106TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 2d Session 106–655, Part I

INTERNET GAMBLING PROHIBITION ACT OF 2000

JUNE 7, 2000.—Ordered to be printed

Mr. MCCOLLUM, from the Committee on the Judiciary,

submitted the following

R E P O R T

together with additional and

DISSENTING VIEWS

[To accompany H.R. 3125]

[Including cost estimate of the Congressional Budget Office]

The Committee on the Judiciary, to whom was referred the bill

(H.R. 3125) to prohibit Internet gambling, and for other purposes,

having considered the same, reports favorably thereon with an

amendment and recommends that the bill as amended do pass.

TABLE OF CONTENTS

Page

The Amendment ......................................................................................... 2

Purpose and Summary .............................................................................. 10

Background and Need for the Legislation ................................................ 11

Hearings ...................................................................................................... 12

Committee Consideration .......................................................................... 12

Votes of the Committee ............................................................................. 12

Committee Oversight Findings ................................................................. 17

Committee on Government Reform Findings .......................................... 17

New Budget Authority and Tax Expenditures ........................................ 17

Congressional Budget Office Cost Estimate ............................................ 17

Constitutional Authority Statement ......................................................... 21

Section-by-Section Analysis and Discussion ............................................ 21

Changes in Existing Law Made by the Bill, as Reported ....................... 31

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Additional Views ........................................................................................ 45

Dissenting Views ........................................................................................ 47

The amendment is as follows:

Strike out all after the enacting clause and insert in lieu thereof the following:

SECTION 1. SHORT TITLE.

This Act may be cited as the ‘‘Internet Gambling Prohibition Act of 2000’’.

SEC. 2. PROHIBITION ON INTERNET GAMBLING.

(a) IN GENERAL.—Chapter 50 of title 18, United States Code, is amended by

adding at the end the following:

‘‘§ 1085. Internet gambling

‘‘(a) DEFINITIONS.—In this section the following definitions apply:

‘‘(1) BETS OR WAGERS.—The term ‘bets or wagers’—

‘‘(A) means the staking or risking by any person of something of value

upon the outcome of a contest of others, a sporting event, or a game predominantly subject to chance, upon an agreement or understanding that the

person or another person will receive something of greater value than the

amount staked or risked in the event of a certain outcome;

‘‘(B) includes the purchase of a chance or opportunity to win a lottery

or other prize (which opportunity to win is predominantly subject to

chance);

‘‘(C) includes any scheme of a type described in section 3702 of title 28;

and

‘‘(D) does not include—

‘‘(i) a bona fide business transaction governed by the securities

laws (as that term is defined in section 3(a)(47) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(47))) for the purchase or sale at

a future date of securities (as that term is defined in section 3(a)(10)

of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(10)));

‘‘(ii) a transaction on or subject to the rules of a contract market

designated pursuant to section 5 of the Commodity Exchange Act (7

U.S.C. 7);

‘‘(iii) a contract of indemnity or guarantee;

‘‘(iv) a contract for life, health, or accident insurance; or

‘‘(v) participation in a simulation sports game or an educational

game or contest that—

‘‘(I) is not dependent solely on the outcome of any single sporting event or nonparticipant’s singular individual performance in

any single sporting event;

‘‘(II) has an outcome that reflects the relative knowledge and

skill of the participants with such outcome determined predominantly by accumulated statistical results of sporting events and

nonparticipants accumulated individual performances therein; 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) CLOSED-LOOP SUBSCRIBER-BASED SERVICE.—The term ‘closed-loop subscriber-based service’ means any information service or system that uses—

‘‘(A) a device or combination of devices—

‘‘(i) expressly authorized and operated in accordance with the laws

of a State, exclusively for placing, receiving, or otherwise making a bet

or wager described in subsection (f)(1)(B); and

‘‘(ii) by which a person located within any State must subscribe and

be registered with the provider of the wagering service by name, address, and appropriate billing information to be authorized to place, receive, or otherwise make a bet or wager, and must be physically located

within that State in order to be authorized to do so;

‘‘(B) an effective customer verification and age verification system, expressly authorized and operated in accordance with the laws of the State

in which it is located, to ensure that all applicable Federal and State legal

and regulatory requirements for lawful gambling are met; and

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‘‘(C) appropriate data security standards to prevent unauthorized access by any person who has not subscribed or who is a minor.

‘‘(3) FOREIGN JURISDICTION.—The term ‘foreign jurisdiction’ means a jurisdiction of a foreign country or political subdivision thereof.

‘‘(4) GAMBLING BUSINESS.—The term ‘gambling business’ means—

‘‘(A) a business that is conducted at a gambling establishment, or

that—

‘‘(i) involves—

‘‘(I) the placing, receiving, or otherwise making of bets or wagers; or

‘‘(II) the offering to engage in the placing, receiving, or otherwise making of bets or wagers;

‘‘(ii) involves 1 or more persons who conduct, finance, manage, supervise, direct, or own all or part of such business; and

‘‘(iii) has been or remains in substantially continuous operation for a period in excess of 10 days or has a gross revenue of $2,000 or more

from such business during any 24-hour period; and

‘‘(B) any soliciting agent of a business described in subparagraph (A).

‘‘(5) INFORMATION ASSISTING IN THE PLACING OF A BET OR WAGER.—The term

‘information assisting in the placing of a bet or wager’—

‘‘(A) means information that is intended by the sender or recipient to

be used by a person engaged in the business of betting or wagering to place,

receive, or otherwise make a bet or wager; and

‘‘(B) does not include—

‘‘(i) information concerning parimutuel pools that is exchanged exclusively between or among 1 or more racetracks or other parimutuel

wagering facilities licensed by the State or approved by the foreign jurisdiction in which the facility is located, and 1 or more parimutuel wagering facilities licensed by the State or approved by the foreign jurisdiction in which the facility is located, if that information is used only

to conduct common pool parimutuel pooling under applicable law;

‘‘(ii) information exchanged exclusively between or among 1 or

more racetracks or other parimutuel wagering facilities licensed by the

State or approved by the foreign jurisdiction in which the facility is located, and a support service located in another State or foreign jurisdiction, if the information is used only for processing bets or wagers made

with that facility under applicable law;

‘‘(iii) information exchanged exclusively between or among 1 or

more wagering facilities that are licensed and regulated by the State

in which each facility is located, and any support service, wherever located, if the information is used only for the pooling or processing of

bets or wagers made by or with the facility or facilities under each

State’s applicable law;

‘‘(iv) any news reporting or analysis of wagering activity, including

odds, racing or event results, race and event schedules, or categories of

wagering; or

‘‘(v) any posting or reporting of any educational information on how

to make a bet or wager or the nature of betting or wagering.

‘‘(6) INTERACTIVE COMPUTER SERVICE.—The term ‘interactive computer service’ means any information service, system, or access software provider that operates in, or uses a channel or instrumentality of, interstate or foreign commerce to provide or enable access by multiple users to a computer server, which

includes the transmission, storage, retrieval, hosting, linking, formatting, or

translation of a communication made by another person, and including specifically a service, system, or access software provider that—

‘‘(A) provides access to the Internet; or

‘‘(B) is engaged in the business of providing an information location tool

(which means a service that refers or links users to an online location, including a directory, index, reference, pointer, or hypertext link).

‘‘(7) INTERACTIVE COMPUTER SERVICE PROVIDER.—The term ‘interactive computer service provider’ means any person that provides an interactive computer

service, to the extent that such person offers or provides such service.

‘‘(8) INTERNET.—The term ‘Internet’ means the international computer network of both Federal and non-Federal interoperable packet switched data networks.

‘‘(9) PERSON.—The term ‘person’ means any individual, association, partnership, joint venture, corporation (or any affiliate of a corporation), State or political subdivision thereof, department, agency, or instrumentality of a State or poVerDate 11-MAY-2000 01:52 Jun 13, 2000 Jkt 010199 PO 00000 Frm 00003 Fmt 6659 Sfmt 6621 E:\WAISREPT\HR655P1.106 ATX006 PsN: ATX006
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litical subdivision thereof, or any other government, organization, or entity (including any governmental entity (as defined in section 3701(2) of title 28)).

‘‘(10) PRIVATE NETWORK.—The term ‘private network’ means a communications channel or channels, including voice or computer data transmission facilities, that use either—

‘‘(A) private dedicated lines; or

‘‘(B) the public communications infrastructure, if the infrastructure is

secured by means of the appropriate private communications technology to

prevent unauthorized access.

‘‘(11) STATE.—The term ‘State’ means a State of the United States, the District of Columbia, the Commonwealth of Puerto Rico, or a commonwealth, territory, or possession of the United States.

‘‘(12) SUBSCRIBER.—The term ‘subscriber’—

‘‘(A) means any person with a business relationship with the interactive

computer service provider through which such person receives access to the

system, service, or network of that provider, even if no formal subscription

agreement exists; and

‘‘(B) includes registrants, students who are granted access to a university system or network, and employees or contractors who are granted access to the system or network of their employer.

‘‘(13) SOLICITING AGENT.—The term ‘soliciting agent’ means any agent who

knowingly solicits for a gambling business described in paragraph (4)(A) of this

subsection.

‘‘(b) INTERNET GAMBLING.— ‘‘(1) PROHIBITION.—Subject to subsection (f), it shall be unlawful for a person engaged in a gambling business knowingly to use the Internet or any other

interactive computer service—

‘‘(A) to place, receive, or otherwise make a bet or wager; or

‘‘(B) to send, receive, or invite information assisting in the placing of

a bet or wager.

‘‘(2) PENALTIES.—A person engaged in a gambling business who violates

this section shall be—

‘‘(A) fined in an amount equal to not more than the greater of—

‘‘(i) the total amount that such person bet or wagered, or placed,

received, or accepted in bets or wagers, as a result of engaging in that

business in violation of this section; or ‘‘(ii) $20,000;

‘‘(B) imprisoned not more than 4 years; or

‘‘(C) both.

‘‘(3) PERMANENT INJUNCTIONS.—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.

‘‘(c) CIVIL REMEDIES.— ‘‘(1) JURISDICTION.—The district courts of the United States shall have

original and exclusive jurisdiction to prevent and restrain violations of this section by issuing appropriate orders in accordance with this section, regardless of

whether a prosecution has been initiated under this section.

‘‘(2) PROCEEDINGS.— ‘‘(A) INSTITUTION BY FEDERAL GOVERNMENT.— ‘‘(i) IN GENERAL.—The United States may institute proceedings

under this subsection to prevent or restrain a violation of this section.

‘‘(ii) RELIEF.—Upon application of the United States under this

subparagraph, the district court may enter a temporary restraining

order or an injunction against any person to prevent or restrain a violation of this section if the court determines, after notice and an opportunity for a hearing, that there is a substantial probability that such

violation has occurred or will occur.

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

‘‘(i) IN GENERAL.—The attorney general of a State (or other appropriate State official) in which a violation of this section allegedly has

occurred or will occur, after providing written notice to the United

States, may institute proceedings under this subsection to prevent or

restrain the violation.

‘‘(ii) RELIEF.—Upon application of the attorney general (or other

appropriate State official) of an affected State under this subparagraph,

the district court may enter a temporary restraining order or an injunction against any person to prevent or restrain a violation of this section

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if the court determines, after notice and an opportunity for a hearing,

that there is a substantial probability that such violation has occurred

or will occur.

‘‘(C) INDIAN LANDS.—Notwithstanding subparagraphs (A) and (B), for a

violation that is alleged to have occurred, or may occur, on Indian lands (as

that term is defined in section 4 of the Indian Gaming Regulatory Act (25

U.S.C. 2703))—

‘‘(i) the United States shall have the enforcement authority provided under subparagraph (A); 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.

‘‘(D) EXPIRATION.—Any temporary restraining order or preliminary injunction entered pursuant to subparagraph (A) or (B) shall expire if, and

as soon as, the United States, or the attorney general (or other appropriate

State official) of the State, as applicable, notifies the court that issued the

order or injunction that the United States or the State, as applicable, will

not seek a permanent injunction.

‘‘(3) EXPEDITED PROCEEDINGS.— ‘‘(A) IN GENERAL.—In addition to any proceeding under paragraph (2),

a district court may, in exigent circumstances, enter a temporary restraining order against a person alleged to be in violation of this section upon

application of the United States under paragraph (2)(A), or the attorney

general (or other appropriate State official) of an affected State under paragraph (2)(B), without notice and the opportunity for a hearing as provided

in rule 65(b) of the Federal Rules of Civil Procedure (except as provided in

subsection (d)(3)), if the United States or the State, as applicable, demonstrates that there is probable cause to believe that the use of the Internet

or other interactive computer service at issue violates this section.

‘‘(B) HEARINGS.—A hearing requested concerning an order entered

under this paragraph shall be held at the earliest practicable time.

‘‘(d) INTERACTIVE COMPUTER SERVICE PROVIDERS.— ‘‘(1) IMMUNITY FROM LIABILITY FOR USE BY ANOTHER.— ‘‘(A) IN GENERAL.—An interactive computer service provider described

in subparagraph (B) shall not be liable, under this section or any other provision of Federal or State law prohibiting or regulating gambling or gambling-related activities, for the use of its facilities or services by another

person to engage in Internet gambling activity or advertising or promotion

of Internet gambling activity that violates such law—

‘‘(i) arising out of any transmitting, routing, or providing of connections for gambling-related material or activity (including intermediate

and temporary storage in the course of such transmitting, routing, or

providing connections) by the provider, if—

‘‘(I) the material or activity was initiated by or at the direction

of a person other than the provider;

‘‘(II) the transmitting, routing, or providing of connections is

carried out through an automatic process without selection of the

material or activity by the provider;

‘‘(III) the provider does not select the recipients of the material

or activity, except as an automatic response to the request of another person; and

‘‘(IV) the material or activity is transmitted through the system or network of the provider without modification of its content;

or

‘‘(ii) arising out of any gambling-related material or activity at an

online site residing on a computer server owned, controlled, or operated

by or for the provider, or arising out of referring or linking users to an

online location containing such material or activity, if the material or

activity was initiated by or at the direction of a person other than the

provider, unless the provider fails to take expeditiously, with respect to

the particular material or activity at issue, the actions described in

paragraph (2)(A) following the receipt by the provider of a notice described in paragraph (2)(B).

‘‘(B) ELIGIBILITY.—An interactive computer service provider is described

in this subparagraph only if the provider—

‘‘(i) maintains and implements a written or electronic policy that

requires the provider to terminate the account of a subscriber of its sysVerDate 11-MAY-2000 01:52 Jun 13, 2000 Jkt 010199 PO 00000 Frm 00005 Fmt 6659 Sfmt 6621 E:\WAISREPT\HR655P1.106 ATX006 PsN: ATX006
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tem or network expeditiously following the receipt by the provider of

a notice described in paragraph (2)(B) alleging that such subscriber has

violated or is violating this section; and

‘‘(ii) with respect to the particular material or activity at issue, has

not knowingly permitted its computer server to be used to engage in

activity that the provider knows is prohibited by this section, with the

specific intent that such server be used for such purpose.

‘‘(2) NOTICE TO INTERACTIVE COMPUTER SERVICE PROVIDERS.—

‘‘(A) IN GENERAL.—If an interactive computer service provider receives

from a Federal or State law enforcement agency, acting within its authority

and jurisdiction, a written or electronic notice described in subparagraph

(B), that a particular online site residing on a computer server owned, controlled, or operated by or for the provider is being used by another person

to violate this section, the provider shall expeditiously—

‘‘(i) remove or disable access to the material or activity residing at

that online site that allegedly violates this section; or

‘‘(ii) in any case in which the provider does not control the site at

which the subject material or activity resides, the provider, through

any agent of the provider designated in accordance with section

512(c)(2) of title 17, or other responsible identified employee or

contractor—

‘‘(I) notify the Federal or State law enforcement agency that

the provider is not the proper recipient of such notice; and

‘‘(II) upon receipt of a subpoena, cooperate with the Federal or

State law enforcement agency in identifying the person or persons

who control the site.

‘‘(B) NOTICE.—A notice is described in this subparagraph only if it—

‘‘(i) identifies the material or activity that allegedly violates this

section, and alleges that such material or activity violates this section;

‘‘(ii) provides information reasonably sufficient to permit the provider to locate (and, as appropriate, in a notice issued pursuant to

paragraph (3)(A) to block access to) the material or activity;

‘‘(iii) is supplied to any agent of a provider designated in accordance with section 512(c)(2) of title 17, if information regarding such

designation is readily available to the public;

‘‘(iv) provides information that is reasonably sufficient to permit

the provider to contact the law enforcement agency that issued the notice, including the name of the law enforcement agency, and the name

and telephone number of an individual to contact at the law enforcement agency (and, if available, the electronic mail address of that individual); and

‘‘(v) declares under penalties of perjury that the person submitting

the notice is an official of the law enforcement agency described in

clause (iv).

‘‘(3) INJUNCTIVE RELIEF.—

‘‘(A) IN GENERAL.—The United States, or a State law enforcement agency acting within its authority and jurisdiction, may, not less than 24 hours

following the issuance to an interactive computer service provider of a notice described in paragraph (2)(B), in a civil action, obtain a temporary restraining order, or an injunction to prevent the use of the interactive computer service by another person in violation of this section.

‘‘(B) LIMITATIONS.—Notwithstanding any other provision of this section,

in the case of any application for a temporary restraining order or an injunction against an interactive computer service provider described in paragraph (1)(B) to prevent a violation of this section—

‘‘(i) arising out of activity described in paragraph (1)(A)(i), the injunctive relief is limited to—

‘‘(I) an order restraining the provider from providing access to

an identified subscriber of the system or network of the interactive

computer service provider, if the court determines that there is

probable cause to believe that such subscriber is using that access

to violate this section (or to engage with another person in a communication that violates this section), by terminating the specified

account of that subscriber; and

‘‘(II) an order restraining the provider from providing access,

by taking reasonable steps specified in the order to block access,

to a specific, identified, foreign online location;

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‘‘(ii) arising out of activity described in paragraph (1)(A)(ii), the injunctive relief is limited to—

‘‘(I) the orders described in clause (i)(I);

‘‘(II) an order restraining the provider from providing access to

the material or activity that violates this section at a particular online site residing on a computer server operated or controlled by

the provider; and

‘‘(III) such other injunctive remedies as the court considers

necessary to prevent or restrain access to specified material or activity that is prohibited by this section at a particular online location residing on a computer server operated or controlled by the

provider, that are the least burdensome to the provider among the

forms of relief that are comparably effective for that purpose.

‘‘(C) CONSIDERATIONS.—The court, in determining appropriate injunctive relief under this paragraph, shall consider—

‘‘(i) whether such an injunction, either alone or in combination with

other such injunctions issued, and currently operative, against the

same provider would significantly (and, in the case of relief under subparagraph (B)(ii), taking into account, among other factors, the conduct

of the provider, unreasonably) burden either the provider or the operation of the system or network of the provider;

‘‘(ii) whether implementation of such an injunction would be technically feasible and effective, and would not materially interfere with

access to lawful material at other online locations;

‘‘(iii) whether other less burdensome and comparably effective

means of preventing or restraining access to the illegal material or activity are available; and

‘‘(iv) the magnitude of the harm likely to be suffered by the community if the injunction is not granted.

‘‘(D) NOTICE AND EX PARTE ORDERS.—Injunctive relief under this paragraph shall not be available without notice to the service provider and an

opportunity for such provider to appear before the court, except for orders

ensuring the preservation of evidence or other orders having no material

adverse effect on the operation of the communications network of the service provider.

‘‘(4) ADVERTISING OR PROMOTION OF NON-INTERNET GAMBLING.— ‘‘(A) DEFINITIONS.—In this paragraph:

‘‘(i) CONDUCTED.—With respect to a gambling activity, that activity

is ‘conducted’ in a State if the State is the State in which the gambling

establishment (as defined in section 1081) that offers the gambling activity being advertised or promoted is physically located.

‘‘(ii) NON-INTERNET GAMBLING ACTIVITY.—The term ‘non-Internet

gambling activity’ means—

‘‘(I) a gambling activity in which the placing of the bet or

wager is not conducted by the Internet; or

‘‘(II) a gambling activity to which the prohibitions of this section do not apply.

