The Internet Gambling Prohibition Act, sponsored by Reps. Bob Goodlatte (R-VA) and Rick Boucher (D-VA), would update the U.S. Wire Act, which prohibits gambling over telephone wires, to cover use of the Internet to operate a gambling business.

The bill not only forbids a gambling business from accepting payments made by credit cards and electronic transfers, but also includes an enforcement mechanism to address gambling operations, located offshore, that use bank accounts in the U.S.

"For too long our children have been placed in harm's way as online gambling has been permitted to flourish into a $12 billion industry," Goodlatte said in a statement. "The Internet Gambling Prohibition Act brings the current ban against interstate gambling up to speed with the development of new technology."

Matching New Tech

The bill would allow federal, state, local, and tribal law-enforcement officials to seek help from Internet service providers to remove or disable access to Internet gambling sites that violate the act. In addition, the bill would boost the maximum prison term for a violation of the Wire Act to five years from two years.

Similar legislation has been introduced over the years, but has been thwarted consistently by notorious gambling lobbyist Jack Abramoff.

The U.S. Department of Justice has contended that companies offering online gaming to U.S. residents are in violation of existing federal laws, including the Wire Act, the Illegal Gaming Business Act, the Paraphernalia Act, and the Travel Act.

Despite the claims made by the Justice Department that Internet gaming is unlawful in the U.S., the lack of clear legislation regarding the practice has meant that there have been few legal cases brought against gambling operators.

In the MasterCard International case in 2002, a federal appellate court concluded that the Wire Act does not prohibit nonsports Internet gambling.

Online gaming company PartyGaming, which operates PartyPoker.com and StarluckCasino.com, has said that state and locals laws that prohibit or restrict online gaming and related services are a violation of the "dormant commerce clause" of the U.S. Constitution, which provides that state and local regulation of interstate activities is an impermissible restriction on interstate commerce.

The BBC has reported that the new legislation could run afoul of a World Trade Organization ruling last August that the U.S. cannot block offshore online gambling sites.

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It is no secret that online wagering is a multibillion-dollar business, and that most of the illegal activity originates in the U.S. PartyGaming, which reported revenues in excess of $600 million in 2004, said 88 percent of that money came from the pockets of U.S. customers.

"Gambling is illegal in the U.S., and there are many different state laws regulating it, but all of the online gaming businesses are located overseas, where the government has no jurisdiction," said Yankee Group analyst Michael Goodman. "How will this new law be enforced? Will the government track the online activities of the millions of people involved in online gambling?"

Still, Rep. Goodlatte said that illegal online gambling adversely impacts the economy by draining dollars from the United States and serves as a vehicle for money laundering.

The Internet Gambling Prohibition Act has been referred to the House Judiciary Committee.