CONGRESSIONAL PANEL STUDIES ONLINE GAMBLING
Wednesday, October 26, 2011 : But may have to reconvene to get a fuller picture
Tuesday's Congressional House Energy and Commerce Committee hearing on internet gambling heard testimony on a range of issues from enabling technologies to tribal gambling perspectives from a series of experts who voiced views that appeared to show a broad agreement that any legalization of online gambling must provide secure, fair and legal games to adequately protected adult players.
The complexity and breadth of the topic prompted chairwoman Mary Bono Mack, a Californian Republican, to suggest that further study may be necessary before any legislative proposals were acted upon. Mack noted that some form of gambling is already legal in every state except Hawaii and Utah.
"There's just way too much here that has to be fleshed out to rush it and to put it into the work of the supercommittee [on budget deficit reduction]," Bono Mack said. "We have to find a balance of moving it and balancing the technological problems with the policy problems."
Industry observers subsequently noted that such a delay could impact proposals to include the legalization of online gambling on the agenda of the bipartisan "supercommittee" appointed to develop ways in which to reduce the US budget deficit. The deadline for submissions to that body is November 23.
Rep. Joe Barton of Texas, who has introduced leglislation that would legalise and regulate online poker spoke out strongly for the pastime, emphasising the skill element and pointing to statistics that show millions of Americans gamble online, sending as much as $6 billion to illegal offshore gambling sites each year.
"People are playing poker on the Internet in the U.S. for money today," said Barton. "It's not regulated and so these sites are offshore, overseas and, consequently, outside the ability for us to tax the winnings and make sure it's a fair game."
Barton estimated that legalising online poker could raise around $40 billion over 10 years.
Several other experts said regulating and taxing the industry could provide a steady stream of revenue to help close the federal deficit, and that the 2006 law (UIGEA) that banned U.S. financial institutions from processing payments for online gambling sites has failed.
Ranking committee member and Democrat G.K. Butterfield from North Carolina said games like internet poker and bingo “are as ubiquitous in the U.S. as baseball and football” and said Congress’s inaction on the issue has driven millions of Americans to offshore sites where they can easily be scammed.
Poker Players Alliance chairman and former Sen. Alfonso D’Amato said the Obama administration’s crackdown on the industry earlier this year has only served to drive the game underground, where players have no assurances that games are fair or that they will be paid if they win.
“The status quo is badly broken and benefits no one,” D’Amato said. “Internet poker has not gone away and it’s hard to envision a scenario where it will.”
D’Amato also noted that the Wire Act, which banned interstate financial transactions related to gambling, was intended to prevent sports betting, and it remains unclear whether online poker is illegal.
Opposition to online gambling has emerged from the organisers of state lotteries, which argue that legalization would drain dollars from state coffers that are often earmarked for education. D’Amato argued that online poker sites serve a different customer and would have minimal impact on lotteries if the game were legalised.
“We believe that people who buy lottery tickets are generally not the same people [as gamble online] and we don’t believe they really compete,” D’Amato said.
Several witnesses at the hearing pushed for enhanced age verification to prevent children from gambling online. Others called for funding to help address the social costs of gambling addiction.
National Council on Problem Gambling executive director Keith Whyte said at least $50 million should be set aside to deal with gambling addiction. He noted that minorities, young men and veterans are particularly prone to pproblem gambling.
Whyte said his organization is neutral on legalising gambling but noted that the online form may exacerbate addiction problems due to the speed of the games, the relative anonymity and the reliance on credit instead of cash.
A researcher of gambling behaviour among high school and college aged youth, Dan Romer, associate director of The Annenberg Public Policy Center at the University of Pennsylvania and the director of its Adolescent Communication Institute (ACI), testified that federal regulation provides the best opportunity to protect youth.
Dr. Romer discussed how regulation could help limit possibilities for children and teenagers to gamble online.
“By controlling online gambling the federal government could minimize the harm that this activity can inflict on the young and their families and could also make the use of these sites safer for them. Additional research is needed to determine the best ways to implement such controls and to determine how best to protect children and other vulnerable populations from exploitation by gambling site operators,” he said.