‘‘(B) IMMUNITY FROM LIABILITY FOR USE BY ANOTHER.— ‘‘(i) IN GENERAL.—An interactive computer service provider described in clause (ii) shall not be liable, under any provision of Federal

or State law prohibiting or regulating gambling or gambling-related activities, or under any State law prohibiting or regulating advertising

and promotional activities, for—

‘‘(I) content, provided by another person, that advertises or promotes non-Internet gambling activity that violates such law (unless

the provider is engaged in the business of such gambling), arising

out of any of the activities described in paragraph (1)(A) (i) or (ii);

or

‘‘(II) content, provided by another person, that advertises or

promotes non-Internet gambling activity that is lawful under Federal law and the law of the State in which such gambling activity

is conducted.

‘‘(ii) ELIGIBILITY.—An interactive computer service is described in

this clause only if the provider—

‘‘(I) maintains and implements a written or electronic policy

that requires the provider to terminate the account of a subscriber

of its system or network expeditiously following the receipt by the

provider of a notice described in paragraph (2)(B) alleging that

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such subscriber maintains a website on a computer server controlled or operated by the provider for the purpose of engaging in

advertising or promotion of non-Internet gambling activity prohibited by a Federal law or a law of the State in which such activity

is conducted;

‘‘(II) with respect to the particular material or activity at issue,

has not knowingly permitted its computer server to be used to engage in the advertising or promotion of non-Internet gambling activity that the provider knows is prohibited by a Federal law or a

law of the State in which the activity is conducted, with the specific

intent that such server be used for such purpose; and

‘‘(III) at reasonable cost, offers residential customers of the provider’s Internet access service, if the provider provides Internet access service to such customers, computer software, or another filtering or blocking system that includes the capability of filtering or

blocking access by minors to online Internet gambling sites that

violate this section.

‘‘(C) NOTICE TO INTERACTIVE COMPUTER SERVICE PROVIDERS.—

‘‘(i) NOTICE FROM FEDERAL LAW ENFORCEMENT AGENCY.—If an

interactive computer service provider receives from a Federal law enforcement agency, acting within its authority and jurisdiction, a written

or electronic notice described in paragraph (2)(B), that a particular online site residing on a computer server owned, controlled, or operated

by or for the provider is being used by another person to advertise or

promote non-Internet gambling activity that violates a Federal law prohibiting or regulating gambling or gambling-related activities, the provider shall expeditiously take the actions described in paragraph (2)(A)

(i) or (ii) with respect to the advertising or promotion identified in the

notice.

‘‘(ii) NOTICE FROM STATE LAW ENFORCEMENT AGENCY.—If an interactive computer service provider receives from a State law enforcement

agency, acting within its authority and jurisdiction, a written or electronic notice described in paragraph (2)(B), that a particular online site

residing on a computer server owned, controlled, or operated by or for

the provider is being used by another person to advertise or promote

non-Internet gambling activity that is conducted in that State and that

violates a law of that State prohibiting or regulating gambling or gambling-related activities, the provider shall expeditiously take the actions

described in paragraph (2)(A) (i) or (ii) with respect to the advertising

or promotion identified in the notice.

‘‘(D) INJUNCTIVE RELIEF.—The United States, or a State law enforcement agency, acting within its authority and jurisdiction, may, not less

than 24 hours following the issuance to an interactive computer service provider of a notice described in paragraph (2)(B), in a civil action, obtain a

temporary restraining order, or an injunction, to prevent the use of the

interactive computer service by another person to advertise or promote nonInternet gambling activity that violates a Federal law, or a law of the State

in which such activity is conducted that prohibits or regulates gambling or

gambling-related activities, as applicable. The procedures described in paragraph (3)(D) shall apply to actions brought under this subparagraph, and

the relief in such actions shall be limited to—

‘‘(i) an order requiring the provider to remove or disable access to

the advertising or promotion of non-Internet gambling activity that violates Federal law, or the law of the State in which such activity is conducted, as applicable, at a particular online site residing on a computer

server controlled or operated by the provider;

‘‘(ii) an order restraining the provider from providing access to an

identified subscriber of the system or network of the provider, if the

court determines that such subscriber maintains a website on a computer server controlled or operated by the provider that the subscriber

is knowingly using or knowingly permitting to be used to advertise or

promote non-Internet gambling activity that violates Federal law or the

law of the State in which such activity is conducted; and

‘‘(iii) an order restraining the provider of the content of the advertising or promotion of such illegal gambling activity from disseminating

such advertising or promotion on the computer server controlled or operated by the provider of such interactive computer service.

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‘‘(E) APPLICABILITY.—The provisions of subparagraphs (C) and (D) do

not apply to the content described in subparagraph (B)(i)(II).

‘‘(5) EFFECT ON OTHER LAW.—

‘‘(A) IMMUNITY FROM LIABILITY FOR COMPLIANCE.—An interactive computer service provider shall not be liable for any damages, penalty, or forfeiture, civil or criminal, under Federal or State law for taking in good faith

any action described in paragraphs (2)(A), (4)(B)(ii)(I), or (4)(C) to comply

with a notice described in paragraph (2)(B), or complying with any court

order issued under paragraph (3) or (4)(D).

‘‘(B) DISCLAIMER OF OBLIGATIONS.—Nothing in this section may be construed to impose or authorize an obligation on an interactive computer service provider described in paragraph (1)(B)—

‘‘(i) to monitor material or use of its service; or

‘‘(ii) except as required by a notice or an order of a court under this

subsection, to gain access to, to remove, or to disable access to material.

‘‘(C) RIGHTS OF SUBSCRIBERS.—Nothing in this section may be construed to prejudice the right of a subscriber to secure an appropriate determination, as otherwise provided by law, in a Federal court or in a State

or local tribunal or agency, that the account of such subscriber should not

be terminated pursuant to this subsection, or should be restored.

‘‘(e) AVAILABILITY OF RELIEF.—The availability of relief under subsections (c)

and (d) shall not depend on, or be affected by, the initiation or resolution of any

action under subsection (b), or under any other provision of Federal or State law.

‘‘(f) APPLICABILITY.—

‘‘(1) IN GENERAL.—Subject to paragraph (2), the prohibition in this section

does not apply to—

‘‘(A) any otherwise lawful bet or wager that is placed and received, or

otherwise made wholly intrastate for a State lottery, or for a multi-State

lottery operated jointly between 2 or more States in conjunction with State

lotteries if—

‘‘(i) each such lottery is expressly authorized, and licensed or regulated, under applicable State law;

‘‘(ii) the bet or wager is placed on an interactive computer service

that uses a private network or a closed-loop subscriber based service

regulated and operated by the State lottery or its expressly designated

agent for such activity;

‘‘(iii) each person placing or otherwise making that bet or wager is

physically located when such bet or water is placed at a facility that

is open to the general public; and

‘‘(iv) each such lottery complies with sections 1301 through 1304,

and other applicable provisions of Federal law;

‘‘(B) any otherwise lawful bet or wager that is placed, received, or otherwise made on an interstate or intrastate basis on a live horse or a live

dog race or on jai alai, or the sending, receiving, or inviting of information

assisting in the placing of such a bet or wager, if such bet or wager, or the

transmission of such information, as applicable, is—

‘‘(i) expressly authorized, and licensed or regulated by the State in

which such bet or wager is received, under applicable Federal and such

State’s laws;

‘‘(ii) placed on a closed-loop subscriber-based service;

‘‘(iii) initiated from a State in which betting or wagering on that

same type of live horse or live dog racing or on jai alai is lawful and

received in a State in which such betting or wagering is lawful;

‘‘(iv) subject to the regulatory oversight of the State in which the

bet or wager is received and subject by such State to minimum control

standards for the accounting, regulatory inspection, and auditing of all

such bets or wagers transmitted from 1 State to another; and

‘‘(v) in the case of—

‘‘(I) live horse racing, made in accordance with the Interstate

Horse Racing Act of 1978 (15 U.S.C. 3001 et seq.) and the requirements, if any, established by an appropriate legislative or regulatory body of the State in which the bet or wager originates;

‘‘(II) live dog racing, subject to regulatory consent agreements

that are comparable to those required by the Interstate Horse Racing Act of 1978, and the requirements, if any, established by an appropriate legislative or regulatory body of the State in which the

bet or wager originates; or

10

‘‘(III) live jai alai, subject to regulatory consent agreements

that are comparable to those required by the Interstate Horse Racing Act of 1978, and the requirements, if any, established by an appropriate legislative or regulatory body of the State in which the

bet or wager originates;

‘‘(C) any otherwise lawful bet or wager that is placed, received, or otherwise made wholly intrastate, or the sending, receiving, or inviting of information assisting in the placing of such a bet or wager, if such bet or

wager, or the transmission of such information, as applicable is—

‘‘(i) expressly authorized, and licensed or regulated by the State in

which such bet or wager is initiated and received, under applicable

Federal and such State’s laws; and

‘‘(ii) placed on a closed-loop subscriber based service; or

‘‘(D) any otherwise lawful bet or wager that is—

‘‘(i) placed on a closed-loop subscriber based service or a private

network; and

‘‘(ii) is lawfully received by a federally recognized Indian tribe, or

the sending, receiving, or inviting of information assisting in the placing of any such bet or wager, if the game is permitted under and conducted in accordance with the Indian Gaming Regulatory Act, so long

as each person placing, receiving, or otherwise making such a bet or

wager, or transmitting such information, is physically located on Indian

lands (as that term is defined in section 4 of the Indian Gaming Regulatory Act) when such person places, receives, or otherwise makes the

bet or wager.

‘‘(2) BETS OR WAGERS MADE BY AGENTS OR PROXIES.—

‘‘(A) IN GENERAL.—Paragraph (1) does not apply in any case in which

a bet or wager is placed, received, or otherwise made by the use of an agent

or proxy using the Internet or an interactive computer service.

‘‘(B) QUALIFICATION.—Nothing in this paragraph may be construed to

prohibit the owner operator of a parimutuel wagering facility that is licensed by a State from employing an agent in the operation of the account

wagering system owned or operated by the parimutuel facility.

‘‘(3) ADVERTISING AND PROMOTION.—The prohibition of subsection (b)(1)(B)

does not apply to advertising, promotion, or other communication by, or authorized by, anyone licensed to operate a gambling business in a State.

‘‘(g) RULE OF CONSTRUCTION.—Nothing in this section may be construed to affect any prohibition or remedy applicable to a person engaged in a gambling business under any other provision of Federal or State law.’’.

(b) TECHNICAL AMENDMENT.—The analysis for chapter 50 of title 18, United

States Code, is amended by adding at the end the following:

‘‘1085. Internet gambling.’’.

SEC. 3. REPORT ON ENFORCEMENT.

Not later than 3 years after the date of enactment of this Act, the Attorney

General shall submit to Congress a report, which shall include—

(1) an analysis of the problems, if any, associated with enforcing section

1085 of title 18, United States Code, as added by section 2 of this Act;

(2) recommendations for the best use of the resources of the Department

of Justice to enforce that section; and

(3) an estimate of the amount of activity and money being used to gamble

on the Internet.

SEC. 4. SEVERABILITY.

If any provision of this Act, an amendment made by this Act, or the application

of such provision or amendment to any person or circumstance is held to be unconstitutional, the remainder of this Act, the amendments made by this Act, and the

application of this Act and the provisions of such amendments to any other person

or circumstance shall not be affected thereby.

PURPOSE AND SUMMARY

Under current Federal law, it is unclear that using the Internet

to operate a gambling business is illegal. H.R. 3125, the ‘‘Internet

Gambling Prohibition Act of 2000,’’ would prohibit persons engaged

in a gambling business from using the Internet or any other interactive computer service to place, receive, or otherwise make a bet

11

or wager, or send, receive, or invite information assisting in the

placing of a bet or wager. This legislation also contains mechanisms intended to facilitate enforcement through a ‘‘notice and

takedown’’ civil remedy program involving interactive computer

service providers and illegal gambling websites. The authorized

penalties are imprisonment up to 4 years and fines as much as

$20,000.

BACKGROUND AND NEED FOR THE LEGISLATION

Over the last few years, gambling websites have proliferated on

the Internet. What was once a cottage industry has become an extremely lucrative and large business. Numerous studies have

charted the explosive growth of this industry, both by the increases

in gambling websites available, and via industry revenues. Earlier

this year, an FBI study reported growth from $300 million in 1998

to $651 million in 1999. More recently Bear, Stearns & Co. Inc. reported that there were then at least 650 Internet gambling

websites, and that total revenues for 1999 had been $1.2 billion (an

80% increase from 1998) and would grow to $3 billion by 2002.

On-line casino operators have created ‘‘virtual strip’’—where

gamblers who are tired of one casino can simply ‘‘walk’’ down the

virtual Internet boardwalk into a different casino. Internet gambling sites offer everything from sports betting to blackjack. Most

of these virtual casinos are organized and operated from tropical

off-shore locations, where the operators feel free from both State

and Federal interference. Among the most popular locales are Antigua, St. Martin and Costa Rica.

The bill brings the law up to date with Internet technology by

clarifying Federal law that operating an Internet gambling business is illegal. It does not, however, supersede the traditional leadership roles of States in enforcing gambling border within their

borders. It addresses a growing problem that no single State, or

collection of States, can adequately address. Because of the uniquely interstate and international nature of the Internet, H.R. 3125 is

necessary. The bill sets forth an effective Internet gambling regulatory framework that recognizes States’ leadership role is regulating gambling, and avoids intruding the Federal Government into

regulating legal gaming industries already regulated by the States.

At the same time H.R. 3125 provides the States and the Federal

Government with the needed tools to limit and regulate Internet

gambling.

Since the founding of our country, the Federal Government has

left gambling regulation to the States. The last two Federal commissions Congress created to look into gambling have concluded

that States are best equipped to regulate gambling within their

own borders, and recommended that Congress continue to defer to

the States in this respect. The Federal Government has largely deferred to the authority of States to determine the type and amount

of gambling permitted. For over 100 years, Congress has acted to

assist States in enforcing their respective policies on gambling

when development in technology, such as the Internet, have compromised the effectiveness of State gambling laws.

12

HEARINGS

In the 105th Congress, the Committee’s Subcommittee on Crime

held two day’s of hearing on legislation to ban Internet gambling

businesses. In the 106th Congress, one day of hearings on H.R.

3125 was held, on March 9, 2000. Testimony was received from the

following witnesses: ‘‘John Doe,’’ Internet Gambling Addict, San

Diego, California; The Honorable Jon Kyl, U. S. Senator, Arizona;

The Honorable Robert W. Goodlatte, 6th District, Virginia; Mr.

Kevin DiGregory, Deputy Assistant Attorney General, Criminal Division, United States Department of Justice; Mr. Robert Minnix,

Associate Athletics Director, Florida State University; The Honorable James E. Doyle, Attorney General, State of Wisconsin; Mr.

Stephen Walters, Chairman, Oregon Racing Commission; Mr. Keith

Whyte, Executive Director, National Council on Problem Gambling;

Bartlett Cleland, Policy Director, Center for Technology and Freedom. Additional material was submitted by: Jeffrey Pash, Executive Vice President and General Counsel, National Football League;

and, the Honorable Montie Deere, Chairman, National Indian

Gaming Commission.

COMMITTEE CONSIDERATION

On November 3, 1999, the Subcommittee on Crime met in open

session and ordered favorably reported the bill H.R.3125, by a vote

of 5 to 3, a quorum being present. On April 6, 2000, the committee

met in open session and ordered favorably reported the bill H.R.

3125 with amendment by a recorded vote of 21 to 8, a quorum

being present.

VOTES OF THE COMMITTEE

The committee considered the following amendments with recorded votes:

Mr. Goodlatte offered an amendment making largely technical

amendments to the bill, and providing a limited exemption for certain Indian gaming activities. Mr. Watt made a request for a division of the question on the technical amendments and the limited

Indian gaming exemption, which Chairman Hyde granted.

Part I of the amendment offered by Mr. Goodlatte to H.R. 3125.

By a rollcall vote of 24 yeas to 0 nays, the amendment was agreed

to.

ROLLCALL NO. 1

Ayes Nays Present

Mr. Sensenbrenner ............................................................................................ X ..................... .....................

Mr. McCollum .................................................................................................... X ..................... .....................

Mr. Gekas .......................................................................................................... X ..................... .....................

Mr. Coble ........................................................................................................... X ..................... .....................

Mr. Smith (TX) .................................................................................................. X ..................... .....................

Mr. Gallegly ....................................................................................................... ..................... ..................... .....................

Mr. Canady ........................................................................................................ ..................... ..................... .....................

Mr. Goodlatte .................................................................................................... X ..................... .....................

Mr. Chabot ........................................................................................................ X ..................... .....................

Mr. Barr ............................................................................................................. X ..................... .....................

Mr. Jenkins ........................................................................................................ X ..................... .....................

Mr. Hutchinson .................................................................................................. ..................... ..................... .....................

13

ROLLCALL NO. 1—Continued

Ayes Nays Present

Mr. Pease .......................................................................................................... X ..................... .....................

Mr. Cannon ....................................................................................................... X ..................... .....................

Mr. Rogan ......................................................................................................... X ..................... .....................

Mr. Graham ....................................................................................................... X ..................... .....................

Ms. Bono ........................................................................................................... X ..................... .....................

Mr. Bachus ........................................................................................................ X ..................... .....................

Mr. Scarborough ................................................................................................ ..................... ..................... .....................

Mr. Vitter ........................................................................................................... X ..................... .....................

Mr. Conyers ....................................................................................................... X ..................... .....................

Mr. Frank ........................................................................................................... ..................... ..................... .....................

Mr. Berman ....................................................................................................... ..................... ..................... .....................

Mr. Boucher ....................................................................................................... ..................... ..................... .....................

Mr. Nadler ......................................................................................................... ..................... ..................... .....................

Mr. Scott ........................................................................................................... X ..................... .....................

Mr. Watt ............................................................................................................ X ..................... .....................

Ms. Lofgren ....................................................................................................... ..................... ..................... .....................

Ms. Jackson Lee ................................................................................................ ..................... ..................... .....................

Ms. Waters ........................................................................................................ X ..................... .....................

Mr. Meehan ....................................................................................................... ..................... ..................... .....................

Mr. Delahunt ..................................................................................................... ..................... ..................... .....................

Mr. Wexler ......................................................................................................... X ..................... .....................

Mr. Rothman ..................................................................................................... X ..................... .....................

Ms. Baldwin ...................................................................................................... ..................... ..................... .....................

Mr. Weiner ......................................................................................................... X ..................... .....................

Mr. Hyde, Chairman .......................................................................................... X ..................... .....................

Total ................................................................................................ 24 0 .....................

Part II of the Goodlatte amendment, providing a limited exemption for certain Indian gaming activities, was agreed to by a rollcall

vote of 19 yeas to 5 nays.

ROLLCALL NO. 2

Ayes Nays Present

Mr. Sensenbrenner ............................................................................................ ..................... X .....................

Mr. McCollum .................................................................................................... X ..................... .....................

Mr. Gekas .......................................................................................................... X ..................... .....................

Mr. Coble ........................................................................................................... X ..................... .....................

Mr. Smith (TX) .................................................................................................. X ..................... .....................

Mr. Gallegly ....................................................................................................... ..................... ..................... .....................

Mr. Canady ........................................................................................................ ..................... ..................... .....................

Mr. Goodlatte .................................................................................................... X ..................... .....................

Mr. Chabot ........................................................................................................ X ..................... .....................

Mr. Barr ............................................................................................................. X ..................... .....................

Mr. Jenkins ........................................................................................................ X ..................... .....................

Mr. Hutchinson .................................................................................................. ..................... ..................... .....................

Mr. Pease .......................................................................................................... X ..................... .....................

Mr. Cannon ....................................................................................................... X ..................... .....................

Mr. Rogan ......................................................................................................... X ..................... .....................

Mr. Graham ....................................................................................................... X ..................... .....................

Ms. Bono ........................................................................................................... X ..................... .....................

Mr. Bachus ........................................................................................................ X ..................... .....................

Mr. Scarborough ................................................................................................ ..................... ..................... .....................

Mr. Vitter ........................................................................................................... X ..................... .....................

Mr. Conyers ....................................................................................................... ..................... X .....................

