US House of Representatives to Vote on Anti-Online Gambling Bill

The US House of Representatives will vote today on a proposed bill designed to prohibit online gambling in the U.S. and prevent financial transactions with offshore online gambling sites. The bill combines two measures sponsored by Republican Representatives James Leach of Iowa and Bob Goodlatte of Virginia. The bill would exempt online gambling involving horse racing (pari-mutuel betting) and state lotteries. If approved, the bill will go to the Senate for consideration.

The crux of the bill is a set of provisions designed to prevent the use of credit cards and other financial instruments for online gambling by making it unlawful for financial intermediaries to process payments for online-gaming businesses. The bill requires financial intermediaries and web service providers to cooperate with American law enforcement agencies to restrict online gambling.

Enforcement with financial intermediaries will take at least two forms: (a) on the prevention side, financial intermediaries, such as credit card companies, will have to identify which of their merchants are involved in online gambling activities involving US based cardholders. Once they have identified those merchants, the relevant merchant account numbers used to process credit card authorizations will be restricted. This means that a gambling transaction will simply not be authorized. The prohibitions should not affect credit cards issued outside the US; (b) on the deterrence side, credit card issuers will likely be asked or compelled to provide transaction records for the merchants identified as providing online gambling services. Transaction records will show the credit card numbers that were used to gamble online, allowing an investigating authority to then obtain from the credit card issuers, the names and addresses of credit card holders who gambled online. This information will likely be used for prosecution purposes.

There are significant privacy concerns, national and international, that arise with legislative attempts to control online conduct. Those concerns should be addressed concurrently with measures intended to compel production of personal information.

As the bill is being considered at the House of Representatives, some of the largest US gaming companies, such as MGM Mirage and Harrah's Entertainment Inc., are lobbying Congress to consider whether online gaming should be legalized in the US.