49–006 

109TH CONGRESS REPT. 109–412 " ! HOUSE OF REPRESENTATIVES 2d Session Part 1 

UNLAWFUL INTERNET GAMBLING ENFORCEMENT ACT 

OF 2006 

APRIL 6, 2006.—Committed to the Committee of the Whole House on the State of 

the Union and ordered to be printed 

Mr. OXLEY, from the Committee on Financial Services, 

submitted the following 

R E P O R T 

together with 

DISSENTING VIEWS 

[To accompany H.R. 4411] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on Financial Services, to whom was referred 

the bill (H.R. 4411) to prevent the use of certain payment instruments, credit cards, and fund transfers for unlawful Internet gambling, and for other purposes, having considered the same, report 

favorably thereon with an amendment and recommend that the bill 

as amended do pass. 

CONTENTS 

Page 

Amendment .............................................................................................................. 2 

Purpose and Summary ............................................................................................ 8 

Background and Need for Legislation .................................................................... 8 

Hearings ................................................................................................................... 11 

Committee Consideration ........................................................................................ 11 

Committee Votes ...................................................................................................... 11 

Committee Oversight Findings ............................................................................... 12 

Performance Goals and Objectives ......................................................................... 12 

New Budget Authority, Entitlement Authority, and Tax Expenditures ............. 12 

Committee Cost Estimate ....................................................................................... 12 

Congressional Budget Office Estimate ................................................................... 12 

Federal Mandates Statement ................................................................................. 15 

Advisory Committee Statement .............................................................................. 15 

Constitutional Authority Statement ...................................................................... 16 


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Applicability to Legislative Branch ........................................................................ 16 

Section-by-Section Analysis of the Legislation ...................................................... 16 

Changes in Existing Law Made by the Bill, as Reported ..................................... 18 

Dissenting Views ..................................................................................................... 28 

AMENDMENT

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 Enforcement Act of 

2006’’. 

SEC. 2. PROHIBITION ON ACCEPTANCE OF ANY PAYMENT INSTRUMENT FOR UNLAWFUL 

INTERNET GAMBLING. 

(a) IN GENERAL.—Chapter 53 of title 31, United States Code, is amended by adding at the end the following new subchapter: 

‘‘SUBCHAPTER IV—PROHIBITION ON FUNDING OF UNLAWFUL INTERNET 

GAMBLING 

‘‘§ 5361. Congressional findings and purpose 

‘‘(a) FINDINGS.—The Congress finds the following: 

‘‘(1) Internet gambling is primarily funded through personal use of payment 

system instruments, 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 such sites. 

‘‘(3) Internet gambling is a growing cause of debt collection problems for insured depository institutions and the consumer credit industry. 

‘‘(4) New mechanisms for enforcing gambling laws on the Internet are necessary because traditional law enforcement mechanisms are often inadequate 

for enforcing gambling prohibitions or regulations on the Internet, especially 

where such gambling crosses State or national borders. 

‘‘(b) RULE OF CONSTRUCTION.—No provision of this subchapter shall be construed 

as altering, limiting, or extending any Federal or State law or Tribal-State compact 

prohibiting, permitting, or regulating gambling within the United States. 

‘‘§ 5362. Definitions 

‘‘For purposes of this subchapter, the following definitions shall apply: 

‘‘(1) BET OR WAGER.—The term ‘bet or wager’—

‘‘(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 value 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; 

‘‘(D) includes any instructions or information pertaining to the establishment or movement of funds by the bettor or customer in, to, or from an account 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 that Act); 

‘‘(ii) any transaction conducted on or subject to the rules of a registered entity or exempt board of trade under 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; 


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‘‘(vii) any deposit or other transaction with an insured depository institution; or ‘‘(viii) any participation in a fantasy or simulation sports game, an 

educational game, or a 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 of the 

participants, or their skill at physical reaction or physical manipulation (but not chance), and, in the case of a fantasy or simulation 

sports game, has an outcome that is determined predominantly by 

accumulated statistical results of sporting events, including any 

nonparticipant’s individual performances in such 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 the activities of a financial transaction provider, or 

any interactive computer service or telecommunications service. 

‘‘(3) DESIGNATED PAYMENT SYSTEM.—The term ‘designated payment system’

means any system utilized by a financial transaction provider that the Secretary and the Board of Governors of the Federal Reserve System, in consultation with the Attorney General, jointly determine, by regulation or order, could 

be utilized in connection with, or to facilitate, any restricted transaction. 

‘‘(4) FINANCIAL TRANSACTION PROVIDER.—The term ‘financial transaction provider’ means 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 payment network utilized to effect a credit transaction, electronic fund transfer, stored value product 

transaction, or money transmitting service, or a participant in such network, or 

other participant in a designated payment system. 

‘‘(5) INTERNET.—The term ‘Internet’ means the international computer network of interoperable packet switched data networks. 

‘‘(6) INTERACTIVE COMPUTER SERVICE.—The term ‘interactive computer service’

has the same meaning as in section 230(f) of the Communications Act of 1934. 

‘‘(7) RESTRICTED TRANSACTION.—The term ‘restricted transaction’ means any 

transaction or transmittal involving any credit, funds, instrument, or proceeds 

described in any paragraph of section 5363 which the recipient is prohibited 

from accepting under section 5363. 

‘‘(8) SECRETARY.—The term ‘Secretary’ means the Secretary of the Treasury. 

‘‘(9) STATE.—The term ‘State’ means any State of the United States, the District of Columbia, or any commonwealth, territory, or other possession of the 

United States. 

‘‘(10) UNLAWFUL INTERNET GAMBLING.—

‘‘(A) IN GENERAL.—The term ‘unlawful Internet gambling’ means to place, 

receive, or otherwise knowingly 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 

or Tribal lands in which the bet or wager is initiated, received, or otherwise 

made. 

‘‘(B) INTRASTATE TRANSACTIONS.—The term ‘unlawful Internet gambling’

shall not include placing, receiving, or otherwise transmitting a bet or 

wager where—

‘‘(i) the bet or wager is initiated and received or otherwise made exclusively within a single State; 

‘‘(ii) the bet or wager and the method by which the bet or wager is 

initiated and received or otherwise made is expressly authorized by and 

placed in accordance with the laws of such State, and the State law or 

regulations include—

‘‘(I) age and location verification requirements reasonably designed to block access to minors and persons located out of such 

State; and 

‘‘(II) appropriate data security standards to prevent unauthorized 

access by any person whose age and current location has not been 

verified in accordance with such State’s law or regulations; and 

‘‘(iii) the bet or wager does not violate any provision of the—

‘‘(I) Interstate Horseracing Act; 


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‘‘(II) Professional and Amateur Sports Protection Act; 

‘‘(III) Gambling Devices Transportation Act; or 

‘‘(IV) Indian Gaming Regulatory Act. 

‘‘(C) INTRATRIBAL TRANSACTIONS.—The term ‘unlawful Internet gambling’

shall not include placing, receiving, or otherwise transmitting a bet or 

wager where—

‘‘(i) the bet or wager is initiated and received or otherwise made exclusively—

‘‘(I) within the Indian lands of a single Indian tribe (as those 

terms are defined by the Indian Gaming Regulatory Act); or 

‘‘(II) between the Indian lands of 2 or more Indian tribes to the 

extent that intertribal gaming is authorized by the Indian Gaming 

Regulatory Act; 

‘‘(ii) the bet or wager and the method by which the bet or wager is 

initiated and received or otherwise made is expressly authorized by and 

complies with the requirements of—

‘‘(I) the applicable tribal ordinance or resolution approved by the 

Chairman of the National Indian Gaming Commission; and 

‘‘(II) with respect to class III gaming, the applicable Tribal-State 

Compact; 

‘‘(iii) the applicable tribal ordinance or resolution or Tribal-State compact includes—

‘‘(I) age and location verification requirements reasonably designed to block access to minors and persons located out of the applicable Tribal lands; and 

‘‘(II) appropriate data security standards to prevent unauthorized 

access by any person whose age and current location has not been 

verified in accordance with the applicable tribal ordinance or resolution or Tribal-State Compact; and 

‘‘(iv) the bet or wager does not violate any provision of the—

‘‘(I) Interstate Horseracing Act; 

‘‘(II) the Professional and Amateur Sports Protection Act; 

‘‘(III) the Gambling Devices Transportation Act; or 

‘‘(IV) the Indian Gaming Regulatory Act. 