Mr. Frank ........................................................................................................... ..................... ..................... .....................

Mr. Berman ....................................................................................................... ..................... ..................... .....................

Mr. Boucher ....................................................................................................... ..................... ..................... .....................

Mr. Nadler ......................................................................................................... ..................... ..................... .....................

Mr. Scott ........................................................................................................... ..................... X .....................

Mr. Watt ............................................................................................................ ..................... X .....................

14

ROLLCALL NO. 2—Continued

Ayes Nays Present

Ms. Lofgren ....................................................................................................... ..................... ..................... .....................

Ms. Jackson Lee ................................................................................................ ..................... ..................... .....................

Ms. Waters ........................................................................................................ ..................... X .....................

Mr. Meehan ....................................................................................................... ..................... ..................... .....................

Mr. Delahunt ..................................................................................................... ..................... ..................... .....................

Mr. Wexler ......................................................................................................... X ..................... .....................

Mr. Rothman ..................................................................................................... X ..................... .....................

Ms. Baldwin ...................................................................................................... ..................... ..................... .....................

Mr. Weiner ......................................................................................................... X ..................... .....................

Mr. Hyde, Chairman .......................................................................................... X ..................... .....................

Total ................................................................................................ 19 5 .....................

Mr. Pease offered an amendment to strike the portion of the

State lottery exemption that would allow the sale of State lottery

tickets over the Internet at home. By a vote of 24 to 11, the amendment was agreed to.

ROLLCALL NO. 3

Ayes Nays Present

Mr. Sensenbrenner ............................................................................................ X ..................... .....................

Mr. McCollum .................................................................................................... X ..................... .....................

Mr. Gekas .......................................................................................................... X ..................... .....................

Mr. Coble ........................................................................................................... X ..................... .....................

Mr. Smith (TX) .................................................................................................. X ..................... .....................

Mr. Gallegly ....................................................................................................... X ..................... .....................

Mr. Canady ........................................................................................................ X ..................... .....................

Mr. Goodlatte .................................................................................................... X ..................... .....................

Mr. Chabot ........................................................................................................ ..................... X .....................

Mr. Barr ............................................................................................................. X ..................... .....................

Mr. Jenkins ........................................................................................................ X ..................... .....................

Mr. Hutchinson .................................................................................................. X ..................... .....................

Mr. Pease .......................................................................................................... X ..................... .....................

Mr. Cannon ....................................................................................................... ..................... X .....................

Mr. Rogan ......................................................................................................... X ..................... .....................

Mr. Graham ....................................................................................................... X ..................... .....................

Ms. Bono ........................................................................................................... X ..................... .....................

Mr. Bachus ........................................................................................................ X ..................... .....................

Mr. Scarborough ................................................................................................ X ..................... .....................

Mr. Vitter ........................................................................................................... X ..................... .....................

Mr. Conyers ....................................................................................................... ..................... X .....................

Mr. Frank ........................................................................................................... ..................... X .....................

Mr. Berman ....................................................................................................... ..................... X .....................

Mr. Boucher ....................................................................................................... X ..................... .....................

Mr. Nadler ......................................................................................................... ..................... X .....................

Mr. Scott ........................................................................................................... ..................... X .....................

Mr. Watt ............................................................................................................ ..................... X .....................

Ms. Lofgren ....................................................................................................... ..................... ..................... .....................

Ms. Jackson Lee ................................................................................................ X ..................... .....................

Ms. Waters ........................................................................................................ ..................... X .....................

Mr. Meehan ....................................................................................................... ..................... ..................... .....................

Mr. Delahunt ..................................................................................................... ..................... X .....................

Mr. Wexler ......................................................................................................... X ..................... .....................

Mr. Rothman ..................................................................................................... X ..................... .....................

Ms. Baldwin ...................................................................................................... X ..................... .....................

Mr. Weiner ......................................................................................................... ..................... X .....................

Mr. Hyde, Chairman .......................................................................................... X ..................... .....................

Total ................................................................................................ 24 11 .....................

15

Mr. Scott offered an amendment that would extend criminal liability under the bill to individuals.

The amendment was defeated 7–24.

ROLLCALL NO. 4

Ayes Nays Present

Mr. Sensenbrenner ............................................................................................ ..................... X .....................

Mr. McCollum .................................................................................................... ..................... X .....................

Mr. Gekas .......................................................................................................... ..................... X .....................

Mr. Coble ........................................................................................................... ..................... X .....................

Mr. Smith (TX) .................................................................................................. ..................... X .....................

Mr. Gallegly ....................................................................................................... X ..................... .....................

Mr. Canady ........................................................................................................ ..................... X .....................

Mr. Goodlatte .................................................................................................... ..................... X .....................

Mr. Chabot ........................................................................................................ ..................... X .....................

Mr. Barr ............................................................................................................. ..................... X .....................

Mr. Jenkins ........................................................................................................ ..................... X .....................

Mr. Hutchinson .................................................................................................. ..................... X .....................

Mr. Pease .......................................................................................................... ..................... ..................... .....................

Mr. Cannon ....................................................................................................... ..................... X .....................

Mr. Rogan ......................................................................................................... ..................... X .....................

Mr. Graham ....................................................................................................... ..................... ..................... .....................

Ms. Bono ........................................................................................................... ..................... X .....................

Mr. Bachus ........................................................................................................ ..................... ..................... .....................

Mr. Scarborough ................................................................................................ X ..................... .....................

Mr. Vitter ........................................................................................................... X ..................... .....................

Mr. Conyers ....................................................................................................... ..................... X .....................

Mr. Frank ........................................................................................................... ..................... X .....................

Mr. Berman ....................................................................................................... ..................... X .....................

Mr. Boucher ....................................................................................................... ..................... X .....................

Mr. Nadler ......................................................................................................... ..................... X .....................

Mr. Scott ........................................................................................................... X ..................... .....................

Mr. Watt ............................................................................................................ ..................... X .....................

Ms. Lofgren ....................................................................................................... ..................... ..................... .....................

Ms. Jackson Lee ................................................................................................ X ..................... .....................

Ms. Waters ........................................................................................................ X ..................... .....................

Mr. Meehan ....................................................................................................... ..................... ..................... .....................

Mr. Delahunt ..................................................................................................... ..................... X .....................

Mr. Wexler ......................................................................................................... ..................... X .....................

Mr. Rothman ..................................................................................................... ..................... ..................... .....................

Ms. Baldwin ...................................................................................................... X ..................... .....................

Mr. Weiner ......................................................................................................... ..................... X .....................

Mr. Hyde, Chairman .......................................................................................... ..................... X .....................

Total ................................................................................................ 7 24 .....................

Ms. Waters offered an amendment restating that the bill would

not diminish any rights available to Indian tribes under the Indian

Gaming Regulatory Act. The amendment was defeated 7–17.

ROLLCALL NO. 5

Ayes Nays Present

Mr. Sensenbrenner ............................................................................................ ..................... ..................... .....................

Mr. McCollum .................................................................................................... ..................... ..................... .....................

Mr. Gekas .......................................................................................................... ..................... X .....................

Mr. Coble ........................................................................................................... ..................... X .....................

Mr. Smith (TX) .................................................................................................. ..................... X .....................

Mr. Gallegly ....................................................................................................... ..................... ..................... .....................

Mr. Canady ........................................................................................................ ..................... X .....................

Mr. Goodlatte .................................................................................................... ..................... X .....................

Mr. Chabot ........................................................................................................ ..................... X .....................

Mr. Barr ............................................................................................................. ..................... X .....................

16

ROLLCALL NO. 5—Continued

Ayes Nays Present

Mr. Jenkins ........................................................................................................ ..................... X .....................

Mr. Hutchinson .................................................................................................. ..................... X .....................

Mr. Pease .......................................................................................................... ..................... ..................... .....................

Mr. Cannon ....................................................................................................... ..................... X .....................

Mr. Rogan ......................................................................................................... ..................... X .....................

Mr. Graham ....................................................................................................... ..................... ..................... .....................

Ms. Bono ........................................................................................................... ..................... X .....................

Mr. Bachus ........................................................................................................ ..................... X .....................

Mr. Scarborough ................................................................................................ ..................... X .....................

Mr. Vitter ........................................................................................................... ..................... X .....................

Mr. Conyers ....................................................................................................... ..................... ..................... .....................

Mr. Frank ........................................................................................................... ..................... ..................... .....................

Mr. Berman ....................................................................................................... ..................... ..................... .....................

Mr. Boucher ....................................................................................................... ..................... ..................... .....................

Mr. Nadler ......................................................................................................... X ..................... .....................

Mr. Scott ........................................................................................................... X ..................... .....................

Mr. Watt ............................................................................................................ X ..................... .....................

Ms. Lofgren ....................................................................................................... ..................... ..................... .....................

Ms. Jackson Lee ................................................................................................ ..................... ..................... .....................

Ms. Waters ........................................................................................................ X ..................... .....................

Mr. Meehan ....................................................................................................... ..................... ..................... .....................

Mr. Delahunt ..................................................................................................... ..................... ..................... .....................

Mr. Wexler ......................................................................................................... ..................... X .....................

Mr. Rothman ..................................................................................................... X ..................... .....................

Ms. Baldwin ...................................................................................................... X ..................... .....................

Mr. Weiner ......................................................................................................... X ..................... .....................

Mr. Hyde, Chairman .......................................................................................... ..................... X .....................

Total ................................................................................................ 7 17 .....................

Final passage motion to report H.R. 3125 favorably, as amended.

The motion passed 21–8.

ROLLCALL NO. 6

Ayes Nays Present

Mr. Sensenbrenner ............................................................................................ X ..................... .....................

Mr. McCollum .................................................................................................... X ..................... .....................

Mr. Gekas .......................................................................................................... X ..................... .....................

Mr. Coble ........................................................................................................... ..................... ..................... .....................

Mr. Smith (TX) .................................................................................................. X ..................... .....................

Mr. Gallegly ....................................................................................................... ..................... ..................... .....................

Mr. Canady ........................................................................................................ X ..................... .....................

Mr. Goodlatte .................................................................................................... X ..................... .....................

Mr. Chabot ........................................................................................................ X ..................... .....................

Mr. Barr ............................................................................................................. X ..................... .....................

Mr. Jenkins ........................................................................................................ X ..................... .....................

Mr. Hutchinson .................................................................................................. X ..................... .....................

Mr. Pease .......................................................................................................... ..................... ..................... .....................

Mr. Cannon ....................................................................................................... ..................... X .....................

Mr. Rogan ......................................................................................................... X ..................... .....................

Mr. Graham ....................................................................................................... X ..................... .....................

Ms. Bono ........................................................................................................... X ..................... .....................

Mr. Bachus ........................................................................................................ ..................... ..................... .....................

Mr. Scarborough ................................................................................................ X ..................... .....................

Mr. Vitter ........................................................................................................... X ..................... .....................

Mr. Conyers ....................................................................................................... ..................... X .....................

Mr. Frank ........................................................................................................... ..................... X .....................

Mr. Berman ....................................................................................................... ..................... X .....................

Mr. Boucher ....................................................................................................... ..................... ..................... .....................

Mr. Nadler ......................................................................................................... X ..................... .....................

Mr. Scott ........................................................................................................... ..................... X .....................

17

ROLLCALL NO. 6—Continued

Ayes Nays Present

Mr. Watt ............................................................................................................ ..................... X .....................

Ms. Lofgren ....................................................................................................... ..................... ..................... .....................

Ms. Jackson Lee ................................................................................................ X ..................... .....................

Ms. Waters ........................................................................................................ X ..................... .....................

Mr. Meehan ....................................................................................................... ..................... ..................... .....................

Mr. Delahunt ..................................................................................................... ..................... ..................... .....................

Mr. Wexler ......................................................................................................... X ..................... .....................

Mr. Rothman ..................................................................................................... X ..................... .....................

Ms. Baldwin ...................................................................................................... ..................... X .....................

Mr. Weiner ......................................................................................................... ..................... X .....................

Mr. Hyde, Chairman .......................................................................................... X ..................... .....................

Total ................................................................................................ 21 8 .....................

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.

COMMITTEE ON GOVERNMENT REFORM FINDINGS

No findings or recommendations of the Committee on Government Reform were received as referred to in clause 3(c)(4) of rule

XIII of the Rules of the House of Representatives.

NEW BUDGET AUTHORITY AND TAX EXPENDITURES

Clause 3(c)(2) of House Rule XIII is inapplicable because this legislation does not provide new budgetary authority or increased tax

expenditures.

CONGRESSIONAL BUDGET OFFICE COST ESTIMATE

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

House of Representatives, the Committee sets forth, with respect to

the bill, H.R. 3125, the following estimate and comparison prepared

by the Director of the Congressional Budget Office under section

402 of the Congressional Budget Act of 1974:

U.S. CONGRESS,

CONGRESSIONAL BUDGET OFFICE,

Washington, DC, May 1, 2000.

Hon. HENRY J. HYDE, 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. 3125, the Internet Gambling Prohibition Act of 2000.

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

to provide them. The CBO staff contacts are Susanne S. Mehlman

(for federal costs), who can be reached at 226–2860, Shelley

18

Finlayson (for the state and local impact), who can be reached at

225–3220, and John Harris (for the private-sector impact), who can

be reached at 226–2618.

Sincerely,

DAN L. CRIPPEN, Director.

Enclosure

cc: Honorable John Conyers Jr.

Ranking Democratic Member

H.R. 3125—Internet Gambling Prohibition Act of 2000.

SUMMARY

H.R. 3125 would prohibit gambling conducted over the Internet

or an interactive computer service. CBO estimates that implementing this legislation would not result in any significant cost to

the federal government. Because enactment of H.R. 3125 could affect direct spending and receipts, pay-as-you-go procedures would

apply to the bill. However, CBO estimates that any impact on direct spending and receipts would not be significant.

H.R. 3125 contains intergovernmental mandates as defined in

the Unfunded Mandates Reform Act (UMRA) because it would preempt certain state liability laws and prohibit certain state and local

lottery activities. However, CBO estimates that these mandates

would currently impose no costs on state, local, or tribal governments and that future costs, if any, would not exceed the threshold

established by the act during the next five years ($55 million in

2000, adjusted annually for inflation).

H.R. 3125 would impose new private-sector mandates, as defined

in UMRA, on operators of Internet sweepstakes and contests, certain gambling businesses that would use wireless communication

systems to transfer data, and providers of Internet service. CBO

expects that the costs of those mandates would not exceed the

threshold in UMRA for private-sector mandates ($109 million in

2000, adjusted annually for inflation).

ESTIMATED COST TO THE FEDERAL GOVERNMENT

Because H.R. 3125 would establish a new federal crime relating

to gambling, the federal government would be able to pursue cases

that it otherwise would not be able to prosecute. CBO expects, however, that most cases would be pursued under state law. Therefore,

we estimate that any increase in federal costs for law enforcement,

court proceedings, or prison operations would not be significant.

Any such additional costs would be subject to the availability of appropriated funds.

H.R. 3125 would require the Department of Justice, not later

than three years after enactment, to submit a report on the enforcement of the bill’s provisions and on the extent of Internet gambling. CBO estimates that preparing and completing the report

would cost less than $500,000, subject to the availability of appropriated funds.

Because those prosecuted and convicted under the bill could be

subject to criminal fines, the federal government might collect additional fines if the bill is enacted. Collections of such fines are reVerDate 11-MAY-2000 01:52 Jun 13, 2000 Jkt 010199 PO 00000 Frm 00018 Fmt 6659 Sfmt 6601 E:\WAISREPT\HR655P1.106 ATX006 PsN: ATX006
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corded in the budget as governmental receipts (i.e., revenues),

which are deposited in the Crime Victims Fund and spent in subsequent years. Any additional collections are likely to be negligible

because of the small number of cases involved. Because any increase in direct spending would equal the amount of fines collected

(with a lag of one year or more), the additional direct spending also

would be negligible.

PAY-AS-YOU-GO CONSIDERATIONS

The Balanced Budget and Emergency Deficit Control Act sets up

pay-as-you-go procedures for legislation affecting direct spending or

receipts. Enacting H.R. 3125 could affect both direct spending and

receipts, but CBO estimates that any such effects would be negligible.

ESTIMATED IMPACT ON STATE, LOCAL, AND TRIBAL GOVERNMENTS

H.R. 3125 contains intergovernmental mandates as defined by

UMRA. CBO estimates that these mandates would currently impose no costs on state, local, or tribal governments and that future

costs, if any, would not exceed the threshold established by the act

in the next five years ($55 million in 2000, adjusted annually for

inflation).

The bill would impose two types of mandates on the state and

local governments. First, it would preempt state liability laws by

granting immunity to providers of interactive computer services if

third parties use their facilities in ways that violate federal and

state laws regulating gambling. CBO estimates that states would

incur no direct costs to comply with this mandate.

H.R. 3125 also would prohibit state and local governments that

conduct lotteries from using the Internet or other technology covered by the bill to provide access to the lottery in any place that

is not public. While no governments currently use or plan to use

the Internet for these purposes, as technology expands and becomes more widely used in the home (a nonpublic place), it is possible that, in the absence of this bill, some would offer such options.

CBO cannot estimate the future loss of income from this prohibition because it is not clear if or when such access to lotteries would

be provided by state and local governments. However, we do not

expect that such losses would exceed the threshold established by

UMRA ($55 million in 2000, adjusted annually for inflation) in the

next five years.

ESTIMATED IMPACT ON THE PRIVATE SECTOR

H.R. 3125 would have only a limited effect on the private sector

because the Federal Interstate Wire Act (‘‘Wire Act’’) currently prohibits the use of wire communication facilities to place or receive

bets or wagers or to transmit information that assists persons who

place bets or wagers on sporting events and certain contests. The

Wire Act applies to all wires and cables used to transmit information across state lines, including telephone lines, cable television

systems, and the Internet, and effectively prohibits many forms of

Internet gambling. Other federal statutes, such as racketeering

laws, also apply to Internet gambling. It is not clear, however, that

20

existing federal law prohibits all forms of Internet gambling. The

status of some Internet contests, particularly lotteries or raffles

that require entry fees, is ambiguous.

H.R. 3125 would impose new private-sector mandates, as defined

in UMRA, on operators of Internet sweepstakes and contests, certain gambling businesses that use wireless communication systems

to transfer data, and providers of Internet service. CBO expects

that the costs of these mandates would not exceed the threshold in

UMRA for private-sector mandates ($109 million in 2000, adjusted

annually for inflation).

First, the bill would prohibit persons engaged in a gambling business from conducting lotteries, raffles, or other, similar contests

over the Internet. Specifically, the bill would forbid any Internet

contest in which participants stake or risk ‘‘something of value’’

and the ‘‘opportunity to win is predominantly subject to chance.’’

According to the National Gambling Impact Study Commission Report, no known privately-operated Internet lotteries are located in

the United States. Privately-operated lotteries are generally illegal

under state laws, and most businesses that would be affected by

the prohibition are located in foreign countries. Domestic lotteries

are generally run by states and Indian tribes. Further, the prohibition would not affect privately-operated Internet contests that do

not require entry fees. The prohibition would also not apply to certain other popular legal games that charge fees, including sports

and educational contests, such as the popular fantasy sports

leagues. Consequently, CBO expects that the costs of this mandate

would not be significant.

Second, H.R. 3125 would impose a new mandate on some gambling businesses. The bill would prohibit the use of certain interactive computer services ‘‘to place, receive, or otherwise make a bet

or wager.’’ Under H.R. 3125 it would be illegal for gambling businesses to operate electronic gaming devices linked together by a

wireless means of communication that do not meet certain technical requirements. Devices of this type are legal in some states,

but are not popular with gambling businesses. Linked electronic

gaming devices, such as progressive slot machines, typically use

dedicated phone lines rather than wireless systems, which are susceptible to interference from other signals. The bill, moreover,

would not prohibit wireless systems that are regulated by the

states and meet the technical requirements. For these reasons,

CBO estimates that the costs of the mandate would be low.

