[DOCID: f:sr121.106]
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                                                       Calendar No. 158
106th Congress                                                   Report
                                 SENATE
 1st Session                                                    106-121

======================================================================


                 THE INTERNET GAMBLING PROHIBITION ACT

                                _______


                 July 26, 1999.--Ordered to be printed

                                _______

  Mr. Hatch, from the Committee on Judiciary, submitted the following

                              R E P O R T

                             together with

                            ADDITIONAL VIEWS

                         [To accompany S. 692]

    The Committee on the Judiciary, to which was referred the
bill (S. 692) to prohibit Internet gambling, having considered
the same, reports favorably thereon, with an amendment, and
recommends that the bill, as amended, do pass.

                                CONTENTS

                                                                   Page
  I. Purpose..........................................................8
 II. Legislative history..............................................8
III. Discussion......................................................10
 IV. Vote of the Committee...........................................20
  V. Section-by-section analysis.....................................21
 VI. Cost estimate...................................................28
VII. Regulatory impact statement.....................................32
VIII.Additional views of Senator Leahy...............................33

 IX. Changes in existing law.........................................36

    The amendment is as follows:
    Strike all after the enacting clause and insert the
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Internet Gambling Prohibition Act of
1999''.

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:

``Sec. 1085. Internet gambling

  ``(a) Definitions.--In this section:
          ``(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 of chance, upon an
                agreement or understanding that the person or another
                person will receive something of value based on that
                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;
                        or
                          ``(iv) a contract for life, health, or
                        accident insurance.
          ``(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--
                                  ``(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 located within a single State and are
                        licensed and regulated by that State, 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 applicable
                        State 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,
        including specifically a service or system that provides access
        to the Internet.
          ``(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.
  ``(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 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 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 gambling-related activities, for the use of its
                facilities or services by another person to engage in
                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
                        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 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;
                          ``(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) 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 paragraph (2)(A) to
                comply with a notice described in paragraph (2)(B), or
                complying with any court order issued under paragraph
                (3).
                  ``(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, 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;
                          ``(iii) each person placing or otherwise
                        making that bet or wager is physically located
                        when such bet or wager 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
                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 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.); or
                                  ``(II) live dog racing, subject to
                                consent agreements that are comparable
                                to those required by the Interstate
                                Horse Racing Act of 1978, approved by
                                the appropriate State regulatory
                                agencies, in the State receiving the
                                signal, and in the State in which the
                                bet or wager originates; or
                  ``(C) any otherwise lawful bet or wager that is
                placed, received, or otherwise made for a fantasy
                sports league game or contest.
          ``(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 or promotion
        of any activity that is not prohibited by subsection (b)(1)(A).
  ``(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.

                               I. Purpose

    The purpose of S. 692 is to prohibit any person engaged in
a gambling business from using the Internet or any other
interactive computer service 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, and to establish
mechanisms tailored to the Internet to enforce this
prohibition.

                        II. Legislative History

    On March 23, 1999, Senators Jon Kyl and Richard Bryan
introduced S. 692, the Internet Gambling Prohibition Act of
1999.<SUP>1</SUP> The bill was referred to the Judiciary
Subcommittee on Technology, Terrorism, and Government
Information, which held a public hearing on the bill on March
23, 1999, chaired by Senator Kyl.
---------------------------------------------------------------------------
    \1\ As of July 6, 1999, there were 21 additional cosponsors of the
legislation: Senators Allard, Bond, Brownback, Bunning, Coverdell,
DeWine, Enzi, Feinstein, Gorton, Grassley, Hutchinson, Johnson, Lott,
Mack, Nickles, Reid, Santorum, Bob Smith, Thurmond, Torricelli, and
Voinovich.
---------------------------------------------------------------------------
    Testifying in favor of the legislation were James E. Doyle,
attorney general of the State of Wisconsin, and Betty
Montgomery, attorney general of the State of Ohio, on behalf of
the National Association of Attorneys General; James R. Hurley,
chair, New Jersey Casino Control Commission; Jeffrey Pash,
executive vice president, National Football League; Bill Saum,
director of agent and gambling activities, National Collegiate
Athletic Association; and Marianne McGettigan, Esq.,
representing the Major League Baseball Players Association. A
statement in opposition to S. 692, arguing for regulation of
Internet gambling rather than prohibition, was submitted by Sue
Schneider, chair of the Interactive Gaming Council, a trade
association representing the Internet gambling industry.
    Letters in support of S. 692 were submitted by the American
Horse Council, the American Quarter Horse Association, the
National Association of Attorneys General, the National
Football League, the National Collegiate Athletic Association,
the National Hockey League, the National Basketball
Association, Major League Baseball, and Major League Soccer.
America Online, the Commercial Internet eXchange Association,
the United States Telephone Association, and US West also
submitted a letter stating that the bill had been revised to
address their most significant concerns, but which also
expressed a desire for broader liability protections.
    S. 692 is also supported by the Federal Bureau of
Investigation; the African Methodist Episcopal Church; the
American Muslim Council; the Christian Coalition; the Church of
Jesus Christ of Latter Day Saints; the Consumer Project on
Technology (Ralph Nader); the Family Research Council; Focus on
the Family; Friends United Meeting; the National Coalition
Against Gambling Expansion; the National Council of Churches;
the Presbyterian Church; Rev. Jay Lintner, Director, Washington
Office of the United Church of Christ, Office of Church in
Society (title for identification purposes only); the United
Methodist Church, General Board of Church and Society; the
Southern Baptist Convention, Ethics and Religious Liberty
Commission; and the Traditional Values Coalition.
    On May 12, 1999, the Subcommittee on Technology, Terrorism,
and Government Information unanimously approved S. 692 after
adopting, by unanimous consent, an amendment to the bill in the
nature of a substitute offered by Senator Kyl. The substitute
reflected certain changes incorporated after extensive
discussions with groups affected by the legislation, including
the National Football League, the National Collegiate Athletic
Association, the National Association of Attorneys General, the
Commercial Internet eXchange Association, the United States
Telephone Association, Internet service providers, parimutuel
wagering interests, fantasy sports league interests,
institutions of higher education, and publishers.
    On June 17, 1999, the full Judiciary Committee approved S.
692 by a recorded vote of 16 to 1 after adopting, by unanimous
consent, a further amendment to the bill in the nature of a
substitute offered by Senator Kyl. The approved version of the
bill included changes responding to issues identified by the
Department of Justice and by the Racketeering Records Analysis
Unit of the FBI. The National Gambling Impact Study Commission
submitted a letter to the Committee stating that S. 692 ``is
consistent with the intent of the Commission'' that Internet
gambling be federally prohibited.<SUP>2</SUP>
---------------------------------------------------------------------------
    \2\  Letter dated June 15, 1999, from Kay C. James, Chair, and
William Bible, Commissioner, National Gambling Impact Study Commission,
to Senator Patrick Leahy, at 1. See National Gambling Impact Study
Commission, final report (June 1999) (``Final Commission Report'').
---------------------------------------------------------------------------
    S. 692 is the successor to legislation introduced by
Senator Kyl in the 105th Congress and passed overwhelmingly by
the Senate--S. 474, the Internet Gambling Prohibition Act of
1997. This legislation, introduced on March 19, 1997, was
considered at a hearing of the Subcommittee on Technology,
Terrorism, and Government Information on July 28, 1997.
Testifying in support of the legislation were Senator Richard
Bryan; James E. Doyle, attorney general of the State of
Wisconsin and then-president of the National Association of
Attorneys General; Jeffrey Pash, executive vice president of
the National Football League; Ann Geer, chair of the National
Coalition Against Gambling Expansion; and Anthony Cabot,
professor at the International Gaming Institute. Additionally,
Louis Freeh, Director of the Federal Bureau of Investigation,
endorsed the legislation during a Judiciary Committee hearing
on oversight of the FBI. S. 474 was also supported by the
National Collegiate Athletic Association, the National Hockey
League, the National Basketball Association, Major League
Soccer, and Major League Baseball, as well as a wide variety of
consumer, religious, and antigambling groups.
    The Subcommittee approved S. 474 by a unanimous poll on
August 1, 1997. The full Judiciary Committee approved the
legislation by a voice vote on October 23, 1997. In July 1998,
the bill was attached as an amendment to the Commerce-Justice-
State appropriations bill by a recorded vote of 90 to 10. The
Subcommittee on Crime of the House Judiciary Committee held
hearings on an Internet gambling bill (H.R. 2380) on February
4, 1998, and June 24, 1998, and approved by voice vote a
revised version of that bill (H.R. 4427), with amendments, on
September 14, 1998, but the House did not complete action on
the legislation due to the lateness of the session. The Senate
language was not included in the final version of the Commerce-
Justice-State appropriations measure.

