|PayPal's settlement of an Internet gambling investigation by New York state is alarming public interest groups, the New York Times reports. The $200,00 fine settlement also includes a much broader provision that requires PayPal to alert law enforcement officials if it finds that any of its customers operate a website that 'reflects or represents conduct that violates any state or federal law' -- even outside New York. |
Representatives of several public interest groups that follow Internet issues said the provision could put PayPal in the position of acting as an agent of law enforcement.
Mike Godwin, staff lawyer for the Center for Democracy and Technology, a public interest group that deals with Internet legal issues, said the provision seemed overbroad, asserting that PayPal had been deputized to 'be always on watch.'
PayPal, based in Mountain View, Calif., has become widely used as an Internet payment mechanism, particularly on auction sites such as eBay. In fact, the dependency between the two companies had grown so close that eBay recently announced plans to acquire PayPal for $1.5 billion.
A spokesman for Paypal,, Anderson asserted Wednesday that the company already reports people engaged in fraud to law enforcement. She said she did not know whether the company has reported people involved in other illegal activities, like selling contraband on websites, but that they would do so in the future.
According to the settlement, PayPal, upon learning of possible illegal activity, would be required to report it if, `for instance, should PayPal determine that a member advertises for sale on its website controlled substances without a doctor's permission’.