Bill could loosen betting ban

WASHINGTON -- U.S. House-passed legislation to restrict Internet casinos would actually legalize bets placed over the Web from nongambling states such as Utah, according to a new Department of Justice analysis.
The opinion from the department's Office of Legislative Affairs appears to validate the concerns raised by 3rd District Rep. Chris Cannon, R-Utah, who tried repeatedly to kill the measure on the claim it would legalize online wagering in Utah, one of only two states where all forms of gambling are illegal.
"The Department of Justice has now confirmed my fears that gambling could be legalized in Utah through the exemptions I sought to remove," Cannon said Wednesday. "I hope that with this new evaluation from the Department of Justice, Congress will re-examine its approach."
On June 10, the House overwhelmingly passed the "Unlawful Internet Gambling Funding Prohibition Act," which requires credit card companies and banks to block payment of electronic money transactions or personal checks for online casino-style gambling.
But the bill included a controversial provision that legalizes such electronic fund transfers with "a business licensed or authorized by a state," an exemption aimed at protecting credit card payments for wagers made on horse races, dog tracks or state lotteries. A Senate version of the House bill, which includes the same exemption language, is scheduled today for consideration in the Senate Banking, Housing and Urban Affairs Committee.
Cannon has argued including a "carve-out" for state-licensed gaming entities to accept online wagers would allow Utah residents to legally place bets over the Internet. He succeeded in removing the provision in a Judiciary Committee hearing in May over the objection of a majority of Republican members, only to have it reappear in an identical bill reported out of the House Financial Services Committee in June. Cannon and other opponents failed on a 237-183 floor vote to strip the provision after the racehorse industry declared Cannon's amendment would be "catastrophic" for states that allow parimutuel betting.
Although supporters of the measure hailed the bill's passage as a major deterrent to the spread of Internet gambling, the Justice Department determined the measure "could expand legal gambling opportunities," according to a July 14 letter from Assistant Attorney General William Moschella to House Judiciary Committee ranking Democrat Rep. John Conyers of Michigan.
Because the state exemption provision is ambiguous, Justice Department lawyers believe it is open to wide interpretation by courts.
"For example, one could argue that because the provision does not specify which state's laws must be considered, only the laws applicable in the state in which the gambling business is located need to be consulted in order to determine if the transaction is lawful," Moschella wrote. "This interpretation would make lawful transactions that are currently unlawful in the state where the bet is initiated."
Because the provision can be interpreted in contrary ways that create confusion and uncertainty in federal statutes, the Justice Department "supports clarifying the meaning of this provision so that it cannot be interpreted as expanding Internet gambling opportunities . . ."
Cannon has joined with Conyers in pushing an alternative bill to federally regulate online gambling with licenses denied to cybercasinos that cannot effectively block betting from Utah and Hawaii, where gambling is illegal.