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While an Internet gambling ban making its way through the House Judiciary and Commerce committees has been in the headlines, a lesser known piece of legislation takes a very pragmatic approach to the problem: It prohibits online casinos from getting paid. The Internet Gambling Funding Prohibition Act passed the House Banking Committee last week with cheers from the sports leagues, state attorneys general, and family values groups that have lined up in opposition to online wagering. Lobbyists for banks and credit card associations are keeping a nervous watch. “Gambling opponents are just targeting another pressure point,” says Interactive Gaming Council Chairwoman Sue Schneider, which represents Internet casinos. “This time they are trying to make the bank the enforcer, instead of the [Internet service provider].” The bill would make it unlawful for an online gambling establishment to accept a bank instrument — like a credit card payment, electronic funds transfer, or check — in connection with the placement of bets or wagers over the Internet. The measure is sponsored by House Banking Committee Chairman James Leach, R-Iowa, and co-sponsored by Rep. John LaFalce, D-N.Y., the committee’s ranking member. THE ROOT OF ALL EVIL “Money is the reason these Web sites are in existence, and cutting off the supply of money for the Web site operators would have a strong effect on the industry,” Wisconsin Assistant Attorney General Alan Kesner says. “It would be entirely like cutting off the air supply of these operations.” Fearing for the integrity of its football and basketball games, the National Collegiate Athletic Association has been one of the lead opponents of gambling in general. The NCAA has been fighting for the Internet ban for almost four years and sees the Leach bill as an important step. Not only is the NCAA worried about a point-shaving scandal, but it also claims that online bookies make it easy for students to become problem gamblers. “All you need to place a bet online is a credit card, and college students have no problem obtaining credit cards,” says Daniel Nestel of the NCAA. “Studies show that over 70 percent of students have credit cards and 20 percent have four or more cards.” Spokesmen for Visa and MasterCard say the credit card giants do not take a position on Internet gambling. A lobbyist in American Express’ D.C. office did not return phone calls, but American Express does not allow its card to be used for gambling. The financial institutions had a hand in the Leach bill early on. As a result of successful lobbying by the banking and credit card industries, payment processors are granted safe harbor for any transaction if they don’t know that the payee is involved in Internet gambling. Advocates for credit card companies say it would be impossible for their clients to determine what charges are for gambling and, therefore, unfair to penalize them. They point to third-party billing agents with generic names — like Costa Rica-based “UChargedIt” and “Perplexa” — that are often used by online casinos. About a dozen financial institutions and e-commerce companies have formed the E-Commerce Payments Coalition, which has hired Greenberg Traurig’s Ronald Platt to monitor the legislation, but not to take a stand on it. Platt also represents some offshore gambling establishments that oppose the bill. Other lobbyists say the credit card companies have been working through the coalition instead of acting individually because they have other issues before Congress and don’t want to be tainted by fighting for gambling interests. The Clinton administration has expressed mixed views on the legislation. While expressing concern about the spread of online gambling, the Treasury Department strongly opposes the bill’s enforcement provisions and its sanctions to dissuade other nations from hosting online casinos. Still, Treasury recognizes the need for some action. “Use of credit cards presents special concerns because gamblers are indebting themselves in order to gamble,” says Gregory Baer, Treasury’s assistant secretary for financial institutions. “Casinos appear to prefer them for the speed with which gamblers can be registered and begin gambling.” The Department of Justice also takes issue with the bill’s distinction between online gambling and conventional gambling, and with its failure to distinguish between legal and illegal wagering.

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