49–006 

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

UNLAWFUL INTERNET GAMBLING ENFORCEMENT ACT 

OF 2006 

MAY 26, 2006.—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 

[To accompany H.R. 4411] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on the Judiciary, 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 

The Amendment ...................................................................................................... 1 

Purpose and Summary ............................................................................................ 7 

Background and Need For Legislation .................................................................. 8 

Hearings ................................................................................................................... 9 

Committee Consideration ........................................................................................ 10 

Vote of the Committee ............................................................................................. 10 

Committee Oversight Findings ............................................................................... 10 

New Budget Authority and Tax Expenditures ...................................................... 10 

Congressional Budget Office Cost Estimate .......................................................... 10 

Performance Goals and Objectives ......................................................................... 13 

Constitutional Authority Statement ...................................................................... 14 

Section-by-Section Analysis and Discussion .......................................................... 14 

Changes in Existing Law Made by the Bill, as Reported ..................................... 16 

THE AMENDMENT

The amendment is as follows: 

Strike all after the enacting clause and insert the following: 


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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; 

‘‘(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 


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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; 

‘‘(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 


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‘‘(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). 

‘‘§ 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 


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‘‘(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; 

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

procedures developed pursuant to subparagraph (A); and 

‘‘(C) block transactions that are in violation of section 1084 of title 18. 

‘‘(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 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 


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‘‘(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 

‘‘(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 


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‘‘(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. 

PURPOSE AND SUMMARY

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

2006,’’ prohibits the acceptance of any bank instrument for unlawful Internet gambling. This legislation does not amend the Wire 

Act (Pub. L. No. 87–216). H.R. 4411 prohibits persons engaged in 

the business of betting or wagering from knowingly accepting credit, electronic fund transfers, checks, drafts, or similar instruments, 


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or the proceeds of any other financial transaction in connection 

with unlawful Internet gambling. 

H.R. 4411 does not prohibit any Internet gambling activity that 

complies with the Interstate Horseracing Act (Pub. L. No. 95–515). 

Nor does this legislation cover: (1) intrastate and intratribal transactions, provided that regulatory requirements are met and data 

security standards (e.g. age and location verification, within State 

or Indian lands); (2) fantasy sports; (3) financial transaction providers, interactive computer service or telecommunications service. 

H.R. 4411 instructs the Treasury Secretary, in consultation with 

the Attorney General and Federal Reserve Board, to promulgate 

regulations directing banks and other members of the payment system to adopt policies and practices to identify and prevent restricted internet gambling transactions; and places enforcement of 

this section exclusively with the Federal Trade Commission, in a 

manner provided in section 5005(a) of the Gramm-Leach-Bliley Act. 

The bill also creates a Federal cause of action for the benefit of 

Federal and State Attorneys General to prevent and restrain violations of the bill’s provisions, including injunctions and temporary 

restraining orders under rule 65 of the Federal Rules of Civil Procedure. Furthermore, H.R. 4411 limits relief against an interactive 

computer service to removal of, or disabling access to, an online 

site violating the Act. H.R. 4411 sets a maximum penalty of five 

years imprisonment under title 18 of the U.S. Code, and a permanent injunction against activity related to betting or wagering for 

violations. 

BACKGROUND AND NEED FOR THE LEGISLATION

Gambling on the Internet has increasingly become an extremely 

lucrative business. The explosive growth of this industry has seen 

an increase both in gambling websites and in industry revenues. 

Internet gambling is now estimated to be a $12 billion industry, 

with approximately $6 billion coming from bettors based in the 

United States. It has been reported that there are as many as 

2,300 gambling sites. 

The booming industry of offshore websites accepting bets and wagers from persons located in the United States raises a number of 

social and criminal concerns related to Internet gambling. The 

Internet’s ease of accessibility and anonymous nature: (1) make it 

difficult to prevent underage gambling; and (2) feed on the compulsive behavior of the millions of Americans suffering from gambling 

addiction. Worldwide Internet gambling sites offer organized crime 

groups another avenue to launder the proceeds of their criminal activity, and assist in the facilitation of crimes. 

As a general rule, Congress has found that: 

(1) the States should have the primary responsibility for determining what forms of gambling may legally take place within their 

borders; and 

(2) the Federal government should prevent interference by one 

State with the gambling policies of another, and should act to protect identifiable national interests. (Title 15 U.S.C. 57, Sec. 3001.) 

Although the separate States generally regulate gambling, the 

Federal government has in limited circumstances proscribed certain gambling activities. 


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In 1961, Congress enacted the ‘‘Interstate Wire Communications 

Act’’, 18 U.S.C. § 1084, (Pub. L. No. 87–216) which prohibits any 

person who is ‘‘engaged in the business of betting or wagering’’

from ‘‘knowingly using 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.’’ The Act also grants State and local law enforcement agencies the power to direct a communication service provider (‘‘common carrier’’) to disconnect any persons who are using 

communication facilities to transmit gambling information. Violations of this Act can result in imprisonment for not more than two 

years, a fine, or both. 

