Senate Cracks Down on Net Gambling

In a move engineered by Senate Majority Leader Bill Frist (R - Tenn.), the United States Senate on Saturday passed legislation, by a voice vote, that ostensibly would tighten security restrictions on cargo shipments from overseas. But attached to the tail end of this bill was language from an earlier House bill that was going nowhere since last July, which effectively makes it illegal for a bank or other institution to transfer funds to organizations that are involved in so-called "unlawful Internet gambling."

Although the measure does not render Internet gambling in the U.S. unlawful, it may as well have, since the new language makes it tremendously more difficult, if not impossible, for banks to process online gambling transactions even when they may be permitted.

The bill whose language was grafted onto the SAFE Ports Act, last known as the Unlawful Internet Gambling and Prohibition Act, did spell out certain exceptions for legal online gambling, including between states where gambling was legalized, within individual states or tribal territories, as well as certain other categories such as some horse racing wagers.


Earlier, President Bush indicated he would be willing to sign the gambling act into law, were he to receive it on his desk. Instead, the President will find it tucked beneath anti-terrorism and security legislation, which he also has indicated he supports.

"No person engaged in the business of betting or wagering," reads the language of the Act, "may knowingly accept, in connection with the participation of another person in unlawful Internet gambling: electronic funds transfer...any check [or] draft...[or] the proceeds of any other form of financial transaction."

Within a 270-day period, the Federal Reserve Board of Governors has been instructed to work out a plan with financial institutions to implement an electronic regulatory system that will block funds transfers that fall under new federal restrictions.

The very notion that such a system will be created has resulted in the shutdown, within hours, of U.S. branches of Internet gambling operations, a great many of them based in the UK. The Times of London reported today that PartyGaming, Sportingbet, World Gaming, and 888 Holdings are among the British companies that saw giant chunks of their capital value erased from the books: as much as 3 billion pounds ($5.66 billion USD) ceasing to exist, and stock value plummeting as much as 75%.

PartyGaming today issued this statement: "After taking extensive legal advice, the Board of PartyGaming Plc has concluded that the new legislation, if signed into law, will make it practically impossible to provide US residents with access to its real money poker and other real money gaming sites. As a result of this development, the Board of PartyGaming has determined that if the President signs the Act into law, the Company will suspend all real money gaming business with US residents, and such suspension will continue indefinitely, subject to clarification of the interpretation and enforcement of US law and the impact on financial institutions of this and other related legislation." Free games access, and gambling access to non-US customers, will remain unaffected.

In Montreal, Optimal Group, which co-owns an online payment processing service, saw its share value plunge today a full 31%, to $8.08 CAN.

Sen. Frist was quoted over the weekend as saying, "Although we can't monitor every online gambler or regulate offshore gambling, we can police the financial institutions that disregard our laws."

A December 2002 Government Accountability Office report looked into the possibility of whether Internet gambling operations could effectively be used as fronts for money laundering. "Law enforcement officials...cited several characteristics of Internet gambling that they believed made it vulnerable to money laundering," the report reads, "including the volume, speed, and international reach of Internet transactions and the offshore locations of Internet gambling sites. In their view, these characteristics promoted a high level of anonymity and gave rise to complex jurisdictional issues." The report made no recommendations, but certainly raised the specter of possible complicity.

"It was a sad night last night for all poker players," a spokesperson for the gambling advocacy group was quoted as saying. "We feel the best course of action is to now concentrate on including a carve-out for skill based games or poker as a whole from the current legislation... We will be adapting our website appropriately to help aid in this process, making it clean and clear cut, so that poker players internationally can unite and contribute to the effort to fight for our poker freedom."

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