Finally, the bill would impose new mandates on Internet service

providers (ISPs). H.R. 3125 would require Internet service providers to terminate the accounts of customers who run gambling

businesses or promote illegal gambling and to block specific foreign

gambling Internet sites when given an official notice of noncompliance by state or federal law enforcement agencies. Based on information from the Department of Justice, CBO estimates that the

number of Internet service providers that would receive such notices would be low. Because such notices would apply to specific

subscriber accounts (or foreign sites), the cost per order would also

be low. Consequently, CBO estimates that the costs to Internet

service providers of complying with this mandate would be small.

21

H.R. 3125 would impose an additional mandate on Internet service providers by requiring them to offer their residential customers

filtering software (or equivalent systems) that would block access

by children to gambling Internet sites. CBO estimates that the cost

of complying with the mandate would be small because such software is commonly available. The bill would permit providers to

charge reasonable fees for the use of the software, allowing them

to pass the cost on to their customers.

PREVIOUS CBO ESTIMATE

On July 15, 1999, CBO transmitted a cost estimate for S. 692,

a similar bill reported by the Senate Committee on the Judiciary

on June 17, 1999. Both bills would prohibit gambling conducted

over the Internet or an interactive computer service, but would provide for different exemptions from this prohibition. H.R. 3125, unlike S. 692, would not prohibit tribal governments from operating

certain games of chance and therefore would not impose intergovernmental mandates with costs exceeding the threshold specified in

UMRA.

ESTIMATE PREPARED BY:

Federal Costs: Susanne S. Mehlman (226-2860)

Impact on State, Local, and Tribal Governments: Shelley Finlayson

(225-3220)

Impact on the Private Sector: John Harris (226-2618)

ESTIMATE APPROVED BY:

Robert A. Sunshine

Assistant Director for Budget Analysis

CONSTITUTIONAL AUTHORITY STATEMENT

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

of Representatives, the Committee finds the authority for this legislation in Article I, section 8, of the Constitution.

SECTION-BY-SECTION ANALYSIS AND DISCUSSION

Section 1. Short Title.

Section 1 states the short title as the ‘‘Internet Gambling Prohibition Act of 2000.’’

Section 2. Prohibition on Internet Gambling.

Section 2(a) adds a new Section 1085 to title 18 of the United

States Code.

Section 1085(a). Definitions.

Subsection 1085(a)(1) defines ‘‘bets or wagers’’ as the staking or

risking, by any person, of something of value upon the outcome of

either: (1) a contest of others; (2) a sporting event; or (3) a game

predominantly subject to chance, upon an agreement or understanding that such person or another person will receive something

of value based on that outcome. It is important to note that the

term includes the purchase of a chance or opportunity to win a lotVerDate 11-MAY-2000 01:52 Jun 13, 2000 Jkt 010199 PO 00000 Frm 00021 Fmt 6659 Sfmt 6601 E:\WAISREPT\HR655P1.106 ATX006 PsN: ATX006
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tery or other prize (if the opportunity is predominantly subject to

chance) and any scheme of a type prohibited by Federal laws prohibiting betting on professional and amateur sports. The term ‘‘bets

or wagers’’ does not include bona fide business transactions governed by Federal securities law; certain specified transactions governed by Federal commodities law; contracts of indemnity or guarantee; or, contracts for life, health, or accident insurance.

It is the view of the committee that the term ‘‘bets or wagers’’

does not include participation in a simulation sports game or educational game or contest that: (1) is not dependent solely on the

outcome of any single sporting event or nonparticipant’s singular

individual performance in any single sporting event; (2) has an outcome that reflects the knowledge and skill of the participants, with

an outcome determined predominantly by accumulated statistical

results of sporting events; and, (3) offers a prize or award established in advance of the game and not determined by the number

of participants. This exclusion is intended to cover ‘‘fantasy sports

league games’’ which are simulation sports games in which the outcome is determined using the results of actual sporting events, and

the outcome reflects the relative knowledge and skill of the participants in determining those results. It is the view of the committee

that fantasy sport leagues operated in this manner are not gambling. It is important to note, however, that this exclusion from the

definition of a bet or wager for the purposes of 18 U.S.C. § 1085 is

not intended to change the legality of fantasy sports league games

or contests under the laws of any State, or under any other applicable Federal law.

It is the view of the committee that not all games offered on the

Internet are ‘‘games of chance’’ for purposes of this definition. The

committee recognizes that many computer and video games played

on the Internet are based predominantly on skill, and are not intended to be included within the definition of ‘‘bets or wagers.’’ The

committee intends that the courts will continue to perform their

traditional functions in determining whether games are ‘‘games of

chance.’’

Subsection 1085(a)(2) defines a ‘‘closed-loop subscriber-based

service’’ as an information service or system meeting specified conditions restricting use, including: 1) express State authorization of

the particular customer and age verification system proposed to be

used by the service, requiring a person within that State to subscribe and be registered with the provider of the wagering service

by name, address, appropriate billing information, and the physical

location of that subscribing person within that State; and 2) an effective customer and age verification system, expressly authorized

under State law; and, 3) that appropriate date security standards

to prevent unauthorized access by any person who has not lawfully

subscribed or who is a minor. The committee intends that this term

be narrowly construed to include only a closed-loop service that

cannot be circumvented, or disabled, and is effective in preventing

use by unauthorized persons, especially minors. The committee expects the States, in ensuring that any such system is truly effective

in preventing unauthorized use, to consult with information security experts who are not current or prospective employees of or consultants to, and who have no financial relationship, direct or indiVerDate 11-MAY-2000 01:52 Jun 13, 2000 Jkt 010199 PO 00000 Frm 00022 Fmt 6659 Sfmt 6601 E:\WAISREPT\HR655P1.106 ATX006 PsN: ATX006
23

rect, with any gambling business or closed-loop subscriber-based

service.

Subsection 1085(a)(3) defines ‘‘foreign jurisdiction’’ as a foreign

country or political subdivision thereof.

Subsection 1085(a)(4) defines a ‘‘gambling business’’ as (i) a business that is conducted at a gambling establishment, or that involves the placing, receiving, or otherwise making bets or wagers,

or the offering to engage in doing so, and that either has been in

substantially continuous operation for more than 10 days or has a

gross revenue of $2,000 or more from such business during any 24-

hour period; and (ii) any soliciting agent of such a business.

This subsection contains a further qualification that a gambling

business ‘‘involves 1 or more persons who conduct, finance, manage, supervise, direct, or own all or part of such business.’’ With respect to this qualification, it is the view of the committee that, in

enforcing this section, it is appropriate for law enforcement agencies to pierce the corporate veil and prosecute individuals less directly involved in illegal Internet gambling business operations,

such as silent financiers of illegal gambling businesses. However,

the definition of ‘‘gambling business’’ is not intended to include

credit card companies, or their cardholders, based only on the use

of such credit cards for prohibited Internet gambling activities.

Subsection 1085(a)(5) defines ‘‘information assisting in the placing of a bet or wager’’ to include information intended by the sender or recipient to be used by a gambling business to place, receive,

or otherwise make a bet or wager. It is the view of the committee

that the definition does not include: (1) information concerning parimutuel pools exchanged exclusively between or among parimutuel

wagering facilities, if the information is used only to conduct common pool parimutuel pooling; (2) information exchanged exclusively

between or among parimutuel wagering facilities and a support

service, if the information is used only for processing bets or wagers; (3) information exchanged exclusively between or among wagering facilities in the same State and a support service, if the information is used only for the pooling or processing of bets or wagers made by or with the facility or facilities; (4) 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; (5) news reporting or analysis of wagering activity; and (6) posting or reporting of educational information on how to make a bet or wager or

the nature of betting or wagering. The exclusion of items (1)

through (3) from the definition means that parimutuel wagering facilities and other wagering facilities will not be prohibited by Section 1085 from transmitting a narrow category of specified information in the course of conducting their parimutuel or wagering activity, subject to the laws of the States in which they operate. Additionally, the committee notes, and Section 1085(f) makes explicit,

that H.R. 3125 does not prohibit advertising or promotion of gambling opportunities at casinos, at racetracks, or at other ‘‘brick-andmortar’’ establishments.

Subsection 1085(a)(6) defines an ‘‘interactive computer service’’

as any information service, system, or access software provider that

operates in, or uses a channel or instrumentality of, interstate or

24

foreign commerce to provide or enable access by multiple users to

a computer server. The definition of the term ‘‘interactive computer

service’’ is intended to encompass all the interactive computer service functions defined elsewhere in Federal law, including functions

such as Internet access and transmission, storage, hosting web

sites, providing online services such as chatrooms and online bulletin boards in which users communicate with each other, and offering online links or directories of online content. The definition

applies to interactive computer services performing these functions.

It does not apply to these entities to the extent that they are operating a gambling business that violates H.R. 3125.

Subsection 1085(a)(7) defines ‘‘interactive computer service provider’’ as any person that provides an interactive computer service,

to the extent that such person offers or provides such service. This

term encompasses persons who provide an interactive computer

service as defined in subsection (6). A person is treated as an interactive computer service provider only to the extent that the person

provides an interactive computer service. To the extent that a person is engaged in a gambling business or otherwise violating Subsection (b), that person (to the extent of engaging in those activities) is not an interactive computer service provider and, therefore,

is fully subject to the provisions of Section 1085 and other applicable Federal and State laws that apply to persons other than interactive computer service providers.

Subsection 1085(a)(8) defines ‘‘Internet’’ as the international computer network of both Federal and non-Federal interoperable packet switched data networks. The committee intends the terms

‘‘Internet’’ and ‘‘interactive computer service’’ to encompass technologies that in the future may perform functions similar or analogous to those that the Internet and interactive computer services

perform today.

Subsection 1085(a)(9) defines ‘‘person’’ as any individual, association, partnership, joint venture, corporation (or any affiliate of a

corporation), State or political subdivision thereof, department,

agency, or instrumentality of a State or political subdivision thereof, or any other government, organization, or entity.

Subsection 1085(a)(10) defines ‘‘private network’’ as a communications channel meeting specified conditions restricting use, such

as either private dedicated lines, or, the public communications infrastructure, if the infrastructure is secured by means of the appropriate private communications technology to prevent unauthorized

access. It is the view of the committee that this term be narrowly

construed to include only services that are (a) effective in preventing use by unauthorized persons and (b) specifically authorized

by statute or regulation by the States involved.

Subsection 1085(a)(11) defines ‘‘State’’ as a State of the United

States, the District of Columbia, the Commonwealth of Puerto Rico,

or a commonwealth, territory, or possession of the United States.

Subsection 1085(a)(12) defines ‘‘subscriber’’ as any person with a

business relationship with the interactive computer service provider through which such person receives access to the system,

service, or network of that provider, even if no formal subscription

agreement exists, and, includes registrants, students who are

granted access to a university system or network, and employees

25

or contractors who are granted access to the system or network of

their employer.

Subsection 1085(a)(13) defines ‘‘soliciting agent’’ as a person who

knowingly solicits for a gambling business, as described in subsection 1085(a)(4). It is the view of the committee that a soliciting

agent is an agent of such business who has actual knowledge of the

illegal aspect of such a gambling business. However, the term

would not include those parties lacking knowledge and who merely

accept and/or run advertisements for such a business.

Section 1085(b). Prohibitions and Penalties.

Subsection 1085(b)(1) sets forth the prohibitions regarding Internet gambling. The subsection provides that it shall be unlawful for

a person engaged in a gambling business to use the Internet or any

other interactive computer service: (A) to place, receive, or otherwise make a bet or wager; or (B) to send, receive, or invite information assisting in the placing of a bet or wager. Paragraph (2) sets

forth the penalties. These include a fine equal to, but not more

than the greater of: (A) the total amount bet or wagered, or placed,

received, or accepted in bets or wagers, by the person, or (B)

$20,000. The subsection also provides for imprisonment of not more

than 4 years, in lieu of or in addition to any fine. Paragraph (3)

authorizes the court, upon conviction, to 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. It is important to

note that the prohibitions of Section 1085(b) apply only to persons

engaged in the gambling business, and not to individual bettors or

communication services not engaged in a gambling business, but

simply used by illegal gambling businesses to offer such activity.

However, individual bettors who engage in Internet gambling (as

well as persons engaged in a gambling business using the Internet)

continue to be fully subject to prosecution under other laws, if applicable.

Section 1085(c). Civil Remedies.

Subsection 1085(c)(1) provides the district courts of the United

States with jurisdiction to prevent and restrain violations of section

1085. Subsection (c)(2)(A) authorizes the United States to apply to

a district court for a temporary restraining order or an injunction

against any person to prevent or restrain a violation. Subsection

(c)(2)(B) provides similar authority to the Attorney General or

other appropriate State official of a State in which a violation allegedly has occurred or will occur. The court is authorized to grant relief upon determining, after notice and an opportunity for hearing,

that there is a substantial probability that a violation has occurred

or will occur. Subsections (c)(2)(C) and (D) cover proceedings on Indian lands and expiration of temporary restraining orders issued.

Subsection (c)(3) permits temporary relief to be obtained on an expedited basis.

Section 1085(d). Interactive Computer Service Providers.

Section 1085(d) establishes a mechanism through which interactive computer service providers (‘‘providers ’’) may be required to

26

terminate accounts, and/or remove, disable, or block access to material or activity that violates Section 1085. This scheme provides

limitations on liability for qualifying providers, subject to providers

meeting conditions for eligibility which involve certain responsibilities with regard to material that violates this section.

The Internet is a communications medium of great importance

for both national and international commerce and human communication. Although illegal content, including illegal gambling sites,

exist on the Internet, it is a very small percentage of content on

the Internet. The committee does not intend to create remedies for

illegal activity that burden the operation of online networks for

lawful purposes, or that impose unreasonable burdens on interactive computer services who are not active participants in, and do

not profit from, the illegal gambling activity.

Subsection 1085(d)(1)(A) clarifies that providers shall not be held

liable for the use of their services by others to violate laws prohibiting gambling. It is important to note that the intent of this limitation is to avoid unintended criminal prosecution of interactive

service providers under this new section 1085. Subsection

1085(d)(1)(A) limits liability under this section or ‘‘any other provision of Federal or State law prohibiting or regulating gambling or

gambling-related activities for the use of its facilities or services by

another person to engage in Internet gambling activity or advertising or promotion of Internet gambling activity.’’ It is important

to clarify the committee’s view that this limitation of liability extends only to criminal offenses and penalties.

This liability limitation applies to providers with regard to gambling-related material for functions described in subsections

1085(d)(1)(i) & (ii), and it applies only to content provided by another person. For example, the provider of a hyperlink or Internet

directory service would not be liable for links to a site containing

an illegal gambling business run by a third party, if the directory

service met the conditions for eligibility set forth in subsection

(d)(1)(B). The committee intends that content provided by another

person include content provided by third parties, including users,

volunteers, or a different content provider. Qualifying providers

also receive immunity with regard to conduit and server caching

functions, such as those described in 17 U.S.C. § 512(a) & (b), to the

extent that those functions are not initiated by the provider so as

to evade the requirements of Section 1085. With regard to material

that violates this section (as well as links to such material) posted

to an online site controlled by the provider, a provider has responsibilities if it receives appropriate notice from a law enforcement official under subsection 1085(d)(2)(B).

Subsection 1085(d)(1)(B) sets forth the conditions of eligibility

that a provider must meet to qualify for these criminal liability

limitations. The provider must adopt and implement, in a reasonable fashion, a policy of terminating the accounts of subscribers

whom the provider is notified (in accordance with subsection

1085(d)(2)(B)) are using their accounts to engage in an Internet

gambling business prohibited by this bill. The provider also must

not knowingly permit its computer server to be used to engage in

the particular violation at issue with the specific intent that its

server be used for such purpose.

27

Subsection 1085(d)(2)(A) establishes a ‘‘notice and takedown’’ regime under which certain law enforcement officials and providers

will cooperate in removing or disabling access to online sites that

violate § 1085(b). A provider receiving a notice that conforms to the

requirements of subsection (d)(2)(B), and that relates to gambling

material that violates § 1085(b), should expeditiously remove or disable access to the material described in the notice. If the notice relates to an online reference or hypertext link, then the provider

should remove or disable access to the reference or the link to the

illegal material. One of the purposes of this provision is to create

an orderly process for the notice and take down of illegal materials.

To ensure proper take down, notice must come from the law enforcement officials specified in subsection (d)(2)(A) and follow the

procedures set forth in subsection (d)(2)(B). Therefore, it is the view

of the committee that any notice that does not conform to the requirements of this subsection may not be considered as evidence

bearing on whether a provider has met the conditions of eligibility

in subsection (d)(1)(B).

It is the view of the committee that H.R. 3125 does not require

a provider to take down content on any computer server that the

provider does not control. For example, subsection (d)(2)(A)(ii) provides that if a provider receives notice from a law enforcement official regarding the site at which the illegal material or activity resides, but which is not under the control of such provider, then the

provider should notify the law enforcement official that the provider is not the proper recipient of the notice and upon receipt of

lawful process cooperate in identifying the entity that is the proper

recipient of the notice. With respect to subsection (d)(1)(B), the

committee intends that an interactive computer service provider

not be deemed to fail to satisfy this specific intent condition unless

at least one of the employees of such service had the requisite intent and the provider knowingly permitted the violation, or engaged in deliberate acts constituting a purposeful effort to avoid

learning the true and accurate basis of such information. It is the

view of the committee that the ‘‘collective knowledge’’ doctrine employed in some Federal circuit courts of appeals should not apply

to aggregate the knowledge of intent of various employees of an

interactive service provider.

Subsection 1085(d)(3) allows Federal or State law enforcement

agencies to seek an injunction not less than 24 hours after providing notice under subsection (d)(2)(B). However, it limits injunctions that may be issued against providers in subsection (d)(3)(B)

to orders restraining providers to terminate specified accounts of

subscribers engaging in an activity that violates this section, to remove or disable access to material on a site residing on a computer

server that the provider controls, and, in rare circumstances, to foreign online locations, as well as other injunctive remedies regarding material residing on a computer server that the provider controls that the court considers necessary and that are the least burdensome to the provider among comparably effective forms of relief.

It also requires that prior to issuing any injunction against an

interactive computer service provider, a court weigh each of the

considerations set forth in subsection (d)(3)(C). Subsection

1085(d)(3)(c) sets forth the factors a court shall consider in deterVerDate 11-MAY-2000 01:52 Jun 13, 2000 Jkt 010199 PO 00000 Frm 00027 Fmt 6659 Sfmt 6601 E:\WAISREPT\HR655P1.106 ATX006 PsN: ATX006
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mining whether injunctive relief is appropriate, including: (i)

whether the injunction would significantly burden the provider, or

the operation that provider’s system or network; (ii) that the injunction in question is technically feasible and effective and that it

will not materially interfere with access to lawful material at other

online locations; (iii) whether less burdensome preventative means

are available; and, (iv) the magnitude of the harm likely to be suffered by the community. With respect to subsection (d)(3)(C)(iii), in

many cases remedies against other entities or industries may be

equally, or more, effective than an injunction against an interactive

computer service. In such cases, it is the view of the committee

that an injunction against the interactive computer service is not

appropriate and that the court may instead issue other injunctions

available under § 1085(c) against other persons.

Subsection 1085(d)(4) creates a notice and take down regime for

advertising of non-Internet gambling activity, and preempts all

other liability for such content under any Federal or State criminal

law. The section applies to gambling activity that either is not conducted via the Internet, or is not prohibited by Section 1085. It is

important to note that subsection (d)(4) concerns the advertising of

criminal activity which is not protected by the first amendment,

and that it does not regulate or restrict content of any commercial

advertising of lawful activity. Subsection (d)(4)(E) clarifies that providers have no obligation to take down non-Internet gambling activity that is lawful where the gambling business is physically located and not prohibited by Federal law.

The injunctive relief available under this subsection is also different than under subsection 1085(d)(3). Providers are subject to an

injunction: (1) to take down illegal advertising of gambling; or (2)

to terminate the account of a subscriber of the provider who is

knowingly using the site or permitting it to be used to engage in

advertising of non-Internet gambling activity that violates Federal

law, or the law of the State in which the gambling establishment

is physically located. In addition, Federal or State law enforcement

officials acting within their authority and jurisdiction may obtain

an order against the provider of the illegal advertising content enjoining that provider from disseminating the illegal advertising in

question on the provider’s computer server.

