[Senate Hearing 106-170]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 106-170


 
                           INTERNET GAMBLING

=======================================================================

                                HEARING

                               before the

                 SUBCOMMITTEE ON TECHNOLOGY, TERRORISM,
                       AND GOVERNMENT INFORMATION

                                 of the

                       COMMITTEE ON THE JUDICIARY
                          UNITED STATES SENATE

                       ONE HUNDRED SIXTH CONGRESS

                             FIRST SESSION

                                   on

    ISSUES RELATING TO INTERNET GAMBLING INCLUDING YOUTH GAMBLERS, 
  ADDICTION, BANKRUPTCY, UNFAIR PAYOUT, CRIME, THE WIRE ACT, AND THE 
               PROPOSED INTERNET GAMBLING PROHIBITION ACT

                               __________

                             MARCH 23, 1999

                               __________

                           Serial No. J-106-8

                               __________

         Printed for the use of the Committee on the Judiciary


                                


                      U.S. GOVERNMENT PRINTING OFFICE
 59-677 CC                   WASHINGTON : 1999
------------------------------------------------------------------------------
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                       COMMITTEE ON THE JUDICIARY

                     ORRIN G. HATCH, Utah, Chairman

STROM THURMOND, South Carolina       PATRICK J. LEAHY, Vermont
CHARLES E. GRASSLEY, Iowa            EDWARD M. KENNEDY, Massachusetts
ARLEN SPECTER, Pennsylvania          JOSEPH R. BIDEN, Jr., Delaware
JON KYL, Arizona                     HERBERT KOHL, Wisconsin
MIKE DeWINE, Ohio                    DIANNE FEINSTEIN, California
JOHN ASHCROFT, Missouri              RUSSELL D. FEINGOLD, Wisconsin
SPENCER ABRAHAM, Michigan            ROBERT G. TORRICELLI, New Jersey
JEFF SESSIONS, Alabama               CHARLES E. SCHUMER, New York
BOB SMITH, New Hampshire

             Manus Cooney, Chief Counsel and Staff Director
                 Bruce A. Cohen, Minority Chief Counsel

                                 ______

   Subcommittee on Technology, Terrorism, and Government Information

                       JON KYL, Arizona, Chairman

ORRIN G. HATCH, Utah                 DIANNE FEINSTEIN, California
CHARLES E. GRASSLEY, Iowa            JOSEPH R. BIDEN, Jr., Delaware
MIKE DeWINE, Ohio                    HERBERT KOHL, Wisconsin

                     Stephen Higgins, Chief Counsel
        Neil Quinter, Minority Chief Counsel and Staff Director

                                  (ii)



                            C O N T E N T S

                              ----------                              

                    STATEMENTS OF COMMITTEE MEMBERS

                                                                   Page

Kyl, Hon. Jon, U.S. Senator from the State of Arizona............     1
Feinstein, Hon. Dianne, U.S. Senator from the State of California     3
DeWine, Hon. Mike, U.S. Senator from the State of Ohio...........     4

                    CHRONOLOGICAL LIST OF WITNESSES

Panel consisting of James E. Doyle, attorney general, State of 
  Wisconsin, Madison, WI; Betty Montgomery, attorney general, 
  State of Ohio, Columbus, OH, on behalf of the National 
  Association of Attorneys General; and James R. Hurley, 
  chairman, New Jersey Casino Control Commission, Atlantic City, 
  NJ.............................................................     6
Panel consisting of Jeffrey Pash, executive vice president, 
  National Football League, New York, NY; Bill Saum, director of 
  agent and gambling activities, National Collegiate Athletic 
  Association, Overland Park, KS; and Marianne McGettigan, 
  counsel, Major League Baseball Players Association, Portland, 
  ME.............................................................    22

                ALPHABETICAL LIST AND MATERIAL SUBMITTED

Doyle, James E.:
    Testimony....................................................     6
    Prepared statement...........................................     8
Hurley, James R.:
    Testimony....................................................    12
    Prepared stattement..........................................    15
Kyl, Hon. Jon:
    Letter to Senator Kyl from Commercial Internet Exchange 
      Association, United States Telephone Association, America 
      Online, and USWest, dated Mar. 23, 1999....................    64
    Prepared statement of Ralph Sims on behalf of the Commercial 
      Internet Exchange Association..............................    64
    Letter to Senator Kyl from James J. Hickey, Jr., president, 
      American Horse Council, dated Mar. 22, 1999................    67
McGettigan, Marianne:
    Testimony....................................................    57
    Prepared statement...........................................    60
Montgomery, Betty: Testimony.....................................     9
Pash, Jeffrey:
    Testimony....................................................    22
    Prepared statement...........................................    24
        Exhibit A-E: Various articles............................    27
Saum, Bill:
    Testimony....................................................    54
    Prepared statement...........................................    56



                           INTERNET GAMBLING

                              ----------                              


                        TUESDAY, MARCH 23, 1999

                           U.S. Senate,    
         Subcommittee on Technology, Terrorism,    
                            and Government Information,    
                                Committee on the Judiciary,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10:03 a.m., in 
room SD-226, Dirksen Senate Office Building, Hon. Jon Kyl 
(chairman of the subcommittee) presiding.
    Also present: Senators DeWine, and Feinstein.

  OPENING STATEMENT OF HON. JON KYL, A U.S. SENATOR FROM THE 
                        STATE OF ARIZONA

    Senator Kyl. The hearing before the Senate Committee on the 
Judiciary Subcommittee on Technology, Terrorism, and Government 
Information will come to order. This is a hearing on Internet 
gambling. I am Senator Jon Kyl, chairman of the subcommittee, 
and this is Senator Dianne Feinstein, the ranking Democrat on 
the subcommittee, and we welcome all of you to the subcommittee 
this morning.
    Good morning, Dianne.
    Senator Feinstein. Good morning, Jon.
    Senator Kyl. Let me begin by making a brief opening 
statement, call on Senator Feinstein, and then we will roll the 
video. I think that also Senator DeWine will be joining us in 
just a little bit.
    As I suspect we all are well aware, societies throughout 
history have sought to prohibit most forms of gambling. There 
are many reasons for this, but they are, I think, especially 
applicable to Internet gambling today. Let me begin by 
commenting on a couple of recent stories.
    The New York Times recently had an article that warned that 
``Internet sports betting entices youthful gamblers into 
potentially costly losses.'' And in this article, Kevin 
O'Neill, who is Deputy Director of the Council on Compulsive 
Gambling in New Jersey, said, ``Internet sports gambling 
appeals to college-age people who don't have immediate access 
to a neighborhood bookie * * * it's on the Net and kids think 
it's credible, which is scary.''
    It is very likely to be a big part of the underground 
economy. Ted Koppel noted in a ``Nightline'' feature on 
Internet gambling, ``Last year, 1,333,000 American consumers 
filed for bankruptcy, thereby eliminating about $40 billion in 
personal debt. That's of some relevance to all of us because 
the $40 billion in debt doesn't just disappear. It's 
redistributed among the rest of us in the form of increased 
prices on consumer goods.'' And he continued, ``If anything 
promises to increase the level of personal debt in this 
country, expanding access to gambling should do it.''
    And we do know that--and there are some new studies that 
talk about the addictive nature of gambling, particularly 
gambling on the Internet. It enhances the addictive nature of 
gambling because it is so easy to do. You don't have to travel 
anywhere to do it; you can just log on to your own computer.
    Prof. John Kindt has described electronic gambling like the 
type being offered in these virtual casinos as, ``the hardcore 
cocaine of gambling.'' And William Bible, who is the chair of 
the Internet Gambling Subcommittee on the National Gambling 
Impact Study Commission, wrote in the ABA Journal that ``anyone 
who gambles over the Internet is making a sucker bet.''
    We also know that this has an impact on crime. Gambling on 
the Internet is apt to lead to criminal behavior. Indeed, up to 
90 percent of pathological gamblers commit crimes to pay off 
their wagering debts, according to testimony before this 
committee in 1997.
    And with respect to cost, again, according to this March 
ABA Journal article, online wagering is generating a $600 
million a year kitty, and some analysts say it could reach as 
high as $100 billion by the year 2006. We are talking about 
something that is very, very big here. The article concludes, 
``The number of Web sites offering Internet gambling is growing 
at a similar rate. In just one year, that number more than 
quadrupled, going from about 60 in late 1997 to now more than 
260 according to some estimates.''
    Now, a lot of times problems that are national aren't 
necessarily Federal. But this is a case where this national 
problem is a Federal problem, which is why the State attorneys 
general have come before us and are before us again today. The 
Internet, of course, is interstate in nature, and States cannot 
protect their citizens, enforcing their own laws from Internet 
gambling, if anyone can transmit into their States. And that is 
why they have asked us for Federal legislation and Federal 
enforcement.
    Now, the current law, as many of you know, is the 1991 Wire 
Act, which prohibits using telephone facilities to receive bets 
or send gambling information. But as this ABA Journal article 
pointed out that I quoted before, the problem with the current 
Federal law is that the communications technology it specifies 
is dated and limited. And that is why this Subcommittee on 
Technology, which in so many other areas has tried to bring the 
law up to date with evolving technology, began looking at this 
particular problem. The advent of the Internet, a 
communications medium not envisaged by the Wire Act, requires 
enactment of a new law to address activities in cyberspace, 
again, not contemplated by the drafters of the older law.
    So the bill that we introduced and which passed the Senate, 
90 to 10, last year and which, with certain modifications, we 
have reintroduced, bans gambling on the Internet, just as the 
Wire Act prohibited gambling over the wires. And it does not 
limit the subject to gambling sports. In sum, the Internet 
Gambling Prohibition Act brings Federal law up to date.
    With the advent of new, sophisticated technology, the Wire 
Act is becoming outdated, as I said, and the Internet Gambling 
Prohibition Act corrects that problem. In short, it ensures 
that the law keeps pace with technology. We are going to be 
introducing our 1999 version of the bill very soon, perhaps 
today, and plan to hold a subcommittee markup in April if all 
goes well.
    So, that is the brief introductory statement that I would 
like to make here, and let me now call on Senator Feinstein for 
any comments that she would have.

 STATEMENT OF HON. DIANNNE FEINSTEIN, A U.S. SENATOR FROM THE 
                      STATE OF CALIFORNIA

    Senator Feinstein. Thank you very much, Mr. Chairman, and I 
certainly agree with your comments and I want to welcome the 
witnesses here this morning. I think all of us have been 
surprised at how fast the Internet has blossomed, and with that 
blossoming comes a great deal of potential and a number of 
challenges.
    I know there is a rush, in a sense, to regulate, but I 
think we should first ask ourselves several questions, and 
among them and most prominent is this. Are current laws 
adequate to address the conduct already? Would the transaction 
be illegal if it took place over the telephone lines or by 
mail? And does the Internet present some threat that is 
distinct from these more established means of communication? I 
believe that when it comes to gambling via the Internet, these 
questions are answered in favor of this legislation.
    Gambling is heavily regulated in most States. Utah and 
Hawaii, for example, outlaw gambling altogether. Interstate 
wagering over wires is already a violation of Federal law. 
However, many believe that this existing Federal law would not 
necessarily apply to Internet gambling. For instance, the 
Internet could be accessed through microwave signals rather 
than over a wire. Thus, conduct that would be illegal if 
conducted over the phone is able to escape punishment when 
conducted via the Internet. In effect, the Internet creates a 
loophole in existing law.
    Gambling over the Internet is undergoing rapid growth. The 
Justice Department recently estimated that $600 million was bet 
illegally over the Internet on sports alone in 1997. This 
already undermines the severe restrictions against gambling 
which the major athletic leagues take so seriously, as 
illustrated, I think, well by the case of Pete Rose, a sure-
fire first-ballot entry into the Hall of Fame who apparently is 
forever barred from its doors because he bet on baseball.
    We already have seen the effects that sports gambling has. 
College athletes from Northwestern University to Arizona 
University have been convicted of shaving points in their 
games. If the Internet permits sports gambling to dramatically 
escalate, as apparently is happening, the threat to the 
integrity of our athletic events will also escalate 
accordingly. But we must be careful in how we go about 
remedying the problem. There are legitimate businesses across 
the country which rely on legal gambling.
    Horse racing, for example, is supported by gambling which 
has been legalized and regulated by most States in the country. 
Horse racing has a $3 billion impact on California's economy 
each year, nearly triple that of any other professional sport, 
surprisingly, and more than 30,000 Californians depend directly 
on the horse racing industry to support their families.
    So we must be careful that we don't inadvertently disrupt 
legal businesses on which so many people rely for their 
livelihood. In that regard, Mr. Chairman, I have appreciated 
your efforts to work with me to carefully address these 
concerns in this legislation.
    We must also be careful not to slow down the Internet or 
place unreasonable burdens on legitimate Internet-related 
businesses. The Internet and the businesses which are involved 
in or related to it have been the engine of dynamic economic 
growth, contributing greatly to the economic prosperity which 
we now enjoy.
    Revenue for online merchants in North America was $4.4 
billion in just the first 6 months of 1998. Nearly 16 million 
Americans were buying online in just the last 90 days alone. 
Forester Research predicts that worldwide Internet commerce 
could reach as high as $3.2 trillion in 2003. Already, 
Americans spent $643 billion on information and computer 
technology in 1997.
    So the Internet has great potential for even significantly 
greater growth, with its dynamic interactivity and rapid 
delivery of electronic products. For the Internet to reach its 
full potential, however, it and the computer which people to 
access it must be even faster so that switching from one 
multimedia web site to another takes no longer than changing 
the channel on our television sets.
    We must be careful not to impose requirements which slow 
down Internet functions or which place unreasonable burdens on 
Internet-related businesses which create such robust economic 
activity. I believe we can do this, Mr. Chairman, and I look 
forward to discussing these issues with our witnesses today and 
to working closely with you, as we do so often, in addressing 
these issues and passing this legislation.
    Senator Kyl. Thank you very much, Senator Feinstein.
    We are now joined by Senator Mike DeWine. Senator DeWine, 
in addition to making any opening comments, could I call upon 
you to introduce one of our opening panelists, your State 
attorney general, please, and then I will introduce the others.