                            III. Discussion

                       a. overview of legislation

    S. 692, the Internet Gambling Prohibition Act of 1999,
would prohibit any person engaged in a gambling business from
using the Internet or any other interactive computer service
(collectively ``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, and would establish
mechanisms tailored to the Internet to enforce that
prohibition. The bill would provide criminal penalties for
violations, authorize civil enforcement proceedings by Federal
and State authorities, establish mechanisms for requiring
Internet service providers to terminate or block access to
material or activity that violates the prohibition, and
authorize other relief. By these means, the bill would
strengthen and extend existing prohibitions on gambling,
including gambling on sporting events. The legislation is
needed to prevent the substantial societal harms caused by
Internet gambling and to provide necessary and appropriate
enforcement tools tailored to this medium.
    S. 692 would add a new section 1085 to title 18 that would
complement section 1084 of title 18, known as the Wire Act.
Enacted in 1961, section 1084 prohibits a person engaged in the
business of betting or wagering from using telephones or other
``wire communication facilities'' to transmit bets or wagers or
information assisting in the placing of bets or wagers. 18
U.S.C. 1084(a). The statute requires a telephone company to
terminate service to the gambling business upon receiving a
notice from a Federal, State, or local law enforcement agency
that the company's facilities are being used to transmit or
receive gambling information in violation of Federal, State, or
local law. 18 U.S.C. 1084(d). Section 1084 protects telephone
companies from liability for complying with such notices, while
preserving a subscriber's right to contest the termination of
service. Id. The statute exempts the transmission of (i)
``information for use in news reporting of sporting events or
contests'' and (ii) ``information assisting in the placing of
bets or wagers on a sporting event or contest from a State or
foreign country where the betting on that sporting event or
contest is legal into a State or foreign country in which such
betting is legal.'' 18 U.S.C. 1084(b). Section 1084 also
specifies that it does not create immunity from criminal
prosecution under State law. 18 U.S.C. 1084(c).
    Most States prohibit many if not most forms of gambling
currently offered on the Internet. Although Internet gambling,
to the extent that it is carried over telephone lines may
violate section 1084 and other Federal laws, these laws do not
provide mechanisms for combating Internet gambling tailored
specifically to this medium. S. 692 creates a new section 1085,
modeled on section 1084 and other relevant law, to address
Internet gambling specifically.

                        b. need for legislation

1. The growth of Internet gambling

    Although the Internet is a new medium of communication, its
attractiveness as a vehicle for gambling is unmistakable. First
introduced in the summer of 1995, Internet gambling is ``the
newest medium offering games of chance.'' <SUP>3</SUP> As the
National Gambling Impact Study Commission has stated, ``the
previously small number of operations has grown into an
industry practically overnight.'' <SUP>4</SUP> The Commission
reported that as of May 1998, there were approximately 90
online casinos, 39 lotteries, 8 bingo games, and 53 sports
books providing gambling over the Internet.<SUP>5</SUP> A year
later, the Commission found that there were over 250 online
casinos, 64 lotteries, 20 bingo games, and 139 sports books
providing gambling over the Internet.<SUP>6</SUP> The
Racketeering Records Analysis Unit of the FBI informed the
Subcommittee that a search for gambling websites had discovered
349 sites worldwide that offered gambling for real money,
including 254 offering casino-style gambling and 143 sites
offering sports wagering.<SUP>7</SUP> The Commission concluded
that the number of these sites ``can be expected to grow.''
<SUP>8</SUP>
---------------------------------------------------------------------------
    \3\ Final Commission report at 2-15.
    \4\ Id.
    \5\ Id.
    \6\ Id.
    \7\ Federal Bureau of Investigation, Racketeering Records Analysis
Unit, ``Analysis of Offshore Gambling'' at 1 (May 1999) (``FBI
Analysis'').
    \8\ Final Commission report at 5-3.
---------------------------------------------------------------------------
    The National Gambling Impact Study Commission also reported
that Internet gambling revenues are both sizable and growing
rapidly. Although estimates of the exact dollar amounts vary,
two studies cited by the Commission indicate that Internet
gambling revenues have doubled every year for the past 3 years.
One study reported growth from $300 million in 1998 to $651
million in 1999, and projected revenues of $2.3 billion by
2001. Another study reported growth from $445.4 million in 1997
to $919.1 million in 1998.<SUP>9</SUP> The Commission noted
estimates by the Financial Times and Smith Barney that Internet
gambling will reach annual revenues of $10 billion in the
beginning of the next century.<SUP>10</SUP> One of the studies
cited by the Commission found that the number of online
gamblers increased from 6.9 million to 14.5 million between
1997 and 1998.<SUP>11</SUP> The Commission reported that
``virtually all observers assume the rapid growth of Internet
gambling will continue.'' <SUP>12</SUP>
---------------------------------------------------------------------------
    \9\ Id. at 2-16, 5-1.
    \10\ Id. at 5-1.
    \11\ Id.
    \12\ Id.
---------------------------------------------------------------------------
    The National Gambling Impact Study Commission provided a
vivid description of Internet gambling sites:

        Gambling sites now feature interactive games, broadcast
        races in real-time video, and walk customers through a
        virtual tour of the site, complete with colorful
        graphics and background music. Prior to gambling, most
        sites require people to fill out registration forms and
        to either purchase ``chips'' or set up accounts with a
        preset minimum amount. Payment is made using credit or
        debit cards, money transfers, or other forms of
        electronic payment, such as ``smart cards'' or
        ``Cybercash.'' <SUP>13</SUP>
---------------------------------------------------------------------------
    \13\ Id. at 5-3.

    As Betty Montgomery, attorney general of the State of Ohio,
---------------------------------------------------------------------------
testified:

        These interactive sites allow individuals to play games
        as if he or she were inside a casino. Audio available
        while visiting or playing these sites allows
        individuals to hear the wheels turn, to hear the
        machines ring, to hear the chips fall and the dollars
        fall, to actually be in a virtual casino.<SUP>14</SUP>
---------------------------------------------------------------------------
    \14\ ``Hearing on S. 692 before the Subcommittee on Technology,
Terrorism, and Government Information of the Senate Committee on the
Judiciary, 106th Cong., 1st sess. (March 23, 1999) (``Senate
Hearing'').

    The explosive growth of Internet gambling reflects three
facts: (1) Internet gambling sites are inexpensive to operate;
(2) Internet gambling is convenient; and (3) Internet gambling
is largely uncontrolled. The National Gambling Impact Study
Commission explained why Internet sports gambling is especially
successful: First, unlike casino-style games, ``Internet sports
books do not necessarily use highly complex Web sites that
require bettors to download software in order to participate.''
Second, the fact that the outcomes of sporting events are
public knowledge and are assumed to be beyond the control of
the site operator obviates concerns about ``tampered results.''
<SUP>15</SUP>
---------------------------------------------------------------------------
    \15\ Final Commission report at 5-3; see also id. at 2-14 to 2-15,
3-8 to 3-11 (describing general harms of sports gambling).
---------------------------------------------------------------------------
    Jeffrey Pash, executive vice president of the National
Football League, identified these additional factors in the
growth of Internet gambling:

          Internet gambling is successful both because it is
        currently uncontrolled and because so little effort is
        required to participate. Unlike traditional casinos,
        which require gamblers to travel to the casino and
        place their bets on-site, Internet gambling allows
        bettors access to on-line wagering facilities twenty-
        four hours per day, seven days a week. Gamblers can
        avoid the difficulty and expense of traveling to a
        casino, which in many parts of the country requires out-
        of-state travel. Internet gamblers also can avoid the
        stigma that may be attached to gambling in public on a
        regular basis. Indeed, Internet gambling threatens to erode
        the stigma of gambling generally, including sports gambling.
          Internet gambling sites are easily accessible and
        offer a wide range of gambling opportunities from all
        over the world. Any personal computer can be turned
        into an unregulated casino where Americans can lose
        their life savings with the mere click of a mouse. Many
        of these gambling web sites have been designed to
        resemble video games, and therefore are especially
        attractive to children. But gambling--even on the
        Internet--is not a game. Studies have shown that sports
        betting is a growing problem for high school and
        college students, who develop serious addictions to
        other forms of gambling as a result of being introduced
        to ``harmless'' sports wagering. * * * <SUP>16</SUP>
---------------------------------------------------------------------------
    \16\ Senate hearing.

    It is no exaggeration to say that the Internet has brought
gambling into every home that has purchased a computer and
chosen to go online. As an industry representative said of
Internet gambling, ``it's really in your home.'' <SUP>17</SUP>
---------------------------------------------------------------------------
    \17\  ``Nightline: Betting without Borders'' (ABC television
broadcast, Apr. 7, 1998) (statement of Mark Dohlen, Starnet
Communications International).
---------------------------------------------------------------------------

2. The harms of Internet gambling

    Internet gambling is harmful--for young people and adults
alike. With respect to young people, the National Gambling
Impact Study Commission noted that, ``[b]ecause the Internet
can be used anonymously, the danger exists that access to
Internet gambling will be abused by underage gamblers.''
<SUP>18</SUP> According to the Commission:
---------------------------------------------------------------------------
    \18\  Final Commission report at 5-4.

        In most instances, a would-be gambler merely has to
        fill out a registration form in order to play. Most
        sites rely on the registrant to disclose his or her
        correct age and make little or no attempt to verify the
        accuracy of the information. Underage gamblers can use
        their parents' credit cards or even their own credit
        and debit cards to register and set up accounts for use
        at Internet gambling sites.<SUP>19</SUP>
---------------------------------------------------------------------------
    \19\  Id.