‘‘(D) INTERSTATE HORSERACING.—The term ‘unlawful Internet gambling’

shall not include placing, receiving, or otherwise transmitting a bet or 

wager that is governed by and complies with the Interstate Horseracing Act 

of 1978. 

‘‘(E) INTERMEDIATE ROUTING.—The intermediate routing of electronic data 

shall not determine the location or locations in which a bet or wager is initiated, received, or otherwise made. 

‘‘(11) OTHER TERMS.—

‘‘(A) CREDIT; CREDITOR; CREDIT CARD; AND CARD ISSUER.—The terms ‘credit’, ‘creditor’, ‘credit card’, and ‘card issuer’ have the same meanings as in 

section 103 of the Truth in Lending Act. 

‘‘(B) ELECTRONIC FUND TRANSFER.—The term ‘electronic fund transfer’—

‘‘(i) has the same meaning as in section 903 of the Electronic Fund 

Transfer Act, except that such term includes transfers that would otherwise be excluded under section 903(6)(E) of that 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 

same meaning as in section 903 of the Electronic Fund Transfer Act, except 

that such term does not include a casino, sports book, or other business at 

or through which bets or wagers may be placed or received. 

‘‘(D) INSURED DEPOSITORY INSTITUTION.—The term ‘insured depository institution’—

‘‘(i) has the same meaning as in section 3 of the Federal Deposit Insurance Act; and 

‘‘(ii) includes an insured credit union (as defined in section 101 of the 

Federal Credit Union Act). 

‘‘(E) MONEY TRANSMITTING BUSINESS AND MONEY TRANSMITTING SERVICE.—The terms ‘money transmitting business’ and ‘money transmitting 

service’ have the same meanings as in section 5330(d) (determined without 

regard to any regulations prescribed by the Secretary thereunder). 


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‘‘§ 5363. Prohibition on acceptance of any financial instrument for unlawful 

Internet gambling 

‘‘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 such other person; ‘‘(3) any check, draft, or similar instrument which is drawn by or on behalf 

of such 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 

and the Board of Governors of the Federal Reserve System may jointly prescribe 

by regulation, which involves a financial institution as a payor or financial 

intermediary on behalf of or for the benefit of such other person. 

‘‘§ 5364. Policies and procedures to identify and prevent restricted transactions 

‘‘(a) REGULATIONS.—Before the end of the 270-day period beginning on the date 

of the enactment of this subchapter, the Secretary and the Board of Governors of 

the Federal Reserve System, in consultation with the Attorney General, shall prescribe regulations (which the Secretary and the Board jointly determine to be appropriate) requiring each designated payment system, and all participants therein, to 

identify and block or otherwise prevent or prohibit restricted transactions through 

the establishment of policies and procedures reasonably designed to identify and 

block or otherwise prevent or prohibit the acceptance of restricted transactions in 

any of the following ways: 

‘‘(1) The establishment of policies and procedures that—

‘‘(A) 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 

‘‘(B) block restricted transactions identified as a result of the policies and 

procedures developed pursuant to subparagraph (A). 

‘‘(2) The establishment of policies and procedures that prevent or prohibit the 

acceptance of the products or services of the payment system in connection with 

a restricted transaction. 

‘‘(b) REQUIREMENTS FOR POLICIES AND PROCEDURES.—In prescribing regulations 

under subsection (a), the Secretary and the Board of Governors of the Federal Reserve System shall—

‘‘(1) identify types of policies and procedures, including nonexclusive examples, which would be deemed, as applicable, to be reasonably designed to identify and block or otherwise prevent or prohibit the acceptance of the products 

or services with respect to each type of restricted transaction; 

‘‘(2) to the extent practical, permit any participant in a payment system to 

choose among alternative means of identifying and blocking, or otherwise preventing or prohibiting the acceptance of the products or services of the payment 

system or participant in connection with, restricted transactions; and 

‘‘(3) consider exempting certain restricted transactions or designated payment 

systems from any requirement imposed under such regulations, if the Secretary 

and the Board jointly find that it is not reasonably practical to identify and 

block, or otherwise prevent or prohibit the acceptance of, such transactions. 

‘‘(c) COMPLIANCE WITH PAYMENT SYSTEM POLICIES AND PROCEDURES.—A financial 

transaction provider shall be considered to be in compliance with the regulations 

prescribed under subsection (a), if—

‘‘(1) 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—

‘‘(A) identify and block restricted transactions; or 

‘‘(B) otherwise prevent or prohibit the acceptance of the products or services of the payment system, member, or participant in connection with restricted transactions; and 

‘‘(2) such policies and procedures of the designated payment system comply 

with the requirements of regulations prescribed under subsection (a). 

‘‘(d) NO LIABILITY FOR BLOCKING OR REFUSING TO HONOR RESTRICTED TRANS- ACTIONS.—A person that identifies and blocks a transaction, prevents or prohibits 

the acceptance of its products or services in connection with a transaction, or otherwise refuses to honor a transaction—

‘‘(1) that is a restricted transaction; 


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‘‘(2) that such person reasonably believes to be a restricted transaction; or 

‘‘(3) as a designated payment system or a member of a designated payment 

system in reliance on the policies and procedures of the payment system, in an 

effort to comply with regulations prescribed under subsection (a), 

shall not be liable to any party for such action. 

‘‘(e) REGULATORY ENFORCEMENT.—The requirements of this section shall be enforced exclusively by—

‘‘(1) the Federal functional regulators, with respect to the designated payment 

systems and financial transaction providers subject to the respective jurisdiction 

of such regulators under section 505(a) of the Gramm-Leach-Bliley Act and section 5g of the Commodities Exchange Act; and 

‘‘(2) the Federal Trade Commission, with respect to designated payment systems and financial transaction providers not otherwise subject to the jurisdiction of any Federal functional regulators (including the Commission) as described in paragraph (1). 

‘‘§ 5365. Civil remedies 

‘‘(a) JURISDICTION.—The district courts of the United States shall have original 

and exclusive jurisdiction to prevent and restrain restricted transactions by issuing 

appropriate orders in accordance with this section, regardless of whether a prosecution has been initiated under this subchapter. 

‘‘(b) PROCEEDINGS.—

‘‘(1) INSTITUTION BY FEDERAL GOVERNMENT.—

‘‘(A) IN GENERAL.—The United States, acting through the Attorney General, may institute proceedings under this section to prevent or restrain a 

restricted transaction. 

‘‘(B) RELIEF.—Upon application of the United States under this paragraph, the district court may enter a temporary restraining order, a preliminary injunction, or an injunction against any person to prevent or restrain a restricted transaction, in accordance with rule 65 of the Federal 

Rules of Civil Procedure. 

‘‘(2) INSTITUTION BY STATE ATTORNEY GENERAL.—

‘‘(A) IN GENERAL.—The attorney general (or other appropriate State official) of a State in which a restricted transaction allegedly has been or will 

be initiated, received, or otherwise made may institute proceedings under 

this section to prevent or restrain the violation or threatened violation. 

‘‘(B) RELIEF.—Upon application of the attorney general (or other appropriate State official) of an affected State under this paragraph, the district 

court may enter a temporary restraining order, a preliminary injunction, or 

an injunction against any person to prevent or restrain a restricted transaction, in accordance with rule 65 of the Federal Rules of Civil Procedure. 

‘‘(3) INDIAN LANDS.—

‘‘(A) IN GENERAL.—Notwithstanding paragraphs (1) and (2), for a restricted transaction that allegedly has been or will be initiated, received, or 

otherwise made 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 paragraph (1); and 

‘‘(ii) the enforcement authorities specified in an applicable TribalState compact negotiated under section 11 of the Indian Gaming Regulatory Act (25 U.S.C. 2710) shall be carried out in accordance with that 

compact. 

