Congress Has Always Preserved the Right of States to Regulate Internet Gambling
Summary: Support for H.R. 707/S. 1688, the Restoration of America’s Wire Act is built on a false
premise. Authors of the bill claim that, by executive fiat, the Department of Justice gave states
the ability to regulate Internet gambling. However, a simple review of Congress’ history with
Internet gambling tells an entirely different story. In fact, H.R. 707/S. 1688 would not only
usurp the power of states to responsibly regulate Internet gambling, these bills would
overturn what Congress has expressly authorized.
History: Between 1999 and 2006, the Republican-controlled House of Representatives
considered several bills aimed at stopping offshore Internet gambling. Some of these bills
amended the Wire Act (18 U.S.C. § 1084) and created enforcement mechanisms against
offshore operators; these were introduced by Rep. Bob Goodlatte (R-VA). Others did not
amend the Wire Act, but simply prohibited the processing of payments for gambling which was
illegal under other statutes; these were introduced by then-Rep. Jim Leach (R-IA) and others.
Every Goodlatte bill would have made state-licensed intrastate bets legal under the Wire Act,
and every Leach-style bill considered by the House exempted from its enforcement
mechanism state-licensed intrastate gaming. The Unlawful Internet Gambling Enforcement
Act, the ONLY federal law related to Internet gambling, exempted state-licensed intrastate
bets from its enforcement mechanism.
The House passed many different variations of Internet gambling prohibitions, but every one
that received serious consideration in the House respected states’ rights by exempting from its
prohibition or enforcement mechanism state-licensed intrastate bets.
Below is an in-depth look at the bills Congress has considered regarding Internet gambling. The
analysis includes excerpts of the bill language that preserves the right of states to license and
regulate the activity.
106th Congress: In October of 1999, Rep. Goodlatte introduce H.R. 3125, which was introduced
as a companion bill to then-Sen. Jon Kyl’s S. 692, which had passed the Senate (and which also
would have amended the Wire Act to make state –licensed intrastate bets legal). H.R. 3125
would have made the Wire Act clearly apply to non-sports betting, but it would have exempted
state-licensed intrastate betting. H.R. 3125(f)(1) denotes the exceptions:
(f) APPLICABILITY.—
(1) IN GENERAL.—Subject to paragraph (2), the prohibition in this section does not apply
to—
Subparagraph (C) is the exception for state-licensed intrastate bets.
(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;
107th Congress: Rep. Goodlatte’s Wire Act bill in the 107th Congress, H.R. 3215, structured the
state-licensed intrastate exemption differently. It would have created a new Section 1084(d):
(d) Nothing in this section prohibits the use of a communication facility for the
transmission of bets or wagers or information assisting in the placing of bets or wagers, if—
(1) at the time the transmission occurs, the individual or entity placing the bets or
wagers or in- formation assisting in the placing of bets or wagers, the gambling business,
and any facility or support service processing those bets or wagers is physically located
in the same State, and the State has a se- cure and effective customer verification
and
age verification system to assure compliance with age and residence
requirements, and for class II or class III gaming under the Indian Gaming Regulatory
Act, are physically located on Indian lands within that State;
(2) the State or Tribe has explicitly authorized such bets and wagers;
(3) the State has explicitly authorized and licensed the operation of the gambling
business, any facility processing the bets and wagers, and the sup- port service within its
borders or the Tribe has ex- plicitly authorized and licensed the operation of such
gambling business, any facility processing the bets and wagers, and the support service
on Indian lands within its jurisdiction;
Rep. Leach’s bill in that Congress, H.R. 556, has a very simple exemption for state-licensed
activity as well. H.R. 556 (b)(1) provides the definition of “bets or wagers” for the purpose of
that statute. (b)(1)(E) lists the various activities the definition should not include, and the last
one is:
ix. any lawful transaction with a business licensed or authorized by a state.
108th Congress: In the 108th Congress, Rep. Goodlatte did not introduce a bill in this area. Rep.