    As the NFL's Jeffrey Pash stated, ``[b]ecause no one
currently stands between Internet casinos and their gamblers to
check identification, our children will have the ability to
gamble on the family computer after school, or even in the
schools themselves.'' <SUP>}20</SUP> Senator Kyl warned that,
``[a]s the Internet reaches more and more school children,
Internet gambling is certain to promote even more gambling
among young people.'' <SUP>}21</SUP>
---------------------------------------------------------------------------
    \20\  Senate Hearing.
    \21\  Id.
---------------------------------------------------------------------------
    The younger generation's familiarity with and frequent use
of the Internet makes it especially susceptible to the dangers
of fraud and abuse that exist in Internet gambling. As Attorney
general Doyle stated, ``the kids are frequently much more adept
at it than the parents, so that even if there are parents in
the house, the parents may not know what their child is
doing.'' <SUP>22</SUP> Young people use the Internet more
frequently than any other segment of the population. For
example, the Commission reported that more than 69 percent of
18- to 24-year-olds use computers for an average of four hours
per day.<SUP>23</SUP> The Committee is particularly concerned
about the growth of Internet gambling because young people have
been shown, in recent studies, to have significant and growing
problems with sports betting. For example, a 1998 study at the
University of Michigan found that 35 percent of student-
athletes gambled on sports while attending
college.<SUP>24</SUP> As Bill Saum, Director of Agent and
Gambling Activities for the NCAA, concluded, the ``growing
consensus of research reveals that the rates of pathological
and problem gambling among college students are higher than any
other segment of the population.'' <SUP>25</SUP>
---------------------------------------------------------------------------
    \22\  Id.
    \23\  Final Commission report at 5-4.
    \24\  Senate Hearing (testimony of Bill Saum).
    \25\  Id.
---------------------------------------------------------------------------
    College sports betting raises an additional concern--
students betting on contests in which they are participants. As
Bill Saum of the NCAA testified, ``Internet gambling offers
students virtual anonymity. With nothing more than a credit
card, the possibility exists for any student-athlete to place a
wager via the Internet and then attempt to influence the
outcome of the contest while participating on the court or
playing field.'' <SUP>26</SUP> Recent sports betting and point-
shaving scandals on college campuses from Arizona State to
Northwestern University to Boston College provide further
evidence of the vulnerability of young people to the
temptations of gambling. The ease of Internet gambling, its
anonymity, and its ubiquity threaten the integrity of, and
public confidence in, college sports. The Internet Gambling
Prohibition Act is necessary to prevent young Americans from
gambling and to prevent college athletes from placing wagers on
sports contests in which they are participants.
---------------------------------------------------------------------------
    \26\  Id.
---------------------------------------------------------------------------
    Even for those individuals old enough to engage in
traditional casino gambling legally--where such gambling is
legal--Internet gambling poses great dangers. The harms caused
by addiction to gambling and crimes related to gambling are
well documented.
    The Council on Compulsive Gambling reports that five
percent of all gamblers become addicted.<SUP>27</SUP> Internet
gambling threatens to expand the number of addicted gamblers
because it can greatly expand the total number of gamblers in
America. In addition, the Committee believes that the anonymous
nature of Internet gambling increases the likelihood that
individuals will become addicted to gambling. As General
Montgomery testified, Internet gambling ``allows individuals to
gamble away their life savings and their family's life savings
in just the click of a mouse. * * * Consumers can play poker,
black jack, roulette, without ever leaving the convenience of
their homes and computers.'' <SUP>28</SUP> Strong social
pressures that temper addictive gambling practices are removed
by Internet gambling, including the stigma that may be attached
to gambling in public. Internet gambling threatens to erode
that stigma.
---------------------------------------------------------------------------
    \27\  Id.
    \28\  Id.
---------------------------------------------------------------------------
    In its report, the National Gambling Impact Study
Commission warned, ``the high-speed instant gratification of
Internet games and the high level of privacy they offer may
exacerbate problem and pathological gambling.'' <SUP>29</SUP>
Indeed, the Internet has been likened by Dr. Howard J. Schaffer
of the Harvard Medical School's Division on Addictive Studies
to ``new delivery forms for addictive narcotics.'' Dr. Schaffer
stated: ``As smoking crack cocaine changed the cocaine
experience, I think electronics is going to change the way
gambling is experienced.'' <SUP>30</SUP> It is well established
that gambling, as such, can be addictive. Bernie Horn, Director
of Political Affairs, National Coalition Against Gaming
Expansion, has testified that Internet gambling ``magnifies the
potential destructiveness of the addiction.'' <SUP>31</SUP> As
General Doyle testified:
---------------------------------------------------------------------------
    \29\  Final Commission report at 5-5.
    \30\  Id.
    \31\  ``Hearing on H.R. 2380 before the Subcommittee on Crime of
the House Committee on the Judiciary,'' 105th Cong., 2d sess. (Feb. 4,
1998).

        [W]e are all moving in the direction [of] highly
        addictive video games. * * * [W]ithin a number of
        years, most people look at this and say that every home
        computer will be an Atlantic City-style video game
        sitting on your desk at home, in which the lemons are
        spinning around, in which the cherries are coming up,
        in which the bells are ringing.
          Those are the addictive games; those are the really
        addictive games. And they are going to be able to be
        played in your home without anybody else around,
        without any of the other social interaction that is
        going on. And a person in a night, instead of reading a
        book or watching television, can lose $5,000 without
        even thinking about it. So we have yet to see the real
        addictive nature of this activity reaching right into
        our homes, but we are right on the verge of it. And as
        the Internet gets faster and more powerful, that is
        what we are going to see. That is why * * * we have got
        to do this now before it really hits * * *
        .<SUP>32</SUP>
---------------------------------------------------------------------------
    \32\ Senate hearing.

    The Committee is also concerned that Internet gambling will
allow criminal practices to proliferate. Since Internet
gambling operations require just a minimal initial investment
and little physical space, they can dissolve rapidly and move
easily. The National Gambling Impact Study Commission reported
that ``[t]his mobility makes it possible for dishonest
operators to take credit card numbers and money from deposited
accounts and close down. Stories of unpaid gambling winnings
often surface in news reports and among industry insiders.''
<SUP>33</SUP> Additionally, unscrupulous operations may tamper
with the payoff rates to modify odds in the operator's favor.
In testimony before the Subcommittee, James R. Hurley, chair of
the New Jersey Casino Control Commission, outlined the detailed
procedures that New Jersey has implemented to prevent criminal
activity in the gambling industry.<SUP>34</SUP> The regulatory
safeguards outlined by Mr. Hurley for land-based gambling
operations (from minimum required paybacks to background
investigations on operators) are not available when gambling
occurs on the Internet.<SUP>35</SUP> The Committee agrees with
William A. Bible, the chair of the Internet gambling
subcommittee of the National Gambling Impact Study Commission,
who stated: ``Anyone who gambles over the Internet is making a
sucker bet.'' <SUP>36</SUP>
---------------------------------------------------------------------------
    \33\ Final Commission report at 5-5.
    \34\ Senate hearing.
    \35\ See id. (testimony of James R. Hurley and Attorney General
Montgomery).
    \36\ Senate hearing (testimony of Senator Kyl).
---------------------------------------------------------------------------
    The involvement of organized crime in Internet gambling is
particularly alarming. According to an analysis prepared by the
Racketeering Records Analysis Unit of the FBI and provided to
the Subcommittee in May 1999, organized crime groups are
``heavily involved'' in offshore gambling, and the majority of
Internet gambling operations are located offshore--in the
Caribbean and Central and South America.<SUP>37</SUP> The FBI
predicts that:
---------------------------------------------------------------------------
    \37\ FBI Analysis at 1.

        [i]n order to avoid prosecution [under the Wire Act],
        offshore sportsbooks will streamline their operations
        with the latest Internet technology available to assist
        setting up accounts, accepting wagers, and paying
        winners. Offshore gambling operations will increasingly
        make use of Internet software to interact with
        customers. This will allow the offshore owners/
        operators to conceal their identities from U.S. law
        enforcement.<SUP>38</SUP>
---------------------------------------------------------------------------
    \38\ Id. at 3.

    Both the National Gambling Impact Study Commission and the
FBI also noted the ``easy means'' that Internet gambling
provides for money laundering: ``To launder money, a person
need only deposit money into an offshore account, use those
funds to gamble, lose a small percent of the original funds,
then cash out the remaining funds. Through the dual protection
of encryption and anonymity, much of this activity can take
place undetected.'' <SUP>39</SUP>
---------------------------------------------------------------------------
    \39\ Final Commission report at 5-6; see also ``FBI Analysis'' at
3.
---------------------------------------------------------------------------