One witness pointed to a study by the UK-based consultancy H2 Gambling Capital, which supplies data and market information regarding the global gambling industry, and last year reported that regulating all forms of Internet gambling except sports wagering in the U.S. would generate a gross expenditure of $67 billion over five years and create 25,470 new jobs.
Ernest Stevens Jr., a chairman of the National Indian Gaming Association suggested that in a legalised online gambling environment the tribes must be allowed to run their own games free of taxation and with regulations separate from those of the states of the union. He proposed that any legalization should facilitate an early entrance into Internet gaming by the tribes.
Several members of the panel voiced fears that the legalization of online gambling could adversely impact lotteries and horseracing.
Parry Aftab, who spokes for the recently formed action group FairPlay USA, said federal legalization will allow for the deployment of sophisticated tools to shut down illegal sites, keep children from playing online and protect consumers.
Aftab said that FairPlayUSA would like to see Congress "once and for all" defining what is illegal gambling, leading to strong law enforcement tools to ban such gambling, and providing a strict regulatory framework for online poker.
"I believe that FairPlayUSA reflects a growing consensus among a spectrum of stakeholders for an online gambling policy solution that has three principal elements — strong law enforcement and strict regulation, consumer protection, and the rights of U.S. adult consumers to engage safely in legal pastimes,” he said.
Kurt Eggert, a professor at Chapman University School of Law in California opined that the incidence of cheating and the dangers of cheaters using bots in the online poker environment makes consumer protection more difficult.
"I know of no way to prevent somebody from having a bot on one computer telling him what to play on another computer," Eggert said. "This is a huge problem for the industry in that recreational gamblers don't want to go on their poker sites and get killed by somebody using a bot, and that is going to happen more and more as bots get smarter and smarter."
“By legalizing Internet gambling, we would be causing perhaps the greatest single increase in legal access to gambling ever. With smart phones, many Americans carry the Internet in their pockets, and so gambling would for many always be just a click away, on the train, in the Laundromat, in the school library. Making such a great change should be done with great caution,” Eggert concluded.
In a written statement following the hearing Frank Fahrenkopf, the chief executive of the American Gaming Association, said:
“Today’s hearing on Internet gambling made it abundantly clear that the “safe bet” is to allow states, following federal guidelines, to license and regulate online poker. Such action would protect U.S. consumers, keep children from gambling on the Internet, and provide the tools law enforcement needs to shut down illegal Internet gambling operators. It would also create new jobs and tax revenue at a time when our country sorely needs both.
“Testimony heard today and other testimony presented in writing, such as ours, demonstrates that new technology and processes used in ecommerce have been successfully adapted in jurisdictions where Internet gambling is legal, such as Great Britain, France, Italy and provinces in Canada, to keep minors from betting online and prevent illegal activities, such as money laundering and fraud.
“The subcommittee today heard clear evidence that millions of U.S. residents who play online are being put at risk because they are playing illegally with companies that are poorly regulated and, in the vast majority of the cases, outside the reach of U.S. law enforcement. The only way to protect U.S. consumers and ensure that minors aren’t gambling on the Internet is to allow the states to license and regulate the online poker.
“We support state licensing and regulation, following federal guidelines, on online poker because it is substantially different than other forms of gaming. First, it is a game that vast numbers of Americans have historically played and that millions of Americans still play.
“Second, unlike other forms of Internet gambling, poker is primarily a game of skill. And, poker is played between or among individuals, whereas in other forms of Internet gambling the customer is playing against the “house.” Finally, the support we’ve seen around the country is really focused on online poker and not on other forms of Internet gambling.
“We do not support any specific legalization, but there are certain provisions that any change should include:
• Each state should have the right to determine whether online poker should be legalized within their jurisdictions.
• Federal guidelines should be established that the states must follow to insure a consistent regulatory and legal framework.
• U.S. law enforcement should be provided with the ability to go after illegal operators and successfully prosecute them.
“We welcomed the hearings today and urge Congress to act to protect the U.S. consumer and ensure that online poker is being provided by law abiding, responsible companies.”