STATEMENT OF HON. MIKE DeWINE, A U.S. SENATOR FROM THE STATE OF 
                              OHIO

    Senator DeWine. I would be delighted to, Mr. Chairman. 
Thank you very much. I just want to thank you, Mr. Chairman, 
for holding this very important hearing on Internet gambling.
    The global nature of the Internet confronts our States with 
really a number of challenges, not the least of which is 
policing gambling on the Internet. Many of our States are now 
wrestling with the thorny law enforcement and consumer problems 
surrounding interstate Internet gambling. Mr. Chairman, you 
have been a leader for some time on this whole issue, and I 
really appreciate your continued work and your tenacity in 
dealing with this problem.
    I would like to take a moment to welcome my friend and the 
Attorney General of the State of Ohio, Betty Montgomery, who is 
appearing in front of our committee today on behalf of the 
National Association of Attorneys General. Attorney General 
Montgomery and I have worked together for a number of years on 
many law enforcement issues in Ohio.
    Betty, we just welcome you here and we are delighted that 
you have taken the time to testify this morning. We look 
forward to your testimony.
    Mr. Chairman, I believe that Attorney General Montgomery's 
law enforcement perspective is going to be particularly 
valuable for us this morning, stemming from her work with the 
National Association of Attorneys General Working Group on 
Internet Gambling. This will be helpful to our consideration of 
this issue and I certainly look forward to hearing her 
testimony.
    Thank you, Mr. Chairman.
    Senator Kyl. Thank you, Senator DeWine, and I welcome 
Attorney General Montgomery. I also want to introduce Attorney 
General James Doyle. I know that Senator Kohl was going to try 
to be here this morning, and hopefully he will join us. And he 
could give you a much better introduction than I can, but let 
me tell you, as a Republican introducing a Democrat attorney 
general here, there isn't anybody that has been more of an 
educator to me and more helpful in pursuing this matter than 
Attorney General Jim Doyle, who has acted as head of the 
National Association of Attorneys General, has really helped to 
educate other members of the Attorney Generals Association on 
this, whose staff has been of immense help to my staff, and who 
has worked with us with each different draft.
    We have had a lot of different iterations of our 
legislation through the last year when it passed 90 to 10, and 
then in working with other groups this year trying to see that 
they could be comfortable with what we are doing. And we have 
made some modifications to meet some of their objectives. And I 
can't say enough about Attorney General James Doyle and the 
support that he has given to us in this legislation and the way 
that he has been a real leader in the area.
    So, Jim, I am very happy to have you testifying again for 
us.
    And we have another panelist here who hasn't testified 
before our panel before, but we are very happy to welcome Mr. 
James Hurley, who is the Chairman of the New Jersey Casino 
Control Commission, Atlantic City, NJ.
    You will bring a very useful perspective to us with respect 
to this legislation and I welcome you as well, Mr. Hurley.
    Now, I didn't ask you which order to go in--oh, we are 
going to roll some video before we start, and maybe I could ask 
our technical people here to go ahead with that. Roll the tape.
    [Videotape shown.]
    Senator Kyl. Well, that was Jim Lampley in a special 
interview for HBO which ran, I think, about a month ago. I hope 
you enjoyed it.
    Let's begin with Attorney General James Doyle, and then we 
will just move down the table this way.
    Again, General Doyle, thank you very much for everything 
you have done in the past and for being with us here today.

PANEL CONSISTING OF JAMES E. DOYLE, ATTORNEY GENERAL, STATE OF 
  WISCONSIN, MADISON, WI; BETTY MONTGOMERY, ATTORNEY GENERAL, 
    STATE OF OHIO, COLUMBUS, OH, ON BEHALF OF THE NATIONAL 
    ASSOCIATION OF ATTORNEYS GENERAL; AND JAMES R. HURLEY, 
CHAIRMAN, NEW JERSEY CASINO CONTROL COMMISSION, ATLANTIC CITY, 
                               NJ

                  STATEMENT OF JAMES E. DOYLE

    Mr. Doyle. Well, Mr. Chairman, Senator Feinstein, Senator 
DeWine, thank you for giving us this opportunity. Senator Kyl, 
I want to thank you as well and your staff who have been 
extraordinarily responsive to the attorneys general from around 
the country. And you have been the leader on this issue and we 
have been proud to be working with you.
    As you know, I have long supported this legislation, and I 
hope this is the year that you will be successful in seeing it 
become the law of the United States. It was about 3 years ago 
that the National Association of Attorneys General took the 
step that many of us never imagined. The organization 
recommended an expansion of the Federal Government's 
traditional law enforcement role.
    If you sit around one of our meetings, normally we are 
complaining about how the Federal Government is always trying 
to take another crime away from the State and put it on the 
Federal side of things. But this was a case where we strongly 
supported Federal action.
    And since that initial recommendation, as you know through 
your work, a lot has changed. The Internet has continued to 
grow faster. Gambling is more available than it was 3 years 
ago. The kind of stories that were detailed there are becoming 
more and more common.
    The reason the State attorneys general took this action was 
that we recognized the limitations of traditional concepts of 
State jurisdiction when it comes to regulating and controlling 
gambling on the Internet. Although the overwhelming majority of 
Internet traffic occurs within the United States, the Internet 
is global and any single State or even any combination of our 
States working together can only have a limited effect in 
controlling the myriad of activities occurring in that medium.
    Gambling laws and regulations have more State-to-State 
variation than almost any other area of the law. There probably 
is no other area that so reflects the different cultural values 
and concerns of the various States in this country. Each 
State's gambling policy is carefully crafted to meet its own 
moral, law enforcement, consumer protection, and revenue 
concerns.
    Most States believe that they have the correct combination 
of law and policy to address the needs of their citizens. The 
Internet threatens to disrupt those laws and policies, and 
Federal action on Internet gambling is necessary in order to 
preserve each State's ability to direct its own gambling 
policies. This is not an instance in which we are asking the 
Federal Government to take over an area that we seek to control 
within our own States. This is an area where we are asking the 
Federal Government through this bill to, in fact, protect the 
States in their ability to decide their own gambling policy 
within their own States.
    The technology of the Internet simply cannot meet the needs 
of effective gambling regulation. Gambling laws must address a 
wide variety of specific issues in order to meet these policy 
concerns. Some of the most crucial issues include game 
integrity; dispute resolution; underage gambling, which again 
is something that you, Senator, mentioned as a growing problem; 
problem and compulsive gambling; effective means to verify the 
physical location of the players and proprietors. And as we 
just saw in the show there, Aruba turned out to be a house in 
Pennsylvania. Internet technology is currently unable to 
adequately address all of these policy considerations.
    Many have argued, and undoubtedly will argue again today 
that the Government cannot effectively prohibit gambling on the 
Internet. Instead, they argue that the Government should 
attempt to regulate gambling rather than prohibit it. Let's be 
clear about what they are really asking.
    They are asking for a national policy permitting gambling, 
with a national Federal regulatory scheme for regulating 
gambling. That is the request that is being made as far as 
regulating Internet gambling. We don't want gambling in 
Wisconsin. We don't want a federally regulated system of 
gambling in Wisconsin. We want to make our own choice about 
what kind of gambling is going to be permitted in the State.
    In addition, the argument, I think, turns on its own head. 
The fact that it is difficult to flat out prohibit Internet 
gambling also demonstrates that it is impossible, I believe, to 
have any effective regulation as well. The difficulty of 
prohibition does not provide a reason to legalize the activity, 
which is opposed by the great majority of people in the United 
States.
    I have no illusions about the U.S. Government's choice here 
that it will change the behavior of all the jurisdictions 
around the world. However, I do believe that a strong statement 
in favor of prohibition will raise the necessary red flags for 
citizens all over the world, and certainly all over this 
country, who might fall prey to unscrupulous gambling 
organizations.
    In particular, U.S. citizens should be able to understand 
clearly that the Government does not support or condone this 
activity. They should also know that they will not be able to 
turn to the Government for help when they lose their money to 
an unknown operator on the other end of a wire or when their 
financial information is used in a way that harms them.
    If this Government were to choose to regulate this 
activity, it is clear that the regulation would not be 
effective. There are simply too many work-arounds and too much 
anonymity programmed into the infrastructure of today's 
Internet for any regulator to vouch for the security and 
identity of a Web gambling operator.
    In addition, there is no way to regulate the person who is 
placing the bet. Unlike an actual physical casino where you can 
see the people who are going in, there is no way to regulate or 
to make sure that the person who is using the computer and 
gambling is of appropriate legal age, that they are not a 
compulsive gambler. There is no way to cut them off after 
significant losses. There is no way to put into place the kinds 
of protections from money laundering that exists in legalized 
gambling operations in the United States.
    Senator Kyl and Senator Feinstein, you have indicated some 
of the problems in the current Wire Communications Act. It was 
a good attempt that was not designed to be directed at Internet 
gambling. That law needs to be modernized; it needs to be 
updated, and it needs to make clear that Internet gambling is 
illegal in this country. That then permits each State to make 
its own decision about what its gambling policy will be.
    As the National Association of Attorneys General, we fully 
support your bill, Senator Kyl. We look forward to working with 
this committee and, as I say, I hope this is the year we are 
finally going to see it enacted into law.
    Thank you.
    Senator Kyl. Thank you, Attorney General Doyle.
    [The prepared statement of Mr. Doyle follows:]

