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House OKs bar to Web gaming

Bloomberg News

July 12, 2006

WASHINGTON

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The House approved yesterday a measure to stifle online gambling in the United States by restricting the flow of money to illegal Internet gaming sites.

Under the bill, credit-card companies would be forbidden to collect payments for Internet casinos. Financial institutions also would have to aid law-enforcement agencies in shutting down money transfers to illegal gaming sites.The measure was approved 317 to 93 but faces an uncertain future in the Senate, whose leaders don't consider it a priority.

"This bill cuts off the money sources for these illegal businesses," said Rep. Robert W. Goodlatte, the Virginia Republican who co-wrote the bill with another GOP representative, Jim Leach, of Iowa.

Online gambling is a growing $12 billion-a-year business that includes two Gibraltar companies, PartyGaming PLC and Hand 888 Holdings PLC.

Shares of PartyGaming, the world's biggest Web poker company, fell 5.9 percent last week on the London Stock Exchange after the American Gaming Association said it expected the measure to win House approval.

The bill now goes to the Senate, where similar measures have failed. U.S. casino operators including MGM Mirage and Harrah's Entertainment Inc. have urged Congress to consider legalizing and regulating online gambling.

Supporters of the House bill said many Internet sites are fronts for money laundering, drug trafficking and terrorist financing. Minors and young adults are often their biggest victims, they say.

"There are no social benefits for Internet gambling," Leach said.

The bill would use federal authority to regulate payment systems to attack online gambling, most of which is conducted in offshore tax havens. The bill would require the Treasury Department and Federal Reserve to develop ways to identify payments to online gambling.

The Justice Department would have authority to block money transfers to offshore gaming sites and seek injunctions against persons who foster illegal gambling via the Internet.

House Republicans supported the measure as a way to clear the record, to purge the smear on the Congress of disgraced lobbyist Jack Abramoff, Goodlatte said.

Abramoff, 47, used his connections with Republican leaders to block similar legislation banning online gaming on four occasions since 2000, Leach said. Abramoff pleaded guilty in January to corruption charges after a U.S. government investigation into his financial dealings.

Rep. Barney Frank, a Massachusetts Democrat, said the bill restricted individual rights. "What kind of social, cultural authoritarianism are we practicing here?" Frank said during debate. "The fundamental principle of the autonomy of the individual is at stake today."

Online gambling is already deemed illegal in the U.S. under a 1961 law against using telephone lines to place interstate bets. The House bill clarifies that the wire statute applies to online gaming.

The Justice Department has used that wire statute to prosecute offshore Web-site operators and seek injunctions against U.S. companies that foster online gambling by accepting advertising or providing Internet links.

Rep. Shelley Berkley, a Nevada Democrat, called Goodlatte a hypocrite because the bill wouldn't block online gambling on horse racing, which is legal under a separate U.S. statute governing the horse-racing industry.