Internet Gaming Bill Introduced

Proposed federal legislation would legalize most forms of Internet wagering.

By American Horse Council
Press Release
June 14, 2013

Generic Racing Photo

Congressman Peter King (R-NY) has introduced federal legislation to legalize all forms of wagering on the Internet, except sports betting.  The Internet Gambling Regulation, Enforcement, and Consumer Protection Act of 2013 (H. R. 2282) would set up a federal structure to license and regulate entities, including race tracks, that might offer various forms of gambling online.  
 
The legislation would make it illegal for any entity to operate an Internet gambling facility that offers wagering to people in the U.S., except as authorized under the Act.  
 
The bill includes several provisions beneficial to horse racing that do not involve Internet wagering.
 
Congressman King's bill does not repeal the Unlawful Internet Gambling Enforcement Act (UIGEA), which was enacted in 2006 to stop Internet wagering.  Rather it creates a new federal regulatory and enforcement framework under which Internet gambling operators could obtain licenses from the Department of Treasury or state or tribal authorities authorizing them to accept wagers over the Internet from individuals in the U.S. or outside the U.S. if the transaction is not unlawful in the state and foreign jurisdiction.
 
States and Tribes May "Opt-Out"
 Individual states and Indian tribes would be able to "opt-out" and prohibit or limit Internet gambling within their borders by notifying the Secretary of Treasury that they will limit such bets.  Bets could not be taken from any such state or tribal land.
 
Internet gambling would be deemed lawful in the U.S. only with individuals in states or Indian lands that have "opted-in" to allow such gambling.  A state would be considered to have opted-in if its Governor has not notified the Secretary within 120 days of enactment that Internet gambling is prohibited in the state or the state declines to participate in such gambling.  A state shall be considered not to have opted-in if a majority of the state legislature has approved a bill or resolution that expresses that bets or wagers authorized under this Act are prohibited.
 
Office of Internet Gambling Oversight
The bill would create an Office of Internet Gambling Oversight in the Department of Treasury ("Treasury Office").  This Treasury Office would have authority to oversee state and tribal agencies carrying out licensing activities and would have independent authority to license any entity that chooses to apply directly to the Office.  The bill sets out criteria for state and tribal agencies to be designated as "qualified bodies" enabling them to license operators on behalf of the federal government.  The Treasury Office must review the regulatory experience and history of such agencies, but there are no specific minimum restrictions on agencies that can be approved.    
 
Any state and tribal agency could qualify as a qualified governing body if they meet federal standards of suitability.  Each state or tribal qualified body must establish standards for conducting background checks, licensing and regulating operators, and conducting investigations, if necessary.
 
The bill requires qualifying bodies to adopt rules regarding compulsive gambling, responsible gambling, and self-exclusion programs before issuing any licenses to operators.  Each licensee must implement these rules before receiving a license.  Each operator must maintain a list of self-excluded people.
 
Qualified bodies can assess fees against applicants and licensees for the costs of reviewing the licenses and administering the Act.
 
The Treasury Office has the responsibility to write regulations to administer the Act and to ensure that state and tribal qualified bodies are carrying out their responsibilities.
 
Licensing Process for Operators
Applicants for licenses may apply to either the Treasury Office directly or to a state or tribal qualified agency designated by Treasury.
 
The bill is intended to treat casinos, Indian tribes, lotteries, race tracks, and other operators of Internet gambling equally.  No one entity or group would receive preference in licensing.  There are no requirements that an operator have been in existence for a minimum length of time or be of a certain size.  But they must show they are suitable and capable of operating online gaming.  Once licensed an operator would be able to take bets on all types of Internet wagering as authorized under state law.  
 
In order to receive a license, operators would have to:
 
•    Provide information about their financial condition, structure, experience, and suitability, including criminal background information;
•    Agree not to accept bets that are initiated or terminated in a state or tribal land that prohibits that type of Internet gambling or any bets on sports in violation of the Professional and Amateur Sports Protection Act;  
•    Have safeguards in place to:
•        Ensure that a bettor is of legal age and physically-located in a jurisdiction that permits Internet gambling;
•        Combat fraud and money laundering;
•        Ensure that all taxes and fees are collected from operators and individuals;
•        Combat compulsive Internet gambling.
 
Licenses are good for five years and may be renewed.  Violations would subject operators to loss of license, fines and/or criminal penalties of up to five years.
 
Horseracing Provisions
 The bill would not apply to current interstate bets on horse racing "permissible under the Interstate Horseracing Act of 1978," whether made by "telephone, Internet, satellite, or other wire or wireless communication facility, service, or medium."  A track or operator would not need a federal license under this bill to offer interstate off-track wagers that are permissible under the IHA.  Should a racing operator wish to offer other forms of Internet wagering, the requirements of the bill would apply.  
 
The bill includes several important benefits for horseracing:  
 
•    The industry and the Department of Justice have a long-standing disagreement regarding the application of the federal Wire Act (18 U.S.C. 1084) to racing's interstate wagering activities.  This bill would clarify that the Wire Act does not prohibit activities allowed under the IHA.  The bill would exempt from the federal Wire Act any transaction permissible under the IHA.
 
•    The bill would also exempt wagers under the IHA or international wagers on horseracing that are lawful in the state and foreign jurisdiction involved from UIGEA.  This provision also exempts the financial institutions serving racing operators offering interstate wagers under the IHA.
 
General
The Act would grandfather any online gambling operations offered by states or tribes as of the date of enactment.  Presently, Nevada, New Jersey and Delaware have adopted laws on Internet gaming.  The bill would also not prohibit or apply to wholly intrastate Internet gambling.
 
Congressional Action
 The bill was referred to three committees: the House Committee on Financial Services, on which Mr. King sits, the House Committee on Judiciary; and the House Committee on Energy and Commerce.