Also in 1961, Congress passed the ‘‘Travel Act’’, 18 U.S.C. § 1952, 

(Pub. L. No. 87–228), which makes it illegal to ‘‘travel in interstate 

or foreign commerce or use the mail or any facility in interstate or 

foreign commerce, with intent to (1) distribute the proceeds of any 

unlawful activity; or (2) commit any crime of violence to further 

any unlawful activity; or (3) otherwise promote, manage, establish, 

carry on, or facilitate the promotion, management, establishment, 

or carrying on, of any unlawful activity.’’ An unlawful activity is 

defined as, among other things, any business involving gambling 

committed in violation of State or Federal laws. 

In 1970, Congress enacted 18 U.S.C. § 1955, the ‘‘Prohibition of 

Illegal Gambling Business Act.’’ This section provides for imprisonment of not more than five years for any person who ‘‘conducts, finances, manages, supervises, directs or owns all or part of an illegal gambling business.’’ An ‘‘illegal gambling business’’ is defined 

as a gambling business which is (1) in violation of State law; (2) 

involves five or more persons; and (3) has been or remains in substantially continuous operation for a period in excess of thirty days 

or has a gross revenue of $2,000 in any single day. 

However, there are specific Federal laws which allow interstate 

gambling. For example, the ‘‘Interstate Horseracing Act’’ 15 U.S.C. 

§§ 3001–3007, (Pub. L. No. 95–515) was enacted in 1978, permitting interstate off-track wagers under certain specified conditions. 

In 1988, Congress enacted the Indian Gaming Regulatory Act, 25 

U.S.C. § 2701, (‘‘IGRA’’) (Pub. L. No. 100–497), allowing casinos to 

be built on Indian reservations. 

H.R. 4411 was introduced by Representative Leach on November 

18, 2005. The bill has 35 cosponsors. The bill was referred to the 

Committee on Financial Services, and then to the Subcommittee on 

Financial Institutions and Consumer Credit. The Full Financial 

Services Committee held a markup on March 15, 2006. Mr. Leach 

offered an amendment in the nature of a substitute, which included 

both technical and substantive changes. The bill was reported favorably via voice vote. On April 6, 2006 the bill was referred sequentially, until May 26, 2006, to the Committee on the Judiciary. 

HEARINGS

The Committee on the Judiciary held no hearings on H.R. 4411, 

the ‘‘Unlawful Internet Gambling Enforcement Act of 2006.’’


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COMMITTEE CONSIDERATION

On May 25, 2006, the Committee met in open session and ordered favorably reported the bill H.R. 4411, as amended, by voice 

vote, 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 there were no 

recorded votes during the committee consideration of H.R. 4411. 

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 rule XIII of the Rules of the House of Representatives 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. 4411, the following estimate and comparison prepared 

by the Congressional Budget Office pursuant to section 402 of the 

Congressional Budget Act of 1974. 

MAY 26, 2006. 

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 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. 

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 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 


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11 

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 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 institution 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 Department 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 


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12 

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 within 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 significant. 

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 bet 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 

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). 


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13 

The bill would require the Secretary of 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 certain 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 other bank 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. 

Previous estimates: On March 30, 2006, CBO transmitted a cost 

estimate for H.R. 4411, the Unlawful Internet Gambling Enforcement Act of 2006, as ordered reported by the House Committee on 

Financial Services on March 15, 2006. The two bills are virtually 

identical and the estimated costs are the same. 

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. 

PERFORMANCE GOALS AND OBJECTIVES

The Committee states that pursuant to clause 3(c)(4) of rule XIII 

of the Rules of the House of Representatives, H.R. 4411 is to prevent the use of certain payment instruments, credit cards, and 

fund transfers for unlawful Internet gambling, and for other purposes. 


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14 

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 art. I, § 8 of the Constitution. 

SECTION-BY-SECTION ANALYSIS AND DISCUSSION

The following discussion describes the bill as reported by the 

Committee on the Judiciary. 

Section 1. Short title 

This section would provide that this legislation 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. 

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 

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. 


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15 

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 (Pub. L. No. 95–515) (IHA) 

which will not be considered unlawful, because the IHA only regulates legal transactions that are lawful in each of the states involved. This section 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 United States 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, including transactions that are in violation of the Wire Act. 

(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. 

SECTION 5365. CIVIL REMEDIES

Authorizes the United States 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; 


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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, under title 18 of the U.S. Code, 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 4. Internet gambling in or through foreign jurisdictions 

Section 4(a) provides that, in deliberations between the United 

States government and any other country on money laundering, 

corruption, and crime issues, the United States 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 issues 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 

* * * * * * * 

SUBTITLE IV—MONEY 

* * * * * * * 


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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; 

(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); 


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18 

(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. 

(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 


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19 

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—


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20 

(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 

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 


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21 

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 TRANS- MITTING 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. 

§ 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 


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22 

(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; 

(B) block restricted transactions identified as a result of 

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

(C) block transactions that are in violation of section 

1084 of title 18. 

(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 PROCE- DURES.—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 TRANSACTIONS.—A person that identifies and blocks a 

transaction, prevents or prohibits the acceptance of its products or 


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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 

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.—


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(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 

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 


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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. 

* * * * * * * 

Æ 


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