‘‘(B) 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. 

‘‘(c) LIMITATION RELATING TO INTERACTIVE COMPUTER SERVICES.—

‘‘(1) IN GENERAL.—Relief granted under this section against an interactive 

computer service shall—

‘‘(A) be limited to the removal of, or disabling of access to, an online site 

violating section 5363, or a hypertext link to an online site violating such 

section, that resides on a computer server that such service controls or operates, except that the limitation in this subparagraph shall not apply if the 

service is subject to liability under this section under section 5367; 

‘‘(B) be available only after notice to the interactive computer service and 

an opportunity for the service to appear are provided; 

‘‘(C) not impose any obligation on an interactive computer service to monitor its service or to affirmatively seek facts indicating activity violating this 

subchapter; 

‘‘(D) specify the interactive computer service to which it applies; and 


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‘‘(E) specifically identify the location of the online site or hypertext link 

to be removed or access to which is to be disabled. 

‘‘(2) COORDINATION WITH OTHER LAW.—An interactive computer service that 

does not violate this subchapter shall not be liable under section 1084(d) of title 

18, except that the limitation in this paragraph shall not apply if an interactive 

computer service has actual knowledge and control of bets and wagers and—

‘‘(A) 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 

‘‘(B) 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. 

‘‘(d) LIMITATION ON INJUNCTIONS AGAINST REGULATED PERSONS.—Notwithstanding any other provision of this section, and subject to section 5367, no provision of this subchapter shall be construed as authorizing the Attorney General of 

the United States, or the attorney general (or other appropriate State official) of any 

State to institute proceedings to prevent or restrain a restricted transaction against 

any financial transaction provider, to the extent that the person is acting as a financial transaction provider. 

‘‘§ 5366. Criminal penalties 

‘‘(a) IN GENERAL.—Whoever violates section 5363 shall be fined under title 18, or 

imprisoned for not more than 5 years, or both. 

‘‘(b) PERMANENT INJUNCTION.—Upon conviction of a person under this section, the 

court may enter a permanent injunction enjoining such person from placing, receiving, or otherwise making bets or wagers or sending, receiving, or inviting information assisting in the placing of bets or wagers. 

‘‘§ 5367. Circumventions prohibited 

‘‘Notwithstanding section 5362(2), a financial transaction provider, or any interactive computer service or telecommunications service, may be liable under this subchapter if such person 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.’’. 

(b) TECHNICAL AND CONFORMING AMENDMENT.—The table of sections for chapter 

53 of title 31, United States Code, is amended by adding at the end the following: 

‘‘SUBCHAPTER IV—PROHIBITION ON FUNDING OF UNLAWFUL INTERNET GAMBLING

‘‘5361. Congressional findings and purpose. 

‘‘5362. Definitions. 

‘‘5363. Prohibition on acceptance of any financial instrument for unlawful Internet gambling. 

‘‘5364. Policies and procedures to identify and prevent restricted transactions. 

‘‘5365. Civil remedies. 

‘‘5366. Criminal penalties. 

‘‘5367. Circumventions prohibited.’’. 

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 purposes. 

(b) REPORT REQUIRED.—The Secretary of the Treasury shall submit an annual report to the Congress on any deliberations between the United States and other 

countries on issues relating to Internet gambling. 


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PURPOSE AND SUMMARY

The Unlawful Internet Gambling Enforcement Act of 2006, H.R. 

4411, prohibits the acceptance of any bank instrument for unlawful 

Internet gambling. It defines certain terms for purposes of the Act; 

establishes civil remedies, criminal penalties, and regulatory enforcement authorities; encourages cooperation by foreign governments in the enforcement of the Act; and requires the Secretary of 

the Treasury to report annually to Congress on deliberations between the United States and other countries on issues relating to 

Internet gambling. Its primary purpose is to give U.S. law enforcement new, more effective tools for combating offshore Internet gambling sites that illegally extend their services to U.S. residents via 

the Internet. 

BACKGROUND AND NEED FOR LEGISLATION

The Committee on Financial Services has established a comprehensive hearing and markup record on Internet gambling, most 

particularly in the 107th Congress. In addition to the extensive debate at the Committee’s October 11, 2001 markup of H.R. 3004, the 

Financial Anti-Terrorism Act of 2001, Internet gambling was addressed at the Committee’s October 3, 2001 hearing on terrorism 

and money laundering. At that hearing, the Federal Bureau of Investigation (FBI), the Department of Justice, and a money laundering expert testified that Internet gambling serves as a vehicle 

for money laundering and can be exploited by terrorists for that 

purpose. The FBI also testified about pending litigation linking organized crime to money laundering and Internet gambling. 

At two hearings held in July 2001 by the Subcommittee on Oversight and Investigations and the Subcommittee on Financial Institutions and Consumer Credit, witnesses discussed the legal status 

of Internet gambling, the social and financial challenges it poses, 

and legislative options for addressing those challenges. 

Many legal experts, including officials from the Department of 

Justice, State attorneys general, and others involved in law enforcement hold the view that Internet gambling is generally prohibited under various Federal statutes. Among them, the Federal Wire 

Act (18 U.S.C. 1084 et seq.) criminalizes the knowing use of a wire 

communication facility by a gambling establishment for the transmission of bets and wagers in interstate or foreign commerce. 

Conventional forms of gambling activities, such as casino wagering, State lotteries, slot machines and horse racing, legal in many 

jurisdictions, are regulated by the individual States. However, 

these activities are subject to intense scrutiny and a myriad of licensing and other operational requirements. Virtually all States 

prohibit the operation of gambling businesses not expressly permitted by their respective constitutions or special legislation. Internet gambling currently constitutes illegal gambling activity in all 

50 States. Although in June of 2001 the Nevada legislature authorized the Nevada Gaming Commission to legalize on-line, Internet 

gambling operations if and when such operations can be conducted 

in compliance with Federal law, the Gaming Commission believes 

that such compliance cannot be ensured at present. 

Because Internet gambling is generally held to be illegal under 

Federal and State law, most of the estimated 2,000 Internet gamVerDate Aug 31 2005 06:07 Apr 11, 2006 Jkt 049006 PO 00000 Frm 00008 Fmt 6659 Sfmt 6602 E:\HR\OC\HR412P1.XXX HR412P1

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bling sites today operate from offshore locations in the Caribbean 

and elsewhere. As such, they operate effectively beyond the reach 

of U.S. regulators and law enforcement, as well as the statutory 

anti-money laundering regimes that apply to U.S.-based casinos. 

These ‘‘virtual casinos’’ advertise the ease of opening betting accounts mainly through the use of credit cards and alternative payment systems. Internet gambling sites are not only vulnerable to 

criminal exploitation by money launderers; they also can easily 

abuse a customer’s credit card information or manipulate the odds 

of a particular wager to the casino’s advantage. 

At the Oversight Subcommittee’s hearing on July 12, 2001, the 

American Gaming Association (AGA), representing commercial casinos and their supporters in the United States, addressed some of 

the practical problems associated with Internet gambling, including 

the difficulty of subjecting Internet operations to the kinds of regulation currently applied to U.S.-based casinos. According to the 

AGA, its major concern is that offshore Internet gambling sites 

‘‘frustrate important state policies, including restrictions on the 

availability of gaming within each State.’’ The AGA went on to say: ‘‘* * * unregulated Internet gambling that exists today allows an 

unlicensed, untaxed, unsupervised operator to engage in wagering 

that is otherwise subject to stringent federal and state regulatory 

controls. These controls are vital to preserving the honesty, integrity and fairness that those in the gaming industry today have 

worked so hard for so long to bring about.’’ The AGA further reported that it does not believe the technology for exercising such 

controls with respect to Internet gambling is yet available. 

Testifying from a State perspective, the New Jersey Director of 

Gaming Enforcement also noted that offshore Internet gambling 

operations provide no tax revenue or jobs to States, unlike Stateregulated casinos. 