3. The need for new Federal legislation

    The Internet Gambling Prohibition Act of 1999 is a
necessary and appropriate Federal response to a growing problem
that, as Attorneys General Doyle and Montgomery testified, no
single State, or collection of States, can adequately address.
Because of the uniquely interstate and international nature of
the Internet, a Federal response is required.
    Ten years ago, a bookmaker might have used the telephone to
call his customers or Las Vegas. Now, he simply logs on to a
computer. Gambling businesses around the country--and around
the world--have turned to the Internet in aclear (and
illegitimate) attempt to circumvent the existing prohibitions on
gambling contained in the Wire Act and the Professional and Amateur
Sports Protection Act of 1992 (``PASPA''), Public Law 102-559, 106
stat. 4227 (1992) (codified at 28 U.S.C. 3701-3704). Many gambling
organizations now provide betting opportunities over the Internet from
offshore locations to avoid or complicate effective Federal and State
law enforcement.
    S. 692 is needed because it strengthens existing law to
facilitate the enforcement of gambling prohibitions in the face
of this new technology. In its report accompanying the
legislation enacted as PASPA, the Committee noted the growth of
``new technologies'' facilitating gambling, including the use
of automatic teller machines to sell lottery tickets and
proposals to allow ``video gambling'' at home.<SUP>40</SUP> It
was, in significant part, the specter of expanded gambling
raised by those ``new technologies'' that spurred Congress to
enact PASPA. In those days, the ``new technologies'' did not
yet include the Internet. It is now appropriate for Congress to
act to ensure that Federal law keeps pace with advances in
technology.
---------------------------------------------------------------------------
    \40\ See S. Rep. No. 248, 102d Cong., 1st sess. 5 (1991).
---------------------------------------------------------------------------
    The need for Federal action to address Internet gambling is
underscored by the fact that the Nation's chief State law
enforcement officers are among its strongest proponents. James
E. Doyle, the attorney general of the State of Wisconsin and
the former president of the National Association of Attorneys
General, noted: ``Almost three years ago, the National
Association of Attorneys General took a step many of us never
imagined: The organization recommended an expansion of the
Federal government's traditional law enforcement role.''
<SUP>41</SUP> The Committee gives great weight to the fact that
the Nation's State attorneys general have specifically and
repeatedly urged Congress to address Internet gambling.
---------------------------------------------------------------------------
    \41\ Senate hearing.
---------------------------------------------------------------------------
    Attorney General Doyle told the Subcommittee that NAAG
supports Federal legislation addressing Internet gambling
because ``[a]lthough the overwhelming majority of Internet
traffic occurs within the United States, the Internet is global
and any single State, or even any combination of States working
together, can have only a limited effect in controlling the
myriad of activities occurring in that medium.'' <SUP>42</SUP>
Betty Montgomery, the attorney general of the State of Ohio,
similarly testified that ``[e]ach State's gambling laws are
carefully crafted to meet its own public policy concerns. * * *
But the Internet is a threat to the traditional independence of
State law enforcement.'' <SUP>43</SUP> General Montgomery also
testified that the Internet ``is a global medium, and therefore
intrinsically `interstate' in its reach.'' <SUP>44</SUP>
---------------------------------------------------------------------------
    \42\ Id.
    \43\ Id.
    \44\ Id.
---------------------------------------------------------------------------
    The Committee agrees with this assessment. The Committee
concludes that the control of Internet gambling can be
effectively accomplished only through Federal legislation that
gives Federal and State authorities the tools they need to
address this serious social problem.
    The legislation creating section 1084 was a centerpiece of
Attorney General Robert F. Kennedy's 1961 program to curb
organized crime and racketeering. <SUP>45</SUP> That
legislation was the culmination of 65 years of efforts--begun
before Colonel Roosevelt charged up San Juan Hill--to enact
Federal legislation prohibiting the use of the telegraph and
telephone for gambling purposes. <SUP>46</SUP> Indeed, section
1084 dates back to a time when the telephone, itself, was new
and the use of the telegraph to transmit bets and racing odds
from one State to another was the principal concern.
<SUP>47</SUP> Even when section 1084 was finally enacted in
1961--based on a 1952 ABA recommendation <SUP>48</SUP>--
Americans still marveled at the ``modern techniques'' that
allowed callers to make long-distance telephone calls without
the assistance of an operator. <SUP>49</SUP>
---------------------------------------------------------------------------
    \45\  Pub. L. 87-216, sec. 2, 75 Stat. 491 (1961). See S. Rep. No.
588, 87th Cong., 1st sess. 3 (1961); ``Attorney General's Program To
Curb Organized Crime and Racketeering: Hearings on H.R. 1653, etc.,
before the Committee on the Judiciary,'' 87th Cong., 1st sess. 1, 5-6,
12-36 (1961) (``1961 Senate Hearings'') (statement and testimony of
Attorney General Kennedy); ``Legislation Relating to Organized Crime:
Hearings on H.R. 468, etc., before Subcommittee No. 5 of the House
Committee on the Judiciary,'' 87th Cong., 1st sess. 1, 18, 24-26 (1961)
(statement and testimony of Attorney General Kennedy).
    \46\  The Congressional Information Service index discloses bills
introduced, as early as 1896, ``to protect State antigambling laws from
nullification through interstate gambling by telegraph, telephone, or
otherwise, by extending to such gambling the penalties provided for
interstate gambling by mail or express.'' See, e.g., H.R. 5921, 54th
Cong., 1st sess. (1896); S. 2846, 54th Cong., 1st sess. (1896); H.R.
10355, 54th Cong., 2d sess. (1897) (Report No. 3066); H.R. Rep. No.
3066, 54th Cong., 2d sess. (1897); H.R. 8497, 56th Cong., 1st sess.
(1900); H.R. 12545, 57th Cong., 1st sess. (1902); H.R. 6298, 58th
Cong., 2d sess. (1903); S. 7451, 59th Cong., 2d sess. (1907); S. 509,
60th Cong., 1st sess. (1907); S. 8703, 60th Cong., 2d sess. (1909); S.
225, 61st Cong., 1st sess. (1909); H.R. 15949, 64th Cong., 1st sess.
(Report No. 773); H.R. Rep. No. 773, 64th Cong., 1st sess. (1916).
    \47\  ``Interstate Race Gambling by Telegraph: Hearing on S. 509
before a Subcommittee of the Senate Committee on the Judiciary,'' 60th
Cong., 2d sess. 7 (1909) (``1909 Senate Hearing'') (statement of Rev.
Wilbur F. Crafts, superintendent and treasurer, International Reform
Bureau) (``This bill applies first to the telegraph and then to all
other carriers, so that no interstate communication of odds or bets can
be made from a race track to another State for gambling purposes.'').
The telegraph, like the telephone a half-century later and the Internet
today, was regarded in its early days as ``an epoch in the progress of
time,'' a new technology that ``has changed the habits of business, and
become one of the necessities of commerce.'' Pensacola Telegraph Co. v.
Western Union Telegraph Co., 96 U.S. 1, 9 (1877). The telegraph and
telephone legislation introduced on the eve of the 20th century was
viewed as ``the logical successor'' to earlier Federal legislation
prohibiting lottery materials from being sent through the mails. 1909
Senate hearing at 7 (Rev. Crafts) (``This bill extends the prohibition
to all other carriers except the mails, from which gambling messages
are already excluded.''); ``Interstate Race Gambling: Hearing on S. 225
before a Subcommittee of the Senate Committee on the Judiciary,'' 61st
Cong., 1st sess. 6 (1909) (Rev. Crafts) (``[T]his Burkett bill is
simply one step further in a line in which Congress has acted again and
again.''). Examples of the 19-century legislation addressing the use of
the mails for gambling purposes include act of Mar. 2, 1895, 28 Stat.
963 (prohibiting the transportation in interstate or foreign commerce,
and the mailing of, tickets and advertisements for lotteries and
similar enterprises); Anti-Lottery Act of 1890, sec. 1, 26 Stat. 465
(extending the mails prohibition to newspapers containing
advertisements or prize lists for lotteries or gift enterprises); Act
of July 12, 1876, sec. 2, 19 Stat. 90 (repealing an 1872 limitation of
the mails prohibition to letters and circulars concerning ``illegal''
lotteries); Act of July 27, 1868, sec. 13, 15 Stat. 196 (prohibiting
the mailing of any letters or circulars concerning lotteries or similar
enterprises); Act of Mar. 2, 1827, sec. 6, 4 Stat. 238 (restricting the
participation of postmasters and assistant postmasters in the lottery
business).
    \48\  The direct source of section 1084(d) was section 5(2) of the
American Bar Association's Model Anti-Gambling Act of 1952. 1961 Senate
hearings, supra note 45, at 140-43. Section 5(2) of the Model Act was
based, in turn, on a recently enacted Delaware statute. Id. at 143
(citing Delaware Senate Bill No. 214, 48 Del. Laws ch. 493 (1952)
(current version codified at 11 Del. Code 1412 (1998)).
    \49\  107 Cong. Rec. 16534 (1961) (Rep. Harris) (``with the modern
techniques that have been developed a person can pick up his phone in
one city and dial someone in another city and State and obviously the
common carrier would know nothing about what the conversation was and
therefore would be in no position to know what is taking place'').
---------------------------------------------------------------------------
    The ``modern techniques'' of the Internet present a new set
of challenges to law enforcement. The Committee believes that
Federal law must be adapted to meet the challenges of this new
technology. S. 692 would, in Senator Kyl's words, ``bring
federal law up to date.'' <SUP>50</SUP>
---------------------------------------------------------------------------
    \50\  Senate hearing.
---------------------------------------------------------------------------
    Section 1084(d), which was designed to address issues
presented by the telephone and other ``wire communication
facilities,'' was not designed to address the issues presented
by the Internet. For example, section 1084(d) requires
telephonecompanies, upon receiving an appropriate notice from a
law enforcement agency, to terminate service to subscribers using their
facilities for gambling purposes. It provides no similar mechanism
requiring Internet service providers to terminate or block access to
gambling material or activity on the Internet. Similarly, section
1084(d), by its terms, applies to common carriers subject to the
jurisdiction of the Federal Communications Commission. Such carriers
are subject to regulatory action by the Commission and similar State
agencies if they fail to comply with notices issued under section
1084(d). Internet service providers, however, typically are not subject
to the jurisdiction of the Commission or similar State agencies. In the
future, moreover, Internet communications may no longer depend on
telephone lines to carry their transmissions. <SUP>51</SUP> Other means
of ensuring compliance by Internet service providers with notices to
remove, disable, or block access to gambling material or activity on
the Internet are required. However, given the unique nature of the
Internet as an interactive communications medium, it is important that
any such mechanism does not have the unintended effect of disrupting or
impeding lawful communications.
---------------------------------------------------------------------------
    \51\ Id. (testimony of Bill Saum, NCAA) (S. 692 ``recognizes that
the Internet is quickly moving to a wireless environment''); id.
(testimony of Attorney General James E. Doyle) (same); Final Commission
report at 5-7 (same).
---------------------------------------------------------------------------
    Just as Congress enacted the Wire Act to prohibit the use
of the telephone as an instrument of gambling, so S. 692
prohibits the use of the Internet as an instrument of gambling.
Just as the Wire Act provides a mechanism for terminating
telephone service to gambling businesses, so S. 692 provides an
appropriate and effective mechanism for terminating or blocking
access to gambling material or activity on the Internet. The
Committee emphasizes that simply prohibiting Internet gambling
is not adequate. Enforcing that prohibition against persons who
violate section 1085, and using all of the means provided in
section 1085 and other law to remedy violations, are essential.
    Like the Wire Act of 1961 and the Professional and Amateur
Sports Protection Act of 1992, S. 692 is a logical and
appropriate extension of existing Federal law and policy. The
precedents for Federal action in this area were well canvassed
by the Committee in its report accompanying the legislation
enacted as PASPA. <SUP>52</SUP> The Committee incorporates that
analysis by reference here. The Internet Gambling Prohibition
Act of 1999 reinforces this well-established Federal policy by,
in Senator Kyl's phrase, ``ensur[ing] that the law keeps pace
with technology.'' <SUP>53</SUP> As the Racketeering Records
Analysis Unit of the FBI has stated, Section 1085 is ``a
modernized version'' of section 1084. <SUP>54</SUP> ``By using
the combined prosecution vehicles of U.S.C. 1084, 1085, and
U.S.C. 1955, Federal law enforcement action can be effective
against offshore Internet gambling operations.'' <SUP>55</SUP>
---------------------------------------------------------------------------
    \52\ S. Rep. No. 248, 102d Cong., 1st sess. 5-8 (1991).
    \53\ Senate hearing.
    \54\ ``FBI Analysis'' at 3.
    \55\ Id. at 4.
---------------------------------------------------------------------------
    Although the Department of Justice has recommended that the
issues presented by Internet gambling be handled through
amendments to sections 1081-1084, the Committee believes that
Internet gambling is best addressed through a new section 1085
specifically tailored to the Internet. Section 1084, itself,
was added as a new section to a chapter in title 18 that
already prohibited the operation of gambling ships on the high
seas (18 U.S.C. 1082), and, as mentioned, Congress has
addressed the use of the mails for gambling purposes in other
statutory provisions. This reflects Congress' judgment that
different instrumentalities of gambling should be treated in
legislation specifically tailored to the particular
instrumentality.
    At the full Committee markup, Chairman Hatch succinctly
summarized many of the concerns of the Committee:

          Gambling has a pernicious and far reaching effect on
        society. According to the Department of Justice,
        gambling contributes to corruption and organized crime,
        underwrites bribery, narcotics trafficking and other
        illegal conduct, imposes a regressive tax on the poor
        and fosters a false hope of financial advancement. But
        it is not only illegal gambling which is harmful in its
        effect. Compulsive gambling has grown concurrently with
        the expansion of legalized gambling nationwide, leading
        to billions of dollars in economic costs, and loss to
        the gamblers, their families, and communities.
          Now, I am a great proponent of e-commerce; the
        Internet is a wonderful medium whose existence has in
        no small part contributed to the growth of our economy
        over the last ten years. However, while recognizing and
        appreciating the opportunities the Internet has
        created, we must also guard against the use of that
        medium for improper purposes. Were we to fail to take
        action to prevent gambling on the Internet, we would be
        faced with the possibility that any home with a
        computer could be turned into an unregulated casino. S.
        692 draws aline in the sand--ensuring that the Internet
        will become a gambling-free zone.

    Upon careful consideration, the Committee concludes that
Federal legislation is both warranted and necessary to prohibit
Internet gambling.

                       IV. Vote of the Committee

    On June 17, 1999, with a quorum present, the Committee on
the Judiciary ordered the bill, S. 692, favorably reported by a
rollcall vote of 16 to 1, after adopting, by unanimous consent,
an amendment to the bill in the nature of a substitute offered
by Senator Kyl.
    The following rollcall votes occurred:
        Yeas                          Nays
Thurmond                            Feingold (proxy)
Grassley (proxy)
Specter
Kyl
DeWine
Ashcroft
Abraham (proxy)
Sessions
Smith (proxy)
Leahy
Kennedy (proxy)
Kohl
Feinstein
Torricelli
Schumer (proxy)
Hatch

                     V. Section-by-Section Analysis

Section 1

    Section 1 contains the short title.

Section 2

    Subsection 2(a) of the bill adds a new section 1085 to
title 18 of the United States Code.
    Section 1085(a) contains definitions.
    Section 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 of chance, upon an agreement or
understanding that the person or another person will receive
something of value based on that outcome. The term includes the
purchase of a chance or opportunity to win a lottery or other
prize (if the opportunity is predominantly subject to chance)
and any scheme of a type described in PASPA, 28 U.S.C. 3702,
that PASPA prohibits a State or other governmental entity from
legalizing, sponsoring, or fostering. The term ``bets or
wagers'' does not include bona fide business transactions
governed by the securities laws for the purchase or sale of
securities at a later date, transactions on or subject to the
rules of a contract market designated pursuant to the Commodity
Exchange Act, contracts of indemnity or guarantee, or contracts
for life, health, or accident insurance. The Committee does not
presuppose that all games offered on the Internet are ``games
of chance'' for purposes of this definition. 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. The Committee intends
that this term be narrowly construed to include only services
that are effective in preventing use by unauthorized persons.
Such services may not be utilized unless the States involved
have by statute or regulation specifically authorized the
particular customer and age verification system proposed to be
used by the service, and determined that the system cannot be
circumvented, fooled, or disabled. 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 other current or
prospective financial relationship, direct or indirect, with,
any gambling business or closed-loop subscriber-based service.
    Subsection 1085(a)(3) defines ``foreign jurisdiction.''
    Subsection 1085(a)(4) defines a ``gambling business'' as
(i) a business that (a) is conducted at a gambling
establishment, or (b) involves specified gambling operations,
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.
    Section 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. Stated in
simplified form for the sake of summary, and subject to further
limitations set forth in the bill, the definition does not
include: (i) information concerning parimutuel pools exchanged
exclusively between or among parimutuel wagering facilities, if
the information is used only to conduct common pool parimutuel
pooling; (ii) information exchanged exclusively between or
among parimutuel wagering facilities and a support service, if
the information is used only for processing bets or wagers;
(iii) 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; (iv)
news reporting or analysis of wagering activity; and (v)
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 (i) through (iii) 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. The
Committee stresses that these exclusions have been carefully
crafted to apply only to the narrow category of ``back office''
operations identified in those three items. Additionally, the
Committee notes, and section1085(f) makes explicit, that S. 692
does not prohibit advertising or promotion of gambling opportunities at
casinos, at racetracks, or at other ``brick-and-mortar''
establishments.
    Section 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
instrumentation of, interstate or foreign commerce to provide
or enable access to a computer server, including specifically a
service or system that provides access to the Internet.'' The
Committee emphasizes that it intends by this legislation to
regulate interstate and foreign commerce to the fullest extent
permitted by the Constitution. As the Supreme Court long ago
recognized, Commerce Clause powers

          * * *
          are not confined to the instrumentalities of commerce
        * * * known or in use when the Constitution was
        adopted, but * * * keep pace with the progress of the
        country, and adapt themselves to the new developments
        of time and circumstances. * * * They extend from the
        horse with its rider to the stage coach, from the
        sailing vessel to the steamboat, from the coach and the
        steamboat to the railroad, and from the railroad to the
        telegraph, as these new agencies are successively
        brought into use to meet the demands of increasing
        population and wealth.

Champion v. Ames, 188 U.S. 321, 350 (1903) (citation omitted).