Subsection 1085(d)(5)(A) makes clear that providers are not liable under any Federal, State or local law for good faith efforts to

comply with the take down requests and injunctions authorized by

this section. Subsection (d)(5)(B) makes clear that providers have

no obligation to monitor particular material or use of their networks, or to take down illegal gambling material except pursuant

to a notice or court order under this section. Subsection (d)(5)(C)

provides that this section does not in any way interfere with the

right of a subscriber to secure under other provisions of law, a determination that his or her account should not be terminated or

that it should be restored, notwithstanding the account termination

procedures set forth in this section.

To be eligible for this provision, the provider must abide by conditions for eligibility similar to those set forth in § (d)(1)(B), as well

as an additional condition of eligibility for providers of residential

access service, offering residential customers at reasonable cost

29

software that has some capability of filtering or blocking access by

minors to online Internet gambling sites that violate § 1085. The

committee understands that such user empowerment software

deals with a wide array of objectionable content on the Internet

and may not be fully effective in blocking access to illegal sites.

The committee notes that section 1085(d) is not a form of Internet regulation. It does not establish mandatory regulatory requirements for providers. The committee notes that subsection (d)(2)(A)

is simply a law enforcement mechanism, conditioning a provider’s

eligibility for limitations on liability under existing laws on certain

actions described in that subsection. This mechanism is conceptually modeled after the ‘‘Wire Act,’’ 18 U.S.C. § 1084, which prohibits gambling businesses from using a ‘‘wire communication facility’’ (such as a telephone or the Internet) to place or receive bets

or wagers. Specifically, § 1084(d) protects common carriers from

‘‘civil or criminal’’ liability if they ‘‘discontinue or refuse, the leasing, furnishing, or maintaining of such facility,’’ upon proper notice

from a law enforcement agency that ‘‘any facility furnished by it is

being used or will be used for the purpose of transmitting or receiving gambling information in interstate or foreign commerce in violation of Federal, State, or local law.’’ The committee notes that

§ 1084 was adopted by Congress in 1961 (Public Law 87–216). The

1961 legislation, which later was enacted as the Wire Act, was referred to and reported by the Committee on the Judiciary (House

Report 87–967), and was not referred to any other committee.

Additionally, the liability immunity provisions in H.R. 3125 are

similar to those within the ‘‘Electronic Communications Privacy Act

of 1986,’’ 18 U.S.C. § 3124(d), which immunize communications

service providers that assist State and Federal law enforcement authorities to install pen registers or trap and trace devices. Specifically, § 3124(d) provides that ‘‘no cause of action shall lie in any

court against any provider of a wire or electronic communications

service, its officers, employees, agents, or other specified persons

for providing information, facilities, or assistance in accordance

with the terms of a court order under this chapter. . . .’’ Moreover,

§ 3124(e) provides that a ‘‘good faith reliance on a court order under

this chapter . . . is a complete defense against any civil or criminal

action brought under this chapter or any other law.’’ The Electronic

Communications Privacy Act (Public Law 99–508) originated as

H.R. 4952, a bill referred to and reported out by the Committee on

the Judiciary, and which was not referred to any other committee.

Section 1085(e). Availability of Relief.

This section clarifies that the availability of relief under sections

(c) and (d), which is civil in nature, is independent of any criminal

action under section (b) or any other Federal or State law.

Section 1085(f). Applicability.

It is the view of the committee that, if otherwise lawful, certain

regulated gaming activities within this section are not subject to

the prohibition of § 1085(b).

Subsection (f)(1)(A) clarifies that the prohibitions of § 1085 do not

apply to any otherwise lawful bets or wagers placed, received, or

otherwise made wholly intrastate for a State lottery, or for a multiVerDate 11-MAY-2000 01:52 Jun 13, 2000 Jkt 010199 PO 00000 Frm 00029 Fmt 6659 Sfmt 6601 E:\WAISREPT\HR655P1.106 ATX006 PsN: ATX006
30

State lottery operated jointly between two or more States in conjunction with State lotteries, subject to four conditions: (i) express

authorization, and licensing or regulation, under applicable State

law; (ii) use of a ‘‘private network’’; (iii) use of facilities open to the

general public to place the bet or wager, where each person placing

or otherwise making the bet or wager must be physically located

when such bet or wager is placed; and (iv) compliance with applicable Federal lottery laws (18 U.S.C. §§ 1301–1304) and other applicable Federal laws.

Subsection (f)(1)(B) clarifies that the prohibitions of § 1085 do not

apply to any otherwise lawful bet or wager placed, received, or otherwise made on an interstate or intrastate basis on a live horse or

a live dog race, or on jai alai, or the sending, receiving, or inviting

of information assisting in the placing of such a bet or wager, subject to five specified conditions, which require: (i) express authorization, and licensing or regulation, by the State in which the bet

or wager is received, under applicable Federal and such State’s

laws; (ii) use of a ‘‘closed-loop subscriber-based service’’; (iii) initiation from a State in which betting or wagering on that same type

of live horse racing, or on that same type of live dog racing, or jai

alai, as applicable, is lawful, and receipt in a State in which such

betting or wagering is lawful; (iv) specified regulatory oversight by

the State in which the bet or wager is received; and (v) compliance

with the Interstate Horse Racing Act of 1978 (15 U.S.C. § 3001 et

seq.), or with comparable consent agreements between the participating States applicable to dog racing and jai alai.

Subsection (f)(1)(C) clarifies that the prohibitions of § 1085 do not

apply to any otherwise lawful bet or wager, placed and received

wholly intrastate on a closed-loop subscriber based service, and

subject to the express authorization, licensing, and regulation by

that State.

Subsection (f)(1)(D) clarifies that the prohibitions of § 1085 do not

apply to any otherwise lawful bet or wager, placed on a closed-loop

subscriber based service, and lawfully received by a federally recognized Indian tribe, subject to being permitted under and conducted

in accordance with the Indian Gaming Regulatory Act (‘‘IGRA’’),

and, so long as each person placing, receiving, or otherwise making

such a bet or wager is physically located on Indian lands (as that

term is defined in section 4 of IGRA) when such person places, receives, or otherwise makes the bet or wager.

Section 1085(g). Rule of Construction.

Section 1085(g) specifies that § 1085 is not to be construed to affect any prohibition or remedy applicable to a person engaged in

a gambling business under any other provision of Federal or State

law. This means that a person engaged in a gambling business who

is subject to prosecution or the imposition of civil remedies under

§ 1085 continues to be subject to any other prohibitions or remedies

applicable under any other provision of Federal or State law. Section 2(b) of the bill concerns codification of § 1085.

Section 3. Report on Enforcement.

Section 3 directs the Attorney General, not later than 3 years

after the date of enactment, to submit to Congress a report includVerDate 11-MAY-2000 01:52 Jun 13, 2000 Jkt 010199 PO 00000 Frm 00030 Fmt 6659 Sfmt 6601 E:\WAISREPT\HR655P1.106 ATX006 PsN: ATX006
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ing (1) an analysis of the problems, if any, associated with enforcing § 1085; (2) recommendations for the best use of Department of

Justice resources to enforce § 1085; and (3) an estimate of the

amount of activity and money being used to gamble on the Internet.

Section 4. Severability.

Section 4 is a severability provision that provides that any provisions within the act found to be unconstitutional shall not affect

any other provisions within the act.

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 italics

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

roman):

CHAPTER 50 OF TITLE 18, UNITED STATES CODE

CHAPTER 50—GAMBLING

Sec.

1081. Definitions.

* * * * * * *

1085. Internet gambling.

* * * * * * *

§ 1085. Internet gambling

(a) DEFINITIONS.—In this section the following definitions

apply:

(1) BETS OR WAGERS.—The term ‘‘bets or wagers’’—

(A) means the staking or risking by any person of

something of value upon the outcome of a contest of others,

a sporting event, or a game predominantly subject to

chance, upon an agreement or understanding that the person or another person will receive something of greater

value than the amount staked or risked in the event of a

certain outcome;

(B) includes the purchase of a chance or opportunity to

win a lottery or other prize (which opportunity to win is

predominantly subject to chance);

(C) includes any scheme of a type described in section

3702 of title 28; and

(D) does not include—

(i) a bona fide business transaction governed by

the securities laws (as that term is defined in section

3(a)(47) of the Securities Exchange Act of 1934 (15

U.S.C. 78c(a)(47))) for the purchase or sale at a future

date of securities (as that term is defined in section

3(a)(10) of the Securities Exchange Act of 1934 (15

U.S.C. 78c(a)(10)));

32

(ii) a transaction on or subject to the rules of a

contract market designated pursuant to section 5 of the

Commodity Exchange Act (7 U.S.C. 7);

(iii) a contract of indemnity or guarantee;

(iv) a contract for life, health, or accident insurance; or

(v) participation in a simulation sports game or an

educational game or contest that—

(I) is not dependent solely on the outcome of

any single sporting event or nonparticipant’s singular individual performance in any single sporting event;

(II) has an outcome that reflects the relative

knowledge and skill of the participants with such

outcome determined predominantly by accumulated statistical results of sporting events and nonparticipants accumulated individual performances

therein; 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) CLOSED-LOOP SUBSCRIBER-BASED SERVICE.—The term

‘‘closed-loop subscriber-based service’’ means any information

service or system that uses—

(A) a device or combination of devices—

(i) expressly authorized and operated in accordance with the laws of a State, exclusively for placing,

receiving, or otherwise making a bet or wager described

in subsection (f)(1)(B); and

(ii) by which a person located within any State

must subscribe and be registered with the provider of

the wagering service by name, address, and appropriate billing information to be authorized to place, receive, or otherwise make a bet or wager, and must be

physically located within that State in order to be authorized to do so;

(B) an effective customer verification and age

verification system, expressly authorized and operated in

accordance with the laws of the State in which it is located,

to ensure that all applicable Federal and State legal and

regulatory requirements for lawful gambling are met; and

(C) appropriate data security standards to prevent unauthorized access by any person who has not subscribed or

who is a minor.

(3) FOREIGN JURISDICTION.—The term ‘‘foreign jurisdiction’’

means a jurisdiction of a foreign country or political subdivision thereof.

(4) GAMBLING BUSINESS.—The term ‘‘gambling business’’

means—

(A) a business that is conducted at a gambling establishment, or that—

(i) involves—

33

(I) the placing, receiving, or otherwise making

of bets or wagers; or

(II) the offering to engage in the placing, receiving, or otherwise making of bets or wagers;

(ii) involves 1 or more persons who conduct, finance, manage, supervise, direct, or own all or part of

such business; and

(iii) has been or remains in substantially continuous operation for a period in excess of 10 days or has

a gross revenue of $2,000 or more from such business

during any 24-hour period; and

(B) any soliciting agent of a business described in subparagraph (A).

(5) INFORMATION ASSISTING IN THE PLACING OF A BET OR

WAGER.—The term ‘‘information assisting in the placing of a bet

or wager’’—

(A) means information that is intended by the sender

or recipient to be used by a person engaged in the business

of betting or wagering to place, receive, or otherwise make

a bet or wager; and

(B) does not include—

(i) information concerning parimutuel pools that is

exchanged exclusively between or among 1 or more

racetracks or other parimutuel wagering facilities licensed by the State or approved by the foreign jurisdiction in which the facility is located, and 1 or more parimutuel wagering facilities licensed by the State or approved by the foreign jurisdiction in which the facility

is located, if that information is used only to conduct

common pool parimutuel pooling under applicable law;

(ii) information exchanged exclusively between or

among 1 or more racetracks or other parimutuel wagering facilities licensed by the State or approved by

the foreign jurisdiction in which the facility is located,

and a support service located in another State or foreign jurisdiction, if the information is used only for

processing bets or wagers made with that facility under

applicable law;

(iii) information exchanged exclusively between or

among 1 or more wagering facilities that are licensed

and regulated by the State in which each facility is located, and any support service, wherever located, if the

information is used only for the pooling or processing

of bets or wagers made by or with the facility or facilities under each State’s applicable law;

(iv) any news reporting or analysis of wagering activity, including odds, racing or event results, race and

event schedules, or categories of wagering; or

(v) any posting or reporting of any educational information on how to make a bet or wager or the nature

of betting or wagering.

(6) INTERACTIVE COMPUTER SERVICE.—The term ‘‘interactive computer service’’ means any information service, system,

or access software provider that operates in, or uses a channel

34

or instrumentality of, interstate or foreign commerce to provide

or enable access by multiple users to a computer server, which

includes the transmission, storage, retrieval, hosting, linking,

formatting, or translation of a communication made by another

person, and including specifically a service, system, or access

software provider that—

(A) provides access to the Internet; or

(B) is engaged in the business of providing an information location tool (which means a service that refers or

links users to an online location, including a directory,

index, reference, pointer, or hypertext link).

(7) INTERACTIVE COMPUTER SERVICE PROVIDER.—The term

‘‘interactive computer service provider’’ means any person that

provides an interactive computer service, to the extent that such

person offers or provides such service.

(8) INTERNET.—The term ‘‘Internet’’ means the international computer network of both Federal and non-Federal

interoperable packet switched data networks.

(9) PERSON.—The term ‘‘person’’ means any individual, association, partnership, joint venture, corporation (or any affiliate of a corporation), State or political subdivision thereof, department, agency, or instrumentality of a State or political subdivision thereof, or any other government, organization, or entity (including any governmental entity (as defined in section

3701(2) of title 28)).

(10) PRIVATE NETWORK.—The term ‘‘private network’’ means

a communications channel or channels, including voice or computer data transmission facilities, that use either—

(A) private dedicated lines; or

(B) the public communications infrastructure, if the infrastructure is secured by means of the appropriate private

communications technology to prevent unauthorized access.

(11) STATE.—The term ‘‘State’’ means a State of the United

States, the District of Columbia, the Commonwealth of Puerto

Rico, or a commonwealth, territory, or possession of the United

States.

(12) SUBSCRIBER.—The term ‘‘subscriber’’—

(A) means any person with a business relationship

with the interactive computer service provider through

which such person receives access to the system, service, or

network of that provider, even if no formal subscription

agreement exists; and

(B) includes registrants, students who are granted access to a university system or network, and employees or

contractors who are granted access to the system or network

of their employer.

(13) SOLICITING AGENT.—The term ‘‘soliciting agent’’ means

any agent who knowingly solicits for a gambling business described in paragraph (4)(A) of this subsection.

(b) INTERNET GAMBLING.—

(1) PROHIBITION.—Subject to subsection (f), it shall be unlawful for a person engaged in a gambling business knowingly

to use the Internet or any other interactive computer service—

35

(A) to place, receive, or otherwise make a bet or wager;

or

(B) to send, receive, or invite information assisting in

the placing of a bet or wager.

(2) PENALTIES.—A person engaged in a gambling business

who violates this section shall be—

(A) fined in an amount equal to not more than the

greater of—

(i) the total amount that such person bet or wagered, or placed, received, or accepted in bets or wagers, as a result of engaging in that business in violation of this section; or

(ii) $20,000;

(B) imprisoned not more than 4 years; or

(C) both.

(3) PERMANENT INJUNCTIONS.—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.

(c) CIVIL REMEDIES.—

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

shall have original and exclusive jurisdiction to prevent and restrain violations of this section by issuing appropriate orders in

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

(2) PROCEEDINGS.—

(A) INSTITUTION BY FEDERAL GOVERNMENT.—

(i) IN GENERAL.—The United States may institute

proceedings under this subsection to prevent or restrain

a violation of this section.

(ii) RELIEF.—Upon application of the United

States under this subparagraph, the district court may

enter a temporary restraining order or an injunction

against any person to prevent or restrain a violation of

this section if the court determines, after notice and an

opportunity for a hearing, that there is a substantial

probability that such violation has occurred or will

occur.

(B) INSTITUTION BY STATE ATTORNEY GENERAL.—

(i) IN GENERAL.—The attorney general of a State

(or other appropriate State official) in which a violation of this section allegedly has occurred or will occur,

after providing written notice to the United States, may

institute proceedings under this subsection to prevent

or restrain the violation.

(ii) RELIEF.—Upon application of the attorney general (or other appropriate State official) of an affected

State under this subparagraph, the district court may

enter a temporary restraining order or an injunction

against any person to prevent or restrain a violation of

this section if the court determines, after notice and an

opportunity for a hearing, that there is a substantial

36

probability that such violation has occurred or will

occur.

(C) INDIAN LANDS.—Notwithstanding subparagraphs

(A) and (B), for a violation that is alleged to have occurred,

or may occur, on Indian lands (as that term is defined in

section 4 of the Indian Gaming Regulatory Act (25 U.S.C.

2703))—

(i) the United States shall have the enforcement

authority provided under subparagraph (A); and

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

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

2710) shall be carried out in accordance with that compact.

(D) EXPIRATION.—Any temporary restraining order or

preliminary injunction entered pursuant to subparagraph

(A) or (B) shall expire if, and as soon as, the United States,

or the attorney general (or other appropriate State official)

of the State, as applicable, notifies the court that issued the

order or injunction that the United States or the State, as

applicable, will not seek a permanent injunction.

(3) EXPEDITED PROCEEDINGS.—

(A) IN GENERAL.—In addition to any proceeding under

paragraph (2), a district court may, in exigent circumstances, enter a temporary restraining order against a

person alleged to be in violation of this section upon application of the United States under paragraph (2)(A), or the

attorney general (or other appropriate State official) of an

affected State under paragraph (2)(B), without notice and

the opportunity for a hearing as provided in rule 65(b) of

the Federal Rules of Civil Procedure (except as provided in

subsection (d)(3)), if the United States or the State, as applicable, demonstrates that there is probable cause to believe that the use of the Internet or other interactive computer service at issue violates this section.

(B) HEARINGS.—A hearing requested concerning an

order entered under this paragraph shall be held at the

earliest practicable time.

(d) INTERACTIVE COMPUTER SERVICE PROVIDERS.—

(1) IMMUNITY FROM LIABILITY FOR USE BY ANOTHER.—

(A) IN GENERAL.—An interactive computer service provider described in subparagraph (B) shall not be liable,

under this section or any other provision of Federal or

State law prohibiting or regulating gambling or gamblingrelated activities, for the use of its facilities or services by

another person to engage in Internet gambling activity or

advertising or promotion of Internet gambling activity that

violates such law—

(i) arising out of any transmitting, routing, or providing of connections for gambling-related material or

activity (including intermediate and temporary storage

in the course of such transmitting, routing, or providing connections) by the provider, if—

37

(I) the material or activity was initiated by or

at the direction of a person other than the provider;

(II) the transmitting, routing, or providing of

connections is carried out through an automatic

process without selection of the material or activity

by the provider;

(III) the provider does not select the recipients

of the material or activity, except as an automatic

response to the request of another person; and

(IV) the material or activity is transmitted

through the system or network of the provider

without modification of its content; or

(ii) arising out of any gambling-related material or

activity at an online site residing on a computer server

owned, controlled, or operated by or for the provider, or

arising out of referring or linking users to an online location containing such material or activity, if the material or activity was initiated by or at the direction of

a person other than the provider, unless the provider

fails to take expeditiously, with respect to the particular material or activity at issue, the actions described in paragraph (2)(A) following the receipt by the

provider of a notice described in paragraph (2)(B).

(B) ELIGIBILITY.—An interactive computer service provider is described in this subparagraph only if the

provider—

(i) maintains and implements a written or electronic policy that requires the provider to terminate the

account of a subscriber of its system or network expeditiously following the receipt by the provider of a notice

described in paragraph (2)(B) alleging that such subscriber has violated or is violating this section; and

(ii) with respect to the particular material or activity at issue, has not knowingly permitted its computer

server to be used to engage in activity that the provider

knows is prohibited by this section, with the specific intent that such server be used for such purpose.

(2) NOTICE TO INTERACTIVE COMPUTER SERVICE PROVIDERS.—

(A) IN GENERAL.—If an interactive computer service

provider receives from a Federal or State law enforcement

agency, acting within its authority and jurisdiction, a written or electronic notice described in subparagraph (B), that

a particular online site residing on a computer server

owned, controlled, or operated by or for the provider is

being used by another person to violate this section, the

provider shall expeditiously—

(i) remove or disable access to the material or activity residing at that online site that allegedly violates

this section; or

(ii) in any case in which the provider does not control the site at which the subject material or activity resides, the provider, through any agent of the provider

38

designated in accordance with section 512(c)(2) of title

17, or other responsible identified employee or

contractor—

(I) notify the Federal or State law enforcement

agency that the provider is not the proper recipient

of such notice; and

(II) upon receipt of a subpoena, cooperate with

the Federal or State law enforcement agency in

identifying the person or persons who control the

site.

