House Rejects Internet Gambling Prohibition Act

(July 18, 2000) The House voted on HR 3125, the Internet Gambling Prohibition Act, on Monday, July 17. It was considered under a suspension rule, which meant that it required a 2/3 majority to pass. It failed by a vote of 245 to 159.

HR 3125 would ban some, but not all, forms of gambling on the Internet. A similar bill, S 692, sponsored by Sen. Jon Kyl (R-AZ), passed the Senate last November.

Rep. Bob Goodlatte (R-VA), the sponsor of the bill, spoke optimistically after the defeat. "I am pleased that more than 60 percent of my colleagues in the House understand the importance of this vital legislation," he said.

"It is my sincere hope that leadership will honor the will of the majority and bring The Internet Gambling Prohibition Act up with a rule so that it may pass."

Members who spoke in opposition to the bill cited several reasons. Several stated that state lotteries, which provide significant revenues for state treasuries, do not have the same exemption under the bill that close loop subscriber based systems for horse racing, dog racing, and jai alai have under the bill.

Others condemned the bill for the burdens that it places on Internet Service Providers.

Rep. John Conyers (D-MI), the Ranking Member of the House Judiciary Committee, stated that "it is highly inappropriate to consider a controversial deeply flawed bill on the Suspension Calendar. This is the wrong process because I and other Members have amendments we want to offer that we are foreclosed from offering in this process."

"So on that basis alone, I believe this suspension ought to be rejected. The most controversial aspect of it are the carve-outs for the powerful special interests."

Rep. Patrick Kennedy (D-RI), also spoke against the bill. He cited three reasons. First, while "there are carve-outs for horse racing and Jai-Alai and dog racing," there is no exception in the bill for state Internet lotteries. "The real rub in this bill is that, while those have exceptions, State lotteries do not. I think we would also agree that our State lotteries are perhaps the best form of gaming we have out there and that they are giving legitimate dollars to our States, for the education of our kids, for education, for housing."

Second, there is no exemption for Internet gambling operations run by Indian tribes.

Statement by Rep. Chris Cannon (R-UT) during House floor debate on HR 3125 regarding its effect on ISPs.

Internet service providers are burdened by being required by the Government to act as enforcers of this law. By passing this bill, we will be deputizing ISPs with the task of denying their customers access to any site that allows wagering. The courts will need to issue a court order to each and every ISP in the country telling them to shut off access to any offending site, and the ISP will be required to put in place filters to ensure that none of their subscribers can gain access. What is the cost? Let me assure my colleagues that it is not just monetary. ISPs, in order to be in full compliance with this law, will need to monitor what sites its customers are visiting. Keeping up with the sites that allow gaming will be impossible for most ISPs. AOL may have the resources to monitor the activity on every site accessed by its servers, but Rocky Mount Internet based in Utah does not. ISPs now have or will soon have the technology to shield the identity of its customers. People will be able to access gambling sites anonymously, rendering it impossible for this law to be enforced. With this technology, both the gambling site as well as the subscriber will be able to mask the address from Federal agents. Any filters required by the law will, therefore, be rendered useless. This legislation is harmful and ultimately unenforceable. We should reject this legislation.

Third, Rep. Kennedy said the bill imposed burdens on Internet service providers. He stated that "the very people that are charged with policing this bill, are unequipped to deal with this. ... So it is going to create a real hell of a time for these Internet service providers."

Rep. Robert Scott (D-VA) addressed the close loop systems. "The prohibition in this section does not apply to, any otherwise lawful State regulated parimutuel waging activities on live horse or dog racing or live Jai-Alai conducted on a closed-loop subscriber-based system."

"That closed-loop subscriber-based system is about as hard to get on as opening up an Internet brokerage account to trade stocks. About anybody can do it. As a result of these exemptions, the bill will proliferate rather than prohibit gambling over the Internet," said Rep. Scott.

Several members who spoke against the bill, including Reps. Chris Cannon (R-UT), Chris Cox (R-CA), and Anna Eshoo (D-CA),  focused on the regulatory burdens placed upon Internet Service Providers (ISPs).

Rep. Chris Cox (R-CA), who has sponsored several bills to limit new Internet taxes, said that the bill "would create enormous, if unintentional, regulatory problems. First, it proposes to treat online and offline gambling under different rules." He continued that "regulating commerce on the Internet under different rules from commerce in the offline world is a dangerous precedent that invites significant new regulation of the Internet such as we have not yet seen."

He went on to list several other objections. He said that "the bill would unfairly make Internet service providers and search engines and other interactive service providers, ISPs, who have nothing to do with gambling, people who have nothing to do with gambling, it would make them responsible for policing the behavior of their subscribers."

"To avoid criminal prosecution, they would have to block users from accessing foreign Web sites over which they have no control, an especially dangerous precedent while the United States at this very moment is seeking to oppose efforts by foreign governments to do that to our Web sites."

Rep. Cox continued that "this bill would have the Federal Government dictate, indeed amend, the terms and conditions on which ISPs today offer service. It would require that every ISP terminate the account of any subscriber who is suspected of using the service to gamble."

Finally, he stated that "the bill contains price controls. It requires every ISP to offer gambling filtering software at, quote, `reasonable cost,' putting the Federal Government in an unspecified way in charge of determining what is a reasonable price for filtering software."

Rep. Goodlatte spoke in favor of his bill. He stated that his bill "is designed to respond to a major scourge on the Internet. There are now, more than 700 unregulated out-of-control Internet casino-style gambling sites on the Internet. Sports betting may be even larger than the casino gambling."

"The bill allows the use of the Internet by the States for the sale of lottery tickets in public places where children can be screened out. But there are those who stand to make tens of millions of dollars selling lottery services to the States to sell those tickets online. No State does that today. This bill prevents that from occurring."

Rep. Robert Wexler (D-FL) also spoke in favor. He stated that "I strongly support this bill for three primary reasons: first, it gives law enforcement the ability to block offshore casino Web sites; second, the bill protects children from gambling; and, third, it protects the rights of States to continue governing a legal, regulated, taxpaying industry, the parimutuel industry."

Rep. James Gibbons (D-NV) also spoke. He said that "the Internet is a great educational tool and a valuable source of information and communication. However, American families must be protected from the dangers associated with unrestricted and unregulated gaming."

"In States like Nevada, the gaming industry is well regulated and its activities are tightly monitored. However, allowing gambling to be conducted on the Internet would open the floodgates for corruption, abuse, and fraud. Not only could unscrupulous operators bilk millions of unsuspecting customers, but our children could easily obtain their parents' credit cards, turn their bedrooms into casinos, and with these sites unknowingly squander their families' hard-earned money."

"The Internet Gambling Prohibition Act provides the necessary tools for law enforcement officials to crack down on these fly-by-night Internet gambling sites."

The Representatives who spoke in favor of the bill included James Gibbons (D-NV), Bob Goodlatte (R-VA), Alcee Hastings (D-FL), Sensenbrenner (R-WI), Clay Shaw (R-FL), Cliff Stearns (R-FL), Robert Wexlar (D-FL), Frank Wolf (R-VA),

Those who spoke in opposition included Joe Baca (D-CA), Chris Cannon (R-UT), John Conyers (D-MI), Chris Cox (R-CA), Anna Eshoo (D-CA), Patrick Kennedy (D-RI), Barney Frank (D-MA), Robert Scott (D-VA), and Tom Udall (D-NM).