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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 
1999.1 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.
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    \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.2
---------------------------------------------------------------------------
    \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.'' 3 As the 
National Gambling Impact Study Commission has stated, ``the 
previously small number of operations has grown into an 
industry practically overnight.'' 4 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.5 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.6 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.7 The Commission concluded 
that the number of these sites ``can be expected to grow.'' 
8
---------------------------------------------------------------------------
    \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 1998.9 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.10 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 1998.11 The Commission reported that 
``virtually all observers assume the rapid growth of Internet 
gambling will continue.'' 12
---------------------------------------------------------------------------
    \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.'' 13
---------------------------------------------------------------------------
    \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.14
---------------------------------------------------------------------------
    \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.'' 
15
---------------------------------------------------------------------------
    \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. * * * 16
---------------------------------------------------------------------------
    \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.'' 17
---------------------------------------------------------------------------
    \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.'' 
18 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.19
---------------------------------------------------------------------------
    \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.'' }20 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.'' }21
---------------------------------------------------------------------------
    \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.'' 22 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.23 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.24 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.'' 25
---------------------------------------------------------------------------
    \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.'' 26 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.27 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.'' 28 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.'' 29 
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.'' 30 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.'' 31 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 * * * 
        .32
---------------------------------------------------------------------------
    \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.'' 
33 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.34 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.35 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.'' 36
---------------------------------------------------------------------------
    \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.37 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.38
---------------------------------------------------------------------------
    \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.'' 39
---------------------------------------------------------------------------
    \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.40 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.'' 
41 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.'' 42 
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.'' 43 General Montgomery also 
testified that the Internet ``is a global medium, and therefore 
intrinsically `interstate' in its reach.'' 44
---------------------------------------------------------------------------
    \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. 45 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. 46 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. 
47 Even when section 1084 was finally enacted in 
1961--based on a 1952 ABA recommendation 48--
Americans still marveled at the ``modern techniques'' that 
allowed callers to make long-distance telephone calls without 
the assistance of an operator. 49
---------------------------------------------------------------------------
    \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.'' 50
---------------------------------------------------------------------------
    \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. 51 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. 52 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.'' 53 As the Racketeering Records 
Analysis Unit of the FBI has stated, Section 1085 is ``a 
modernized version'' of section 1084. 54 ``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.'' 55
---------------------------------------------------------------------------
    \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,56 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 * * *.'' 1 
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.'' 
2
---------------------------------------------------------------------------
    \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.3
---------------------------------------------------------------------------
    \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.4
---------------------------------------------------------------------------
    \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. 5 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.6 I believe this referral is 
appropriate because the bill restricts gaming activities under 
the Indian Gaming Regulatory Act.7 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.'' 
8
---------------------------------------------------------------------------
    \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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