(B) NOTICE.—A notice is described in this subparagraph only if it—

(i) identifies the material or activity that allegedly

violates this section, and alleges that such material or

activity violates this section;

(ii) provides information reasonably sufficient to

permit the provider to locate (and, as appropriate, in a

notice issued pursuant to paragraph (3)(A) to block access to) the material or activity;

(iii) is supplied to any agent of a provider designated in accordance with section 512(c)(2) of title 17,

if information regarding such designation is readily

available to the public;

(iv) provides information that is reasonably sufficient to permit the provider to contact the law enforcement agency that issued the notice, including the name

of the law enforcement agency, and the name and telephone number of an individual to contact at the law

enforcement agency (and, if available, the electronic

mail address of that individual); and

(v) declares under penalties of perjury that the person submitting the notice is an official of the law enforcement agency described in clause (iv).

(3) INJUNCTIVE RELIEF.—

(A) IN GENERAL.—The United States, or a State law enforcement agency acting within its authority and jurisdiction, may, not less than 24 hours following the issuance to

an interactive computer service provider of a notice described in paragraph (2)(B), in a civil action, obtain a temporary restraining order, or an injunction to prevent the

use of the interactive computer service by another person in

violation of this section.

(B) LIMITATIONS.—Notwithstanding any other provision of this section, in the case of any application for a temporary restraining order or an injunction against an interactive computer service provider described in paragraph

(1)(B) to prevent a violation of this section—

(i) arising out of activity described in paragraph

(1)(A)(i), the injunctive relief is limited to—

(I) an order restraining the provider from providing access to an identified subscriber of the system or network of the interactive computer service

provider, if the court determines that there is probable cause to believe that such subscriber is using

39

that access to violate this section (or to engage with

another person in a communication that violates

this section), by terminating the specified account

of that subscriber; and

(II) an order restraining the provider from

providing access, by taking reasonable steps specified in the order to block access, to a specific, identified, foreign online location;

(ii) arising out of activity described in paragraph

(1)(A)(ii), the injunctive relief is limited to—

(I) the orders described in clause (i)(I);

(II) an order restraining the provider from

providing access to the material or activity that

violates this section at a particular online site residing on a computer server operated or controlled

by the provider; and

(III) such other injunctive remedies as the

court considers necessary to prevent or restrain access to specified material or activity that is prohibited by this section at a particular online location

residing on a computer server operated or controlled by the provider, that are the least burdensome to the provider among the forms of relief that

are comparably effective for that purpose.

(C) CONSIDERATIONS.—The court, in determining appropriate injunctive relief under this paragraph, shall

consider—

(i) whether such an injunction, either alone or in

combination with other such injunctions issued, and

currently operative, against the same provider would

significantly (and, in the case of relief under subparagraph (B)(ii), taking into account, among other factors,

the conduct of the provider, unreasonably) burden either the provider or the operation of the system or network of the provider;

(ii) whether implementation of such an injunction

would be technically feasible and effective, and would

not materially interfere with access to lawful material

at other online locations;

(iii) whether other less burdensome and comparably effective means of preventing or restraining access to the illegal material or activity are available;

and

(iv) the magnitude of the harm likely to be suffered

by the community if the injunction is not granted.

(D) NOTICE AND EX PARTE ORDERS.—Injunctive relief

under this paragraph shall not be available without notice

to the service provider and an opportunity for such provider

to appear before the court, except for orders ensuring the

preservation of evidence or other orders having no material

adverse effect on the operation of the communications network of the service provider.

(4) ADVERTISING OR PROMOTION OF NON-INTERNET GAMBLING.—

40

(A) DEFINITIONS.—In this paragraph:

(i) CONDUCTED.—With respect to a gambling activity, that activity is ‘‘conducted’’ in a State if the State

is the State in which the gambling establishment (as

defined in section 1081) that offers the gambling activity being advertised or promoted is physically located.

(ii) NON-INTERNET GAMBLING ACTIVITY.—The term

‘‘non-Internet gambling activity’’ means—

(I) a gambling activity in which the placing of

the bet or wager is not conducted by the Internet;

or

(II) a gambling activity to which the prohibitions of this section do not apply.

(B) IMMUNITY FROM LIABILITY FOR USE BY ANOTHER.—

(i) IN GENERAL.—An interactive computer service

provider described in clause (ii) shall not be liable,

under any provision of Federal or State law prohibiting or regulating gambling or gambling-related activities, or under any State law prohibiting or regulating advertising and promotional activities, for—

(I) content, provided by another person, that

advertises or promotes non-Internet gambling activity that violates such law (unless the provider is

engaged in the business of such gambling), arising

out of any of the activities described in paragraph

(1)(A) (i) or (ii); or

(II) content, provided by another person, that

advertises or promotes non-Internet gambling activity that is lawful under Federal law and the law

of the State in which such gambling activity is

conducted.

(ii) ELIGIBILITY.—An interactive computer service

is described in this clause only if the provider—

(I) maintains and implements a written or

electronic policy that requires the provider to terminate the account of a subscriber of its system or

network expeditiously following the receipt by the

provider of a notice described in paragraph (2)(B)

alleging that such subscriber maintains a website

on a computer server controlled or operated by the

provider for the purpose of engaging in advertising

or promotion of non-Internet gambling activity

prohibited by a Federal law or a law of the State

in which such activity is conducted;

(II) with respect to the particular material or

activity at issue, has not knowingly permitted its

computer server to be used to engage in the advertising or promotion of non-Internet gambling activity that the provider knows is prohibited by a Federal law or a law of the State in which the activity

is conducted, with the specific intent that such

server be used for such purpose; and

(III) at reasonable cost, offers residential customers of the provider’s Internet access service, if

41

the provider provides Internet access service to

such customers, computer software, or another filtering or blocking system that includes the capability of filtering or blocking access by minors to

online Internet gambling sites that violate this section.

(C) NOTICE TO INTERACTIVE COMPUTER SERVICE PRO- VIDERS.—

(i) NOTICE FROM FEDERAL LAW ENFORCEMENT

AGENCY.—If an interactive computer service provider

receives from a Federal law enforcement agency, acting

within its authority and jurisdiction, a written or electronic notice described in paragraph (2)(B), that a particular online site residing on a computer server owned,

controlled, or operated by or for the provider is being

used by another person to advertise or promote nonInternet gambling activity that violates a Federal law

prohibiting or regulating gambling or gambling-related

activities, the provider shall expeditiously take the actions described in paragraph (2)(A) (i) or (ii) with respect to the advertising or promotion identified in the

notice.

(ii) NOTICE FROM STATE LAW ENFORCEMENT AGENCY.—If an interactive computer service provider receives from a State law enforcement agency, acting

within its authority and jurisdiction, a written or electronic notice described in paragraph (2)(B), that a particular online site residing on a computer server owned,

controlled, or operated by or for the provider is being

used by another person to advertise or promote nonInternet gambling activity that is conducted in that

State and that violates a law of that State prohibiting

or regulating gambling or gambling-related activities,

the provider shall expeditiously take the actions described in paragraph (2)(A) (i) or (ii) with respect to the

advertising or promotion identified in the notice.

(D) INJUNCTIVE RELIEF.—The United States, or a State

law enforcement agency, acting within its authority and jurisdiction, may, not less than 24 hours following the

issuance to an interactive computer service provider of a

notice described in paragraph (2)(B), in a civil action, obtain a temporary restraining order, or an injunction, to prevent the use of the interactive computer service by another

person to advertise or promote non-Internet gambling activity that violates a Federal law, or a law of the State in

which such activity is conducted that prohibits or regulates

gambling or gambling-related activities, as applicable. The

procedures described in paragraph (3)(D) shall apply to actions brought under this subparagraph, and the relief in

such actions shall be limited to—

(i) an order requiring the provider to remove or

disable access to the advertising or promotion of nonInternet gambling activity that violates Federal law, or

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ducted, as applicable, at a particular online site residing on a computer server controlled or operated by the

provider;

(ii) an order restraining the provider from providing access to an identified subscriber of the system

or network of the provider, if the court determines that

such subscriber maintains a website on a computer

server controlled or operated by the provider that the

subscriber is knowingly using or knowingly permitting

to be used to advertise or promote non-Internet gambling activity that violates Federal law or the law of

the State in which such activity is conducted; and

(iii) an order restraining the provider of the content of the advertising or promotion of such illegal

gambling activity from disseminating such advertising

or promotion on the computer server controlled or operated by the provider of such interactive computer service.

(E) APPLICABILITY.—The provisions of subparagraphs

(C) and (D) do not apply to the content described in subparagraph (B)(i)(II).

(5) EFFECT ON OTHER LAW.—

(A) IMMUNITY FROM LIABILITY FOR COMPLIANCE.—An

interactive computer service provider shall not be liable for

any damages, penalty, or forfeiture, civil or criminal, under

Federal or State law for taking in good faith any action described in paragraphs (2)(A), (4)(B)(ii)(I), or (4)(C) to comply with a notice described in paragraph (2)(B), or complying with any court order issued under paragraph (3) or

(4)(D).

(B) DISCLAIMER OF OBLIGATIONS.—Nothing in this section may be construed to impose or authorize an obligation

on an interactive computer service provider described in

paragraph (1)(B)—

(i) to monitor material or use of its service; or

(ii) except as required by a notice or an order of a

court under this subsection, to gain access to, to remove, or to disable access to material.

(C) RIGHTS OF SUBSCRIBERS.—Nothing in this section

may be construed to prejudice the right of a subscriber to

secure an appropriate determination, as otherwise provided

by law, in a Federal court or in a State or local tribunal

or agency, that the account of such subscriber should not

be terminated pursuant to this subsection, or should be restored.

(e) AVAILABILITY OF RELIEF.—The availability of relief under

subsections (c) and (d) shall not depend on, or be affected by, the

initiation or resolution of any action under subsection (b), or under

any other provision of Federal or State law.

(f) APPLICABILITY.—

(1) IN GENERAL.—Subject to paragraph (2), the prohibition

in this section does not apply to—

(A) any otherwise lawful bet or wager that is placed

and received, or otherwise made wholly intrastate for a

43

State lottery, or for a multi-State lottery operated jointly between 2 or more States in conjunction with State lotteries

if—

(i) each such lottery is expressly authorized, and licensed or regulated, under applicable State law;

(ii) the bet or wager is placed on an interactive

computer service that uses a private network or a

closed-loop subscriber based service regulated and operated by the State lottery or its expressly designated

agent for such activity;

(iii) each person placing or otherwise making that

bet or wager is physically located when such bet or

water is placed at a facility that is open to the general

public; and

(iv) each such lottery complies with sections 1301

through 1304, and other applicable provisions of Federal law;

(B) any otherwise lawful bet or wager that is placed,

received, or otherwise made on an interstate or intrastate

basis on a live horse or a live dog race or on jai alai, or

the sending, receiving, or inviting of information assisting

in the placing of such a bet or wager, if such bet or wager,

or the transmission of such information, as applicable, is—

(i) expressly authorized, and licensed or regulated

by the State in which such bet or wager is received,

under applicable Federal and such State’s laws;

(ii) placed on a closed-loop subscriber-based service;

(iii) initiated from a State in which betting or wagering on that same type of live horse or live dog racing or on jai alai is lawful and received in a State in

which such betting or wagering is lawful;

(iv) subject to the regulatory oversight of the State

in which the bet or wager is received and subject by

such State to minimum control standards for the accounting, regulatory inspection, and auditing of all

such bets or wagers transmitted from 1 State to another; and

(v) in the case of—

(I) live horse racing, made in accordance with

the Interstate Horse Racing Act of 1978 (15 U.S.C.

3001 et seq.) and the requirements, if any, established by an appropriate legislative or regulatory

body of the State in which the bet or wager originates;

(II) live dog racing, subject to regulatory consent agreements that are comparable to those required by the Interstate Horse Racing Act of 1978,

and the requirements, if any, established by an appropriate legislative or regulatory body of the State

in which the bet or wager originates; or

(III) live jai alai, subject to regulatory consent

agreements that are comparable to those required

by the Interstate Horse Racing Act of 1978, and the

44

requirements, if any, established by an appropriate

legislative or regulatory body of the State in which

the bet or wager originates;

(C) any otherwise lawful bet or wager that is placed,

received, or otherwise made wholly intrastate, or the sending, receiving, or inviting of information assisting in the

placing of such a bet or wager, if such bet or wager, or the

transmission of such information, as applicable is—

(i) expressly authorized, and licensed or regulated

by the State in which such bet or wager is initiated

and received, under applicable Federal and such

State’s laws; and

(ii) placed on a closed-loop subscriber based service; or

(D) any otherwise lawful bet or wager that is—

(i) placed on a closed-loop subscriber based service

or a private network; and

(ii) is lawfully received by a federally recognized

Indian tribe, or the sending, receiving, or inviting of

information assisting in the placing of any such bet or

wager, if the game is permitted under and conducted

in accordance with the Indian Gaming Regulatory Act,

so long as each person placing, receiving, or otherwise

making such a bet or wager, or transmitting such information, is physically located on Indian lands (as

that term is defined in section 4 of the Indian Gaming

Regulatory Act) when such person places, receives, or

otherwise makes the bet or wager.

(2) BETS OR WAGERS MADE BY AGENTS OR PROXIES.— (A) IN GENERAL.—Paragraph (1) does not apply in any

case in which a bet or wager is placed, received, or otherwise made by the use of an agent or proxy using the Internet or an interactive computer service.

(B) QUALIFICATION.—Nothing in this paragraph may

be construed to prohibit the owner operator of a parimutuel

wagering facility that is licensed by a State from employing

an agent in the operation of the account wagering system

owned or operated by the parimutuel facility.

(3) ADVERTISING AND PROMOTION.—The prohibition of subsection (b)(1)(B) does not apply to advertising, promotion, or

other communication by, or authorized by, anyone licensed to

operate a gambling business in a State.

(g) RULE OF CONSTRUCTION.—Nothing in this section may be

construed to affect any prohibition or remedy applicable to a person

engaged in a gambling business under any other provision of Federal or State law.

(45)

ADDITIONAL VIEWS

While I support the overall thrust of H.R. 3125, the Internet

Gambling Prohibition Act, I have serious concerns relating to the

tribal gaming exemption provided by Section 2: (f)(1)(D).

The provision exempts gambling on a closed loop system, as the

term is defined in H.R. 3125. It requires both the sender and the

receiver to be on Indian lands. This is not limited to the Indian

lands on which the game is conducted, therefore, it would allow

linking of all Indian lands nationwide.

Because the language is broad enough to authorize just about

any type of wagering on a closed loop system between tribal lands,

language must also be added to ensure that no Class III gaming

activity can occur without the explicit authorization of a Tribal/

State compact.

The language that a bet be ‘‘lawfully received’’ by a tribe is ambiguous, because it is unclear if the Act itself will make the receipt

of the wager ‘‘lawful,’’ independent of any Compact. The requirement that the ‘‘game is permitted under and conducted in accordance with IGRA’’ is ambiguous, because if the underlying game (i.e.

slot machines) is authorized by a Compact, without specific authorization for a closed loop system, the requirement would appear to

be met.

Let me provide an example: If State A’s compact allows for slots,

and State B’s compact allows for blackjack and slots, absent clarification, the tribe in State A would argue it can now participate in

blackjack.

In conclusion, the ambiguous provision, combined with the rules

of statutory construction, require that the language be clarified so

that the carefully negotiated Tribal/State compacts are not at risk.

F. JAMES SENSENBRENNER, JR.

(47)

1The Christian Coalition, Family Research Council, and Madison Project oppose the expansion of gambling in the bill. 2These groups include the National Governors Association, lottery.com, the Association of Lottery Retailers, and the Lac Vieux Band of Lake Superior Chippewa Indians. 3Subsection (a)(9) of H.R. 3125 would broadly define ‘‘person’’ to include individuals and entities with indirect or highly attenuated connections to the activity in question, such as shareholders of a corporation or officers of a holding company. 4Subsection (a)(4) of H.R. 3125 would define a person engaged gambling business to include

those persons who place or receive bets and is in continuous operation for more than 10 days

or has a gross revenue of at least $2,000. This definition could be construed to apply to an individual gambler. 5 H.R. 3125, subsection (b)(1). The bill would institute new civil and criminal penalties for violating its provisions. Civil penalties would include the greater of the amount of bets and wagers

placed or received by the defendant or $20,000. Criminal penalties would include imprisonment

up to 4 years. A defendant could be subject to both the civil and criminal penalties. H.R. 3125,

subsection (b)(2). 6The Wire Communications Act, 18 U.S.C. § 1084, prohibits persons who are ‘‘engaged in the

business of betting or wagering knowingly [to] use[ ] 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.’’ As defined by 18 U.S.C. § 1081, a ‘‘wire communication facility’’ includes

the Internet.

DISSENTING VIEWS

Although we are opposed to illegal gambling, whether done over

the Internet or otherwise, we cannot support the legislation reported by the Judiciary Committee. H.R. 3125 not only expands

gambling over the Internet, it arbitrarily favors certain forms of

gambling over others. In addition, the bill inappropriately requires

Internet service providers and others to police websites, threatens

the privacy and civil liberty of all Americans, and creates a patchwork of inconsistent laws. By approving this legislation, the Majority reveals its insensitivity to the growth of the Internet and the

interests of our citizens in the information age.

Concerns or outright opposition with regard to the legislation (or

similar predecessor versions of it) have been expressed by the Justice Department and a wide variety of groups. These include Internet and telecommunications concerns such as the Computer &

Communications Industry Association (CCIA), Covad Communications, and AT&T; civil liberties groups such as the Center for Democracy and Technology (CDT) and the ACLU; and groups harmed

by the bill’s arbitrary preference for pari-mutuel betting 1 and its

equally arbitrary dismissal of other forms of gambling,2 including

State lotteries, charitable gaming, and gambling on Indian reservations.