In addition to the legal and economic challenges cited above, 

problem gambling, including problem Internet gambling, can lead 

to personal and family hardships, such as lost savings, excessive 

debt, bankruptcy, foreclosed mortgages, and divorce. In particular, 

Internet gambling is proving to be a serious problem for many college students. The National Collegiate Athletic Association (NCAA) 

at the July 2001 hearings underscored the vulnerability of young 

people to losing large sums through Internet gambling. A 2003 

study by the NCAA showed that almost 35 percent of male studentathletes engaged in some type of sports wagering behavior in the 

past year, and 10 percent of female student-athletes. One student 

reportedly lost $10,000 on Internet sports gambling over a threemonth period. In another case, a student reportedly lost $5,000 on 

a single Internet wager on the Super Bowl and was forced to drop 

out of school. Further, current events show that not just student 

athletes, but professional athletes can be caught by the lure of 

Internet gambling, as the sports pages have detailed the roughly 

$500,000 owed by Washington Capitals hockey star Jaromir Jagr 

to a Caribbean Internet betting site. 

The New Jersey Director of Gaming Enforcement testified that 

the State of New Jersey had filed a suit against certain offshore 

casinos found to be taking online bets from minors in that State. 

Witnesses from the National Council on Problem Gambling and the 

Compulsive Gambling Center testified about the problems associVerDate Aug 31 2005 06:07 Apr 11, 2006 Jkt 049006 PO 00000 Frm 00009 Fmt 6659 Sfmt 6602 E:\HR\OC\HR412P1.XXX HR412P1

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ated with compulsive or pathological gambling, and the Christian 

Coalition, in a letter to a Member of the Committee, echoed concerns about the impact of gambling on families and society and, in 

particular, the impact of Internet gambling on the poor, youth, and 

those who are already compulsive gamblers. 

Because of the pervasive legal, economic and social challenges 

posed by the rapid growth of Internet gambling, the National Gambling Impact Study Commission unanimously recommended in its 

1999 final report that the Federal government prohibit, with no 

new exemptions, all Internet gambling not already authorized by 

law. The Commission also recommended that legislation be adopted 

to prohibit wire transfers to Internet gambling sites or to the banks 

which represent them, and called on the government to develop enforcement strategies that include credit card providers and money 

transfer agencies that facilitate Internet gambling. 

H.R. 4411, the Unlawful Internet Gambling Enforcement Act of 

2006, builds on the recommendations of the National Gambling Impact Study Commission by prohibiting gambling businesses from 

accepting credit cards or other bank instruments in connection 

with unlawful Internet gambling. The bill requires the Secretary of 

the Treasury and the Federal Reserve Board, in conjunction with 

the U.S. Attorney General, to prescribe regulations requiring any 

payment system to establish policies and procedures reasonably designed to identify and block restricted transactions, or otherwise 

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 bill’s enforcement. It is intended to provide regulatory flexibility so that 

compliance may be achieved through coding of transactions or—for 

those financial instruments for which coding is not viable—through 

alternative methods consistent with the bill’s goals. The bill is similar to H.R. 21, reported by the House Financial Services Committee 

by voice vote in the 108th Congress, and H.R. 556, which passed 

the House of Representatives by voice vote in the 107th Congress. 

It is similar to provisions incorporated in the 108th Congress in the 

Committee-reported H.R. 10 and the 107th Congress in the Committee-reported version of H.R. 3004, the Financial Anti-Terrorism 

Act of 2001, as well as to legislation adopted by the House Banking 

Committee in the 106th Congress (H.R. 4419). 

H.R. 4411 does not spell out which activities are legal and which 

are illegal under the bill; rather, it relies on the substantive laws 

in effect at the time a case is brought under the legislation, and 

law enforcement’s interpretation of the underlying law. It clarifies 

that ‘‘bet or wager’’ does not include bona fide business transactions such as securities trading or buying or selling insurance 

contracts, or participation in a simulation sports game or educational game. 

H.R. 4411 does not change the legality of any gambling-related 

activity in the United States. For instance, if use of the Internet 

in connection with dog racing is approved by state regulatory agencies and does not violate any Federal law, then it is allowed under 

the new section 5362(10)(A) of title 31. 

H.R. 4411 does not interfere with intrastate laws. New section 

5362(10)(B) creates a safe harbor from the term ‘‘unlawful internet 

gambling’’ for authorized intrastate transactions. The safe harbor 


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would leave intact the current interstate gambling prohibitions 

such as the Wire Act, federal prohibitions on lotteries, and the 

Gambling Ship Act so that casino and lottery games could not be 

placed on websites and individuals could not access these games 

from their homes or businesses. The safe harbor is intended to recognize current law which allows states jurisdiction over wholly 

intrastate activity, where bets or wagers, or information assisting 

bets or wagers, do not cross state lines. This would, for example, 

allow retail lottery terminals to interact with a processing center 

within a state, and linking of terminals between separate casinos 

within a state if authorized by the state. 

H.R. 4411 is not intended to impose new burdens on financial institutions to identify which offshore gambling sites may be engaged 

in unlawful activities. Rather, the legislation contemplates a mechanism whereby banks and other financial service providers will be 

provided with the identity of specific Internet gambling bank accounts to which payments are to be prohibited. The obligation of 

financial institutions under H.R. 4411 would be similar in effect to 

their obligations under certain other U.S. laws, such as those administered by the Office of Foreign Assets Control (OFAC) barring 

financial transactions with terrorists and drug kingpins. The bill 

recognizes that many credit card companies and issuing banks are 

taking steps to identify, block or prevent Internet gambling transactions, and builds on the experience gained through these voluntary efforts. 

It is the view of the Committee that the definition of ‘‘bets or wagers’’ does not include 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. 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.’’

HEARINGS

No hearings were held on this legislation in the 109th Congress. 

COMMITTEE CONSIDERATION

The Committee on Financial Services met in open session on 

March 15, 2006, and ordered H.R. 4411, the Unlawful Internet 

Gambling Enforcement Act of 2006, reported to the House as 

amended by a voice vote. 

COMMITTEE VOTES

Clause 3(b) of rule XIII of the Rules of the House of Representatives requires the Committee to list the record votes on the motion 

to report legislation and amendments thereto. No record votes were 

taken in conjunction with the consideration of this legislation. A 

motion by Mr. Oxley to report the bill as amended to the House 

with a favorable recommendation was agreed to by a voice vote. 

The Committee considered the following amendment: 


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An amendment in the nature of a substitute by Mr. Leach, 

No.1, making various substantive and technical changes in the 

bill, was agreed to by a voice vote. 

COMMITTEE OVERSIGHT FINDINGS

Pursuant to clause 3(c)(1) of rule XIII of the Rules of the House 

of Representatives, the Committee has held hearings and made 

findings that are reflected in this report. 

PERFORMANCE GOALS AND OBJECTIVES

Pursuant to clause 3(c)(4) of rule XIII of the Rules of the House 

of Representatives, the Committee establishes the following performance related goals and objectives for this legislation: 

By prohibiting the acceptance of any payment instruments for 

unlawful internet gambling, the availability of illegal offshore 

Internet gambling in the United States will be reduced. 

NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND TAX

EXPENDITURES

In compliance with clause 3(c)(2) of rule XIII of the Rules of the 

House of Representatives, the Committee adopts as its own the estimate of new budget authority, entitlement authority, or tax expenditures or revenues contained in the cost estimate prepared by 

the Director of the Congressional Budget Office pursuant to section 

402 of the Congressional Budget Act of 1974. 

COMMITTEE COST ESTIMATE

The Committee adopts as its own the cost estimate prepared by 

the Director of the Congressional Budget Office pursuant to section 

402 of the Congressional Budget Act of 1974. 

CONGRESSIONAL BUDGET OFFICE ESTIMATE

Pursuant to clause 3(c)(3) of rule XIII of the Rules of the House 

of Representatives, the following is the cost estimate provided by 

the Congressional Budget Office pursuant to section 402 of the 

Congressional Budget Act of 1974: 

MARCH 30, 2006. 