                  Prepared Statement of James E. Doyle

    Thank you for inviting me to speak to the subcommittee regarding 
the Internet Gambling Prohibition Act. I have long been a supporter of 
this legislation, and am eager to do all that is necessary to assure 
its enactment into law.
    Almost three years ago, the National Association of Attorneys 
General took a step many of us never imagined: The organization 
recommended an expansion of the federal government's traditional law 
enforcement role. Specifically, we urged the federal government to 
enact legislation to prohibit gambling on the Internet. Since that 
initial recommendation, a lot has changed. The Internet has continued 
to grow faster, the technology of home computers has improved 
dramatically, millions of users have begun ``surfing the net,'' and the 
Internet gambling industry has grown immensely as well.
    The reason the Attorneys General took this action was that state 
law enforcement officials recognize the limitations of traditional 
concepts of state jurisdiction when it comes to regulating and 
controlling gambling on the Internet. Although the overwhelming 
majority of Internet traffic occurs within the United States, the 
Internet is global in scope, and any single state, or even a group of 
states working together, can have only a limited effect in controlling 
the myriad of activities occurring in that medium.
    Gambling laws and regulations have more state to state variation 
than almost any other area of law. Each state's gambling policy is 
carefully crafted to meet its own moral, law enforcement, consumer 
protection and revenue concerns. Most states believe they have the 
correct combination of law and policy to address the needs of their 
citizens. the Internet threatens to disrupt those laws and policies. 
Federal action on Internet gambling is necessary in order to preserve 
each state's ability to direct its own gambling policy.
    The technology of the Internet simply cannot meet the needs of 
effective gambling regulation. Gambling laws must address a wide 
variety of specific issues in order to meet these policy concerns. Some 
of the most crucial issues include game integrity, dispute resolution, 
underage gambling, problem gambling, and effective means to verify the 
physical location of players and proprietors. Internet technology is 
currently unable to adequately address all of these policy 
considerations.
    Many have argued, and undoubtedly will argue again today, that the 
government cannot effectively prohibit gambling on the Internet. 
Instead, they argue, this government should attempt to regulate that 
which it cannot prohibit. However, this argument turns against itself, 
because it is quite clear that an activity which could not be 
effectively prohibited is also not subject to effective regulation. The 
fact that Internet Gambling is difficult to control does not mean that 
law enforcement should bury its head in the sand and pretend the 
problem does not exist. Nor does that difficulty provide a reason by 
the majority of the U.S. population.
    I have no illusions that the United States' policy choice in this 
matter will not, in itself, change the behavior of every jurisdiction 
around the world. However, I do believe that a strong statement in 
favor of prohibition will raise the necessary red flags for citizens 
all over the world who might fall prey to unscrupulous gambling 
operators trolling the information highway for likely victims. In 
particular, U.S. citizens should be able to understand clearly that the 
government does not support or condone this activity. They also should 
know that they will not be able to turn to the government for help when 
they lose their money to an unknown operator on the other end of the 
wire, or when their financial information is used in a way that harms 
them.
    If this government were to choose to regulate this activity, it is 
clear that the regulation could not be effective. There are simply too 
many workarounds and too much anonymity programmed into the 
infrastructure of today's Internet for any regulator to be able to 
vouch for the security and identity of a web gambling operator. Even if 
game integrity and operator identity could be confirmed, there is 
currently no infrastructure available for customers to be assured that 
they are dealing with an individual operator who is covered by that 
regulation. This is just one small example of the difficulties gambling 
regulation would face on the Internet. Any ``Seal of Approval'' 
transmitted over the Internet would not be worth the paper it was 
printed on.
    The Wire Communications Act, 18 Sec.  U.S.C. Sec. 1084, is 
currently the only federal law which directly addresses any aspect of 
gambling on the Internet. The Wire Act was enacted in the early 1960's 
primarily to prohibit interstate transmission of sports and race bets 
via the telephones and telegraph wires. The Act, however, contains 
major limitations which need to be addressed in the age of the 
Internet.
    One of the most critical limitations of the Wire Act is the scope 
of the gambling activity covered. There is, to many, an ambiquity 
regarding the types of gambling covered by the Act. Because of the 
context of the time it was passed, some believe it is limited solely to 
sports and race wagering. While these may be the only types of the 
multimedia transmissions suitable for depicting all forms of casino 
gambling. It is a new world, and we must be certain that these new 
games are addressed as effectively as traditional gambling was under 
the Wire Act.
    This Senate's action on Senator Kyl's bill begins a process in 
which the United States' government can make a strong policy statement 
that gambling via the Internet is not a good bet for its citizens. I 
urge this subcommittee to support this bill.

    Senator Kyl. Attorney General Montgomery.

                 STATEMENT OF BETTY MONTGOMERY

    Ms. Montgomery. Mr. Chairman, Senators Feinstein and 
DeWine, thank you so much for inviting us here today. Having 
been not only a legislator in Ohio, as well as an elected 
county prosecutor and a career prosecutor, it is a pleasure to 
speak today on this very important subject.
    General Doyle has handled this very well. The Internet has, 
in fact, changed our world for the better and also for the 
worse, and it is quite obvious by looking at what we are 
looking at right now. The convenience that allows for instant 
international training, as Senator Feinstein has referred to, 
and communication, also allows individuals to gamble away their 
life savings and their family's life savings in the click of a 
mouse. It all feels just like a video game. It seems it would 
be very easy for the young or the naive who do not fully grasp 
that those little numbers appearing on their computer screen 
are real dollars--they are not Monopoly dollars--going down the 
cyber drain.
    For generations, most communities in the United States have 
not allowed most forms of gambling, as General Doyle has 
indicated and as you have, Mr. Chairman. The average citizen, I 
believe, is aware that because of the advances in the Internet, 
there are some serious problems with access into their own 
community and their home. And it is unprecedented the amount of 
gambling that is going on virtually unregulated.
    The scariest thing about it is that it doesn't take much 
sophistication to gamble on the Internet, and I will show you 
in a moment how easy it is. You have seen on the video that 
Senator Kyl has shown you it takes no time and even less effort 
to be able to do this. Gambling has been primarily regulated by 
States. That is not by accident. It is because, as General 
Doyle has indicated, each of our States has a different set of 
problems, a different set of cultures, a different sense of 
what is appropriate and inappropriate in terms of legalized 
gambling or moral behavior.
    Each of the State's gambling laws have been carefully 
crafted to reflect its own public policy concerns. On Ohio, 
most forms of gambling are prohibited. Exceptions have been 
made for the State lottery, horse racing, and some types of 
gambling activities conducted by nonprofit charitable 
organizations. Most State lawmakers and law enforcement 
officials, including Ohio's, believe that the right combination 
of law and policy address their population's moral, law 
enforcement, consumer protection, and revenue needs.
    But the Internet is a threat to the traditional 
independence of State law enforcement, and I am again repeating 
what General Doyle has said in saying it is with your help that 
we can protect each of our State's individual rights to control 
our own individual State laws, and it is with your help that we 
can join hands to have that happen.
    Let me share with you what we have been able to retrieve by 
simply logging on the Internet and by typing the words 
``Internet gambling.'' By using the search engine Alta Vista, 
we hit 690 references. These interactive sites allow 
individuals to play games as if he or she were inside a casino. 
Audio available while visiting or playing these sites allows 
individuals to hear the wheels turn, to hear the machines ring, 
to hear the chips fall and the dollars fall, to actually be in 
a virtual casino.
    To create one of these sites, individuals need about 
$100,000 to purchase an Internet gambling software package, a 
computer, and a telephone line. No permanent real estate 
location is necessary. Individuals from Alabama can generate 
capital in Switzerland, run their business from Ohio, but have 
their computer software located and licensed in Antigua and 
conduct their business throughout the world.
    According to VIP Sports, a popular Netherlands Antilles 
online gambling site, the gambling industry will generate more 
than $2.3 billion by the year 2001. VIP Sports also reported a 
2,000-percent growth, and this is because of Internet gambling.
    Let me just show you a few sites. Copies of these web sites 
are included in your packet. If you take a look at one, the 
first site shows the worldwide reach of Internet gambling. It 
allows consumers from anywhere on the globe to gamble with 
their currency of choice all with just the click of a mouse.
    Next, the second site invites consumers to ``play for 
free,'' but there is nothing free about gambling on the 
Internet. It is not Monopoly money consumers are losing; it is 
their hard-earned wages.
    The third site offers games of chance that are available in 
any Atlantic City casino, only this isn't Atlantic City. No 
plane ticket is needed, as Senator Kyl has indicated. Consumers 
can play poker, black jack, roulette, without ever leaving the 
convenience of their homes and their computers.
    And, finally, just like Las Vegas tourists head for the 
slot machines with buckets of change, a one-arm bandit in 
cyberspace beckons them on the Net. This site provides all 
real-world action of slot machines--change tumbling into slots, 
levers' downward motion, windows spinning around, matching 
symbols, and lights flashing with instructions.
    That is why, Senator Kyl, the Internet defies traditional 
concepts of jurisdiction and geographic boundaries. And it is a 
global medium and therefore intrinsically interstate in its 
reach. We understand the law enforcement resources of Ohio or 
Wisconsin or any of the States, even well-coordinated, cannot 
get to the reach that the Internet has. That is why, Senator 
Kyl, your legislation is so needed.
    Furthermore, technology alone cannot address the 
requirements of effective gambling regulation. Gambling is 
already one of the most heavily regulated industries in the 
world. Yet, the Internet is one of the most unregulated and 
inherently difficult phenomena to regulate in modern times, and 
it is all just a click of a mouse away.
    Regulation in the traditional gambling industry has 
important parameters. And, Senators, I know that General Doyle 
alluded to it, but the integrity of the gambling system itself, 
background checks of proprietors, resolution of consumer 
disputes, verification, importantly for us, for the age of the 
players, all are things that we can't get to at the State 
level.
    The qualities that make the Internet such a powerful force, 
as Senator Feinstein has referred to, is also the thing that 
has caused our State regulators to frankly have a very 
difficult time in trying to regulate under Ohio's gambling laws 
or Wisconsin's gambling laws. For these reasons, NAAG has for 
several years supported Federal intervention. The industry has 
grown immensely. A few years ago, there were dozens of web 
sites and now, as Senator Kyl has indicated, there are hundreds 
of web sites.
    We continue to support, Senator Kyl, your courageous work 
in this area. We know, frankly, any of us who have dealt with 
gambling, both as a local prosecutor or as a State legislator, 
the pressures that come to bear with the amount of money 
involved and the powerful interests involved, economic as well 
as political interests involved.
    I know personally how difficult this is going to be for 
this Congress to pass. I can only sit here and say as one 
State-elected official to other statewide elected officials and 
national officials, it is critical that we act now because if 
we wait too much longer, it will be virtually impossible for us 
to be able to make those differences.
    Thank you very much.
    Senator Kyl. Thank you very much, General Montgomery. Just 
before I call on Mr. Hurley, just let me say I think all of us 
could live quite comfortably on the money that just was spent 
last year and is likely to be spent this year lobbying against 
this legislation. That is why we had better do it now.
    Commissioner Hurley, thank you very much for being with us 
today and we look forward to your testimony as well.
    Incidentally, I took this down. This was supposed to be a 
useful tool to let you know when you are getting close to 5 
minutes. We are not limiting your testimony. If you can keep it 
to 5 minutes, that is fine, but I didn't want you to feel 
intimidated by these lights.