    Section 1085(a)(7) defines ``interactive computer service
provider.'' This term encompasses persons who provide, among
other things, access to the Internet. A person is subject to
treatment 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 in gambling-related acivities, that person, to the
extent of engaging in those activities, is not an interactive
computer service provider, and 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.
    Section 1085(a)(8) defines ``Internet.'' This definition is
drawn from the Communications Act of 1934, as amended, 47
U.S.C. 230(f)(1). The Committee intends the terms ``Internet''
and ``interactive computer service'' as encompassing all yet-
to-be-developed technologies that in the future may perform
functions similar or analogous to those that the Internet and
interactive computer services perform today.
    Section 1085(a)(9) defines ``person.''
    Subsection 1085(10) defines ``private network'' as a
communications channel meeting specified conditions restricting
use. As in the case of a ``closed-looped subscriber-based
service,'' the Committee intends 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(11) defines ``State.''
    Subsection 1085(12) defines ``subscriber.''
    Section 1085(b) sets forth the prohibitions and penalties.
Paragraph (1) sets forth the prohibitions, providing 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 (A) the total amount
bet or wagered, or placed, received, or accepted in bets or
wagers, by the person or (B) $20,000 (whichever is greater),
imprisonment of not more than 4 years, or both. Paragraph (3)
authorizes the court, upon conviction, to enter a permanent
injunction. In determining whether the total amount exceeds
$20,000, the court is to consider all bets and wagers made,
placed, received, or accepted by a person within a single 24-
hour period to constitute a single violation. Whether the total
amount of the bets and wagers made, placed, received, or
accepted by a person exceeds $20,000 is to be determined by
aggregating the amounts of all bets and wagers made, placed,
received, and accepted by a person within a single 24-hour
period. The prohibitions of section 1085(b) apply only to
persons engaged in a gambling business and not to ``casual
bettors.'' Casual 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
applicable State and other Federal law.
    Section 1085(c) provides for civil actions to prevent and
restrain violations of Section 1085. Paragraph (1) provides the
district courts of the United States with jurisdiction to
prevent and restrain violations. Paragraph (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. Paragraph (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. Paragraph (2)(C) covers proceedings on
Indian lands. Paragraph (3) permits temporary relief to be
obtained on an expedited basis.
    Section 1085(d) establishes a mechanism through which
Internet service providers (``providers'') may be required to
terminate, remove, disable, or block access to material or
activity that violates section 1085. This scheme regulates the
responsibilities and immunities of providers under the statute.
The specified remedies address situations in which the provider
is hosting, providing an online forum where third parties may
post content, or acting as a conduit for, illegal material or
activity originated by others, and not by the provider itself.
These remedies take two forms.First, they require a provider to
terminate the account of a subscriber whose material or activity
violates section 1085, if the provider receives a notice from a Federal
or State law enforcement agency that the subscriber is using the
provider's facilities in violation of section 1085. This ``notice''
remedy is derived from the notice remedy for telephone companies
provided under section 1084(d). Second, the United States and State law
enforcement agencies are authorized to obtain injunctions requiring
providers to eliminate access to material or activity originated by
others that violates section 1085. This injunction remedy is derived
from the remedy for online copyright infringement in similar
circumstances in title II of the WIPO bill, formally known as the
Digital Millennium Copyright Act, Public Law 105-304, 112 Stat. 2877-86
(1998) (codified at 17 U.S.C. 512). Paragraphs (d)(1)(A) (i) and (ii)
are intended to encompass, with greater economy of language, the
service provider functions described in 17 U.S.C. 512 (a) and (b).
Clause (i) applies both to the conduit and caching activities covered
by 17 U.S.C. 512 (a) and (b). Clause (ii) applies to the operation of
online sites and location tools covered by 17 U.S.C. 512 (c) and (d).
    Paragraph (1) creates incentives for providers to prevent
the illegal use of their facilities by others for Internet
gambling on a voluntary basis. It encourages them to take such
voluntary action by immunizing an eligible provider from
liability for the illegal use of its facilities by another
person for Internet gambling in return for the provider's
cooperation in preventing that illegal use, once the provider
has received notice of the illegal use from a Federal or State
law enforcement agency. Specifically, a provider will receive
immunity from liability as specified if it maintains and
implements a written policy requiring it to terminate the
account of a subscriber following receipt by the provider of a
notice issued by a Federal or State law enforcement agency that
the subscriber has violated or is violating section 1085. If
the provider maintains and implements such a policy, and
complies with such a notice, the provider is immunized from
liability--under section 1085 and any other provision of
Federal or State law prohibiting or regulating Internet
gambling or Internet gambling related activities--for the use
of its facilities by such person to engage in Internet gambling
activity that violates such laws.
    Paragraph (2) describes the form of such notices and the
actions a provider is required to take upon receipt of such a
notice. Those actions include expeditiously removing or
disabling access to material or activity residing on an online
site controlled by the provider that is identified as violating
section 1085. If the provider does not control the site at
which the offending material or activity resides, the provider
must expeditiously so notify the Federal or State law
enforcement agency. Upon receipt of a subpoena, the provider
must cooperate with the Federal or State law enforcement agency
in expeditiously working to identify the person or persons who
control the site and is the appropriate recipient of a notice.
    Paragraph (3) authorizes the United States and State law
enforcement agencies to apply to a U.S. district court for a
temporary restraining order or an injunction to remove,
disable, or block access to material or activity originated by
others that violates section 1085. If a provider maintains and
implements the policy described in paragraph (1), the bill
specifies the forms of relief that may be entered. First, if
the provider is simply serving as a ``conduit'' for the
violative material or activity, the court may issue (i) an
order restraining the provider from providing access to the
subscriber who is using that access to violate section 1085 or
to engage in a transmission that violates section 1085; and
(ii) an order requiring the provider to take reasonable steps
to block access to an identified foreign online location being
used to violate section 1085. Second, if the provider is
``hosting'' the violative material, a court may also impose
such other injunctive remedies as the court considers necessary
to prevent or restrain access to material or activity that is
prohibited by section 1085 at a particular online location. The
court, in determining appropriate injunctive relief in either
situation, must take into account a variety of considerations
designed to ensure that the relief will be reasonable and
appropriate under all of the circumstances. Expedited relief is
available in exigent circumstances, as provided in paragraph
(d)(3)(D).
    The Committee intends that, in determining what
``reasonable steps'' a provider should be required to take
under paragraph (d)(1)(B)(i)(II), the court will take into
account the considerations identified in paragraph (d)(3)(C). A
court is not limited to ordering blocking steps that have
previously been shown to be effective. The Committee intends
that, before ordering blocking steps, a court will satisfy
itself that those steps are likely to be effective in blocking
access to the material or activity in question to a meaningful
degree, based on the knowledge that is available at the time.
The Committee does not intend that violations must be remedied
at any cost, or regardless of cost, but the Committee does
intend that violations will be remedied to the fullest extent
possible, consistent with the considerations in paragraph
(d)(3)(C).
    Paragraph (4) specifies that a provider shall not be liable
under any Federal or State law for complying with any notice or
court order issued under subsection (d). It also specifies that
section 1085 is not to be construed to require a provider
described in paragraph (d)(1)(B) to monitor material or use of
its service. This paragraph also clarifies that section 1085
does not require a provider described in paragraph (d)(1)(B) to
gain access to, remove, or disable access to material or
activity violative of section 1085, except as required by a
notice or court order issued under this section. Finally, it
specifies that section 1085 is not to be construed to prejudice
the right of a subscriber to secure an appropriate
determination that its account should not be terminated
pursuant to subsection (d), or should be restored.
    Section 1085(e) specifies that the availability of relief
under subsection (c) and (d), which is civil in nature, is
independent of any criminal action under subsection (b) or any
other Federal or State law.
    Section 1085(f) specifies three categories of activities
that, if otherwise lawful under State and Federal law, are not
subject to the prohibition of section 1085(b).
    Paragraph (1)(A) specifies that the prohibitions of section
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 multi-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.
    Paragraph (1)(B) specifies that the prohibitions of section
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 the sending,
receiving, or inviting of information assisting in the placing
of such a bet or wager, subject to five specified conditions:
(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, 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.) (including consents from the host racing association, the
host racing commission, and the off-track racing commission in
each of the States involved), or with comparable consent
agreements between the States involved applicable to dog
racing. Section 1085, and this subparagraph in particular, do
not authorize any new forms of parimutuel wagering but merely
exclude from the prohibitions of section 1085 ``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.'' This paragraph does not expand the current scope of
legally permissible parimutuel wagering activity, but simply
makes clear that the bill does not restrict that which already
is legal with regard to wagering on horse and dog racing.
    Paragraph (1)(C) specifies that the prohibitions of section
1085 do not apply to any otherwise lawful bet or wager placed,
received, or otherwise made on a fantasysports league game or
contest. Bets and wagers that are otherwise unlawful would be subject
to the prohibitions of section 1085, but section 1085 would not change
the prohibited or permitted status of any fantasy sports league game or
contest under the laws of any State, or under any other Federal law.
Whether a particular fantasy sports league game or contest is otherwise
lawful is to be determined under applicable State or other Federal law,
without regard to section 1085. Section 1085 treats fantasy sports
league games and contests in this fashion because of their highly fact-
dependent status under State and Federal law. These games and contests,
which require at most a small fee to participate and award modest
prizes to winners,<SUP>56</SUP> are permitted in some States but deemed
illegal in others, depending on whether (for example) the particular
game or contest meets a particular State's definition of ``gambling.''
Moreover, depending on how it is conducted, a fantasy sports league
game or contest may be prohibited by other Federal law. In short,
fantasy sports league games and contests may or may not, but do not
automatically, constitute illegal ``gambling'' under State or other
Federal law. It would not be appropriate to make these games and
contests either automatically illegal under section 1085, or
automatically exempt from its prohibition on Internet gambling.
---------------------------------------------------------------------------
    \56\ See Senate hearing (testimony of Marianne McGettigan, Esq.,
representing the Major League Baseball Players Association); id.
(testimony of Attorney General James E. Doyle).
---------------------------------------------------------------------------
    Under section 1085, fantasy sports league games and
contests that are legal in a State and not prohibited by other
Federal law would continue to be legal in that State (subject
to changes in the law of that State), both as a matter of State
law and section 1085. Section 1085 does not make a fantasy
sports league game or contest illegal in all States simply
because it is illegal in one State. Conversely, section 1085
does not make a game or contest legal in all States simply
because it is legal in one State. The operation of a fantasy
sports league game or contest in violation of the laws of a
State would violate section 1085 in that State, but not in a
State where the game or contest is legal. The refusal of a
sponsor to permit a participant to claim a prize if the
participation was undertaken in a State in which the fantasy
game or contest was illegal could be a sufficient defense to a
prosecution under section 1085 if such refusal would be a
sufficient defense to a prosecution under other applicable law.
Subsection (f) does not render section 1085 inapplicable to
persons engaged in a gambling business who use the Internet to
gamble on the performance of participants in fantasy sports
league games or contests, or to transmit information assisting
in such gambling.
    Subsection (f)(3) specifies that the prohibition of
subsection (b)(1)(B) does not apply to the advertising or
promotion of any activity that is not prohibited by subsection
(b)(1)(A).
    Section 1085(g) specifies that section 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. Thus, a person engaged in a gambling
business who is subject to prosecution or the imposition of
civil remedies under section 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 section
1085.

Section 3

    Section 3 directs the Attorney General, not later than 3
years after the date of enactment, to submit to Congress a
report including (1) an analysis of the problems, if any,
associated with enforcing section 1085; (2) recommendations for
the best use of Department of Justice resources to enforce
section 1085; and (3) an estimate of the amount of activity and
money being used to gamble on the Internet.