Hon. MICHAEL G. OXLEY, 

Chairman, Committee on Financial Services, 

House of Representatives, Washington, DC. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 4411, the Unlawful Internet Gambling Enforcement Act of 2006. 

If you wish further details on this estimate, we will be pleased 

to provide them. The CBO staff contact is Kathleen Gramp. 

Sincerely, 

DONALD B. MARRON, 

Acting Director. 

Enclosure. 


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H.R. 4411—Unlawful Internet Gambling Enforcement Act of 2006 

Summary: H.R. 4411 would prohibit businesses from accepting 

credit cards, checks, or other bank instruments from gamblers who 

illegally bet over the Internet. It also would direct the Department 

of the Treasury and the Board of Governors of the Federal Reserve 

System (the Federal Reserve) to issue regulations outlining policies 

and procedures that could be used by financial institutions to identify and block gambling-related transactions that are transmitted 

through their payment systems. Compliance with those prohibitions and regulations would be enforced by various federal agencies 

as well as state governments, and violations would be subject to 

new civil remedies and criminal penalties. Finally, the bill would 

require the Secretary of the Treasury to report annually to the 

Congress on any international deliberations regarding Internet 

gambling. 

Assuming appropriation of the necessary amounts, CBO estimates that implementing H.R. 4411 would cost about $2 million 

over the 2007–2011 period. Enacting the bill would affect direct 

spending and revenues, but CBO estimates that the net impact on 

direct spending and revenues would not be significant in any year. 

H.R. 4411 contains no intergovernmental mandates as defined in 

the Unfunded Mandates Reform Act (UMRA) and would impose no 

costs on state, local, or tribal governments. 

H.R. 4411 would impose mandates, as defined in UMRA, on financial institutions and other financial transaction providers. Because the cost of the mandates would depend on regulations to be 

prescribed under the bill, CBO cannot determine whether the direct cost to comply with those mandates would exceed the annual 

threshold established by UMRA for private-sector mandates ($128 

million in 2006, adjusted annually for inflation). 

Estimated cost to the Federal Government: The estimated budgetary impact of H.R. 4411 is shown in the following table. The costs 

of this legislation fall within budget function 370 (commerce and 

housing credit). 

By fiscal year, in millions of dollars— 

2007 2008 2009 2010 2011 

CHANGES IN SPENDING SUBJECT TO APPROPRIATION 

Estimated Authorization Level ...................................................................... 1 * * * * 

Estimated Outlays ......................................................................................... 1 * * * * 

Note.—* = Less than $500,000. 

Basis of estimate: For this estimate, CBO assumes that H.R. 

4411 will be enacted near the end of fiscal year 2006 and that 

funds will be appropriated for the activities authorized by the bill. 

Spending subject to appropriation 

Based on information from the Department of the Treasury and 

other affected agencies, CBO estimates that implementing this bill 

would cost about $2 million over the 2007–2011 period, assuming 

appropriation of the necessary amounts. That estimate primarily 

reflects the cost of developing regulations to identify and block financial transactions related to illegal Internet gambling. The cost 

of preparing annual reports to the Congress on international deliberations on this issue would not be significant. Spending by the DeVerDate Aug 31 2005 06:07 Apr 11, 2006 Jkt 049006 PO 00000 Frm 00013 Fmt 6659 Sfmt 6602 E:\HR\OC\HR412P1.XXX HR412P1

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partment of Justice and the Federal Trade Commission to enforce 

certain provisions in the bill would likely be negligible in any given 

year, CBO estimates. 

Direct spending and revenues 

Enacting H.R. 4411 would affect direct spending and revenues 

because of provisions affecting financial regulatory agencies and 

criminal penalties. CBO estimates that such effects would not be 

significant. 

H.R. 4411 would direct financial regulatory agencies to enforce 

the regulations on illegal Internet gambling as they apply to financial institutions, including Office of the Comptroller of the Currency (OCC), Federal Deposit Insurance Corporation (FDIC), the 

Federal Reserve, the National Credit Union Administration 

(NCUA), and the Office of Thrift Supervision (OTS). Any additional 

direct spending by NCUA, OCC, and OTS to implement the bill 

would have no net budgetary impact because those agencies charge 

annual fees to cover all of their administrative expenses. In contrast, the FDIC’s sources of income—primarily intragovernmental 

interest earnings and deposit insurance premiums—do not change 

in tandem with in its annual expenditures; as a result, any added 

costs would increase direct spending unless and until the FDIC 

raised deposit insurance premiums to offset those expenses. Budgetary effects on the Federal Reserve are recorded as changes in 

revenues. 

According to financial regulatory agency officials, enacting H.R. 

4411 would not have a significant effect on their workload or budgets. For this estimate, CBO assumes that the FDIC would not assess additional premiums to cover the small costs associated with 

implementing this bill. Thus, CBO estimates that enacting this bill 

would increase direct spending and offsetting receipts of the 

NCUA, OCC, OTS, and FDIC by less than $500,000 a year. Based 

on information from the Federal Reserve, CBO estimates that the 

rulemaking and enforcement activities required by H.R. 4411 

would reduce revenues by less than $500,000 a year. 

Because those prosecuted and convicted under the bill could be 

subject to criminal penalties, the federal government might collect 

additional fines if the bill is enacted. Collections of such fines are 

recorded in the budget as revenues, which are deposited in the 

Crime Victims Fund and spent in subsequent years. Any additional 

collections are likely to be negligible because of the small number 

of cases involved. Because any increase in direct spending would 

equal the amount of fines collected (with a lag of one year or more), 

the additional direct spending also would be insignificant. 

Estimated impact on state, local, and tribal governments: Although H.R. 4411 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. 

4411 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. 4411 would impose 

mandates, as defined in UMRA, on financial institutions and other 


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financial transaction providers. Because the cost of the mandates 

would depend on regulations to be prescribed under the bill, CBO 

cannot determine whether the direct cost to comply with those 

mandates would exceed the annual threshold established by UMRA 

for private-sector mandates ($128 million in 2006, adjusted annually for inflation). 

The bill would require the Secretary of the Treasury and the 

Board of Governors of the Federal Reserve System, in consultation 

with the Attorney General, to prescribe regulations that would require financial transaction providers to identify and block restricted transactions in connection with unlawful Internet gambling through the establishment of reasonable policies and procedures. Such requirements would impose private-sector mandates on 

certain financial entities. Under the bill, the term ‘‘financial transaction providers’’ means creditors, credit card issuers, financial institutions, or other payment networks that utilize a designated 

payment system. Such systems would be determined by regulation. 

The cost for financial transaction providers to comply with those 

mandates would depend on the regulations to be prescribed. Information from representatives of the financial services industry indicates that electronic transactions can currently be identified and 

blocked through the use of a coding system. If the regulations 

apply only to those transactions, based on information from industry and government sources, CBO expects that the cost of the mandates would fall below UMRA’s annual threshold. However, if the 

regulations also include the requirement for banks to identify and 

block checks or similar paper instruments used in a restricted 

transaction, the direct cost to comply with the mandates could increase significantly and CBO has no basis to estimate whether 

those costs would be above or below the annual threshold. 

Although section 2 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. 

Estimate prepared by: Federal Spending: Kathleen Gramp and 

Melissa Petersen. Federal Revenues: Barbara Edwards. Impact on 

State, Local, and Tribal Governments: Sarah Puro. Impact on the 

Private Sector: Page Piper/Bach. 

Estimate approved by: Peter H. Fontaine, Deputy Assistant Director for Budget Analysis. 

FEDERAL MANDATES STATEMENT

The Committee adopts as its own the estimate of Federal mandates prepared by the Director of the Congressional Budget Office 

pursuant to section 423 of the Unfunded Mandates Reform Act. 

ADVISORY COMMITTEE STATEMENT

No advisory committees within the meaning of section 5(b) of the 

Federal Advisory Committee Act were created by this legislation. 


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CONSTITUTIONAL AUTHORITY STATEMENT

Pursuant to clause 3(d)(1) of rule XIII of the Rules of the House 

of Representatives, the Committee finds that the Constitutional 

Authority of Congress to enact this legislation is provided by Article 1, section 8, clause 1 (relating to the general welfare of the 

United States) and clause 3 (relating to the power to regulate interstate commerce). 

