Internet Gambling Banned

Title VIII of H.R. 4954 is entitled 'Unlawful Internet Gambling Enforcement Act of 2006' (the Act). The bill prohibits banks and other financial institutions from processing payments for online-gambling companies. However, exempted from this legislative ban are state lotteries, fantasy sports leagues, horserace betting and Indian gaming. An earlier version of the bill ' passed by the House on July 10, 2006 ' approved an additional provision updating and expanding the 1961 Wire Act, which prohibits gambling companies from using wire-based communications to place bets, to specifically include use of the Internet. However, this provision was not ultimately included in the version finally passed by the full Congress. President Bush signed the bill into law on Friday, Oct. 13, 2006, a date that many offshore online-gambling entities are finding sufficiently unlucky as their potential U.S. market vanishes.

The Act requires that within 270 days of enactment, the Secretary and the Board of Governors of the Federal Reserve, in consultation with the Attorney General, issue regulations that would prohibit approving a transaction between a U.S.-based customer account and an Internet-gambling merchant. The wording of the Act seems to extend to credit cards, electronic funds transfers, checks or similar instruments, or any other form of financial transaction as prescribed by the above-referenced agencies tasked with preparing the regulations. Financial institutions would be required to follow those regulations, and would be subject to criminal fines and imprisonment, for not more than 5 years, as well as civil penalties for failure to comply with the Act.