Leach introduced H.R. 21, which was reported by the House Financial Services Committee and
referred sequentially to the House Judiciary Committee. Rep. Chris Cannon (R-UT) offered an
amendment to strike the exemptions for horse racing and state-licensed interstate bets, which
was adopted. In response, Rep. Bachus introduced H.R. 2143, which was identical to H.R. 21,
except it lacked the civil and criminal penalties that caused the referral to the Judiciary
Committee. The state-licensed exception was identical to the one in H.R. 556.
109th Congress: Rep. Goodlatte introduced H.R. 4777, which once again amended the Wire Act.
It’s exemption for state-licensed intrastate was virtually identical the one in H.R. 3215 from the
107th Congress. It created a new §1084(d)
d) Nothing in this section prohibits the use of a communication facility for the transmission of
bets or wagers or information assisting in the placing of bets or wagers, if—
(1)at the time the transmission occurs, the individual or entity placing the bets or wagers
or information assisting in the placing of bets or wagers, the gambling business, and any
facility or support service processing those bets or wagers is physically located in the same
State, and the State has a secure and effective customer verification and age verification
system to assure compliance with age and residence requirements, and for class II or class
III gaming under the Indian Gaming Regulatory Act, are physically located on Indian lands
within that State;
(2)the State or Tribe has explicitly authorized such bets and wagers;
(3)the State has explicitly authorized and licensed the operation of the gambling business,
any facility processing the bets and wagers, and the support service within its borders or
the Tribe has explicitly authorized and licensed the operation of such gambling business,
any facility processing the bets and wagers, and the support service on Indian lands within
its jurisdiction;
Rep. Leach also introduced H.R. 4411, which this time contained a more comprehensive
exemption for state licensed intrastate bets. H.R. 4411 would have created a new §5362 and
paragraph (10) defines “unlawful internet gambling.” In that definition is:
(B) INTRASTATE TRANSACTIONS.—The term ‘unlawful Internet gambling’ shall not include
placing, receiving, or otherwise transmitting a bet or wager where—
(i) the bet or wager is initiated and received or otherwise made exclusively with in a single
State;
(ii) the bet or wager and the method by which the bet or wager is initiated and received
or otherwise made is expressly authorized by and placed in accordance with the laws of
such State, and the State law or regulations include—
(I) age and location verification requirements reasonably designed to block access to
minors and persons located out of such State; and
(II) appropriate data security standards to prevent unauthorized access by any
person whose age and current location has not been verified in accordance with such
State’s law or regulations; and
(iii) the bet or wager does not violate any provision of the—
(I) Interstate Horseracing Act;
(II) Professional and Amateur Sports Protection Act;
(III) Gambling Devices Transportation Act; or
(IV) Indian Gaming Regulatory Act.
Ultimately, the two bills were married into one bill (H.R. 4411) that combined the Goodlatte
Wire Act Language with the Leach enforcement provisions. The state-licensed intrastate
exemption from the Goodlatte bill was included. H.R. 4411 passed the House.
At the end of the 109th Congress, President Bush signed into law the Unlawful Internet
Gambling Enforcement Act, which was nearly identical to H.R. 4411 as reported by the
committee. That law did not amend the Wire Act, but it contained the same §5362(10)
definition of “unlawful internet gambling” and it exempted from that definition statelicensed intrastate wagers.
(B) Intrastate transactions.— The term “unlawful Internet gambling” does not include
placing, receiving, or otherwise transmitting a bet or wager where—
(i)the bet or wager is initiated and received or otherwise made exclusively within a single
State;
(ii)the bet or wager and the method by which the bet or wager is initiated and received or
otherwise made is expressly authorized by and placed in accordance with the laws of such
State, and the State law or regulations include—
(I)age and location verification requirements reasonably designed to block access to
minors and persons located out of such State; and
(II)appropriate data security standards to prevent unauthorized access by any person
whose age and current location has not been verified in accordance with such State’s
law or regulations; and
(iii)the bet or wager does not violate any provision of—
(I)the Interstate Horseracing Act of 1978 (15 U.S.C. 3001 et seq.);
(II)chapter 178 of title 28 (commonly known as the “Professional and Amateur Sports
Protection Act”);
(III)the Gambling Devices Transportation Act (15 U.S.C. 1171 et seq.); or
(IV)the Indian Gaming Regulatory Act (25 U.S.C. 2701 et seq.).