APPLICABILITY TO LEGISLATIVE BRANCH

The Committee finds that the legislation does not relate to the 

terms and conditions of employment or access to public services or 

accommodations within the meaning of section 102(b) (3) of the 

Congressional Accountability Act. 

SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION

Section 1. Short title 

This Act may be cited as the ‘‘Unlawful Internet Gambling Enforcement Act of 2006.’’

Section 2. Prohibition on acceptance of any payment instrument for 

unlawful Internet gambling 

Subsection (a) adds a new ‘‘Subchapter IV-Prohibition on Funding of Unlawful Internet Gambling’’ to Chapter 53 of Title 31 (Monetary Transactions). The new subchapter will come immediately 

after subchapter III, covering Money Laundering and Related Financial Crimes. 

Section 5361. Congressional findings and purpose 

(a) Findings. The Congressional findings note that: (1) Internet 

gambling is primarily funded through the personal use of payment 

system instruments, 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 such sites; (3) Internet 

gambling is a growing cause of debt collection problems for insured 

depository institutions and the consumer credit industry; and (4) 

new mechanisms for enforcing gambling laws on the Internet are 

necessary because traditional law enforcement mechanisms are 

often inadequate for enforcing gambling prohibitions on the Internet, especially where such gambling crosses State or national borders. 

(b) Rule of Construction. No provision is to be construed as altering, limiting, or extending any Federal or State law or Tribal-State 

compact prohibiting, permitting or regulating gambling within the 

United States. This is intended to alleviate fears that this bill could 

have the effect of changing the legality of any gambling-related activity in the United States. 

Section 5362. Definitions 

This defines the term ‘‘bet or wager’’ 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 value in the 


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event of a certain outcome. This subsection clarifies that ‘‘bet or 

wager’’ does not include bona fide business transactions such as securities trading or buying or selling insurance contracts, or participation in a simulation sports game or educational game. 

Defines the term ‘‘unlawful Internet gambling’’ as placing, receiving, or transmitting a bet or wager by any means which involves 

the use of the Internet, where such bet or wager is unlawful under 

any applicable Federal or State law in the State or Tribal lands in 

which the bet or wager is initiated, received, or otherwise made. 

Clarifies that purely intrastate transactions conducted in accordance with state laws with appropriate security controls will not be 

considered unlawful internet gambling. Likewise, transactions solely within Tribal lands complying with similar security requirements and the Indian Gaming Regulatory Act will not be considered unlawful. Section 5362 (10)(D) addresses transactions complying with Interstate Horseracing Act (IHA) which will not be considered unlawful, because the IHA only regulates legal transactions 

that are lawful in each of the states involved. Also clarifies that intermediate routing of data packets does not determine the location 

in which bets or wagers are made. 

Section 5362 also defines the terms ‘‘business of betting or wagering,’’ ‘‘designated payment system,’’ ‘‘Internet,’’ and ‘‘restricted 

transaction.’’ Several additional terms are defined by reference to 

other sections of the U.S. Code. 

Section 5363. Prohibition on acceptance of any financial instrument 

for unlawful Internet gambling 

Prohibits persons engaged in the business of betting or wagering 

from knowingly accepting credit, funds, bank instruments, or proceeds of any other form of financial transaction in connection with 

the participation of another person in unlawful Internet gambling. 

This is called a ‘‘restricted transaction’’ according to the definitions 

section. 

Section 5364. Policies and procedures to identify and prevent restricted transactions 

(a) Regulations and (b) Requirements for Policies and procedures. 

Requires the Secretary of the Treasury and the Federal Reserve 

Board, in conjunction with the U.S. Attorney General, to prescribe 

regulations within nine months requiring any payment system to 

establish policies and procedures reasonably designed to identify 

and block restricted transactions, or otherwise prevent restricted 

transactions from entering its system. 

(c) Compliance and (d) Liability. Provides persons operating financial systems with immunity from civil liability for blocking 

transactions that they reasonably believe are restricted transactions, or in reliance on the regulations promulgated by the Treasury Department and Federal Reserve. Though a financial institution may block additional transactions based on reasonable belief, 

it has no duty to do so, and may rely solely on the regulations to 

fully discharge its obligations. 

(e) Enforcement. The Federal functional regulators and the Federal Trade Commission are given the exclusive authority to enforce 

this section. 


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Section 5365. Civil remedies 

Authorizes the U.S. Attorney General and State Attorneys General to pursue civil remedies, including a preliminary injunction or 

injunction against any person to prevent or restrain a violation of 

this legislation. It clarifies that the bill does not alter, supersede 

or otherwise affect the Indian Gaming Regulatory Act; generally 

limits responsibility of an interactive computer service to the removal or disabling of access to an online site violating this section, 

upon proper notice; restricts the ability to bring injunctive cases 

against financial transaction provider activities. 

Section 5366. Criminal penalties 

Authorizes criminal penalties for violating section 5363, including fines or imprisonment for not more than five years or both. 

Also authorizes permanently enjoining a person convicted under 

this section from engaging in gambling activities. 

Section 5367. Circumventions prohibited 

Provides that, notwithstanding the safe harbor provided in section 5362(2), a financial intermediary 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 

criminally liable under this subchapter. 

Section 3. Internet gambling in or through foreign jurisdictions 

Section 4(a) 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. 

Subsection (b) requires the Secretary of the Treasury to submit 

an annual report to Congress on any deliberations between the 

United States and other countries on tissues relating to Internet 

Gambling. 

CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

In compliance with clause 3(e) of rule XIII of the Rules of the 

House of Representatives, changes in existing law made by the bill, 

as reported, are shown as follows (new matter is printed in italic 

and existing law in which no change is proposed is shown in 

roman): 

TITLE 31, UNITED STATES CODE 

* * * * * * * 


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SUBTITLE IV—MONEY 

* * * * * * * 

CHAPTER 53—MONETARY TRANSACTIONS 

SUBCHAPTER I—CREDIT AND MONETARY EXPANSION 

Sec. 

5301. Buying obligations of the United States Government. 

* * * * * * * 

SUBCHAPTER IV—PROHIBITION ON FUNDING OF UNLAWFUL INTERNET GAMBLING

5361. Congressional findings and purpose. 

5362. Definitions. 

5363. Prohibition on acceptance of any financial instrument for unlawful Internet 

gambling. 

5364. Policies and procedures to identify and prevent restricted transactions. 

5365. Civil remedies. 

5366. Criminal penalties. 

5367. Circumventions prohibited. 

* * * * * * * 

SUBCHAPTER IV—PROHIBITION ON FUNDING OF UNLAWFUL INTERNET

GAMBLING

§ 5361. Congressional findings and purpose 

(a) FINDINGS.—The Congress finds the following: 

(1) Internet gambling is primarily funded through personal 

use of payment system instruments, 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 such sites. 

(3) Internet gambling is a growing cause of debt collection 

problems for insured depository institutions and the consumer 

credit industry. 

(4) New mechanisms for enforcing gambling laws on the 

Internet are necessary because traditional law enforcement 

mechanisms are often inadequate for enforcing gambling prohibitions or regulations on the Internet, especially where such 

gambling crosses State or national borders. 

(b) RULE OF CONSTRUCTION.—No provision of this subchapter 

shall be construed as altering, limiting, or extending any Federal or 

State law or Tribal-State compact prohibiting, permitting, or regulating gambling within the United States. 

§ 5362. Definitions 

For purposes of this subchapter, the following definitions shall 

apply: 

(1) BET OR WAGER.—The term ‘‘bet or wager’’—

(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 value in the event of a certain outcome; 


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(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; 

(D) includes any instructions or information pertaining 

to the establishment or movement of funds by the bettor or 

customer in, to, or from an account 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 that 

Act); 

(ii) any transaction conducted on or subject to the 

rules of a registered entity or exempt board of trade 

under 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 an insured 

depository institution; or 

(viii) any participation in a fantasy or simulation 

sports game, an educational game, or a 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 of the participants, or their skill at 

physical reaction or physical manipulation (but 

not chance), and, in the case of a fantasy or simulation sports game, has an outcome that is determined predominantly by accumulated statistical 

results of sporting events, including any nonparticipant’s individual performances in such 

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 the activities of a financial transaction provider, or any interactive computer service or telecommunications service. 