H.R. 3125 would make it unlawful for a person 3 engaged in a

gambling business 4 knowingly to use the Internet to place, receive

or otherwise make a bet or wager or to send, receive or invite information assisting in the placing of a bet or wager.5 At the same

time the bill vitiates the existing Federal wire statute prohibition 6

on certain bets from the home by making it legal to place a bet or

wager at home over the Internet on a horse race, dog race or jai

48

7 H.R. 3125, subsection (f). Such bets would be permitted if allowed by the State and placed

on a closed-loop subscriber service, broadly defined, which would include the purchase of a diskette with a credit card which could be used to access the system. 8 Charitable donations that are placed through bets are neither excluded from definition of

‘‘bet or wager,’’ nor from the prohibition on Internet gambling. 9Subsection (f)(1)(A) of H.R. 3125 would permit the purchase of lottery tickets on the Internet

only by a person who ‘‘is physically located when such bet or water [sic] is physically located

when such bet or water [sic] is placed at a facility that is open to the general public.’’ 10Subsection (f)(1)(D) of H.R. 3125 would restrict the placement and receipt of Indian gambling bets over the Internet to situations in which the person is ‘‘physically located on Indian

lands.’’ The 1988 Indian Gambling Regulatory Act currently permits Native Americans to use

the Internet and telecommunications technologies to link Bingo that is played on different Reservations. This legislation expressly encouraged tribes to deploy the latest technology and communications for Bingo. Like its treatment of State lotteries, H.R. 3125 would eliminate the ability of tribes to conduct lawful Bingo games at the same time that it opens the floodgates for

currently unlawful horse races, dog races, and jai alai. 11 H.R. 3125, subsection (a)(1)(D)(v). The bill defines fantasy sports leagues as contests that

do not depend on the outcome of any single sporting event or a singular individual performance,

that have an outcome reflecting the skill and knowledge of contestants, and that offer a prize

that is determined in advance of the event and do not depend on the number of participants

or the fees paid by those participants. 12Subsection (a)(7) of H.R. 3125 would define an ‘‘interactive computer service provider’’ to

be ‘‘any person that provides an interactive computer service, to the extent that such person

offers or provides such service.’’ Since the essence of the Internet is to provide its users with

interactive computer services, the definition would encompass not only Internet Service Providers like AOL, but also on any search engine, portal, website, or even a website infrastructure,

all of which provide interactive services to users. 13Two subsections of H.R. 3125 establish the notice and takedown requirements. First, subsection (b)(2) of H.R. 3125 provides that an ICS, upon receipt of a notice that a website is violating the prohibitions on Internet gambling, must ‘‘expeditiously remove or disable’’ access to

the material or notify law enforcement that it incorrectly received the notice. If the ICS fails

to take either of these steps within 24 hours of receiving the notice, law enforcement may seek

a temporary restraining order or an injunction preventing the ICS from being used to violate

this section. Parallel provisions apply to online advertising of Internet gambling websites. Subsection (3)(D) of H.R. 3125. 14See infra. 15Subsection (d)(3)(B)(II) of H.R. 3125 would authorize law enforcement to go into court to

obtain an order requiring the ICS to block access to ‘‘specific, foreign online location[s].’’

alai match,7 the bill also discriminates against regulated gambling

by church and non-profit organizations,8 in-State lottery sales,9 and

Native American tribes 10 by severely restricting their legality over

the Internet. The bill excludes fantasy sports leagues from its coverage by defining a ‘‘bet or wager’’ to exclude such activities.11

The bill’s enforcement scheme is premised on several broad ‘‘notice and take down,’’ blocking, and injunctive requirements, which

principally rely on so-called ‘‘interactive computer service’’ (ICS)

providers to act as surrogates for law enforcement (presumably,

this would include Internet service providers, such as AOL or the

Microsoft Network (MSN), but potentially include a far broader

range of companies such as search engines and portals 12). With regard to ‘‘notice-and-takedown,’’ the bill specifies that after notice

from a law enforcement agency, an ICS is required to ‘‘take down’’

any web site, customer account, or other offending material which

is seen as facilitating illegal Internet gambling or advertising

thereof.13 This requirement would attach merely upon a court

order based on probable cause and is written so broadly that even

individual consumers engaging in a form of gambling which is not

illegal for them can lose their accounts without any advance notice.14 In terms of blocking, H.R. 3125 would require any ICS to

mandatorily block an individual’s access to specified foreign

websites.15 Again, this provision is not premised on the individual

whose access is being blocked having violated any Federal or State

gambling law. (In nominal exchange for these new burdens, the bill

49

16Subsection (d)(1) of H.R. 3125. The immunity would apply under the following conditions:

(1) the violating material or activity was not initiated by or at the direction of the interactive

computer service providers; (2) the material or activity was automatically processed without selection by the interactive computer service providers; and (3) the interactive computer service

providers played no role in modifying the content of the site. The bill would further immunize

qualifying interactive computer service providers from liability under Federal or State gambling

law if another person advertised legal or illegal gambling activity.

Interactive computer service providers would only qualify for these immunities, however, if

they: (1) maintain a written or electronic policy that requires them to terminate a subscriber’s

account expeditiously following the receipt of a notice; (2) prevent their server from being used

to engage in activity which violates the Act, with the specific intent that the server be used for

that purpose; (3) do not knowingly permit their server to be used to advertise non-Internet gambling activity that violates the law; and (4) offer blocking software that would assist in blocking

minors’ access to Internet gambling sites. 17Subsection (d)(3) of H.R. 3125. This provision, by its own terms, would authorize injunctive

relief ‘‘to prevent the use of the interactive computer service by another person’’ (emphasis supplied). Since ‘‘person’’ is broadly defined in subsection (a)(9) to include ‘‘any individual,’’ the bill

plainly would authorize a court to enjoin any person that is in violation of the bill without notice

or an opportunity to be heard.

immunizes qualifying ICSs from liability under Federal or State

law for the use of its facilities to violate the Act.) 16

Finally, the legislation includes a very broad court-ordered injunction provision. This relief can be obtained upon a mere showing

of ‘‘probable cause.’’ The authorization for an injunction can be

brought against any person other than an ICS to prevent or restrain a violation of the law.17 A summary of our concerns with the

legislation follows.

I. H.R. 3125 EXPANDS GAMBLING OVER THE INTERNET, AND ARBITRARILY FAVORS CERTAIN FORMS OF GAMBLING OVER OTHER FORMS

Amazingly, a bill that purportedly originated as an anti-gambling

initiative would significantly expand the availability of gambling

over the Internet. Rather then calling the bill the ‘‘Internet Gambling Prohibition Act of 2000,’’ the bill more appropriately should

be referred to as the ‘‘Internet Gambling Expansion Act of 2000.’’

The sponsors of H.R. 3125 have catered to special interests by ripping gaping loopholes in a bill originally drafted to prohibit Internet gambling. At the same time, perhaps in a transparent effort to

innoculate the bill against charges that it opens up more loopholes

than it closes, the bill’s sponsors have effectively barred State lotteries, charitable organizations, and Tribes from merging onto the

information superhighway.

This result, though denied or ignored by the legislation’s proponents, is indisputable. In testimony before the Subcommittee on

Crime, the Department of Justice described how the bill prohibits

Internet gambling in name only:

[T]he Department is concerned that the bill does not really

prohibit Internet gambling, but rather facilitates certain

types of gambling from the home and, therefore, arguably

expands gambling opportunities. Specifically, the Department recognizes that H.R. 3125 exempts pari-mutuel wagering from the prohibition against Internet gambling. The

result is that people will be able to bet on horse racing,

dog racing, and jai alai from their living rooms. While the

bill provides that such gambling must be done on a ‘‘closed

loop subscriber based service,’’ the definition of that term

is extremely broad. I could receive a free disk in the mail,

load it on my computer, connect through my regular InterVerDate 11-MAY-2000 01:52 Jun 13, 2000 Jkt 010199 PO 00000 Frm 00049 Fmt 6601 Sfmt 6601 E:\WAISREPT\HR655P1.106 ATX006 PsN: ATX006
50

18 Hearing on H.R. 3125 Before the House Comm. on the Judiciary, Subcomm. on Crime,

106th Cong., 2d Sess. (March 9, 2000) (testimony by Deputy Assistant Attorney General Kevin

DiGregory). 19Letter to Judiciary Chairman Hyde from Jeffrey K. Taylor, Director of Government Relations, the Christian Coalition (March 22, 2000). 20Letter to Judiciary Chairman Hyde from Michael D. Bowman, Director of State & Local Affairs, the Family Research Council (March 22, 2000). 21Letter to House Majority Leader Armey and Majority Whip DeLay from Paul M. Weyrich,

President, the Free Congress Foundation (May 11, 2000). 22Letter to Judiciary Chairman Hyde from Michael P. Farris, Chairman, the Madison Project

(April 3, 2000). 23 Ron Eckstein, ‘‘Rolling the Dice,’’ LEGAL TIMES, at 1 (March 13, 2000). See also, Thomas

E. Weber, ‘‘Playing the Ponies In Your Underwear,’’ The Wall Street Journal Interactive Edition,

http://interactive.wsj.com/archive/retrieve.cgi?id=SB957138139977057683.djm (May 1, 2000).

net service provider, and start betting on horse racing

from my living room. Additionally, if my children have access to that same computer, they may also be able to get

online and bet and wager on pari-mutual activities. Simply

stated, the Department does not understand why the parimutuel wagering industry should be allowed to accept bets

from people in their homes, when other forms of gambling

have rightly been prohibited from doing so.18

Federal law enforcement is not alone in expressing its concerns

regarding a bill that expands Internet gambling. Socially conservative advocacy groups pleaded with the bill’s sponsors to eliminate

the bill’s exemptions—to no avail. The Christian Coalition declared

that ‘‘it cannot support any legislation that purports to restrict

gambling on the Internet and at the same time expands gambling

opportunities on the Internet.’’ 19 The Family Research Council

found ‘‘the ‘exemptions’ in the bill unnecessary.’’ 20 In a letter

signed by Paul Weyrich, the Free Congress Foundation wrote to

voice its ‘‘strong opposition’’:

The bill seems to fly in the face of a number of core principles of conservatism. It turns federalism on its head by

taking the power away from the States to regulate their

own State lotteries . . . There are also substantive concerns about even achieving the goal of regulating gambling

on the Internet. . . . But are we going to create a national

police force to monitor individuals or the server industry? 21

Finally, the Madison Project noted that ‘‘this bill contains loopholes that actually expand [Internet gambling]. . . . Why would

Congress want to pass a law that encourages the expansion of a

problem that already affects 15.4 million Americans. . . . Please

do not allow this bill to be used as a vehicle for expanding the

scope of gambling in America.’’ 22

Recognizing that the prohibition on Internet gambling in H.R.

3125 has become a proxy for the expansion of Internet gambling,

the Legal Times of Washington described the bill’s posture:

Thanks to some swift lobbying, the proposed ban carves

out some big exemptions for online gambling by any Stateregulated industry. . . . Translation: The bill that aims to

rein in online gambling would nonetheless allow online

versions of some of the most popular gaming attractions—

horse racing, dog tracks, . . . and jai alai.23

51

24 National Gambling Impact Study Commission, Final Report, Recommendation 5.1 (June 18,

1999). 25 Hearing on H.R. 3125 Before the House Comm. on the Judiciary, Subcomm. on Crime,

106th Cong., 2d Sess. (March 9, 2000) (testimony by John Doe).

The result of this expansion of Internet gambling could carry

with it potentially devastating results for those Americans who are

at risk for gambling addiction or are compulsive gamblers. This is

completely contrary to the findings of the congressionally created

National Gambling Impact Study Commission, which issued a report to President Clinton and found that gambling is a widespread

problem, and criticized the carve-outs and exemptions contained in

H.R. 3125:

The Commission recommends to the President, Congress,

and the Department of Justice (DOJ) that the Federal

Government should prohibit, without allowing new exemptions or the expansion of existing Federal exemptions to

other jurisdictions, Internet gambling not already authorized within the United States.24

At the Crime Subcommittee hearing on the bill, a self-described

gambling addict described the allure of gambling on the Internet:

Mr. WEINER: Now, if there were other types of gambling

that were available, for example, we particularly take note

in this legislation of horse racing and dog racing, and I

guess jai alai is also included, if there were other types of

gambling available, would you simply move? Do you have

a desire to gamble or is it just a desire to play blackjack?

Mr. DOE: It is mainly a desire to gamble. My game of

choice—well, it is my desire and win money, so it is my

passion for gambling that was driven uncontrollably with

the ease of the Internet.

Mr. WEINER: So if you had a sure shot on a 25 to 1 horse

that you thought for sure was going to win, you would

have a desire to gamble on that horse race, just like you

would have a desire to double down on 11?

Mr. DOE: I would consider that.25

In addition to gambling addicts, the bill also could open the way

for children, who are prohibited by law from gambling in ‘‘bricks

and mortar’’ casinos, to become gambling addicts using the Internet. Although the supporters of H.R. 3125 assert that by requiring

permitted Internet gambling to be carried out on a closed-loop subscriber-based system, website operators can effectively screen out

minors, a closed-loop system does not, by itself, adequately ensure

that minors will be unable to access gambling sites. In fact, the nation’s largest Internet Service Provider, AOL, available in tens of

millions of American homes, would fit the definition of a closedloop, subscriber-based system.

Just as disturbing, from a policy perspective, is the fact that the

bill arbitrarily discriminates against certain forms of gambling as

it elevates the legality of some types of gambling over others. The

victims of this discrimination are State lotteries, charitable contests, and gambling on Indian reservations. Ironically, the very entities that one would expect Congress to protect in a bill to regulate

Internet gambling—those that have the greatest overall benefit to

52

26 In fiscal year 1999 alone, lotteries generated more than $12 billion nationwide for essential

public education, seniors, and environmental programs, as well as for local governments, State

general coffers, and a variety of other programs. Since 1964, thirty-seven States, the District

of Columbia, and Puerto Rico have opted to offer their citizens lotteries, and use the proceeds

to fund critical programs and projects. 27Letter to Judiciary Chairman Hyde from Mark F. Jones, Executive Director, the Association

of Lottery Retailers (May 16, 2000). The Free Congress Foundation reached the same conclusion:

‘‘The only thing that will be accomplished [by H.R. 3125] is that money will be sent abroad as

foreign governments and companies set up their own online lottery games for American consumers.’’ Letter to House Majority Leader Armey and Majority Whip DeLay from Paul M.

Weyrich, President, the Free Congress Foundation (May 11, 2000). 28Letter to Judiciary Chairman Henry Hyde and Ranking Member John Conyers from Governors Michael O. Leavitt and Parris N. Glendening, National Governors Association (April 4,

2000). In addition to the Governors, representatives of the lottery industry wrote that permitting States to determine the format of their lotteries is fundamental to States’ rights. The North

American Association of State & Provincial Lotteries asserted:

[G]aming is a States-rights issue. . . . Lottery profits support much needed programs

and services, and each State must maintain the right to decide the best ways to raise

revenue so that these programs and services do not suffer. . . . We strongly believe

that the States determination to provide gaming is appropriately left at the State legislative and gubernatorial levels.

Letter to Representative Robert Goodlatte from David B. Gale, Executive Director of the North

American Association of State & Provincial Lotteries (March 29, 2000). See also, Letter to Judiciary Chairman Hyde from Mark F. Jones, Executive Director, the Association of Lottery Retailers (May 16, 2000) (noting the ‘‘heavy-handed effort by some in Congress to take a Federal slap

at State lotteries’’); Letter to Judiciary Chairman Hyde from Steven M. Saferin, President &

Chief Executive Officer, MDI Entertainment, Inc. (May 12, 2000) (‘‘The consequences of this Bill

may be extreme . . . To continue to provide valuable revenues to the good causes they serve,

lotteries must be able to compete on a level playing field and the use of the Internet as a distribution method for existing and future games should clearly be a decision left to each individual State and the lottery it operates.’’); Letter to Judiciary Ranking Member Conyers from

Roger W. Ach, II, President & Chief Executive Officer, lottery.com (May 12, 2000) (‘‘By eliminating the ability of State lotteries to sell lottery tickets on-line, Congress will cause a detrimental impact on lottery revenues and on lottery.com business.’’).

society, State lotteries, charitable giving, and those that are essential to the livelihood of Native Americans—have been disregarded

in H.R. 3125.

H.R. 3125 would prevent State lotteries from entering the Internet age. Lotteries are the only form of gaming that return profits

directly to the public.26 H.R. 3125 does this by allowing the online

purchase of in-state lottery tickets only in facilities ‘‘open to the

general public.’’ In other words, States may not allow their own

residents to purchase lottery tickets over the Internet from the convenience of their homes. As a result, whether online gaming activities supplant or supplement physical gaming activities, State lotteries stand to lose even more ground to other forms of gaming that

provide no direct return to the public whatsoever. The Association

of Lottery Retailers noted that the real beneficiaries of the bill’s restrictions on State lotteries would be the offshore operators of

Internet lotteries, and pointed out the irony that the professed opponents of Internet gambling have only benefitted ‘‘a handful of offshore, illegal operators of unregulated and unregulatable internet

lotteries [who] could not be happier.’’ 27

The anti-lottery provision has also drawn the ire of the National

Governors Association, which wrote:

States possess the authority to regulate gambling within

their own borders and must continue to be allowed to do

so. An incursion into this area with respect to online gambling would establish a dangerous precedent with respect

to gambling in general as well as broader principles of

State sovereignty.28

53

29 25 U.S.C. § 2703(7)(A)(i). This provision of the IGRA applies to ‘‘Class II’’ games, such as

Bingo, but does not include other forms of gambling such as parimutuel wagering, slot machines, blackjack, and other ‘‘casino’’ type games. 30Oversight Hearing on Internet Gaming, Before the Senate Committee on Indian Affairs, on

Crime, 106th Cong., 1st Sess. (June 9, 1999) (testimony by Richard Williams, Chairman, Lac

Vieux Desert Band of Lake Superior Chippewa Indians). 31Letter to Judiciary Ranking Member Conyers from the Lac Vieux Desert Band of Lake Superior Chippewa Indians of Michigan (April 3, 2000). See also, Letter to Judiciary Ranking

Member Conyers from Anthony C. Minthorn, Chairman of the Board of Trustees, Confederated

Tribes of the Umatilla Reservation of Oregon (March 23, 2000) (‘‘Without a tribal gaming exemption, H.R. 3125 will bear the dubious distinction of not only treating tribal governments in

an arbitrary—if not discriminatory—fashion, but of stifling one of the few successful economic

engines available to our communities within memory.’’)

H.R. 3125 also would discriminate against charities (as compared

to pari-mutuel gambling), completely preventing non-profits from

raising funds through Internet lotteries and bingo. Although section 1955 of title 18 and most State laws permit charitable gaming,

H.R. 3125 would block charities from raising funds through online

games. Despite the fact that charitable gaming accounts for a mere

1.5% of all wagering in the United States and is not the game of

choice for compulsive gamblers, H.R. 3125 deprives charitable organizations of conducting activities in cyberspace which are perfectly

legal in the physical world. Such an exclusion will place charitable

organizations at a competitive disadvantage as the Internet becomes an increasingly important tool of commerce and communication in our society. Individuals who wish to participate in games

of chance that have social value will have no ability to do so online.

Finally, H.R. 3125 discriminates against Native-Americans by requiring that the player of a game be ‘‘physically located on Indian

lands.’’ This would outlaw a form of online gambling in which a

Tribe conducts a Class II Bingo game and the player need not be

physically on the Reservation. This type of Bingo was developed at

great expense to some tribes, in reliance on the letter and spirit of

the Indian Gambling Regulatory Act (IGRA).29 Indeed, in testimony before a Senate Committee on Indian Affairs Oversight Hearing on Internet Gaming, one Tribe acknowledged its expenditure of

‘‘millions of dollars and countless hours developing a Bingo game

that utilizes Internet technology to expand its participation levels.’’ 30 The Lac Vieux Desert Band of Lake Superior Chippewa Indians of Michigan wrote:

[T]he Tribe opposes passage of this legislation . . . [because] such a broad-sweeping prohibition runs counter to

the letter and spirit of the 1988 Indian Gambling Regulatory Act (IGRA) and deals a serious blow to tribal sovereign rights to enter into legal Class II gaming activities,

via the Internet. . . . In essence, H.R. 3125 takes away

existing legal rights of tribes authorized under the IGRA,

while expanding more privileges to non-Indian gaming interests.31

The Tribe also noted that H.R. 3125 has been universally condemned by tribes and national tribal organization throughout the

country. These include the National Congress of American Indians,

the United South and Eastern Tribes, the Midwest Alliance of Sovereign Tribes, and the National Indian Gaming Association.

54

32Letter to Judiciary Ranking Member Conyers from Ed Black, President and CEO, the Computer & Communications Industry Association (April 3, 2000). 33Position Paper, Center for Democracy and Technology. 34 Id. 35The plain language of H.R. 3125 cannot fairly construed to limit the definition of ‘‘subscriber.’’ H.R. 3125 defines ‘‘subscriber’’ in section 1085(a)(12)(A) to mean (emphasis supplied):

any person with a business relationship with the interactive computer service provider

through which such person receives access to the system, service, or network of that

provider, even if no formal subscription agreement exists. 36 In addition, in discussing the scope of injunctive relief available, the bill states that the relief is limited to:

an order restraining the provider from providing access to an identified subscriber of

the system or network of the interactive computer service provider, if the court deterII. THE NOTICE AND TAKEDOWN PROVISIONS VIOLATE THE RIGHTS AND

LIBERTIES OF WEBSITE OPERATORS AND INDIVIDUAL CUSTOMERS

The notice and takedown provisions in H.R. 3125 operate to

allow any local or Federal law enforcement official to require ICSs

and ISPs to take down a supposedly offending sight with no prior

notice or any semblance of due process. This inappropriately deputizes these parties to serve as law enforcement authorities. As the

Computer and Communications Industry Association wrote:

[R]equiring ISPs to ‘take down’ websites based solely on

the request of a law enforcement official from the Federal

Government or any of the fifty States is a dangerously

broad new grant of censorship power to Federal and State

governments. . . . The provision sets forth a flawed precedent. . . . We believe it is more appropriate to adhere to

well-established procedures of notice and opportunity to be

heard, court review, and judicially imposed injunctions.’’ 32

These concerns were echoed by the Center for Democracy and

Technology (CDT), perhaps the nation’s leading authority on rights

and liberties on the Internet, which observed that the bill’s takedown provisions place ‘‘too much discretion in the hands of government officials, who get to decide in the first instance, without any

independent review, what is legal and what is illegal.’’ 33 CDT

noted further that it is not those government officials, but the ISPs,

which are required to deliver the notice or face injunctive relief:

This approach, were it to serve as a precedent for other

similar burdens on ISPs to cooperate with mere requests

that they take down other illegal or undesirable content,

would fundamentally change the nature of the Internet.

