gambling over the 
Internet.
    Thank you, Mr. Chairman. I yield back the balance of my 
time.
    Chairman Sensenbrenner. The gentleman from North Carolina, 
Mr. Coble.
    Mr. Coble. Thank you, Mr. Chairman. I rise to oppose----
    Chairman Sensenbrenner. The gentleman is recognized for 5 
minutes.
    Mr. Coble.--the amendment of my good friend from Virginia, 
which would criminalize the activity of individual betters who 
gamble online in addition to the activities of gambling 
businesses. Although I am in favor, Mr. Chairman and 
colleagues, of prohibiting gambling on the Internet, I do not 
believe the testimony that we heard at the hearing would 
support this amendment. The consensus seems to be that not only 
from the witnesses but also from the authors of various 
legislative proposals that the most effective way to prohibit 
Internet gambling is to effectively shut down the gambling 
businesses or sites themselves. And I believe the bill before 
us to date accomplishes that goal.
    If this measure is enacted into law and it proves to be 
ineffective in prohibiting all lines of gambling, I would 
certainly be willing to examine the issue of whether or not 
criminalizing the acts of individuals is necessary. For the 
time being, however, I believe that the provision of the bill 
will make the most effective use of the limited law enforcement 
resources that the country has. These same resources it would 
take to prevent one individual from gambling online could be 
better used, it seems to me, to prevent an entire online 
gambling business or gambling site from operating and thereby 
prevent thousands of people from accessing that site.
    As we heard at the hearing, the problem of Internet 
gambling is a complex problem in light of the fact that this 
amendment could be placing undue burden on Federal law 
enforcement agencies and the fact that the States will still 
have the option of prosecuting an individual better under its 
own State laws. I do not think it would be wise to adopt this 
amendment at this time and urge my colleagues to oppose it.
    Chairman Sensenbrenner. Question is on the amendment 
offered by the gentleman from Virginia, Mr. Scott. Those in 
favor will say aye. Opposed no. Noes appear to have it. The 
noes have it, and the amendment is not agreed to.
    Mr. Scott. Mr. Chairman, recorded vote.
    Chairman Sensenbrenner. A recorded vote is requested. Those 
in favor of the Scott amendment will as their name is called 
answer aye. Those opposed no. And the Clerk will call the roll.
    The Clerk. Mr. Hyde.
    [no response.]
    The Clerk. Mr. Coble.
    Mr. Coble. No.
    The Clerk. Mr. Coble votes no.
    Mr. Smith.
    [no response.]
    The Clerk. Mr. Gallegly.
    [no response.]
    The Clerk. Mr. Goodlatte.
    Mr. Goodlatte. No.
    The Clerk. Mr. Goodlatte votes no.
    Mr. Chabot.
    Mr. Chabot. No.
    The Clerk. Mr. Chabot votes no.
    Mr. Jenkins.
    [no response.]
    The Clerk. Mr. Cannon.
    Mr. Cannon. No.
    Mr. Scott. Mr. Chairman, ask unanimous consent that the 
recorded vote be eviscerated.
    Chairman Sensenbrenner. Without objection, so ordered and 
the recorded vote is eviscerated.
    Are there further amendments. There are no further 
amendments?
    A reporting quorum is present. The question is on reporting 
the bill H.R. 21 favorably, as amended. Those in favor will say 
aye. Opposed no.
    Chairman Sensenbrenner. The noes appear to have it.
    Mr. Goodlatte. I ask for a recorded vote.
    Chairman Sensenbrenner. Recorded vote is ordered. Those in 
favor of reporting H.R. 21 favorably, as amended, will as your 
name is called answer aye. Those opposed no. And the Clerk will 
call the roll.
    The Clerk. Mr. Hyde.
    [no response.]
    The Clerk. Mr. Coble.
    Mr. Coble. Aye.
    The Clerk. Mr. Coble votes aye.
    Mr. Smith.
    [no response.]
    The Clerk. Mr. Gallegly.
    [no response.]
    The Clerk. Mr. Goodlatte.
    Mr. Goodlatte. Aye.
    The Clerk. Mr. Goodlatte votes aye.
    Mr. Chabot.
    Mr. Chabot. Aye.
    The Clerk. Mr. Chabot votes aye.
    Mr. Jenkins.
    Mr. Jenkins. Aye.
    The Clerk. Mr. Jenkins votes aye.
    Mr. Cannon.
    Mr. Cannon. No.
    The Clerk. Mr. Cannon votes no.
    Mr. Bachus.
    Mr. Bachus. Aye.
    The Clerk. Mr. Bachus votes aye.
    Mr. Hostettler.
    Mr. Hostettler. Aye.
    The Clerk. Mr. Hostettler votes aye.
    Mr. Green.