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(3) DESIGNATED PAYMENT SYSTEM.—The term ‘‘designated 

payment system’’ means any system utilized by a financial 

transaction provider that the Secretary and the Board of Governors of the Federal Reserve System, in consultation with the 

Attorney General, jointly determine, by regulation or order, 

could be utilized in connection with, or to facilitate, any restricted transaction. 

(4) FINANCIAL TRANSACTION PROVIDER.—The term ‘‘financial 

transaction provider’’ means 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 payment network utilized to effect a credit transaction, electronic fund 

transfer, stored value product transaction, or money transmitting service, or a participant in such network, or other participant in a designated payment system. 

(5) INTERNET.—The term ‘‘Internet’’ means the international 

computer network of interoperable packet switched data networks. 

(6) INTERACTIVE COMPUTER SERVICE.—The term ‘‘interactive 

computer service’’ has the same meaning as in section 230(f) of 

the Communications Act of 1934. 

(7) RESTRICTED TRANSACTION.—The term ‘‘restricted transaction’’ means any transaction or transmittal involving any 

credit, funds, instrument, or proceeds described in any paragraph of section 5363 which the recipient is prohibited from accepting under section 5363. 

(8) SECRETARY.—The term ‘‘Secretary’’ means the Secretary of 

the Treasury. 

(9) STATE.—The term ‘‘State’’ means any State of the United 

States, the District of Columbia, or any commonwealth, territory, or other possession of the United States. 

(10) UNLAWFUL INTERNET GAMBLING.— (A) IN GENERAL.—The term ‘‘unlawful Internet gambling’’

means to place, receive, or otherwise knowingly 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 or 

Tribal lands in which the bet or wager is initiated, received, or otherwise made. 

(B) INTRASTATE TRANSACTIONS.—The term ‘‘unlawful 

Internet gambling’’ shall not include placing, receiving, or 

otherwise transmitting a bet or wager where—

(i) the bet or wager is initiated and received or otherwise made exclusively within a single State; 

(ii) the bet or wager and the method by which the bet 

or wager is initiated and received or otherwise made is 

expressly authorized by and placed in accordance with 

the laws of such State, and the State law or regulations include— (I) age and location verification requirements 

reasonably designed to block access to minors and 

persons located out of such State; and 

(II) appropriate data security standards to prevent unauthorized access by any person whose age 


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and current location has not been verified in accordance with such State’s law or regulations; and 

(iii) the bet or wager does not violate any provision 

of the—

(I) Interstate Horseracing Act; 

(II) Professional and Amateur Sports Protection 

Act; 

(III) Gambling Devices Transportation Act; or 

(IV) Indian Gaming Regulatory Act. 

(C) INTRATRIBAL TRANSACTIONS.—The term ‘‘unlawful 

Internet gambling’’ shall not include placing, receiving, or 

otherwise transmitting a bet or wager where—

(i) the bet or wager is initiated and received or otherwise made exclusively—

(I) within the Indian lands of a single Indian 

tribe (as those terms are defined by the Indian 

Gaming Regulatory Act); or 

(II) between the Indian lands of 2 or more Indian tribes to the extent that intertribal gaming is 

authorized by the Indian Gaming Regulatory Act; 

(ii) the bet or wager and the method by which the bet 

or wager is initiated and received or otherwise made is 

expressly authorized by and complies with the requirements of—

(I) the applicable tribal ordinance or resolution 

approved by the Chairman of the National Indian 

Gaming Commission; and 

(II) with respect to class III gaming, the applicable Tribal-State Compact; 

(iii) the applicable tribal ordinance or resolution or 

Tribal-State compact includes—

(I) age and location verification requirements 

reasonably designed to block access to minors and 

persons located out of the applicable Tribal lands; 

and 

(II) appropriate data security standards to prevent unauthorized access by any person whose age 

and current location has not been verified in accordance with the applicable tribal ordinance or 

resolution or Tribal-State Compact; and 

(iv) the bet or wager does not violate any provision 

of the—

(I) Interstate Horseracing Act; 

(II) the Professional and Amateur Sports Protection Act; 

(III) the Gambling Devices Transportation Act; 

or 

(IV) the Indian Gaming Regulatory Act. 

(D) INTERSTATE HORSERACING.—The term ‘‘unlawful 

Internet gambling’’ shall not include placing, receiving, or 

otherwise transmitting a bet or wager that is governed by 

and complies with the Interstate Horseracing Act of 1978. 

(E) INTERMEDIATE ROUTING.—The intermediate routing 

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tions in which a bet or wager is initiated, received, or otherwise made. 

(11) OTHER TERMS.—

(A) CREDIT; CREDITOR; CREDIT CARD; AND CARD ISSUER.—

The terms ‘‘credit’’, ‘‘creditor’’, ‘‘credit card’’, and ‘‘card 

issuer’’ have the same meanings as in section 103 of the 

Truth in Lending Act. 

(B) ELECTRONIC FUND TRANSFER.—The term ‘‘electronic 

fund transfer’’—

(i) has the same meaning as in section 903 of the 

Electronic Fund Transfer Act, except that such term includes transfers that would otherwise be excluded 

under section 903(6)(E) of that 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 same meaning as in section 903 of the Electronic Fund Transfer Act, except that such term does not 

include a casino, sports book, or other business at or 

through which bets or wagers may be placed or received. 

(D) INSURED DEPOSITORY INSTITUTION.—The term ‘‘insured depository institution’’—

(i) has the same meaning as in section 3 of the Federal Deposit Insurance Act; and 

(ii) includes an insured credit union (as defined in 

section 101 of the Federal Credit Union Act). 

(E) MONEY TRANSMITTING BUSINESS AND MONEY TRANSMITTING SERVICE.—The terms ‘‘money transmitting business’’ and ‘‘money transmitting service’’ have the same 

meanings as in section 5330(d) (determined without regard 

to any regulations prescribed by the Secretary thereunder). 

§ 5363. Prohibition on acceptance of any financial instrument for unlawful Internet gambling 

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 such other person; 

(3) any check, draft, or similar instrument which is drawn by 

or on behalf of such 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 and the Board of Governors of the Federal Reserve System may jointly prescribe by regulation, which involves a financial institution as a payor or financial intermediary on behalf of or for the benefit of such other person. 


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§ 5364. Policies and procedures to identify and prevent restricted transactions 

(a) REGULATIONS.—Before the end of the 270-day period beginning on the date of the enactment of this subchapter, the Secretary 

and the Board of Governors of the Federal Reserve System, in consultation with the Attorney General, shall prescribe regulations 

(which the Secretary and the Board jointly determine to be appropriate) requiring each designated payment system, and all participants therein, to identify and block or otherwise prevent or prohibit 

restricted transactions through the establishment of policies and 

procedures reasonably designed to identify and block or otherwise 

prevent or prohibit the acceptance of restricted transactions in any 

of the following ways: 

(1) The establishment of policies and procedures that—

(A) 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 

(B) block restricted transactions identified as a result of 

the policies and procedures developed pursuant to subparagraph (A). 

(2) The establishment of policies and procedures that prevent 

or prohibit the acceptance of the products or services of the payment system in connection with a restricted transaction. 

(b) REQUIREMENTS FOR POLICIES AND PROCEDURES.—In prescribing regulations under subsection (a), the Secretary and the 

Board of Governors of the Federal Reserve System shall—

(1) identify types of policies and procedures, including nonexclusive examples, which would be deemed, as applicable, to be 

reasonably designed to identify and block or otherwise prevent 

or prohibit the acceptance of the products or services with respect to each type of restricted transaction; 

(2) to the extent practical, permit any participant in a payment system to choose among alternative means of identifying 

and blocking, or otherwise preventing or prohibiting the acceptance of the products or services of the payment system or participant in connection with, restricted transactions; and 

(3) consider exempting certain restricted transactions or designated payment systems from any requirement imposed under 

such regulations, if the Secretary and the Board jointly find 

that it is not reasonably practical to identify and block, or otherwise prevent or prohibit the acceptance of, such transactions. 