Section 4

    Section 4 is a severability provision.

                           VI. Cost Estimate

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, July 15, 1999.
Hon. Orrin G. Hatch,
Chairman, Committee on the Judiciary,
U.S. Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate and mandate statements for
S. 692, the Internet Gambling Prohibition Act of 1999. One
enclosure includes the estimate of federal costs and the
estimate of the impact of the legislation on the private
sector. The estimated impact on state, local, and tribal
governments is discussed in a separate enclosure.
    If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contacts are Mark
Grabowicz (for federal costs), Lisa Cash Driskill (for the
state and local impact), and John Harris (for the private-
sector impact).
            Sincerely,
                                          Barry B. Anderson
                                    (For Dan L. Crippen, Director).
    Enclosures.

               congressional budget office cost estimate

S. 692--Internet Gambling Prohibition Act of 1999

            Summary
    S. 692 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 S. 692 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.
    S. 692 would impose new private-sector mandates, as defined
in the Unfunded Mandates Reform Act (UMRA), on operators of
Internet sweepstakes and contests and on providers of Internet
service. CBO expects that the costs of these mandates would be
below the threshold established by that act ($100 million in
1996, adjusted for inflation). S. 692 also contains
intergovernmental mandates as defined in UMRA; CBO's estimate
of the costs of those intergovernmental mandates is detailed in
a separate statement.
            Estimated cost to the Federal Government
    Because S. 692 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 the government would not pursue many
additional cases. 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.
    S. 692 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 recorded 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 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 S. 692 could affect both direct
spending and receipts, but CBO estimates that any such effects
would be less than $500,000 a year.
            Estimated impact on State, local, and Tribal Governments
    S. 692 would impose intergovernmental mandates as defined
in UMRA. CBO's analysis of those mandates is contained in a
separate statement on intergovernmental mandates.
            Estimated impact on the private sector
    S. 692 would create new private-sector mandates, as defined
in UMRA, for operators of Internet sweepstakes and contests and
for providers of Internet service. CBO expects that the costs
of these mandates would be below the threshold established by
that act ($100 million in 1996, adjusted for inflation).
    The definition of ``bets or wagers'' used in S. 692 would
prohibit Internet contests, such as raffles, that award
nontrivial prizes and require entry fees. CBO has been unable
to obtain reliable information on the number of these contests
or their revenues, but expects that the costs of this mandate
would be small. The vast majority of contests advertised or
conducted through the Internet are intended to generate
publicity or advertise a product and do not require entry fees.
S. 692 would expressly exempt contests for fantasy sports
leagues.
    S. 692 would allow law enforcement agencies to obtain court
orders requiring Internet service providers (ISPs) to block
customer access to specific foreign Internet gambling sites.
The costs of this mandate would depend on the actions of law
enforcement agencies. Based on information from the Department
of Justice, CBO expects that the number of ISPs served with
such orders would be low. Because the orders would require ISPs
to block specific sites rather than all gambling sites, the
cost per order would also be low. Consequently, CBO estimates
that costs to ISPs would be small.
    Estimate prepared by: Federal costs: Mark Grabowicz; impact
on the private sector: John Harris.
    Estimate approved by: Robert A. Sunshine, Deputy Assistant
Director for Budget Analysis.

    congressional budget office intergovernmental mandates statement

S. 692--Internet Gambling Prohibition Act of 1999

            Summary
    S. 692 would prohibit gambling conducted over the Internet
or an interactive computer service. The bill would grant
immunity to providers of interactive computer services if third
parties use their facilities in ways that violate federal and
state laws regulating gambling. The bill also would provide
several exemptions to the gambling prohibition, including,
under certain circumstances, gaming conducted by states,
parimutuel betting, and betting on legal horse and dog racing.
The bill would not provide similar exemptions for gaming
conducted by tribal governments.
    The bill contains several intergovernmental mandates as
defined in the Unfunded Mandates Reform Act (UMRA). CBO
estimates that the total costs of complying with these
mandates, which would be borne primarily by tribal governments,
would exceed the threshold established in UMRA ($50 million in
1996, adjusted annually for inflation).
            Intergovernmental mandates contained in bill
    The prohibition on gambling conducted over the Internet or
an interactive computer service would impose mandates on state,
local, or tribal governments in several ways. First, S. 692
defines an interactive computer service as any information
service, system, or access software provider that provides or
enables computer access by multiple users to a computer server.
This definition is sufficiently broad that it probably would
encompass the systems used by tribal governments to offer
linked bingo and progressive slot machines. Linked bingo occurs
when several tribes, either within a state or across many
states, use an interactive computer service to simultaneously
play one bingo game, thereby increasing the potential payoff
available to all participants. Assuming the bill would prohibit
tribes from operating these games, the prohibition would
constitute an intergovernmental mandate as defined by UMRA.
    The prohibition on gambling conducted over the Internet
would also constitute a mandate because state, local, and
tribal governments would not be allowed to provide access to
gaming or lottery sites using this technology. The bill also
would preempt certain state liability laws as they apply to
providers of interactive computer services.
    Finally, progressive slot machines, like linked bingo,
allow several tribes to link their slot machines using
technology that apparently also would be prohibited by this
bill. Slot machines are linked for the purpose of increasing
the available winnings to all participants. Because the
legality of this activity under current law is unclear, we
cannot determine if the prohibitions in S. 692 would constitute
a new intergovernmental mandate as defined by UMRA.
            Estimated direct costs of mandates to state, local, and
                    tribal governments
    Is the Statutory Threshold Exceeded ($50 million in 1996,
Adjusted Annually for Inflation)?
    Yes.

Total direct costs of mandates

    Linked Bingo.--Tribal gambling is regulated in different
ways, depending on the type of activity. Bingo is considered a
Class II form of gaming, which is currently regulated by the
tribes themselves, under guidelines set forth in the Indian
Gaming Regulatory Act (IGRA). IGRA explicitly allows tribes to
use available forms of technology, such as those used in linked
bingo, to increase the economic benefits of Class II gaming.
Assuming the bill would have the effect of barring the use of
such linked bingo machines, CBO estimates that the net costs to
tribal governments would total more than $60 million a year.
CBO considers the cost of this mandate to be the net revenues
that tribal governments would lose if this activity were
interpreted to be illegal under the bill. Net revenues are the
funds remaining from total bets after associated operating
expenses are paid and payments are made to winners.
    Currently, computers owned by at least 60 tribes are linked
together to play bingo. CBO cannot determine the exact amount
of net revenue generated from the bingo games because much of
the information is proprietary. Based on information provided
by the companies that provide these machines and some of the
tribes that use them, however, we estimate that the cost to
tribal governments would exceed the threshold established in
UMRA ($50 million in1996, adjusted annually for inflation).
Assuming a conservative growth rate, the revenue loss could increase to
as much as $90 million by 2004.
    It might be possible for tribes to implement alternative
forms of gaming that would not use the electronic systems
covered by the bill. However, CBO cannot predict the likelihood
that tribes would implement such systems, how quickly they
could do so, or how much revenue they could generate. In the
absence of electronic linkages, participation might increase in
other games unaffected by S. 692. But different types of games
tend to have different kinds of participants, so this might not
be a substantial shift. In the absence of linked bingo,
participation also might shift away from tribal bingo to other
games operated by nonprofit groups.
    Internet Gambling.--Of all governmental entities, Indian
tribes have shown the greatest interest in using the Internet
as a forum for generating gaming revenues and thus are most
likely to be affected by the bill's ban on Internet gambling.
The use by tribal governments of gambling sites on the Internet
that are accessible to the public from their home computers has
been subject to court challenges. Because these challenges are
still pending, no tribes are currently offering gambling on the
Internet. Thus, the legality of such activities and the
potential for Indian tribes to generate revenues from them, in
the absence of this legislation, are uncertain.
    State and Local Lotteries.--State and local governments
would also be prohibited 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
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.
    Immunity From State Liability Laws.--The bill 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. This preemption would be a mandate as
defined by UMRA, but CBO estimates that it would impose no
costs on state, local, or tribal governments.
    Progressive Slot Machines.--Slot machines are considered
Class III gaming, and are generally regulated by agreements
between a state and tribe. Unlike Class II gaming, however,
this category does not clearly fit within the existing federal
exceptions in IGRA that allow for the use of certain
technology. CBO is therefore unsure whether current federal
laws that prohibit the use of wire communication to assist in
gambling apply to progressive slot machines. We thus cannot
determine whether the prohibition in S. 692 would constitute a
new mandate as defined by UMRA or a reaffirmation of current
law.
    Progressive slot machines are found at 90 Indian casinos in
12 states. Based on information from vendors that provide such
machines and some of the tribes that use them, CBO estimates
that prohibiting their use would cause net revenue losses
totaling more than $80 million per year. This estimate
conservatively assumes that net revenues from the more than
2,200 affected slot machines average at least $100 a day.
    Estimate prepared by: Lisa Cash Driskill.
    Estimate approved by: Robert A. Sunshine, Deputy Assistant
Director for Budget Analysis.

                    VII. Regulatory Impact Statement

    In compliance with paragraph 11(b)(1), rule XXVI of the
Standing Rules of the Senate, the Committee, after due
consideration, concludes that S. 692 will not have significant
regulatory impact.