    Mr. Green. Aye.
    The Clerk. Mr. Green votes aye.
    Mr. Keller.
    Mr. Keller. Aye.
    The Clerk. Mr. Keller votes aye.
    Ms. Hart.
    Ms. Hart. Aye.
    The Clerk. Ms. Hart votes aye.
    Mr. Flake.
    Mr. Flake. No.
    The Clerk. Mr. Flake votes no.
    Mr. Pence.
    Mr. Pence. Aye.
    The Clerk. Mr. Pence votes aye.
    Mr. Forbes.
    [No response.]
    The Clerk. Mr. King.
    Mr. King. Aye.
    The Clerk. Mr. King votes aye.
    Mr. Carter.
    Mr. Carter. Aye.
    The Clerk. Mr. Carter votes aye.
    Mr. Feeney.
    Mr. Feeney. Aye.
    The Clerk. Mr. Feeney votes aye.
    Mrs. Blackburn.
    Mrs. Blackburn. Aye.
    The Clerk. Mrs. Blackburn votes aye.
    Mr. Conyers.
    Mr. Conyers. No.
    The Clerk. Mr. Conyers votes no.
    Mr. Berman.
    Mr. Berman. No.
    The Clerk. Mr. Berman votes no.
    Mr. Boucher.
    [no response.]
    The Clerk. Mr. Nadler.
    Mr. Nadler. No.
    The Clerk. Mr. Nadler votes no.
    Mr. Scott.
    Mr. Scott. No.
    The Clerk. Mr. Scott votes no.
    Mr. Watt.
    Mr. Watt. No.
    The Clerk. Mr. Watt votes no.
    Ms. Lofgren.
    Ms. Lofgren. Pass.
    The Clerk. Ms. Lofgren passes.
    Ms. Jackson Lee.
    Ms. Jackson Lee. No.
    The Clerk. Ms. Jackson Lee votes no.
    Ms. Waters.
    Ms. Waters. No.
    The Clerk. Ms. Waters votes no.
    Mr. Meehan.
    Mr. Meehan. No.
    The Clerk. Mr. Meehan votes no.
    Mr. Delahunt.
    [no response.]
    The Clerk. Mr. Wexler.
    Mr. Wexler. No.
    The Clerk. Mr. Wexler votes no.
    Ms. Baldwin.
    Ms. Baldwin. No.
    The Clerk. Ms. Baldwin votes no.
    Mr. Weiner.
    Mr. Weiner. No.
    The Clerk. Mr. Weiner votes no.
    Mr. Schiff.
    Mr. Schiff. No.
    The Clerk. Mr. Schiff votes no.
    Ms. Sanchez.
    Ms. Sanchez. No.
    The Clerk. Ms. Sanchez votes no.
    Mr. Chairman.
    Chairman Sensenbrenner. Aye.
    The Clerk. Mr. Chairman votes aye.
    Further Members who wish to cast or change their votes? 
Gentlewoman from California, Ms. Lofgren.
    Ms. Lofgren. Aye.
    The Clerk. Ms. Lofgren, aye.
    Chairman Sensenbrenner. Further Members who wish to cast or 
change their votes? If not, the Clerk will report.
    The Clerk. Mr. Chairman, there are 16 ayes and 15 noes.
    Chairman Sensenbrenner. And the motion to report favorably 
is agreed to.
    I thank the Members of the Committee for their vigorous 
debate. The business for this--without objection, the Chairman 
is authorized to move to go to conference pursuant to House 
rules. Without objection, the staff is directed to make any 
technical and conforming changes. Without objection, the bill 
will be reported to the House in the form of a single amendment 
in the nature of a substitute incorporating the amendment 
adopted here today. And all Members will be given 2 days, as 
provided by the House rules, in which to submit additional 
dissenting, supplemental or minority views. And the Committee 
stands adjourned.
    [Whereupon, at 11:35 a.m., the Committee was adjourned.]
                            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 because the 
enforcement mechanisms will likely be ineffective. We question 
the wisdom of spending valuable prosecutorial resources on 
attempting to shut down Internet gambling sites--an endeavor 
which ultimately is likely to be futile.
    H.R. 21 makes it unlawful for a person engaged in a 
gambling business knowingly to accept, with respect to the 
transmission of bets or wagers, credit, electronic fund 
transfers, checks and other similar financial instruments.\1\ 
By prohibiting the payment of credit, electronic funds, checks 
and other similar instruments to Internet gambling businesses, 
H.R. 21 deputizes the financial services industry to be the 
primary enforcers of the law.
---------------------------------------------------------------------------
    \1\ H.R. 21, subsection 3(a).