While ISPs can decide what to host and what not to host,

they should not be required to police their systems, nor

should the government, through immunity provisions, dictate their terms of service with their customers.34

We also have a separate concern that H.R. 3125 will operate to

allow individual Internet users who have not violated the statute

to have their accounts taken down, also without any prior warning.

Under the bill, if a government actor notifies an ISP that a ‘‘subscriber’’ is in violation of the Act’s provisions, the ISP must take

action against the offending ‘‘subscriber.’’ As reported by the committee, the definition of ‘‘subscribers’’ includes both the operators

of gambling websites, as well as the individual consumers who log

on to the targeted websites.35 This is because the definition of ‘‘subscriber’’ would cover anyone with a business relationship with the

ICS through which the person receives access to the system.36

55

mines that there is probable cause to believe that such subscriber is using that access

to violate this section (or to engage with another person in a communication that violates this section), by terminating the specified account of that subscriber.

H.R. 3125, subsection (d)(3)(B)(i)(I). 37Pub. L. 105–304 (105th Cong., 2d Sess.). 38The counter-notification provisions appear in section 512(g)(3) of the DMCA and in section

202(a) of Pub. L. 105–34, 112 Stat. 2282 (105th Congress, 2d Sess.). An effective counter-notification must ‘‘substantially’’ include a physical or electronic signature of the subscriber; information that enables the identification and location of the material in question; a statement of the

subscriber’s good-faith belief that the material was removed or disabled due to mistake or

misidentification; and identifying information about the subscriber along with the subscriber’s

consent to Federal jurisdiction. 39Subsection (e) of H.R. 3125 also departs from the DMCA by allowing takedowns and injunctions without any accompanying prosecution for violations of the prohibition on Internet gambling:

The availability of relief . . . shall not depend on, or be affected by, the initiation or

resolution of any action under subsection (b), or under any other provision of Federal

or State law.

The notice and takedown provisions fail to include the process

and legal safeguards specified in the Digital Millennium Copyright

Act (DMCA), which the legislation purportedly uses as a model.37

The DMCA included language to protect people from becoming the

subject of wrongful or erroneous takedowns. This is because the

DMCA includes a requirement that the ISP give notice to the

website operator and gives the website the opportunity to file a

counter-notification.38 This ensures that the website operator at

least has the opportunity to register its objections to the action by

the ISP if the website believes that the allegation of copyright infringement is not supported by the law. By contrast, under H.R.

3125, without the ability to file a counter-notification, the website

will have no protection from a takedown by an ICS or ISP that incorrectly believes that the site facilitates or promotes illegal gambling or that is acting in response to an overzealous prosecutor.39

III. THE BLOCKING PROVISIONS WILL HARM THE OPERATION OF THE

INTERNET AND CONSTITUTE A THREAT TO INDIVIDUAL PRIVACY

RIGHTS

The legislation’s provisions mandating blocking of foreign

websites are also far broader than any existing law. The requirement not only represents a real and viable threat to our own privacy and our nation’s birthright as an exemplar of individual liberty, but it will have the likely effect of slowing down and interfering with the operation of the Internet.

Not only is it inappropriate to place ICSs in the position of becoming Internet hall monitors, it would have the effect of chilling

unfettered expression on the Internet. For example, H.R. 3125 authorizes court orders to shut off subscriber accounts based merely

on a showing of probable cause that the subscriber is betting at a

prohibited website, even if the subscriber’s activities are lawful

under Federal and State laws. In a letter filed with the Senate during the debate on Senator Kyl’s version of the Internet gambling

bill, the ACLU noted the threat to privacy that arises from ill-conceived measures to regulate the Internet:

[R]espect for issues of personal privacy and content freedom should be central to this and any other debate on

Internet policy. We oppose any effort by States to regulate

56

40Letter to Senate Judiciary Chairman Hatch from the American Civil Liberties Union, Americans for Tax Reform, the Association of Concerned Taxpayers, Citizens for a Sound Economy,

the Competitive Enterprise Institute, the First Amendment Coalition for Expression, the Interactive Services Association, the Small Business Survival Committee, and the United States

Internet Council (October 8, 1997). 41Letter to Judiciary Ranking Member Conyers from Ed Black, President and CEO, CCIA

(May 5, 2000). 42Position Paper, Center for Democracy and Technology. 43See, e.g., the DMCA, Pub. L. 105–304 (105th Cong., 2d Sess.); the Internet Tax Freedom

Act, Pub. L. 105–277 (105th Cong., 2d Sess.).

content on the internet, a national and global communications medium that the Supreme Court has found to be especially valuable because of the breadth and diversity of

the speech found there. We also oppose all attempts to

turn internet service providers into de facto government

agents.40

The CCIA also has explained that the blocking obligation imposed under H.R. 3125 is inappropriate and discriminatory:

It is not appropriate for Congress to mandate that ISPs police the content of the millions of websites accessible

through their facilities, but the risk of criminal sanctions

would clearly force any responsible ISP to do so.... [L]ike many new content regulations, these requirements

unfairly discriminate against the Internet as a medium of

communication. Newspapers, magazines, telephone companies, and mail delivery services need not fear criminal

prosecution for facilitating illegal gambling, although undoubtedly these media are much more central to illegal

gambling activities.41

Similar concerns were echoed by the Center for Democracy and

Technology:

[T]his mandatory filtering approach is fundamentally incompatible with the user empowerment vision of the Internet: filtering is appropriate at the user level [when voluntary], but it is inappropriate at the ISP or server level,

particularly when mandated by the government. The

Internet’s power stems from its decentralized, user-controlled nature. Installing ISPs as chokepoints or gatekeepers turns the Internet into something different, akin

to the broadcast media.42

Intruding on individual privacy by denying individual Internet

users access to websites of their own choosing establishes a very

poor precedent for other nations that look to the United States as

the leader in safeguarding individual liberty. It would be ironic indeed if Congress passed legislation that required private parties to

act as censorship agents for government officials in a medium that

virtually everyone agrees should be left alone. There is a national

consensus that the Internet is the singlemost significant force driving this nation’s unprecedented economic expansion and corresponding explosion of information and communication. H.R. 3125

would represent a dramatic departure from that objective.43

By requiring ISPs to block individual access to specified Internet

locations, H.R. 3125 would send an unintended signal to China,

Cuba, and other autocratic regimes, that they too may block their

citizens access to the Internet. As Time Digital editor Joshua

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44Time.com Digital Daily Edition, http://www.time.com/time/daily/0,2960,42462–

101000405,00.html (April 9, 2000). 45Letter to Senate Judiciary Chairman Orrin Hatch from the ACLU, Americans for Tax Reform, the Association of Concerned Taxpayers, Citizens for a Sound Economy, the Competitive

Enterprise Institute, the First Amendment Coalition for Expression, the Interactive Services Association, the Small Business Survival Committee, and the United States Internet Council (October 8, 1997). 46 Elif Unal, ‘‘Turkey Debates Cyberspace Controls,’’ Reuters.com, http://dailynews.yahoo.com/

h/nm/20000416/wr/turkey—internet—1.html (April 18, 2000). 47Frank Gardner, ‘‘Saudi censors say they’re winning the war against porn,’’ POLITECH,

http://www.politech.bot.com (May 10, 2000).

Quittner has observed, ‘‘I find it objectionable that the government

would feel the need to act as a proxy in this way [mandating blocking of foreign websites]. . . . This is exactly the kind of thing a totalitarian regime would undertake—in fact, it’s exactly what the

Chinese government has already done.’’ 44

As the ACLU noted in its analysis of similar blockage provisions

in the Senate version of the Internet gambling bill, efforts to require ISPs to block overseas websites ‘‘would attempt to segment

the Internet—in effect, placing an electronic wall around the

United States—to ‘protect us from ourselves’ much like China and

Singapore have tried to do. The idea of making U.S. ISPs responsible for policing the content of offshore Internet sites is clearly unworkable.’’ 45 For example, in China, the Ministry of Education recently took steps to police content on the Internet by requiring distance learning websites to register. The Ministry is expected to

have direct supervision of a website’s content. In addition, the

State Council Information Office created the Internet Information

Management Bureau, which is responsible for overseeing the Internet news industry and is requiring pre-approval of all news that

is published on the Internet.

Turkey, a country whose leadership has repeatedly cracked down

on dissenting political views, is considering requirements for patrolling Internet content that is strikingly similar to the framework

proposed in H.R. 3125. The Turkish government is considering creating a watchdog body of government officials who could order ‘‘registered Internet corporations, public and private, to take any measures the watchdog body may request’’ against Internet communications by those with ‘‘evil intentions.’’ 46

Finally, the potential for blocking to become a tool for government censorship is demonstrated by Saudi Arabia, which requires

all ISPs to be linked through a central node in Riyadh. This enables the Saudi government to block all pornographic websites as

well as access to any site that the government believes could stir

up religious hatred.47 These are not precedents this country or this

Congress should support.

Another concern that we have stems from the harm that H.R.

3125’s mandatory blockage provisions will cause to the Internet in

general and to smaller ISPs in particular. The burdens on smaller

ISPs could prove particularly devastating. It is one thing to ask a

multi-billion dollar company such as AOL to institute complex

blocking requirements; it is quite another to ask a fledgling ISP

provider or a new technology firm to change his or her business to

conform to the blocking requirements of this bill. Thus, for the

thousands of small start-up ISPs and other telecommunications

firms, compliance with the blockage provisions would be expensive

58

48Section 512(c) of the DMCA, Pub. L. 105–304, 112 Stat. 2879–2881 (105th Cong. 2d Sess.). 49Testimony of David G. Jemmett, President, WinStar GoodNet, Hearing on H.R. 2380 before

the House Comm. on the Judiciary, Subcomm. On Crime, 105th Cong., 2d Sess. (June 24, 1998). 50Subsections (d)(3) and (d)(4)(D) of H.R. 3125.

and invasive. Either the small ISP would have to dedicate personnel and resources to repeatedly reprogram its computer systems

to block an ever-changing list of online locations where the gambling sites are located—resources that could have been spent on innovation and growth—or the ISP would have to spend funds that

otherwise could be used for capital investment on paying lawyers

to defend against a temporary restraining order or an injunction.

Supporters of the bill would argue that much of its framework

was drawn from the Digital Millennium Copyright Act (DMCA),48

which contains a similar blocking provision. However, there are important differences between the DMCA and H.R. 3125. Unlike H.R.

3125, the DMCA’s blocking provisions require that the ISP be in

violation of the law before a blocking injunction can issue. Under

H.R. 3125, a blocking injunction can issue regardless of whether

the ISP has any complicity in illegal activity. And, as discussed

below, the threshold for issuing an injunction under the DMCA appears to be substantially higher than under H.R. 3125.

We are also concerned that despite all of the threats this bill

poses to civil liberties and privacy, it will all be for naught, as the

provisions are likely to carry little real enforcement value. As one

representative of the ISP industry noted in testimony during consideration of a substantially similar bill that was considered in the

last Congress:

If an ISP receives a court order specifying a list of sites to

be blocked, it can attempt to block access to these sites.

However, as soon as the targeted site moves to another IP

(Internet Protocol) address, as it inevitably will do, the

block is worthless. Sites can change addresses within

hours. Efforts to keep the blocks updated would require

hundreds of thousands of employee hours, while employees

attempt, with dubious likelihood of timely success, to track

down the new location of the targeted site.49

IV. THE GENERAL INJUNCTION PROVISIONS ARE OVERBROAD

It is also important to note that H.R. 3125 includes a broad general injunction provision which applies to anyone other than an

ISP or Interactive Computer Service Provider.50 Although this provision does require a court order, its scope is incredibly broad, and

it could well burden all sorts of unsuspecting parties with little obvious relationship to illegal gambling. As talking points provided by

AT&T explained, the injunctive relief provisions ‘‘would give courts

sweeping power to issue injunctions against ‘any person to prevent

a violation’ of the statute, regardless of whether that person had

any involvement in criminal activity.’’

These general injunction provisions could allow a State attorney

general to launch a ‘‘fishing expedition’’ in which it enlists the help

of an e-mail service to review all of its subscriber accounts for gambling references, seeking to prevent search engines from accessing

any website with any gambling in it (no matter how benign, such

as Gamblers Anonymous), and to limit advertising for these

59

51F.R.C.P. Rule 65. The criteria for injunctive relief under § 512(j) of the DMCA, Pub. L. 105–

304, 112 Stat. 2885 (Oct. 28, 1998), require the court to consider:

(A) whether such an injunction, either alone or in combination with other such injunctions issued against the same service provider under this subsection, would significantly burden either the provider or the operation of the provider’s system or network;

(B) the magnitude of the harm likely to be suffered by the copyright owner in the

digital network environment if steps are not taken to prevent or restrain the infringement;

(C) whether implementation of such an injunction would be technically feasible and

effective, and would not interfere with access to noninfringing material at other online

locations; and

(D) whether other less burdensome and comparably effective means of preventing or

restraining access to the infringing material are available.

websites in newspapers, television, radio and other outlets, to cite

but a few possible examples. Moreover, it is not a stretch to realize

that this provision could authorize a State attorney general to

search through millions of credit card receipts or to prohibit extending credit to users of certain specified websites, legitimate or

otherwise. In this regard, the Department of Justice has previously

noted that the Internet gambling prohibition ‘‘may have serious

economic and societal consequences for Internet usage generally’’

and ‘‘is likely to promote a spate of litigation over what solutions

are feasible.’’

The standard for issuing injunctive relief under the bill may well

encourage law enforcement officials to abuse this authority. Not

only would H.R. 3125 authorize injunctive relief against any person, the bill would empower a court to issue such relief if there is

‘‘probable cause to believe that such subscriber is using that access

to violate this section.’’ It is inappropriate to import the probable

cause standard from fourth amendment search and seizure criminal law jurisprudence to the injunctive relief criteria under H.R.

3125. It is arguably lower—and certainly different—from the criteria for preliminary injunctive relief under rule 65 of Federal

Rules of Civil Procedure, which requires a court to find a reasonable likelihood of success on the merits, no adequate remedy at

law, irreparable injury, and a balance of hardships weighing in the

moving party’s favor; or the DMCA, which also requires a court to

weigh the burdens and balance the hardships.51 Not only is the

standard itself easier to satisfy than that which is in place under

rule 65 or the DMCA, H.R. 3125 would authorize its issuance

against a party without any requirement that law enforcement give

the enjoined party notice and an opportunity to be heard.

V. H.R. 3125 CREATES A CONFUSING PATCHWORK OF INCONSISTENT

LAWS THAT REGULATE THE INTERNET

H.R. 3125 sets up the wrong model for how to regulate the Internet because it creates a patchwork of inconsistent Internet laws

that conflict with existing laws that govern the physical world. The

Wire Communications Act, 18 U.S.C. § 1084, already governs Internet gambling in that the Internet is a ‘‘wire communications facility’’ under the Act. Rather than amending this statute to clarify its

applicability to new types of Internet communications, H.R. 3125

would create a new section of the code, 18 U.S.C. § 1085, that

would overlap with—and be inconsistent with—existing law.

The proposed section 1085 would conflict with existing laws on

gambling. Whereas the Wire Communications Act outlaws all interVerDate 11-MAY-2000 01:52 Jun 13, 2000 Jkt 010199 PO 00000 Frm 00059 Fmt 6601 Sfmt 6601 E:\WAISREPT\HR655P1.106 ATX006 PsN: ATX006
60

52Department of Justice Letter, at 1. 53DiGregory Testimony, at 2. 54Subsections (b)(1) and (b)(2) of H.R. 3125. 55See, e.g., United States v. Reeder, 614 F.2d 1179 (8th Cir. 1980); Cohen v. United States,

378 F.2d 751 (7th Cir. 1967); 5th Circuit Pattern Jury Instruction (Instructing jurors to find

that a person is engaged in a gambling business when the ‘‘defendant was prepared on a regular

basis to accept bets placed by others, that is, the defendant was a ‘bookie’.’’). 56See, e.g., United States v. Anderson, 542 F.2d 428, 436 (7th Cir. 1976); United States v.

Baborian, 528 F. Supp. 324 (D.R.I. 1981).

state bets or wagers that use a ‘‘wire communications facility’’ (including those that use the Internet), H.R. 3125 would create a special set of rules and exceptions that apply to Internet activity only.

Thus, some activity would be legal under the proposed Section

1085, but illegal under the existing Section 1084. One sure way to

spur litigation and quelch innovation is to create a patchwork of

laws that conflict with each other. Yet that is exactly what H.R.

3125 does.

If we are going to regulate content on the Internet—as supporters of the bill are intent on doing—we should not create a

hodge-podge of Internet-specific laws that layer on top of and conflict with existing law. Legislation should treat physical activity

and cyber-activity the same way. As the Department of Justice has

stated, ‘‘If activity is prohibited in the physical world but not on

the Internet, then the Internet becomes a safe haven for that criminal activity.’’ 52 It is hard to understand why conduct previously

deemed unacceptable in the physical world and over the telephone

should now be legal when carried out in cyberspace.

The distinction between ‘‘Internet’’ activity and other types of

‘‘wire communications’’ activity is a false one. Indeed, any effort to

distinguish Internet transmissions from other methods of communication will likely create artificial and unworkable distinctions.

For example, many expect digital Internet telephony to grow in

popularity over the next few years. How would we deal with gambling that occurred over this technology, which would use the

Internet for voice communications? Would the applicable law be the

proposed Section 1085, which is designed specifically for the Internet, or under Section 1084, which deals with wire communications

in general, but also includes the Internet? 53

Finally, we note the inconsistency that is created by H.R. 3125’s

treatment of individual Internet subscribers. Although individuals

come within the definition of ‘‘subscribers’’ who may be the target

of a notice and takedown, and are ‘‘person[s]’’ who may be enjoined,

the criminal penalties of H.R. 3125 would apply only to a ‘‘person

engaged in a gambling business.’’ 54 This term is not defined in current law by 18 U.S.C. § 1081, but it has been interpreted by courts

to mean persons who facilitate or accept bets,55 and to exclude the

individual bettors.56 Thus, individuals not engaged in gambling

businesses are subject to sanctions under H.R. 3125, but not under

current law.

CONCLUSION

H.R. 3125 will establish an unfortunate and dangerous precedent

for selective regulation of content on the Internet. The exemptions

in the bill eliminate the ability of the bill’s sponsors to claim that

they are taking a principled or coherent approach to the regulation

61

of Internet gambling. With respect to the purported policy goals of

the bill’s sponsors and the concern for regulating the Internet, the

bill represents the worst of both worlds. The bill would legalize the

use of the Internet for the most addictive types of gambling, while

excluding the use of the Internet for more benign activities, like

State lotteries, charitable gaming, or Bingo. And to carry out its

goals, the bill would conscript anyone who provides computer services into serving as a handmaiden for law enforcement officials who

want to remove sites that law enforcement deems unlawful.

As more and more activity—both commercial and criminal—migrates to the Internet, we should resist the urge to create Internetspecific legislation that sets a different standard for cyber-activity

as compared to activity in the physical world. A checkerboard of inconsistent and overlapping laws will only create legal uncertainty

and will not benefit Internet providers or Internet users. It is hardly surprising that this scattershot and unprincipled approach to

content-based regulation of the Internet would give rise to an enforcement scheme that disregards the due process and privacy

rights of website operators and individual subscribers. Given the

significant concerns that have been voiced concerning privacy

rights and effective law enforcement on the Internet, we must oppose H.R. 3125.

JOHN CONYERS, JR.

ROBERT C. SCOTT.

MELVIN L. WATT.

ANTHONY D. WEINER.

Æ