                  STATEMENT OF JAMES R. HURLEY

    Mr. Hurley. Thank you, Mr. Chairman and Senators. I thank 
you for inviting me to appear before you today to discuss the 
regulation of casino gambling. My name is James Hurley. I am 
the Chairman of the New Jersey Casino Control Commission. The 
Commission is a five-member panel appointed by the governor, 
confirmed by the New Jersey State Senate, and we regulate New 
Jersey's $4 billion casino industry.
    I realize the topic for this subcommittee hearing is 
internet gambling, and one of the issues is whether Internet 
gambling can be effectively regulated. What I would like to do 
is to describe our system of controlling casino gambling and 
suggest that absent a strict licensing and regulatory system, 
there is no way to ensure the integrity of operators or games.
    New Jersey developed a strict, comprehensive regulatory 
system back in 1977. It was designed to ensure the suppression 
of organized crime and that the casinos pay taxes on all the 
money they win. We believe it has worked very effectively to 
ensure not only that casinos are owned and operated by people 
of good character, honesty and integrity, but also that the 
public has confidence that the games are honestly run, fair, 
and their winning wagers will be paid.
    To accomplish this level of public confidence, New Jersey 
implemented a licensing system that requires every owner, 
officer and director of a casino, as well as many of the 
officers, directors and owners of a holding company or 
intermediary company, to file an extensive license application. 
They had to disclose detailed information about any criminal 
record, business affairs, civil litigation, at least 5 years of 
personal income tax returns, and voluminous additional 
information. Applications for casino operation license 
generally fill several large transfer boxes.
    A copy of that application is forwarded to the New Jersey 
Division of Gaming Enforcement, which is in the Department of 
Law and Public Safety, headed by the attorney general of New 
Jersey, which conducts a full investigation into the applicant 
and its qualifiers. The Gaming Division looks at criminal 
histories, bank records, civil litigation, tax returns, SEC 
filings, and anything else that it feels would be pertinent to 
determine whether a company or a person has the required good 
character, honesty and integrity. It even looks at newspaper 
articles to determine not only the fact of an applicant's good 
character, but also the applicant's reputation for good 
character.
    The results of that application and that investigation are 
put into a report that is submitted to our commission. We then 
schedule a public hearing into the application, during which 
witnesses are examined and cross-examined, documents are 
reviewed and placed into evidence, and attorneys make opening 
and closing statements and argue points of law.
    At the end of that process, we then vote on whether the 
applicant has met its burden to prove by clear and convincing 
evidence that it has the required character, honesty and 
integrity to hold a license. The process is almost identical 
for every key casino employee who works in the New Jersey 
gaming industry. They file lengthy disclosure statements. This, 
by the way, is an application for a casino qualifier. It is 60 
pages long.
    They submit these disclosure statements for rigorous 
investigation and, if necessary, undergo a full hearing before 
a commissioner to determine suitability. Through this process, 
we can, and we have, prevented organized crime and other 
unsavory individuals from owning or operating a casino in 
Atlantic City. But frankly we want to tell you and emphasize 
that we don't stop there. We know that there are other ways for 
organized crime to infiltrate, influence or control the casino 
industry.
    As a result, we subject anyone who sells a product or a 
service to a casino hotel to licensing requirements. Before a 
vendor can sell a slot machine, a deck of cards, or a pair of 
dice to a casino, that company has to file a casino service 
industry license application. The officers, directors and 
owners of that company have to be identified and investigated 
to determine whether the seller is qualified for license. While 
the company can start selling prior to the issuance of a 
license, every single transaction has to be scrutinized and 
approved in advance by our commission.
    Anyone who wants to sell nongaming products or services to 
a casino--soap or towels or food--also could face licensing 
requirements. If a company does regular and continuing 
business, which is defined in our regulations by certain 
monetary thresholds, it also has to file a license application 
and undergo a background check. Even if the vendor never meets 
that threshold, if the Division of Gaming Enforcement discovers 
information that the vendor is unsavory, we can order casinos 
not to deal with that vendor.
    And I will give you one example, a wholesale seafood firm 
in New Jersey supplying casinos. The Gaming Division learned 
that one of its sales representatives was the head of a 
Philadelphia-based organized crime family. Even when the 
seafood firm offered to have that sales representative handle 
only noncasino accounts, we indicated that was not sufficient 
and we ordered casinos not to deal with that firm. Through the 
licensing and registration of casino service industries, we 
have prevented organized crime and other unsavory elements from 
coming in the back door to influence casino operations.
    Let me move quickly to a second prong of our system. That 
is the oversight and control of casino operations. Regulations 
on internal and accounting controls, gaming equipment, and on 
the operation of the games ensure effective control and fair 
gaming for the public. Every casino operates under a strict set 
of regulations and internal controls that spell out in great 
detail how gaming operations are to be conducted. The rules of 
the games are detailed in our regulations, as is the basic 
organizational structure for the casino.
    In addition, the casinos operate under the strict security 
of our inspectors who are on duty in those casinos around the 
clock. Every slot machine that an operator wants to use must be 
tested and approved in advance. Testing is done by the Division 
of Gaming Enforcement in a specialized electronic games 
laboratory in Atlantic City.
    The Gaming Division makes certain not only that the machine 
pays back at least the minimum 83 percent, as required by law, 
but it pays back precisely what the manufacturer says the 
program is designed to pay back. Once a slot machine program is 
approved, the computer chip containing the game is placed in 
the machine and sealed by the Gaming Division.
    When large slot machine jackpots are won, $35,000 or more, 
our inspectors secure the machine and Gaming Division agents 
test the computer chip to make certain that it has not been 
tampered with in any way. Cards are inspected when a game opens 
and cannot be used for more than a single day. Dice are checked 
when the crap table opens to make sure they are perfectly 
square and balanced. They, too, are only used for a single day. 
Roulette wheels are tested to make certain they are balanced 
and true. There are specific procedures that casinos must 
follow to make certain all cards are in the deck and to reduce 
the possibility of cheating and collusion.
    All of this is done, very frankly, with a system of people 
watching people watching people. The actions of a dealer are 
watched by a floor person. Both of them are watched by a pit 
boss. Shift managers watch the pit bosses. And then there is an 
elaborate surveillance system that can monitor activities at 
every table and every slot machine, as well as anything that 
goes on in the count rooms or in the cashier's cage.
    Our inspectors are on-site watching, as well as plain-
clothes agents of the Division of Gaming Enforcement regularly 
are in those casinos. Both our inspectors and the Gaming 
Division also have complete access to the surveillance system 
from our own offices. Under every slot machine is a compartment 
where the winnings fall, but to open that compartment there are 
two locks and the casino only has a key to one of them. We have 
the other one. The same with the drop boxes; two keys are 
needed to open them. That means our inspector must be present 
when cash is collected from the slots and the tables.
    The money is counted in secure count rooms. Once again, to 
get into the count room you need to open two locks. We control 
one, the casino controls the other. Our inspector is physically 
present when all of the currency is counted and when high 
denominations are counted. The counts are videotaped. The soft 
count where paper money is counted is even audiotaped. In 
either case, our inspector has to verify the count before the 
money can leave the room. This procedure allows us to verify 
the amount of the casino's tax liabilities.
    We also require casinos to prevent underage persons from 
gambling. Every year, casinos escort more than 30,000 underage 
persons from casinos. Generally, fewer than 500 have actually 
been found gambling, but casinos know that we take this issue 
very seriously. If they fail to keep underage persons from the 
casino or from gambling, they are subject to complaints and we 
have imposed significant fines against them.
    The list of controls goes on, and I know our time is 
limited, but it is difficult to adequately explain in words how 
this system works. Therefore, Mr. Chairman, I would like to 
invite you and the rest of your committee to visit Atlantic 
City and to see firsthand the protections that I have described 
today. I hope, though, that I have given you a flavor of the 
kinds of protections that are needed to ensure that the games 
are fairly run, and by honest people who cannot be manipulated.
    From what we know about Internet gambling right now, I do 
not believe the same kind of protections are in place or they 
ever could be put in place. The lengthy procedure of background 
checks on employees, inspection of machines, oversight of 
operations, simply cannot be ensured through Internet gambling. 
Without them, I cannot see how anyone can have any level of 
confidence in the fairness of the games or the likelihood of 
receiving their winnings.
    Senator Kyl. Thank you very much. That is a very helpful 
statement.
    [The prepared statement of Mr. Hurley follows:]

                 Prepared Statement of James R. Hurley

    Mr. Chairman, Senators, I want to thank you for inviting me to 
appear before you today to discuss the regulation of casino gambling. 
My name is James Hurley and I am Chairman of the New Jersey Casino 
Control Commission. The commission is a five-member panel appointed by 
the governor and confirmed by the New Jersey State Senate which 
regulates Atlantic City's $4 billion casino industry. I realize the 
topic for this sub-committee hearing is internet gambling and one of 
the issues is whether internet gambling can be effectively regulated. 
What I would like to do is to describe our system of controlling casino 
gambling and suggest that absent a strict licensing and regulatory 
system there is no way to ensure the integrity of operators or games.
    New Jersey developed a strict, comprehensive regulatory system back 
in 1977 which was designed to ensure the suppression of organized crime 
and that the casinos pay taxes on all money they win. We believe that 
it has worked very effectively to ensure not only that casinos are 
owned and operated by people of good character, honesty and integrity, 
but also that the public has confidence that the games are honestly 
run, fair and that their winning wagers will be paid.
    To accomplish this level of public confidence, New Jersey 
implemented a licensing system that requires every owner, officer and 
director of a casino--as well as many of the officers, directors and 
owners of any holding or intermediary company--to file an extensive 
license application. They had to disclose detailed information about 
any criminal record, business affairs, civil litigation, at least five 
years of personal tax returns and voluminous additional information. 
Applications for a casino operating license generally fill several 
large file transfer boxes.
    A copy of that application is forwarded to the New Jersey Division 
of Gaming Enforcement, which then conducts a full investigation into 
the applicant and its qualifiers. The gaming division looks at criminal 
histories, bank records, civil litigation, tax returns, SEC filings and 
anything else that it feels would be pertinent to determine whether a 
company or a person has the required good character, honesty and 
integrity. It even looks at newspaper articles to determine not only 
the fact of an applicant's good character, but also the applicant's 
reputation for good character.
    The results of that investigation are put into a report which is 
submitted to the Casino Control Commission. We then schedule a public 
hearing into the application during which witnesses are examined and 
cross examined, documents are reviewed and placed into evidence and 
attorneys make opening and closing statements and argue points of law. 
At the end of that process, we then vote on whether the applicant has 
met its burden to prove by clear and convincing evidence that it has 
the required good character, honesty and integrity to hold a license.
    The process is almost identical for every casino employee and 
casino key employee who works in New Jersey's gaming industry. They 
file lengthy disclosure forms, submit to rigorous investigations and, 
if necessary, undergo a full hearing before a commissioner to determine 
suitability.
    Through this process, we can, and have, prevented organized crime 
and other unsavory individuals from owning or operating a casino in 
Atlantic City. But we don't stop there. We know that there are other 
ways for organized crime to infiltrate, influence or control the casino 
industry. As a result, we subject anyone who sells a product or a 
service to a casino hotel to licensing requirements.
    Before a vendor can sell a slot machine, a deck of cards or a pair 
of dice to a casino, the company has to file a casino service industry 
license application. The officers, directors and owners of the company 
have to be identified and investigated to determine whether the sellers 
qualify for a license. While the company can start selling prior to the 
issuance of a license, every single transaction has to be scrutinized 
and approved, in advance, by our commission.
    Anyone who wants to sell non-gaming products or services to a 
casino--widgets, perhaps--also could face licensing requirements. If a 
company does ``regular and continuing business''--which is defined in 
our regulations by certain monetary thresholds--it also has to file a 
license application and undergo a background investigation. And even if 
the vendor never meets that threshold, if the Division of Gaming 
Enforcement discovers information that the vendor is unsavory, we can 
order casinos not to deal with that vendor. Let me give you an example 
of a wholesale seafood firm in New Jersey that was supplying casinos. 
The gaming division learned that one of the sales representatives was 
the head of the Philadelphia-based organized crime family. Even when 
the seafood firm offered to have that sales representatives handle only 
non-casino accounts, we indicated that was not sufficient and we 
ordered casinos not to deal with the firm.
    Through the licensing and registration of casino service 
industries, we have prevented organized crime and other unsavory 
elements from coming in the ``back door'' to influence casino 
operators.
    Let me now move on to second prong of our system--oversight and 
control of casino operations.
    Regulations on internal and accounting controls, gaming equipment 
and on the operation of the games ensure effective control and fair 
gaming for the public. Every casino operates under a strict set of 
regulations and internal controls that spell out with great detail how 
gaming operations are to be conducted. The rules of the games are 
detailed in our regulations as is the basic organizational structure 
for the casino. In addition, the casinos operate under the constant 
scrutiny of our inspectors who are on duty in every casino around the 
clock.
    Every slot machine that an operator wants to use must be tested and 
approved in advance. Testing is done by the Division of Gaming 
Enforcement in a specialized electronic games laboratory in Atlantic 
City. The gaming division makes certain not only that the machine pays 
back at least the minimum 83 percent as required by law, but that it 
pays back precisely what the manufacturer says the program is designed 
to pay back. Once a slot machine program is approved, the computer chip 
containing the game is placed in the machine and sealed by the gaming 
division.
    When large machine jackpots are won--$35,000 or more--our 
inspectors secure the machine and gaming division agents test the 
computer chip to make certain that it has not been tampered with in any 
way.
    Cards are inspected when a table opens and they cannot be used for 
more than a single day. Dice are checked when a craps table opens to 
make sure they are perfectly square and balanced. They too are only 
used for a single day. Roulette wheels are tested to make certain that 
they are balanced and true. There are specific procedures that casinos 
must follow to make certain all cards are in a deck and to reduce the 
possibility of cheating and collusion.
    All of this is done with a system of people, watching people, 
watching people. The actions of a dealer are watched by a floorperson 
and both of them are watched by a pit boss. Shift managers watch the 
pit bosses and then there is an elaborate surveillance system that can 
monitor activities at every table and every slot machine as well as 
everything that goes on in count rooms or the cashier's cage, Our 
inspectors are on-site watching as well and plainclothes agents of the 
Division of Gaming Enforcement regularly are in the casinos. Both our 
inspectors and the gaming division also have complete access to the 
surveillance system from our own offices.
    Under every slot machine is a compartment where the winnings fall. 
But to open the compartment, there are two locks and the casino only 
has the key to one of them. We have the other one. The same with the 
drop boxes attached to the gaming tables--two keys are needed to open 
them. That means that our inspector must be present when the cash is 
collected from slots and tables.
    The money is counted in secure count rooms. Once again, to get into 
the count room, you need to open two locks--we control one and the 
casino controls the other. Our inspector is physically present when all 
of the currency is counted and when high denominations are counted. The 
counts are videotaped--the ``soft'' count, where paper money is 
counted--is even audiotaped. In either case, our inspector has to 
verify the count before the money can leave the room. This procedure 
allows us to verify the amount of the casino's tax liability.
    We also require casinos prevent underage persons from gambling. 
Every year, casinos escort more than 30,000 underage persons from 
casinos. Generally, fewer than 500 are actually found gambling, but 
casinos know that we take this issue very seriously. If they fail to 
keep underage persons from gambling, casinos are subject to complaints 
and we have imposed significant fines against them.
    The list of controls goes on and I know our time is limited. It is 
difficult to adequately explain in mere words how these systems work. I 
would like to invite you, Mr. Chairman, and the rest of the committee 
to visit Atlantic City to see first hand the protections we have in 
place.
    I hope, though, that I have given you a flavor of the kinds of 
protections that need to be in place to ensure that games are run 
fairly and by honest people and that they can't be manipulated. From 
what we know about Internet gambling right now, I do not believe the 
same kind of protections are in place or if they ever could be put in 
place. the lengthy procedure of background checks on employees, 
inspections of machines, oversight of operations simply cannot be 
ensured through internet gambling. Without them, I cannot see how 
anyone could have any level of confidence in the fairness of the games 
or the likelihood of receiving their winnings.
    I'd be happy to answer any questions.

