House passes legislation to limit growing online gambling industry

Wednesday, July 12, 2006

WASHINGTON -- Internet gambling is big business and growing.

Just consider the numbers: Consumers worldwide currently spend $12 billion a year on Internet gambling, a figure that is projected to jump to $24 billion by 2010.

But lawmakers are hoping to stem that growth. On Tuesday, the House passed a bill that would forbid online gamblers from using credit cards and other payment forms for settling Internet wagers.

The vote was 317-93.

Critics say the bill unfairly exempts the horse racing industry and state lotteries and will be too difficult to enforce.

"You can't just turn off the faucet on a $12 billion industry," said Mike McComb, director of marketing for, an online gambling company based in Costa Rica. The company, like many of its competitors, favors regulating online gambling.

The American Gaming Association, the industry's largest lobby, opposed online gambling in the past but recently softened its stance and backed a study of the feasibility of regulating it.

The bill's supporters say regulating companies that are largely based outside the United States would be difficult. They vowed Tuesday to push for Senate action.

"The House has acted very strongly on this measure," said Rep. Bob Goodlatte, R-Va, one of the bill's lead sponsors.

"I think that should send a strong signal that we need for the Senate to act.

Senate leaders have not identified the bill as a top priority but the bill's main champion in that chamber, Arizona Republican Sen. Jon Kyl, said Tuesday he would pursue it aggressively.

The legislation would clarify and update current law to spell out that most gambling is illegal online and would prohibit most payment forms from being used to settle online wagers.

The measure also would empower law enforcement authorities to work with Internet providers to block access to gambling Web sites.

Supporters say Internet betting can create problem gamblers.

"The Internet is addictive for many people anyway, and online gambling can be doubly addictive," said Rep. John Duncan Jr., R-Tenn.

The bill's sponsors successfully beat back an amendment to strip out the exemptions for the horse racing industry and state lotteries.

Rep. Shelley Berkley, D-Nev., sponsored the failed amendment. She said it was unfair to allow online lotteries and Internet betting on horse racing to flourish while cracking down on other kinds of sports betting, casino games and card games like poker.

Goodlatte called that "a poison pill" aimed at defeating the overall legislation.

If the horse provision were stricken from the bill, there's a good chance the measure would run into objections in the Senate from Majority Whip Mitch McConnell, R-Ky., and others from racing states.

Under the provision concerning horse racing, betting operators would not be prohibited from any activity allowed under the Interstate Horseracing Act, a law written in the 1970s to set up rules for interstate betting on racing. The industry successfully lobbied for legislation several years ago to clarify that Internet betting on horse racing is allowed.

Greg Avioli, chief executive officer of the National Thoroughbred Racing Association, acknowledged the bill would likely move Internet gamblers away from banned sites toward horseracing sites.

He said the racing industry did not get a new carve out but that Congress recognized existing federal law.

The Justice Department has taken a different view on the legality of Internet betting on horse races.

In a World Trade Organization case involving Antigua, the department said online betting on horse racing remains illegal under the 1961 Wire Act despite the existence of the more recently passed, and updated, Interstate Horseracing Act.

The department hasn't actively enforced its stance, though it recently indicated in a congressional hearing that it was considering taking action on the issue.

Congress has considered banning online gambling in the past.

In 2000, disgraced lobbyist Jack Abramoff led a fierce campaign against a similar bill on behalf of an online lottery company. Supporters of the bill brought up that history Tuesday and suggested that a vote for the bill was a way to make a statement against Abramoff's influence.

Opponents of the latest bill contend the current lottery exemption wasn't in the bill in 2000, and, if it had been, Abramoff's client might have supported the bill.

The bill is H.R.4411

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