(c) COMPLIANCE WITH PAYMENT SYSTEM POLICIES AND PROCEDURES.—A financial transaction provider shall be considered to be 

in compliance with the regulations prescribed under subsection (a), 

if—

(1) 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—

(A) identify and block restricted transactions; or 

(B) otherwise prevent or prohibit the acceptance of the 

products or services of the payment system, member, or participant in connection with restricted transactions; and 


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(2) such policies and procedures of the designated payment 

system comply with the requirements of regulations prescribed 

under subsection (a). 

(d) NO LIABILITY FOR BLOCKING OR REFUSING TO HONOR RE- STRICTED TRANSACTIONS.—A person that identifies and blocks a 

transaction, prevents or prohibits the acceptance of its products or 

services in connection with a transaction, or otherwise refuses to 

honor a transaction— (1) that is a restricted transaction; 

(2) that such person reasonably believes to be a restricted 

transaction; or 

(3) as a designated payment system or a member of a designated payment system in reliance on the policies and procedures of the payment system, in an effort to comply with regulations prescribed under subsection (a), 

shall not be liable to any party for such action. 

(e) REGULATORY ENFORCEMENT.—The requirements of this section 

shall be enforced exclusively by—

(1) the Federal functional regulators, with respect to the designated payment systems and financial transaction providers 

subject to the respective jurisdiction of such regulators under 

section 505(a) of the Gramm-Leach-Bliley Act and section 5g of 

the Commodities Exchange Act; and 

(2) the Federal Trade Commission, with respect to designated 

payment systems and financial transaction providers not otherwise subject to the jurisdiction of any Federal functional regulators (including the Commission) as described in paragraph 

(1). 

§ 5365. Civil remedies 

(a) JURISDICTION.—The district courts of the United States shall 

have original and exclusive jurisdiction to prevent and restrain restricted transactions by issuing appropriate orders in accordance 

with this section, regardless of whether a prosecution has been initiated under this subchapter. 

(b) PROCEEDINGS.— (1) INSTITUTION BY FEDERAL GOVERNMENT.— (A) IN GENERAL.—The United States, acting through the 

Attorney General, may institute proceedings under this section to prevent or restrain a restricted transaction. 

(B) RELIEF.—Upon application of the United States 

under this paragraph, the district court may enter a temporary restraining order, a preliminary injunction, or an 

injunction against any person to prevent or restrain a restricted transaction, in accordance with rule 65 of the Federal Rules of Civil Procedure. 

(2) INSTITUTION BY STATE ATTORNEY GENERAL.—

(A) IN GENERAL.—The attorney general (or other appropriate State official) of a State in which a restricted transaction allegedly has been or will be initiated, received, or 

otherwise made may institute proceedings under this section to prevent or restrain the violation or threatened violation. 

(B) RELIEF.—Upon application of the attorney general (or 

other appropriate State official) of an affected State under 


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this paragraph, the district court may enter a temporary restraining order, a preliminary injunction, or an injunction 

against any person to prevent or restrain a restricted transaction, in accordance with rule 65 of the Federal Rules of 

Civil Procedure. 

(3) INDIAN LANDS.— (A) IN GENERAL.—Notwithstanding paragraphs (1) and 

(2), for a restricted transaction that allegedly has been or 

will be initiated, received, or otherwise made 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 paragraph (1); and 

(ii) the enforcement authorities specified in an applicable Tribal-State compact negotiated under section 11 

of the Indian Gaming Regulatory Act (25 U.S.C. 2710) 

shall be carried out in accordance with that compact. 

(B) 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. 

(c) LIMITATION RELATING TO INTERACTIVE COMPUTER SERVICES.— (1) IN GENERAL.—Relief granted under this section against an 

interactive computer service shall— (A) be limited to the removal of, or disabling of access to, 

an online site violating section 5363, or a hypertext link to 

an online site violating such section, that resides on a computer server that such service controls or operates, except 

that the limitation in this subparagraph shall not apply if 

the service is subject to liability under this section under 

section 5367; 

(B) be available only after notice to the interactive computer service and an opportunity for the service to appear 

are provided; 

(C) not impose any obligation on an interactive computer 

service to monitor its service or to affirmatively seek facts 

indicating activity violating this subchapter; 

(D) specify the interactive computer service to which it 

applies; and 

(E) specifically identify the location of the online site or 

hypertext link to be removed or access to which is to be disabled. 

(2) COORDINATION WITH OTHER LAW.—An interactive computer service that does not violate this subchapter shall not be 

liable under section 1084(d) of title 18, except that the limitation in this paragraph shall not apply if an interactive computer service has actual knowledge and control of bets and wagers and—

(A) 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 

(B) owns or controls, or is owned or controlled by, any 

person who operates, manages, supervises, or directs an 


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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. 

(d) LIMITATION ON INJUNCTIONS AGAINST REGULATED PER- SONS.—Notwithstanding any other provision of this section, and 

subject to section 5367, no provision of this subchapter shall be construed as authorizing the Attorney General of the United States, or 

the attorney general (or other appropriate State official) of any State 

to institute proceedings to prevent or restrain a restricted transaction against any financial transaction provider, to the extent that 

the person is acting as a financial transaction provider. 

§ 5366. Criminal penalties 

(a) IN GENERAL.—Whoever violates section 5363 shall be fined 

under title 18, or imprisoned for not more than 5 years, or both. 

(b) PERMANENT INJUNCTION.—Upon conviction of a person under 

this section, the court may enter a permanent injunction enjoining 

such person from placing, receiving, or otherwise making bets or 

wagers or sending, receiving, or inviting information assisting in 

the placing of bets or wagers. 

§ 5367. Circumventions prohibited 

Notwithstanding section 5362(2), a financial transaction provider, 

or any interactive computer service or telecommunications service, 

may be liable under this subchapter if such person 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. 

* * * * * * * 


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(28) 

DISSENTING VIEWS 

H.R. 4411 limits the ability of individual citizens to use bank instruments, including credit cards or checks, to finance Internet 

gambling. This legislation should be rejected by Congress since the 

federal government has no constitutional authority to ban or even 

discourage any form of gambling. 

In addition to being unconstitutional, H.R. 4411 is likely to prove 

ineffective at ending Internet gambling. Instead, this bill will ensure that gambling is controlled by organized crime. History, from 

the failed experiment of prohibition to today’s futile ‘‘war on drugs,’’

shows that the government cannot eliminate demand for something 

like Internet gambling simply by passing a law. Instead, H.R. 4411 

will force those who wish to gamble over the Internet to patronize 

suppliers willing to flaunt the ban. In many cases, providers of 

services banned by the government will be members of criminal organizations. Even if organized crime does not operate Internet 

gambling enterprises, their competitors are likely to be controlled 

by organized crime. After all, since the owners and patrons of 

Internet gambling cannot rely on the police and courts to enforce 

contracts and resolve other disputes, they will be forced to rely on 

members of organized crime to perform those functions. Thus, the 

profits of Internet gambling will flow into organized crime. Furthermore, outlawing an activity will raise the price vendors are 

able to charge consumers, thus increasing the profits flowing to organized crime from Internet gambling. It is bitterly ironic that a 

bill masquerading as an attack on crime will actually increase organized crime’s ability to control and profit from Internet gambling. 

In conclusion, H.R. 4411 violates the constitutional limits on federal power. Furthermore, laws such as H.R. 4411 are ineffective in 

eliminating the demand for vices such as Internet gambling; instead, they ensure that these enterprises will be controlled by organized crime. Therefore I urge my colleagues to reject H.R. 4411, the 

Unlawful Internet Gambling Funding Prohibition Act. 

RON PAUL. 

Æ 


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