                         VIII. Additional Views

    I have long been an advocate for legislation that ensures
that existing laws keep pace with developing technology. It is
for this reason that I have sponsored and supported over the
past few years a host of bills to bring us into the 21st
Century.
    This same impetus underlies my support of legislation to
ensure our Nation's gambling laws keep pace with developing
technology, particularly the Internet. The Department of
Justice has noted that ``the Internet has allowed for new types
of electronic gambling, including interactive games such as
poker or blackjack, that may not clearly be included within the
types of gambling currently made illegal * * *.'' <SUP>1</SUP>
This new technology clearly has the potential to diminish the
effectiveness of current gambling statutes.
---------------------------------------------------------------------------
    \1\ Letter dated June 9, 1999, from Jon P. Jennings, Acting
Assistant Attorney General, Department of Justice, to Senator Patrick
Leahy, at 1 (``DOJ letter'').
---------------------------------------------------------------------------
    Vermonters have spoken clearly that they do not want
certain types of gambling permitted in our State, and they do
not want current laws to be rendered obsolete by the Internet.
Vermont Attorney General William Sorrell strongly supports
Federal legislation to address Internet gambling, as do other
law enforcement officials in Vermont.
    I believe, therefore, that there is considerable value in
updating our Federal gambling statutes, which is why I voted
for S. 692, the ``Internet Gambling Prohibition Act,'' during
Committee consideration. I supported the bill as a step forward
in our bipartisan efforts to make sure our Federal laws
continue to keep pace with emerging technologies.
    I do, however, have concerns that S. 692 as currently
written may unnecessarily weaken existing Federal and State
gambling laws.
    My first concern is that the bill provides unnecessary
exemptions from its Internet gambling ban for certain forms of
gambling activities without a clear public policy
justification. For example, the bill exempts parimutuel
wagering on horse and dog racing from its ban on Internet
gambling. The sponsors of S. 692 have offered no complying
reason for this special treatment of one form of gambling.
Indeed, the Department of Justice is ``especially troubled by
the broad exemptions given to parimutuel wagering, which
essentially would make legal on the Internet types of
parimutuel wagering that are not legal in the physical world.''
<SUP>2</SUP>
---------------------------------------------------------------------------
    \2\ DOJ letter at 4. The DOJ letter continues: ``The Department of
Justice notes that S. 692 may incorrectly imply that the Interstate
Horse Racing Act of 1978, 15 U.S.C. 3001 et seq., allows for the legal
transmission and receipts of interstate parimutuel bets or wagers. The
Interstate Horse Racing Act does not allow for such gambling, and if a
parimutuel wagering business currently transmits or receives interstate
bets or wagers (as opposed to intrastate bets or wagers on the outcome
of a race occurring in another state), it is violating Federal gambling
laws.''
---------------------------------------------------------------------------
    Broad exemptions from the Internet gambling ban also
contradict the recent recommendations to Congress of the
National Gambling Impact Study Commission. After 2 years of
taking testimony at hearings across the country, the Commission
has endorsed the need for Federal legislation to prohibit
Internet gambling. But the Commission clearly rejected adding
new exemptions to the law in such a ban:

          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 or
        among parties in the United States and any foreign
        jurisdiction.<SUP>3</SUP>
---------------------------------------------------------------------------
    \3\ Letter dated June 15, 1999, from Kay C. James, Chair, and
William Bible, Commissioner, National Gambling Impact Study Commission,
to Senator Patrick Leahy, at 1 (emphasis in the original).

    My second concern is that the bill unnecessarily creates a
new section in our Federal gambling statutes, which may prove
inconsistent with existing law and established legal precedent.
Instead of updating section 1084 of title 18, which has
prohibited interstate gambling through wire communications
since 1961, S. 692 creates a new section 1085 to title 18 to
cover Internet gambling only. Creating a new section out of
whole cloth with different definitions and other provisions
from existing Federal gambling statutes creates overlapping and
inconsistent Federal gambling laws for no good reason.
    The Department of Justice believes overlapping and
inconsistent Federal gambling laws can be easily avoided by
amending section 1084 of title 18 to cover Internet gambling:

          We therefore strongly recommend that Congress address
        the objective of this legislation through amending
        existing gambling laws, rather thancreating new laws
that specifically govern the Internet. Indeed, the Department of
Justice believes that an amendment to section 1084 of title 18 could
satisfy many of the concerns addressed in S. 692, as well as ensure
that the same laws apply to gambling businesses, whether they operate
over the Internet, the telephone, or some other instrumentality of
interstate commerce.<SUP>4</SUP>
---------------------------------------------------------------------------
    \4\  DOJ letter at 2.

    My third concern is that the bill may unnecessarily create
immunity from criminal prosecution under State law for Internet
gambling. Any new immunity is in sharp contrast to existing
Federal law, which specifically does not grant immunity from
State prosecution for illegal gambling over wire
communications. <SUP>5</SUP> The sponsors of S. 692 have not
explained why we should tie the hands of our State crime-
fighting partners in the battle against Internet gambling when
we do not mandate Federal preemption of State criminal laws for
other forms of illegal gambling.
---------------------------------------------------------------------------
    \5\ Compare 18 U.S.C. 1084(c) (``Nothing contained in this section
shall create immunity from criminal prosecution under any laws of any
State.'') and sec. 2(g) of S. 692 (``Nothing in this section may be
construed to affect any prohibition or remedy applicable to a person
engaged in a gambling business under any provision of Federal or State
law.'').
---------------------------------------------------------------------------
    During our consideration of the Internet Gambling
Prohibition Act in this Congress and the last, the Committee
has improved and refined the bill on a bipartisan basis. The
bill now applies only to gambling businesses, instead of
individual betters. This will permit Federal authorities to
target the prosecution of interstate gambling businesses, while
rightly leaving the prosecution of individual bettors to the
discretion of State authorities acting under State law. But
granting immunity from criminal prosecution for illegal
Internet gambling under State law would prohibit such an
effective Federal-State partnership.
    Finally, I note that the Chairman and Ranking Member of the
Senate Indian Affairs Committee have requested referral of S.
692 to their committee.<SUP>6</SUP> I believe this referral is
appropriate because the bill restricts gaming activities under
the Indian Gaming Regulatory Act.<SUP>7</SUP> Indeed, the
Congressional Budget Office estimates that S. 692 would cost
tribal governments millions of dollars in lost revenue as a
result of its restrictions on Indian gaming.
---------------------------------------------------------------------------
    \6\ See letter dated June 15, 1999, from Senator Ben Nighthorse
Campbell and Senator Daniel K. Inouye, Chairman and Vice Chairman of
the Senate Indian Affairs Committee, to Senator Orrin Hatch and Senator
Patrick Leahy, Chairman and Ranking Member of the Senate Judiciary
Committee.
    \7\ See DOJ letter at 5: ``We are concerned that S.692 would make
illegal those gaming activities occurring entirely on Indian lands that
are currently legal under the Indian Gaming Regulatory Act
(``IGRA'').''
---------------------------------------------------------------------------
    As Senators continue to work together to enact a ban on
Internet gambling, we should keep these words from the
Department of Justice foremost in our minds: ``[A]ny
prohibitions that are designed to prohibit criminal activity on
the Internet must be carefully drafted to accomplish the
legislation's objectives without stifling the growth of the
Internet or chilling its use as a communication medium.''
<SUP>8</SUP>
---------------------------------------------------------------------------
    \8\ DOJ letter at 2.
---------------------------------------------------------------------------
    I look forward to working with my colleagues on both sides
of the aisle and the Administration to enact into law carefully
drafted legislation to update our Federal gambling statutes to
ensure that new types of gambling activities made possible by
emerging technologies are prohibited.

                                                     Patrick Leahy.

                      IX. Changes in Existing Law

    In compliance with paragraph 12 of rule XXVI of the
Standing Rules of the Senate, changes in existing law made by
S. 692, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, and existing law in which no
change is proposed is shown in roman):

                          UNITED STATES CODE

           *       *       *       *       *       *       *

                TITLE 18--CRIMES AND CRIMINAL PROCEDURE

                             PART I--CRIMES

Chapter                                                          Section
1. General provisions.............................................     1
     * * * * * * *

                          CHAPTER 50--GAMBLING

Sec.
1081. Definitions.
     * * * * * * *
1084. Transmission of wagering information; penalties.
1085. Internet gambling.
     * * * * * * *

Sec. 1085. Internet gambling

  (a) Definitions.--In this section:
          (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 of chance, upon an agreement or
                understanding that the person or another person
                will receive something of value based on that
                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; or
                          (iv) a contract for life, health, or
                        accident insurance.
          (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--
                                  (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 located
                        within a single State and are licensed
                        and regulated by that State, 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 applicable State 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,
        including specifically a service or system that
        provides access to the Internet.
          (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.
  (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 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 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 gambling-
                related activities, for the use of its
                facilities or services by another person to
                engage in 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 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 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;
                          (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) 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 paragraph (2)(A) to comply with a
                notice described in paragraph (2)(B), or
                complying with any court order issued under
                paragraph (3).
                  (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, 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;
                          (iii) each person placing or
                        otherwise making that bet or wager is
                        physically located when such bet or
                        wager 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 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 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.); or
                                  (II) live dog racing, subject
                                to consent agreements that are
                                comparable to those required by
                                the Interstate Horse Racing Act
                                of 1978, approved by the
                                appropriate State regulatory
                                agencies, in the State
                                receiving the signal, and in
                                the State in which the bet or
                                wager originates; or
                  (C) any otherwise lawful bet or wager that is
                placed, received, or otherwise made for a
                fantasy sports league game or contest.
          (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 or
        promotion of any activity that is not prohibited by
        subsection (b)(1)(A).
  (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.

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