    Senator Kyl. Let's begin the questioning with Senator 
Feinstein.
    Senator Feinstein. Well, let me thank all of the witnesses. 
I think your testimony was excellent and right on point.
    Let me ask the attorneys general this question. Some Indian 
tribes have argued that they should be exempted completely from 
this legislation. What do you think of that?
    Mr. Doyle. Well, we very much oppose such an exemption. The 
National Indian Gaming Regulatory Act provides for a system of 
compacts between the States and the tribes. Wisconsin was one 
of the first States to enter into compacts with tribes. We are 
now on our second generation of compacts. The first have 
expired; we are on the second. We have a process in place of 
negotiating them and of assuring that gambling takes place 
under the terms of those compacts.
    To exempt the tribe would mean that a tribe, as occurred 
several years ago in Idaho, would claim that they have a right 
to conduct gambling operations in the State of Wisconsin even 
though they have never compacted with our State. So I think 
that Indian gaming, as it goes on, should go on consistent with 
the Indian Gaming Regulatory Act, which means that if it is 
going to take place in Wisconsin, it should only take place 
pursuant to a compact between the State of Wisconsin and a 
particular tribe.
    Senator Feinstein. Thank you very much. Ms. Montgomery, do 
you have anything to add to that?
    Ms. Montgomery. Mr. Chairman, Senator Feinstein, no. I 
agree entirely with General Doyle.
    Senator Feinstein. Thank you very much. I wanted you just 
for a moment, if you would--and perhaps, Mr. Doyle, because you 
mentioned it in your remarks, you would expand somewhat on the 
wire communication facility of section 1084, title 18, and why 
this is not sufficient to make Internet gambling illegal.
    Mr. Doyle. Well, the concern there is--and I believe, 
Senator, you mentioned it--is that it was intended to deal with 
telephone and telegraph. And the antecedents of this Act go 
back to the laws that kept bookies from making book over 
telegraph wires, and as communications now expand, microwave 
and other nonwire means of communication, the definition 
section simply is not adequate to keep up with the change in 
technology.
    Senator Feinstein. Thank you very much. One last question 
on technical feasibility. We are going to hear about blocking 
access to gambling web sites. Do you believe this could be 
effective in controlling the problem?
    Ms. Montgomery. Senator Feinstein, I think one thing we 
have all learned in terms of regulation is that as quickly as 
we do that, there will be another way around it. Obviously, as 
a former prosecutor and legislator, and now attorney general, I 
would like to work on doing some effective regulation, as you 
have suggested. But on the other hand, it will be only one tool 
and we will have to have a combination of approaches in order 
to effectively address Internet gambling.
    Mr. Doyle. Senator Feinstein, if I might add to that, we 
have looked at that same issue with respect to the distribution 
of child pornography. Technically, at least the people who work 
for me on this say that as much as that effort is going on, it 
is not feasible at this time. Maybe it will be at some point in 
the future, but it certainly is not feasible now.
    Senator Feinstein. Mr. Chairman, I would like to ask, if 
you have people, Mr. Doyle, that are working on this, perhaps 
they can elaborate somewhat in writing on that answer because I 
think this is going to be one of the objections that we 
constantly get. And I would like to have as detailed an answer 
to that as I possibly could.
    Mr. Doyle. We would be happy to, Senator.
    Senator Feinstein. Thanks very much.
    Senator Kyl. Thank you, Senator Feinstein. Those are 
excellent points to bring out.
    I might say for those who had some familiarity with our 
legislation last year that the enforcement mechanism is 
essentially the same, but there is some additional leeway 
provided to the service providers and others who would be asked 
to assist in the enforcement. The primary method of enforcement 
here is to disconnect the service of the illegal Internet web 
site, and to the extent that the providers and switching 
companies and phone companies and others felt this would 
constitute a burden upon them, something which we really did 
not intend, we have worked with them to develop language which 
will be in our bill that makes it clear that when the court 
finds probable cause to believe that there is an illegal site 
the provider will be asked to pull the plug on that site.
    If it can't be done technically or if it is economically 
not doable, then they would be excused from that liability. We 
are not asking them to monitor it, in other words. Action would 
be precipitated by law enforcement and they would only be 
required to do that which they can economically and feasibly 
and technically do, which I think is fair. I mean, they would 
then be assisting in law enforcement, but not at any burden on 
themselves.
    While it might not be perfect and it might not end up 
putting anybody in jail, at least it would in most cases, we 
think, prevent the continued transmission of this illegal 
activity into the United States. So that is the idea anyway, 
and any technical information that you can provide to us that 
would help us in that regard would be very, very much 
appreciated.
    Senator DeWine, would you like to go next?
    Senator DeWine. Mr. Chairman, thank you very much. I would 
like to explore with Attorney General Montgomery and the other 
members of the panel an issue that has been of concern to me 
and that is the whole issue of fantasy sports, fantasy 
baseball. This is something that a number of people in Ohio are 
involved in, and I have worked with Senator Kyl over the last 
several months on this legislation.
    In Ohio, there are a lot of individuals, Attorney General 
Montgomery, who avidly play these games and I would like maybe 
your comments about this, whether or not you think these are 
games of skill and not gambling and what the impact is on Ohio 
law.
    My understanding--and I have not done it myself, but my 
understanding is that what people really are getting when they 
pay their $16 or whatever it is is the ability to monitor 
sports statistics everyday. They get in a league; they do it 
themselves for their own amusement or 10 of them get together, 
and your friends get together and you pick your own--let's say 
you pick your own baseball team at the beginning of the season 
and you select who the players are. And really what you are 
getting through the Internet is an update everyday on the 
statistics, what the batting averages are, the other statistics 
that might be relevant, so you can see how your ``team'' is 
doing.
    My concern has been that we make sure that whatever we do 
here does not impact on that type of activity that is enjoyed 
by an awful lot of our constituents. Do you have any comments 
on that? And I would be interested in any other comments from 
any other members of the panel.
    Ms. Montgomery. Senator, we are well aware of the fantasy 
sports process on the Internet, and frankly we do not see it as 
being a violation of Ohio law at this point. As you know, we 
regulate games of chance versus games of skill. In this 
instance, because of the access into fantasy sports--it is an 
administrative fee; there is an application of intelligence and 
skill--we have not viewed that as a gambling violation.
    We would not oppose an exemption that I know exists in the 
Kyl bill to allow that to happen. My understanding at this 
point is it is in the bill and we would be supportive of that 
exemption.
    Senator DeWine. Any other panel members want to comment on 
it?
    Mr. Doyle. NAAG has done a survey of some of the States and 
I think there is some disagreement among the States about 
whether these are legal or illegal. NAAG's position has been to 
support the exemption as long as the fee that is being paid--as 
I understand, the exemption is essentially one that covers the 
administrative cost of running this operation; that it would be 
exempt from the Federal legislation. It may run afoul of some 
State laws, but that is for the States to decide.
    Senator DeWine. Thank you all very much. Thank you, Mr. 
Chairman.
    Senator Kyl. Thank you, and I might add we have worked with 
the fantasy sports folks and in our next panel we will have 
some additional testimony on that which I hope will be helpful.
    Attorney General Montgomery, you testified that in getting 
on the computer you identified 690 sites responding to the 
phrase ``Internet gambling.'' Were those actually 690 separate 
web sites, do you know, or were they different references?
    Ms. Montgomery. Those were hits. I think we had some 300 
sites.
    Senator Kyl. Actual sites, right. The number of sites has 
been increasing.
    Ms. Montgomery. Exponentially.
    Senator Kyl. The last number I heard was 260, and it had 
gone up from 60. So it is really climbing rapidly. It is hard 
to keep track of the number of new sites coming up, so I 
appreciate that.
    I wanted to ask each of you to comment on a recent article 
from the BNA publication, Bureau of National Affairs 
publication story on the gambling commission recommendations 
which I think are due out in June. The story begins, ``A 
congressionally-appointed commission ordered to study the 
social and economic effects of gambling announced March 19 that 
it will seek a broad ban on online gambling when it issues its 
report in June.'' I am delighted to get that bit of information 
from the commission.
    And then part of the story goes on to make this point, 
under the heading ``Access by Problem Gamblers, A Concern,'' 
something that all three of you testified about. ``Concerns 
that have emerged and driven the online gambling prohibition 
position during the commission's nearly 2-year probe include 
the access the Internet provides to underage and pathological 
wagerers. According to written testimony provided to the 
committee March 18 by the National Academy of Sciences' 
National Research Council, adolescents comprise the largest 
proportion of pathological gamblers in the country. According 
to statistics compiled by the Council's Committee on the Social 
and Economic Impact of Pathological Gambling, as many as 1.1 
million people between the ages of 12 and 18 in any given year 
are pathological gamblers.'' And then the story goes on.
    Each of you testified in one way or another to the 
difficulty of knowing who is gambling, of verifying the people 
that are placing the bets, and in the case of the comparison 
with the highly regulated States systems, the inability to 
enforce any particular provisions. Since one of the people that 
I cited in my opening statement called the Internet the crack 
cocaine of gambling for adolescents, could you speak to the 
question in terms of public policy of all three of the States 
that you represent--two from the standpoint of attorneys 
general and one from the standpoint of an official 
knowledgeable about the effects of gambling when it is not done 
properly and highly regulated? Let me start with you, Mr. 
Hurley.
    Mr. Hurley. Even in a highly regulated system like ours, it 
is impossible to identify compulsive gamblers. What New 
Jersey's attempt has been is to make available to people 
through whatever agencies or through their own recognition of a 
problem to get help for these people. So there is a $600,000 
appropriation that goes to the Council on Compulsive Gambling 
every year that comes out of fines that we levy on casinos. But 
if we do not make up the $600,000, it comes from the 
legislature; it comes from the general appropriations.
    But I just want to tell you that we think it is very 
difficult to identify these people. And we are there, our 
people are there, the Division of Gaming Enforcement is there, 
and the casino themselves make a claim that they are constantly 
watching for people with gambling problems. And so we have no 
idea how you could in any way know who a compulsive gambler was 
through the Internet.
    Senator Kyl. Thank you.
    General Montgomery.
    Ms. Montgomery. Mr. Chairman, Senators, it goes without 
saying that in each of our respective States we as legislators, 
regulators, enforcers believe strongly that the public welfare 
has to make certain rational assumptions. We in the public 
field look at regulating, whether it is driving, whether it is 
smoking tobacco, or in this instance whether it is gambling, 
particularly with great attention toward our youth, the general 
assumption being that you as policymakers, we are policymakers 
or enforcers, understand that the younger the person involved, 
under the age of 18 particularly, the less likely there may be 
a connect between action and consequence.
    And it is absolutely critical, it seems to me, in the 
public policy arena that we make those kinds of assumptions 
based on our own experience and our own understanding of the 
effects of regulation on kids. And I would sit here having 
worked on at least two antigambling campaigns statewide with 
now Senator Voinovich putting a plea out to the policymakers 
that, in fact, if there is a rational basis at all in the 
public welfare arena, it is in making these assumptions that 
there are some who need to be protected. And this policy that 
you have put into legislation is critical for us to help 
protect those who, either by age or predilection, have not 
protected themselves.
    Senator Kyl. Thank you.
    Attorney General Doyle.
    Mr. Doyle. Senator, I agree with all that was said, and 
there are two further points that come to mind about it. One of 
them that we deal with with kids and the Internet is the fact 
that the kids are frequently much more adept at it than the 
parents, so that even if there are parents in the home, the 
parents may not know what their child is doing.
    We deal in this issue in consumer protection on the 
Internet. We deal with it with pornography, sex predators that 
travel on the Internet, and gambling, where a child can be 
sitting in his or her room with a home computer traveling to 
places that their parents just downstairs in the kitchen have 
no idea that they are going to. So the concern about children I 
think is particularly acute with this.
    The second point I would like to emphasize is something 
that you recognized before, Senator, and that is why it is 
important to act now. It was important to have acted a couple 
of years ago because the addictive nature of these games we 
have yet to really see hit the United States. The computers 
aren't fast enough, the modems aren't fast enough, the way to 
exchange value is not yet fast enough.
    But we are all moving in the direction in which the highly 
addictive video games--we have talked a lot about sports 
betting here because given the speed of the Internet, that is 
sort of what has been taking up most of the volume. But within 
a number of years, most people look at this and say that every 
home computer will be an Atlantic City-style video game sitting 
on your desk at home, in which the lemons are spinning around, 
in which the cherries are coming up, in which the bells are 
ringing.
    Those are the addictive games; those are the really 
addictive games. And they are going to be able to be played in 
your home without anybody else around, without any of the other 
social interaction that is going on. And a person in a night, 
instead of reading a book or watching television, can lose 
$5,000 without even thinking about it. So we have yet to see 
the real addictive nature of this activity reaching right into 
our homes, but we are right on the verge of it. And as the 
Internet gets faster and more powerful, that is what we are 
going to see. That is why when you started this a number of 
years ago it was said we have got to do this now before it 
really hits, and our window of opportunity is closing all the 
time.
    Senator Kyl. Thank you for making those two additional 
points.
    Senator Feinstein, any other questions of this panel?
    Senator Feinstein. No.
    Senator Kyl. Senator DeWine.
    Senator DeWine. No, Mr. Chairman.
    Senator Kyl. I want to thank this panel very much. You have 
been very helpful. And again, General Doyle, for all that you 
have done, and your staff, I appreciate it very much.
    Mr. Doyle. Thank you, Senator.
    Senator Kyl. Thank you all.
    Ms. Montgomery. Thank you very much.
    Senator Feinstein. Thank you.
    Senator Kyl. We will go right into our next panel. I would 
like to call to the table the three witnesses for panel two. We 
have three more experts now to give us a little different 
perspective. The first is Mr. Jeff Pash, executive vice 
president of the National Football League, in New York; Bill 
Saum, who is the director of agent and gambling activities of 
the NCAA, the National Collegiate Athletic Association, in 
Overland Park, KS; and Ms. Marianne McGettigan, counsel for the 
National Baseball Players Association, Portland, ME.
    We welcome all three of you to the hearing this morning, 
and again I won't use the lights. I would like to ask you to 
try to keep your testimony to about 5 minutes and that will 
give us plenty of time for questions.
    Let's start with you, Mr. Jeff Pash.