---------------------------------------------------------------------------
    In order to ensure compliance, the bill authorizes law 
enforcement to obtain injunctive or declaratory relief to 
restrain or prevent any person from paying or assisting in the 
payment of bets or wagers in interstate commerce.\2\ Such 
relief, when granted against an interactive computer service, 
is limited to the removal of, or disabling of access to, an 
online site violating the law or a hypertext link to an online 
site violating the law, that resides on a computer server that 
such service controls or operates.\3\
---------------------------------------------------------------------------
    \2\ H.R. 21, subsection (3)(c).
    \3\ H.R. 21, subsection (3)(c)(4).
---------------------------------------------------------------------------
    The version of H.R. 21 that the Committee initially 
considered would have created an unfair situation in which 
Internet betting was legal for certain types of gambling (e.g. 
horse racing, lotteries, and dog racing \4\), but illegal for 
other types of Internet gambling (e.g. charitable gaming and 
Tribal gaming). At markup, however, the Committee adopted an 
amendment offered by Rep. Cannon that would make it illegal for 
any gambling business knowingly to accept financial 
instruments, thereby eliminating the bill's preferences for 
certain types of gambling interests.
---------------------------------------------------------------------------
    \4\ Such wagering was legal if it was a ``lawful transaction with a 
business licensed or authorized by a State.''
---------------------------------------------------------------------------
    Credit card companies such as Visa and Master Card have 
raised concerns with the bill in the past because it could 
subject them to injunctions in numerous jurisdictions that 
require different--or even conflicting--remedies to prevent the 
payment of Internet bets or wagers. The result will be a hodge-
podge of inconsistent court orders, rather than a cohesive 
enforcement scheme.
    In addition, the U.S. Chamber of Commerce has expressed 
concerns about the bill.\5\ They are concerned that the bill's 
prohibition on accepting financial instruments for ``unlawful 
Internet gambling'' is unduly vague and, as such, will subject 
the financial services industry to criminal liability without 
sufficient notice of the law. We agree that the law governing 
what constitutes ``unlawful Internet gambling'' is not well 
settled.
---------------------------------------------------------------------------
    \5\ Letter from R. Bruce Josten to Chairman Sensenbrenner dated May 
13, 2003.
---------------------------------------------------------------------------
    Also, relying on financial institutions to enforce the law 
will likely be ineffective. Credit card companies have a 
limited ability to block financial transactions to illegal 
Internet gambling businesses. The companies rely on a merchant 
coding system to ascertain the nature of particular 
transactions, but this system has limitations. First, it 
depends on the merchant to accurately code a transaction. There 
are obvious incentives for many Internet gambling merchants to 
falsify their merchant identification.\6\
---------------------------------------------------------------------------
    \6\ Testimony of Mark MacCarthy, Senior Vice President of Public 
Policy, Visa U.S.A., Inc., before the Subcommittee on Oversight and 
Investigations of the Committee on Financial Services, 107th Congress, 
2nd Sess. (July 12, 2001).
---------------------------------------------------------------------------
    More significantly, the Chamber also contends the coding 
system applies only when an online gambler uses a credit card 
to transact business directly with an online gambling merchant. 
Often times, an Internet gambler will use electronic cash and 
account funding systems to create a pool of electronically 
available funds. Thus, a cardholder could use his or her credit 
card to purchase ``e-cash'' on a web site that does not, 
itself, offer gambling, but allows that e-cash to be used on 
another web site that does offer gambling. The credit card 
coding system would not capture these transactions as Internet 
gambling.\7\ And if the e-cash website is offshore, it could be 
beyond the reach of U.S. law enforcement.
---------------------------------------------------------------------------
    \7\ Id.
---------------------------------------------------------------------------
    Additionally, the bill does not make it illegal for an 
individual to place an Internet bet. Rather, the bill only 
criminalizes an Internet gambling business which accepts bets 
or wagers or accepts credit or other types of financial 
instruments. As such, the bill leaves out the most effective 
enforcement mechanism--targeting individual bettors. This 
legislation, therefore, has little or no deterrent value. 
Offshore gambling sites will evade any restrictions easily, and 
individual bettors will continue to seek out these sites and 
gamble free from any fear of any legal consequences.

                               CONCLUSION

    Although the intent of this legislation is laudable, we 
believe conscripting credit card companies to enforce our 
criminal laws is ineffective and will set a bad precedent 
regarding the Internet. In addition, criminalizing only the 
Internet gambling business without placing any penalty on the 
individual bettor further weakens the enforcement scheme of the 
bill. In the end, it is unlikely that this legislation will 
successfully halt Internet gambling.

                                   John Conyers, Jr.
                                   Melvin L. Watt.
                                   Sheila Jackson Lee.
                                   Tammy Baldwin.
                                   Anthony D. Weiner.
                                   Linda T. Sanchez.


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