2003 Cal-bred News

MEMORANDUM

To: Racing Organizations
From: American Horse Council
Re: House to Consider Internet Gambling Bill
Date: June 4, 2003

The House is scheduled to vote on the Unlawful Internet Gambling Funding Prohibition Act (H.R. 2143) soon. The horse racing and breeding industry supports this bill in its present form. The current bill distinguishes between unlawful, off-shore Internet wagering and state-licensed and state-regulated wagering. This distinction is important to the pari-mutuel racing industry.

The racing industry supports this bill. But if this distinction is eliminated, the industry would oppose the bill.

We anticipate that amendments will be permitted, but the Rules Committee has not yet met to issue the rule that will dictate what amendment(s) will be in order.

The message to your Representatives is (1) to oppose any hostile amendments to the bill, such as an amendment to eliminate the exclusion for domestic wagering involving “any transaction with a business licensed or authorized by a state;” and (2) if such an amendment passes, then oppose the amended version of the bill.

Please contact your Representatives asking them to support this legislation as it is and oppose any amendments. Attached is a draft letter that can be faxed to him/her. Fax numbers can be found by visiting the website of the House of Representatives at http://www.house.gov/ and following the instructions or by calling the AHC

Also attached are talking points in support of the bill for your use should you contact your Representative’s office by phone.

If you have any questions or need additional information, please contact the CTBA offices.

June 4, 2002

The Honorable ……………………
United States House of Representatives
Washington, DC 20515

Dear Congressman (Congresswoman) ……………..:

The Unlawful Internet Gambling Funding Prohibition Act (H.R. 2143) is scheduled to be considered by the House of Representatives on June 5. This bill will effectively prohibit illegal, off-shore Internet wagering.

The [Your Organization] asks you to support this bill in its present form and oppose any hostile amendments, particularly any amendment to eliminate the existing distinction in the bill between domestic, state-regulated gaming and off-shore Internet wagering. If such an amendment passes, we ask you to oppose the bill.

This bill now distinguishes between lawful state-licensed and regulated gaming, like horseracing, and Internet gaming offered in violation of federal and state law by off-shore foreign operators beyond the reach of U.S. authorities. Without this distinction, the broad definition of Internet and credit in the bill could sweep into the prohibitions many existing gaming activities offered by horseracing under state and federal law.

U.S. Racing and the agri-business it supports involves 725,000 horses, one million participants, has a total economic impact of $34 billion and supports 472,800 full-time jobs. [Include any economic information about the economic effects of racing and breeding in your state.]

The bill respects federal and state gaming laws. It does not make any unlawful gaming lawful; it does not make any lawful gaming unlawful. It does not expand wagering. It maintains the status quo with respect to the underlying substantive federal and state laws on gaming.

If you have any questions about [Your State] racing or breeding or the legislation, please contact us. Thank you.

Sincerely,

Unlawful Internet Gambling Funding Prohibition Act

• The Unlawful Internet Gambling Funding Prohibition Act (H.R. 2143) effectively prohibits any person engaged in a gambling business from accepting or transmitting “credit” (which is defined to include nearly all forms of money transfers, except cash) in connection with unlawful wagering that involves the “Internet,” even in a technical, minimal way.

• Section 4(2)(E)(ix) of the bill distinguishes between lawful, state-sanctioned and regulated gaming activities, such as pari-mutuel horse racing, that use technology to facilitate existing activities, and the unregulated, off-shore Internet gaming businesses that are violating federal and state bookmaking statutes and operating beyond the reach of U.S. law.

• Without this distinction, this bill could limit the current legal activities of the domestic horse racing industry, which has been using interactive computers to offer simulcast wagering and advanced deposit wagering for many years pursuant to the federal Interstate Horseracing Act and state law. Indeed, today over 80% of the amount wagered on horseracing is wagered in this way at locations other than where the race is run.

• The bill respects existing federal and state gambling laws. It does not make any unlawful gambling lawful; it does not make any lawful gambling unlawful. It does not override any state prohibitions or requirements. It does not expand wagering. It simply maintains the status quo with respect to the underlying substantive law on gaming.

• Because U.S. horseracing is regulated by federal and state laws, the specific concerns expressed about off-shore Internet wagering – the integrity of the operators, the identity of the participants, consumer fraud, and money laundering - are not at issue. If a wager is lawful and made with a business licensed or authorized by the state, then all the protections of state licensing and regulation are ensured. U.S. operators are subject to all the federal withholding tax and cash reporting requirements under the Internal Revenue Code, making money laundering nearly impossible. In addition, these requirements ensure that all revenue involved in these activities supports the domestic industry and state economies.

• If the language regarding state-licensed, domestic wagering were eliminated or changed, this legislation would not simply prohibit credit in connection with Internet gambling, it could effectively restrict the day-to-day wagering activities of the U.S. pari-mutuel horseracing industry because it would limit financial clearing transactions with domestic wagering facilities. The result would be catastrophic for the $34 billion racing/breeding industry, the states that rely on it for tax revenue and the 500,000 full-time jobs it supports.