Lawmaker raps Internet-gambling enforcement

By Peter Kaplan

WASHINGTON (Reuters) - The Democratic head of the House Judiciary Committee voiced frustration on Wednesday about what he said are disparities in the enforcement of U.S. Internet gambling laws.

Chairman John Conyers questioned "the selective nature" of Internet gambling enforcement and said a ban enacted by lawmakers last year could end up hurting U.S. relations overseas.

"Continuing with the same old failed policies for the sake of feel-good politics doesn't make sense," Conyers, of Michigan, said at a hearing on the issue.

Conyers did not signal whether he supports any changes to the current law. A bill introduced by House Financial Services Committee Chairman Rep. Barney Frank, of Massachusetts, would roll back the ban on Internet gambling that was enacted by Congress last year.

However, Conyers and several other lawmakers on the committee pressed officials from the Justice Department and Treasury Department at the hearing to explain why they are cracking down on some forms of Internet gambling but not others.

As part of the crackdown, two founders of payments processor NETeller Plc were arrested in January. In May online gambling operator BETonSPORTS Plc, pleaded guilty to U.S. racketeering charges and agreed to cooperate in a case against the company's founder and other co-defendants.

The Justice Department interprets a decades-old U.S. law, known as the Wire Act, as banning all forms of gambling over the Internet, although the gambling industry has argued the law only bars sports betting.

At Wednesday's hearing, Conyers and other committee members questioned why the Justice Department had not sought to prosecute other forms of Internet gambling, such as online horse-racing.

"To cherry pick ... is what I find to be particularly intellectually dishonest," said Rep. Robert Wexler, a Florida Democrat who has introduced a bill that would exempt poker and some other games from the Internet gambling ban.

Conyers also wanted to know why horse-racing and some other forms of gambling "will continue to proceed unfettered" under new regulations proposed last month by the Treasury Department and the Federal Reserve.

The regulations were drawn up to enforce a law enacted by Congress last year that makes it illegal for banks and credit card companies to make payments to online gambling sites.

The ban has been closely monitored by investors in some British-based gaming companies, such as Partygaming Plc and 888 Holdings Plc.

Conyers also echoed critics of the new Internet gambling ban, saying it could run afoul of the United States' international obligations.

European trade officials argue that the online gambling prohibitions discriminate against European companies that want to offer online gambling services in the U.S. market.

The World Trade Organization in March found U.S. prohibitions on online betting illegal in a complaint filed by Antigua and Barbuda several years ago. However, U.S. officials have said they will maintain the ban anyway and retroactively remove gambling services from its market-opening commitments.

(Editing by Gary Hill)