  PANEL CONSISTING OF JEFFREY PASH, EXECUTIVE VICE PRESIDENT, 
NATIONAL FOOTBALL LEAGUE, NEW YORK, NY; BILL SAUM, DIRECTOR OF 
  AGENT AND GAMBLING ACTIVITIES, NATIONAL COLLEGIATE ATHLETIC 
   ASSOCIATION, OVERLAND PARK, KS; AND MARIANNE McGETTIGAN, 
 COUNSEL, MAJOR LEAGUE BASEBALL PLAYERS ASSOCIATION, PORTLAND, 
                               ME

                   STATEMENT OF JEFFREY PASH

    Mr. Pash. Mr. Chairman and members of the subcommittee, I 
am very pleased to be here to express our strong support for 
this legislation. I had the pleasure, Mr. Chairman, of 
testifying before you in 1997 in support of the bill that 
passed the Senate last year, and we continue strongly to 
support it.
    I should note as a personal matter that as someone who grew 
up in Phoenix and then in Fresno, I am particularly pleased to 
testify before you and Senator Feinstein. And I want to commend 
you, Mr. Chairman, and your staff for your leadership on this 
issue, and thank you for all of the time you have spent and 
your hard work in bringing this bill forward.
    In our judgment, sports and gambling do not mix, and I 
think that on this most fundamental point there can be no 
disagreement. Sports gambling threatens the integrity of our 
games and the values that our games represent, and particularly 
that is true for young people. And for this reason, the NFL and 
all sports organizations have established strict policies 
relating to gambling and have actively supported Federal 
efforts to combat sports gambling.
    We strongly supported the passage of the Professional and 
Amateur Sports Protection Act of 1992 which halted the spread 
of sports gambling in this country. And the legislation that we 
are discussing today is a logical and fully appropriate 
extension of a long, long line of Federal policy with respect 
to sports gambling.
    The Internet Gambling Prohibition Act is necessary because 
as the State attorneys general testified just a few moments 
ago, no single State or collection of States can adequately 
address this problem themselves. Gambling businesses around the 
country and around the world have turned to the Internet in 
what is a clear attempt to circumvent existing prohibitions on 
gambling and to complicate the efforts of Federal and State law 
enforcement.
    This bill will strengthen existing law and bring it into 
line with new technologies, and that is something that the 
Congress has repeatedly expressed its concern about in the 
past. Eight years ago, for example, in the context of the PASPA 
legislation, the Judiciary Committee noted the growth of new 
technologies that facilitate gambling, and the concerns over 
the use of those new technologies as a way of expanding 
gambling was an important reason that underlies the passage of 
that law. In 1991, those new technologies did not include the 
Internet, at least not on a widespread basis. But with its 
arrival and with its growth, it is fully appropriate for the 
Congress to act again to have law keep pace with technology.
    As other witnesses have discussed, Internet gambling is 
successful largely because it is both unregulated and requires 
so little effort to participate. Unlike traditional casinos, 
where one is required to travel to the casino and where 
significant restrictions and protections exist, Internet 
gambling allows bettors access to wagering opportunities on 
sports 24 hours a day, 7 days a week. It is quick and easy and 
anonymous, but as we have heard already today, not painless.
    The gambling sites, as we have seen, have been designed to 
resemble video games and are especially attractive to children. 
And sports betting, which is, of course, our principal concern, 
is an enticing lure to the online bettor. Studies have shown 
that sports betting is a growing problem for high school and 
college students, who may develop serious addictions to other 
forms of gambling as a result of being introduced to sports 
wagering.
    Moreover, the recent sports betting and point-shaving 
scandals on college campuses, from Arizona State to 
Northwestern to Boston College, provide compelling evidence of 
the vulnerability of young people to the temptations of 
gambling. And they demonstrate in as clear a way as possible 
how sports gambling breeds corruption, how it undermines the 
integrity of the athletics that are being out on the football 
field or the basketball court, and how they undermine the 
values that organized college and professional athletics are 
supposed to represent. As the Internet reaches more and more 
college students and school children, the rate of gambling 
among young people is certain to rise unless we use this 
opportunity to address the problem early and effectively.
    Just as Congress enacted the Wire Act to prohibit the use 
of the telephone as an instrument of gambling, it should now 
adopt specific legislation to prohibit the use of the Internet 
for that purpose. The Internet Gambling Prohibition Act, 
through its injunctive relief provisions which are based on 
existing law and have been carefully reviewed with Internet 
service providers, would provide an effective mechanism for 
terminating or blocking access to gambling sites.
    In our view, Mr. Chairman, such a mechanism is essential 
and we believe your bill provides it. I listened with interest 
to General Doyle's remarks concerning the technical feasibility 
of such a step, and I would note that I have been advised that 
it is feasible to have such a blocking mechanism, that it would 
not be a technical problem. And I will certainly ask that our 
people be in touch with subcommittee staff to address that 
problem and that matter in more detail.
    Left unchecked, we know that Internet gambling will 
continue to expand exponentially, and so will the pernicious 
effects. Just as Congress has intervened on numerous occasions 
to address sports gambling, most recently in 1992, we urge it 
to do so again today.
    Mr. Chairman, we appreciate your efforts and your 
leadership in this respect, and again we strongly support the 
passage of this bill.
    Senator Kyl. Thank you for that excellent statement and for 
your continuing strong support.
    [The prepared statement of Mr. Pash follows:]

                   Prepared Statement of Jeffrey Pash

    Mr. Chairman and members of the Subcommittee. My name is Jeffrey 
Pash. I am the Executive Vice-President and General Counsel of the 
National Football League, I testified before you in 1997 in support of 
your prior bill on this matter and am again pleased to appear before 
you today to express the NFL's strong support for the Internet gambling 
Prohibition Act of 1999. We strongly support this bill because it would 
strengthen and extend existing prohibitions on Internet gambling, 
including gambling on sports events, and provide enhanced enforcement 
tools tailored to the unique issues presented by Internet gambling. We 
join the State Attorneys General who testified earlier and other sports 
organizations in urging adoption of this important legislation.
    The NFL's policy on these issues has been consistent for decades. 
Simply, put, gambling and sports do not mix. Sports gambling threatens 
the integrity of our games and all the values our games represent--
especially to young people. For this reason, the NFL has established 
strict policies relative to gambling in general and sports betting in 
particular. The League prohibits NFL club owners, coaches, players and 
anyone else connected with the NFL from gambling on NFL games or 
associating in any way with persons involved in gambling. Anyone who 
does so faces severe disciplinary action by the Commissioner, including 
lifetime suspension. We have posted our anti-gambling rules in every 
stadium locker room and have shared those rules with every player and 
every other individual associated with the NFL.
    The League has also sought to limit references to sports betting or 
gambling that in any way are connected to our games. For example, we 
have informed the major television networks that we regard sports 
gambling commercials and the dissemination of wagering information as 
inappropriate and unacceptable during football game telecasts. NFL 
teams may not accept advertising from gambling establishments.
    Commissioner Tagliabue reemphasized this January that gambling and 
participation in the NFL are incompatible. In a memorandum to all NFL 
clubs, the Commissioner confirmed that no NFL clud owner, officer or 
employee may own any interest in any gambling casino, whether or not 
the casino operates a ``sports book'' or otherwise accepts wagering on 
sports. The Commissioner specifically stated that no club owner, 
officer or employee ``may own, directly or indirectly, or operate any 
`on-line,' computer-based, telephone, or Internet gambling service, 
whether or not such a service accepts wagering on sports.'' (Ex. A)
    The League also has been an active proponent of federal efforts to 
combat sports gambling. We strongly supported the passage of the 
Professional and Amateur Sports Protection Act of 1992 (28 U.S.C. 3701 
et seq.). This 1992 legislation, known as PASPA, halted the spread of 
sports gambling by prohibiting states from enacting new legislation 
legalizing sports betting. The League also worked to promote the 
passage of the Chairman's Internet gambling legislation in the last 
Congress. Like PASPA, the proposed legislation is a logical and 
appropriate extension of existing federal law and policy. The 
precedents for federal action in this area were well canvassed by the 
full Judiciary Committee in its report accompanying the 1992 
legislation (S. Rep. No. 248, 102d Cong., 1st Sess. 5-8 (1991)).
    The Internet Gambling Prohibition Act of 1999 is a necessary and 
appropriate federal response to a growing problem that, as the State 
Attorneys General have testified, no single state can adequately 
address on an individual basis. Ten years ago, a bookmaker might have 
used the telephone to call his customers. Today, he simply logs on. 
Gambling businesses around the country--and around the world--have 
turned to the Internet in an obvious attempt to circumvent the existing 
prohibitions on gambling contained in Title 28 and PASPA. Many offshore 
gambling businesses provide betting opportunities over the Internet, in 
a clear effort to avoid or complicate an effective federal and state 
law enforcement.
    The bill is needed because it strengthens existing law to 
facilitate the enforcement of gambling prohibitions in the face of new 
technology. In its report accompanying the PASPA legislation eight 
years ago, the Judiciary Committee noted the growth of ``new 
technologies'' facilitating gambling, including the use of automatic 
teller machines to sell lottery tickets, and proposals to allow ``video 
gambling'' at home. S. Rep. No. 248, supra, at 5. It was, in 
significant part, the specter of expanded gambling raised by those 
``new technologies'' that spurred Congress to enact PASPA. In those 
days, the ``new technologies'' did not yet include the Internet. But 
now the Internet is a significant source of gambling activity, and it 
is appropriate for Congress--as it has done in the past--to ensure that 
law keeps pace with technology.
    The problem of Internet gambling is significant--and growing. 
According to recent publications, the Justice Department has estimated 
that Internet gambling generated $600 million in revenue in 1997 alone. 
(Ex. B). Recent estimates of future gambling activity on the Internet 
range from $2.3 billion to $10 billion within the next two years. (Exs. 
C, D).
    Internet gambling is successful both because it is currently 
uncontrolled and because so little effort is required to participate. 
Unlike traditional casinos, which require gamblers to travel to the 
casino and place their bets on-site, Internet gambling allows bettors 
access to on-line wagering facilities twenty-four hours per day, seven 
days a week. Gamblers can avoid the difficulty and expense of traveling 
to a casino, which in many parts of the country requires out-of-state 
travel. Internet gamblers also can avoid the stigma that may be 
attached to gambling in public on a regular basis. Indeed, Internet 
gambling threatens to erode the stigma of gambling generally, including 
sports gambling.
    Internet gambling sites are easily accessible and offer a wide 
range of gambling opportunities from all over the world. Any personal 
computer can be turned into an unregulated casino where Americans can 
lose their life savings with the mere click of a mouse. Many of these 
gambling web sites have been designed to resemble video games, and 
therefore are especially attractive to children. But gambling--even on 
the Internet--is not a game. Studies have shown that sports betting is 
a growing problem for high school and college students, who develop 
serious addictions to other forms of gambling as a result of being 
introduced to ``harmless'' sports wagering. Recent sports betting and 
point-shaving scandals on college campuses from Arizona State to 
Northwestern University to Boston College provide further evidence of 
the vulnerability of young people to the temptations of gambling. They 
also demonstrate how sports gambling breeds corruption and undermines 
the values of teamwork, preparation and sportsmanship that our game 
represents.
    As the Internet reaches more and more college students and 
schoolchildren, the rate of Internet gambling among young people is 
certain to rise. Because no one currently stands between Internet 
casinos and their gamblers to check identification, our children will 
have the ability to gamble on the family computer after school, or even 
in the schools themselves. And we must not be lulled by the paper tiger 
set up by proponents of Internet gambling--that children cannot access 
gambling web sites because they lack credit cards. It does not take 
much effort for a child to ``borrow'' one of his or her parents' credit 
cards for the few minutes necessary to copy down the credit card number 
and use it to gain access to an Internet gambling service.
    The problem connected with Internet gambling transcend the NFL's 
concern about protecting the integrity of professional sports and the 
values they represent. According to experts on complusive or addictive 
gambling, access to internet sports wagering dramatically increases the 
risk that people will become active, pathological gamblers. The 
National Council on Problem Gambling has reported that sports betting 
is among the most popular forms of gambling for compulsive gamblers in 
the United States. That means that once individuals become exposed to 
sports betting, they may develop a real problem with recurrent and 
uncontrollable gambling.
    Conducting a gambling business using the Internet is illegal under 
the Wire Act (18 U.S.C. Sec. 1084) and indeed has been prosecuted--for 
example, in the case brought against numerous Internet sports betting 
companies last March by federal authorities in the Southern District of 
New York (Ex. E). But as the prosecutors in that case plainly 
recognized, asserting jurisdiction over offshore gambling businesses 
that use the Internet can be problematic. More significantly, the Wire 
Act does not include direct mechanisms for ensuring termination by 
Internet service providers of access to online gambling sites.
    Just as Congress enacted the Wire Act to prohibit the use of the 
telephone as an instrument of gambling, so Congress should now enact 
specific legislation to prohibit the use of the Internet as an 
instrument of gambling. And just as the Wire Act provides a mechanism 
for bringing about the termination by telephone companies of service to 
gambling businesses, so the Internet Gambling Prohibition Act of 1999, 
through its injunctive relief provisions, would provide an effective 
mechanism for bringing about the termination by Internet service 
providers of access to gambling sites. In our view, Mr. Chairman, 
providing such a mechanism for ensuring that Internet service providers 
will terminate access to such sites is critical to any legislation to 
combat Internet gambling.
    In supporting the PASPA legislation to prevent the spread of 
legalized betting, Commissioner Tagliabue testified:

          Sports gambling threatens the character of team sports. Our 
        games embody the very finest traditions and values. They stand 
        for clean, healthy competition. They stand for teamwork. And 
        they stand for success through preparation and honest effort. 
        With legalized sports gambling, our games instead will come to 
        represent the fast buck, the quick fix, the desire to get 
        something for nothing. The spread of legalized sports gambling 
        would change forever--and for the worse--what our games stand 
        for the way they are perceived. Quoted in S. Rep. No. 248, 
        supra, at 4.

    Left unchecked, Internet gambling amounts to legalized gambling. 
Its effects on the integrity of professional and amateur sports and the 
values they represent are just as pernicious. Just as Congress 
intervened to stem the spread of legalized sports gambling in 1992, so 
it must intervene to stem the spread of Internet gambling today.
    Mr. Chairman, we applaud your efforts and the efforts of your staff 
to address this important problem. The Internet Gambling Prohibition 
Act of 1999 will strengthen the tools available to federal and state 
law enforcement authorities to prevent the spread of Internet gambling 
into every home, office and schoolhouse in this country, and will send 
the vital message--to children and adults alike--that gambling on the 
Internet is wrong. We strongly support the passage of your bill.
    Thank you.
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    Senator Kyl. Mr. Bill Saum.

                     STATEMENT OF BILL SAUM

    Mr. Saum. Mr. Chairman and Senator Feinstein, I am pleased 
to appear before you today to express the National Collegiate 
Athletic Association's support for the Internet Gambling 
Prohibition Act of 1999. The NCAA is a nonprofit association of 
approximately 1,150 colleges, universities, athletic 
conferences and related organizations devoted to the regulation 
and promotion of intercollegiate athletics for over 300,000 
student-athletes.
    As the NCAA's Director of Gambling and Agent Activities, I 
am responsible for coordinating a comprehensive program to 
address gambling issues. My duties range from developing 
educational materials for NCAA members and student-athletes on 
sports gambling topics to conducting investigations related to 
violations of NCAA rules in this area.
    The NCAA opposes all forms of sports gambling because of 
its potential to undermine the integrity of sports contests, 
while jeopardizing the welfare of the student-athlete and the 
intercollegiate athletics community. Despite Federal and State 
laws that prohibit sports gambling in 47 States, this activity 
remains a growing problem on college campuses. I have witnessed 
firsthand the negative impact that sports gambling has on the 
lives of college student-athletes.
    Within the last year, the public has learned of point-
shaving scandals on the campuses of Arizona State and 
Northwestern University. The impact of these cases must not be 
minimized. Several of the student-athletes involved were 
indicted and sentenced to serve time in Federal prison. Coaches 
and teammates were betrayed and the two schools involved have 
seen their excellent reputations tarnished. It is clear that 
sports gambling is not a victimless crime.
    While there are no comprehensive studies available that 
analyze the prevalence of sports gambling or gambling in 
general on college campuses, the preliminary evidence reveals 
an alarming trend. A 1998 study conducted by the University of 
Michigan surveyed 3,000 NCAA female and male student-athletes. 
The research revealed that 35 percent of the student-athletes 
have gambled on sports while in college. Over 5 percent of the 
male student-athletes wagered on a game in which they 
participated, provided inside information for gambling 
purposes, or accepted money for attempting to perform poorly in 
a contest. Furthermore, according to Dr. Shaffer, Director of 
Harvard University Medical School's Division on Addiction, 
research shows that more youth are introduced to gambling in 
general through sports betting than through any other type of 
gambling activity.
    The high incidence of gambling on college campuses is not 
just limited to student-athletes; it extends to the general 
student body. A growing consensus of research reveals that the 
rates of pathological and problem gambling among college 
students are higher than any other segment of the population.
    As you can see, there is reason to be concerned about the 
impact of gambling on today's youth. It should not surprise 
anyone that the growth of Internet gambling presents a whole 
new list of potential dangers on our college campuses. Internet 
gambling provides college students with the opportunity to 
place wagers on professional and college sporting events from 
the privacy of their campus residence. Internet gambling offers 
students virtual anonymity. With nothing more than a credit 
card, the possibility exists for a student-athlete to place a 
wager via the Internet and then attempt to influence the 
outcome of the contest while participating on the court or 
playing field.
    But the very real potential for point-shaving instances is 
not the only troubling aspect of Internet gambling. If left 
unchecked, the growth of Internet gambling may be fueled 
further by college students. After all, who else has greater 
access to the Internet? Many college students have unlimited 
use of the Internet, and most residence halls are wired for 
Internet access.
    Furthermore, college students now have the means to place 
their wagers over the Internet. College campuses are being 
buried with representatives from credit card companies offering 
free gifts to students in return for filling out credit card 
applications. A recent Nellie Mae survey revealed that 65 
percent of all college students have at least one credit card, 
and that 20 percent have 4 or more credit cards, and the 
average balance on those credit cards is $2,200.
    Another concern for the NCAA and college administrators is 
that despite confusion among students regarding the legality of 
Internet gambling, nearly every State has laws that prohibit 
sports gambling. In my position with the NCAA, I continue to 
receive questions from students and administrators who received 
unsolicited E-mails from Internet sports sites. This practice 
has become so troublesome that legislation has been recently 
introduced in the Pennsylvania legislature aimed at protecting 
youth from the onslaught of unsolicited gambling advertisements 
via the Internet.
    My message to our student-athletes who receive these E-
mails is simple. Not only would your participation in this 
activity result in a violation of an NCAA rule, but you would 
likely be furthering the commission of a State crime. It is 
especially difficult for students to understand that not 
everything found on the Internet is legal.
    The best way of addressing Internet gambling in this 
country is for Congress to pass Federal legislation providing 
for a blanket prohibition of this activity in the United 
States. Senator Kyl's bill adopts this approach. While 18 
offshore Internet gambling operators were recently charged with 
violating Section 1084 of Title 18 of the United States Code, 
existing Federal law still needs to be updated.
    Section 1084 was enacted in 1961 and targeted sports 
betting via telephone. Senator Kyl's bill recognizes that the 
Internet is quickly moving to a wireless environment and will 
soon move beyond what is covered under section 1084. In 
addition, the criminal penalties found in Senator Kyl's bill 
will serve as a strong and much-needed deterrent.
    The NCAA recognizes that there is no perfect legislative 
solution in addressing the issue of Internet gambling. However, 
Internet gambling is still in its infancy. As the number of 
online sports betting sites continue to grow abroad, it is 
essential that the United States send a clear message that 
there is no longer any uncertainty. With the passage of the 
Internet Gambling Prohibition Act, it will be a violation of 
Federal law to accept bets over the Internet from the United 
States. A Federal prohibition will send a clear and powerful 
message to an Internet gambling industry that is still in the 
early stages of development. The NCAA strongly endorses the 
Internet Gambling Prohibition Act of 1999 and urges members of 
this subcommittee to move quickly in adopting this legislation.
    Thank you.
    Senator Kyl. Mr. Saum, thank you very much. We were just 
commenting, excellent presentations by everyone, and yours 
representing amateur athletics is very, very important.
    [The prepared statement of Mr. Saum follows:]

                    Prepared Statement of Bill Saum

    Mr. Chairman and members of the Subcommittee. I am pleased to 
appear before you today to express the National Collegiate Athletic 
Association's (NCAA) support for The Internet Gambling Prohibition Act 
of 1999, introduced by Senator Kyl.
    The NCAA is a nonprofit association of approximately 1,150 
colleges, universities, athletics conferences and related organizations 
devoted to the regulation and promotion of intercollegiate athletics 
for over 300,000 student-athletics. As the NCAA's director of gambling 
and agent activities, I am responsible for coordinating a comprehensive 
program addressing gambling issues. My duties range from developing 
educational materials for NCAA members and student-athletes on sports 
gambling topics to conducting investigations related to violations of 
NCAA rules in this area.
    The NCAA opposes all forms of sports gambling because of its 
potential to undermine the integrity of sports contests while 
jeopardizing the welfare of the student-athlete and the intercollegiate 
athletics community. Despite federal and state laws that prohibit 
sports gambling in 47 states, this activity remains a growing problem 
on college campuses. I have witnessed, firsthand, the negative impact 
that sports gambling has on the lives of college student-athletes. 
Within the last year, the public has learned of point shaving scandals 
on the campuses of Arizona State University and Northwestern 
University. The impact of these cases must not be minimized. Several of 
the student-athletes involved were indicted and sentenced to serve time 
in federal prisons. Coaches and teammates were betrayed and the two 
schools involved have seen their excellent reputations tarnished. It is 
clear that sports gambling is not a victimless crime.
    While there are no comprehensive studies available that analyze the 
prevalence of sports gambling or gambling in general on college 
campuses, the preliminary evidence reveals an alarming trend. A 1998 
study conducted by the University of Michigan surveyed 3,000 NCAA male 
and female student-athletes. The research revealed that 35 percent of 
student-athletes gambled on sports while attending college. Over 5 
percent of male student-athletes wagered on a game in which they 
participated, provided inside information for gambling purposes, or 
accepted money for performing poorly in a contest. Furthermore, 
according to Dr. Howard Shaffer, director of Harvard University Medical 
School's Division on Addiction, research shows that more youth are 
introduced to gambling through sports betting than through any other 
type of gambling activity.
    The high incidence of gambling on college campuses is not just 
limited to student-athletes, it extends to the general student body. A 
growing consensus of research reveals that the rates of pathological 
and problem gambling among college students are higher than any other 
segment of the population.
    As you can see, there is reason to be concerned about the impact of 
gambling on today's youth. It should not surprise anyone that the 
growth of Internet gambling presents a whole new list of potential 
dangers on college campuses. Internet gambling provides college 
students with the opportunity to place wagers on professional and 
college sporting events from the privacy of their campus residence. 
Internet gambling offers students virtual anonymity. With nothing more 
than a credit card, the possibility exists for any student-athlete to 
place a wager via the Internet and then attempt to influence the 
outcome of the contest while participating on the court or playing 
field.
    But the very real potential for point shaving incidents is not the 
only troubling aspect of Internet gambling. If left unchecked, the 
growth of Internet gambling may be fueled further by college students. 
After all, who else has greater access to the Internet? Many college 
students have unlimited use of the Internet and most residence halls 
are wired for Internet access. Furthermore, college students now have 
the means to place wagers over the Internet. College campuses are being 
deluged with representatives from credit card companies offering free 
gifts to students in return for filling out credit card applications. A 
recent Nellie Mae survey revealed that 65 percent of undergraduate 
students have credit cards, 20 percent have four or more cards.
    Another concern for the NCAA and college administrators is that 
despite confusion among students regarding the legality of Internet 
gambling, nearly every state has laws that prohibit sports gambling. In 
my position with the NCAA, I continue to receive questions from 
students and administrators who receive unsolicited e-mails from 
Internet sports book sites. This practice has become so troublesome 
that legislation has been recently introduced in the Pennsylvania 
legislature aimes at protecting youth from the onslaught of unsolicited 
gambling advertisements via the Internet. My message to student-
athletes who receive these e-mails is simple--not only would your 
participation in this activity result in a serious NCAA rules violation 
but you would likely be furthering the commission of a state crime. It 
is especially difficult for students to understand that not everything 
found on the Internet is legal.
    The best way of addressing Internet gambling in this country is for 
Congress to pass federal legislation providing for a blanket 
prohibition of this activity in the United States. Senator Kyl's bill 
adopts this approach. While 18 off-shore Internet gambling operators 
were recently charged with violating section 1084 of Title 18 of the 
U.S. code, existing federal law still needs to be updated. Section 1084 
was enacted in 1961 and was targeted at sports betting over telephone 
lines. Senator Kyl's bill recognizes that the Internet is quickly 
moving to a wireless environment and will soon move beyond that which 
is covered under section 1084. In addition, the criminal penalties 
found in Senator Kyl's bill will serve as a strong and much needed 
deterrent.
    The NCAA recognizes that there is no perfect legislative solution 
in addressing the issue of Internet gambling. However, Internet 
gambling is still in its infancy. As the number of on-line sports 
betting sites continues to grow abroad, it is essential that the United 
States send a clear message that there is no longer any uncertainty--
with the passage of The Internet Gambling Prohibition Act it will be a 
violation of federal law to accept bets over the Internet from the 
United States. A federal prohibition will send a clear and powerful 
message to an Internet gambling industry that is still in the early 
stages of development.
    The NCAA strongly endorses The Internet Gambling Prohibition Act of 
1999 and urges members of this Subcommittee to move quickly in adopting 
this legislation.

    Senator Kyl. Now, Ms. Marianne McGettigan, counsel--well, I 
will let you go ahead and introduce yourself in your statement. 
Thank you for being here.

                STATEMENT OF MARIANNE McGETTIGAN

    Ms. McGettigan. Thank you, Mr. Chairman. Mr. Chairman, 
Senator Feinstein, thank you very much for the opportunity to 
appear here today on behalf of the Major League Baseball 
Players Association. I do have a complete statement and I would 
ask that it be included in the record in full.
    Senator Kyl. All of the statements will be included, and 
thank you for summarizing.
    Ms. McGettigan. Thank you. I am here today to express why 
it is that the Players Association no longer has any objection 
to the passage of the Kyl bill. I am glad to be here in this 
capacity and not----
    Senator Kyl. I am glad you are here in that capacity.
    Ms. McGettigan. Thank you. For the reasons set forth in my 
testimony, we have no objection to Senator Kyl's most recent 
draft bill. This change in our position is based on our 
understanding that, first, this new language applies the 
sanctions of the bill only to those involved in the business of 
gambling and not to individual participants.
    Second, fantasy sports games and contests that are 
currently legal in a State will continue to be legal both as a 
matter of State law and as a matter of Federal law. And, third, 
to state it another way, because this will be a Federal law, 
this proposal nonetheless is not intended to make unlawful 
under Federal law activities that are currently lawful under 
the law of certain States. In other words, it retains the 
status quo.
    I would also say that if that is a correct understanding, 
we are confident that the National Football League Players 
Association and the National Hockey League Players Association 
will join us in removing our previous objections to the 
legislation.
    Before I briefly state our underpinnings for our objections 
to the previous bills and the changes in the new proposal that 
appear to cure those objections, I would like to pose three 
questions for the record that stem from our reading of the new 
proposal, and I would hope that at some point in the 
legislative history there would be some attempt to address 
these questions, even if just briefly.
    The first question is the use of the phrase ``otherwise 
lawful,'' we presume to be a reference to a specific State. In 
other words, if the legality of a sports game or contest is 
determined on a State-by-State basis, we hope that it is not 
the case that if a fantasy sports game is illegal in only one 
State, it is therefore illegal under this bill in all other 
States. We trust that is not the construction that was intended 
by this phrase.
    Second, does the bill require the conclusion that a certain 
fantasy sports game may be a violation of Federal law in one 
State where it violates State law, but not a violation of 
Federal law in another State? In other words, the very same 
game could be a violation of Federal law in Wisconsin, but not 
a violation of Federal law in Iowa. That leads to the 
conclusion that what is the Federal violation is that you have 
violated State law, not that it is any particular construction 
of a game.
    And, third, is the refusal of the sponsor to permit a 
participant to claim a prize if the participation is undertaken 
in a State in which a fantasy game is illegal sufficient to 
protect the sponsor from prosecution under this law? We trust 
that the answer to that is yes, and that is partially the basis 
for the removal of our objections.
    Unless anyone has any questions about why we are 
interested, I will simply state for the record we have two 
interests. One is that we do license these fantasy sports sites 
because they are using the identities of players, and we do get 
some licensing revenue from that activities. But in the course 
of all the licensing activity we do, it is a very small amount 
and that is not the principal concern we have with regard to 
fantasy sports.
    Our concern is that these participants represent our most 
avid fans. They follow the sports page everyday. They are 
interested in players, whatever team they may be on, and we 
would hate to see anything that would dampen their enthusiasm 
for the game.
    As a former assistant attorney general for now Senator 
Gorton, former Attorney General Gorton, I am very understanding 
of the position of the attorneys general in terms of 
enforcement. And I must say that one of the problems I have had 
with this all along is I viewed the Internet gambling issue as 
one of a broader class, and that is consumer protection on the 
Internet.
    I think the attorneys general will be coming back at some 
point saying that they have the same type of problem enforcing 
their laws in regard to things such as false advertising or 
ordering groceries on the Net and paying for them with your 
credit card and then not getting the groceries, or ordering a 
camera or a computer and not getting the product, or having a 
problem with the product and not having a warranty that is 
alleged to be there honored, et cetera.
    So I think this is merely a subset of what will be a 
greater problem, and I think it is worth noting that the reason 
for this is unlike anything we have ever had in the past. Those 
who are lawyers in the room remember from first year civil 
procedure the notion of doing business within a State. 
Jurisdiction of a State was premised on whether or not the 
merchant made a purposeful decision to go and do business in a 
State.
    As opposed to what we used to have, it is no longer the 
merchant that decides to do business in the State; it is the 
consumer who decides whether the merchant will do business in 
the State. The consumer, via the Internet, pulls the merchant 
into a State even if the merchant does not intend to be there. 
And that is one of the problems you have with enforcement. It 
is not enough for the merchant to say, I don't want to do 
business in Wisconsin. If a person in Wisconsin attaches their 
modem and gets online, they are doing business in Wisconsin 
whether they want to or not, and that is one of the enforcement 
problems that will occur.
    One of the ways that we think we have been helpful in that 
with regard to fantasy sports is before these fantasy sports 
games lawfully can use the likenesses of players and the names 
of players and their statistics, they must be licensed by the 
Association. Just like what you heard from New Jersey about 
what is done in terms of making sure that these are appropriate 
vendors, we do the same with sites. We make sure that they are 
reputable sites before we allow them a license to use the 
likenesses of the players.
    If people are playing fantasy games and they understand 
that, they will avoid sites that do not have the license of the 
Players Association visible on the page. And they will be 
assured that if it is visible that they will have certain 
consumer protections afforded them or that license will be 
revoked.
    And the final thing I wanted to say is that all along, as a 
matter of public policy, our concern has been why would 
Congress want to regulate fantasy sports. I heard this quote 
alleged to have been made by the chairman, and I don't want 
to----
    Senator Kyl. The quotation is correct, although it didn't 
have specific reference to fantasy sports.
    Ms. McGettigan. OK.
    Senator Kyl. Click the mouse, bet the house.
    Ms. McGettigan. Right.
    Senator Kyl. I stole that from somebody else and forgot 
who, but it was a great sound bite.
    Ms. McGettigan. I thought it was an excellent way of 
summarizing our first concern, and that is that we see two 
prongs to public policy in this regard. One is that you don't 
want the participant playing any game on the Net to potentially 
lose the house. And I suggest that given the small amounts 
involved in fantasy sports, I made the comment facetiously in 
my testimony noting that I thought it was a very good quote 
that in our case it is click the mouse, bet a lunch. It is that 
degree. It is not that anyone can ever get online and lose all 
this money from simply playing fantasy sports.
    The second is that there is no threat to the integrity of 
the game, and I think Mr. Pash would agree with me on this. We 
agree with the NFL and the other leagues. We do not support 
gambling that in any way threatens the integrity of 
professional sports. But we do not think that fantasy sports 
threatens the integrity of those games. There is no incentive 
for anyone to attempt to change the outcome of any one game, 
the performance of any one player. Conversely, there is no 
incentive for anyone to change their performance over a season 
or in any particular game. So we don't think there is really 
any public policy that should be of concern to Congress.
    In conclusion, we appreciate the Senators' willingness to 
work with us and to listen to our concerns and respond to them. 
We think that it has been done, assuming the answers that we 
think are known to those three questions are correct, and we 
would be willing to work with the chairman and members of the 
subcommittee and the full committee in any way possible in the 
future.
    Thank you very much.
    [The prepared statement of Ms. McGettigan follows:]

               Prepared Statement of Marianne McGettigan

    Mr. Chairman, members of the Subcommittee, my name is Marianne 
McGettigan. I represent the Major League Baseball Players Association 
(MLBPA). I am here today to address the affect of Senator Kyl's 
proposed legislation to prohibit Internet gambling on what is commonly 
referred to as fantasy or rotisserie sports leagues. For reasons I will 
explain below, unlike the case with previous proposals, the Major 
League Baseball Players Association has no objection to Senator Kyl's 
most recent draft bill dealing with Internet gambling. This change in 
position is based on our understanding that:

  (1) This new language applies the sanctions of the bill only to those 
    involved in the ``business of gambling,'' not to individual 
    participants;

  (2) Fantasy sports games and contests that are currently legal in a 
    state will continue to be legal both as a matter of state law and 
    federal law: and

  (3) Stated another way, because this will be a federal law, this 
    proposal nonetheless is not intended to make unlawful under federal 
    law, activities that are currently lawful under the law of certain 
    states. The proposal retains the status quo.

The following testimony, and our support for this proposal, is premised 
on this understanding. And, if this understanding is correct, we are 
confident that the National Football Players Association and the 
National Hockey League Players Association will join us in removing our 
previous objections to Senator Kyl's legislation.

    The MLBPA understands the concerns of Congress with respect to the 
growth of gambling on the Internet and the frustration of the state 
attorneys general in attempting to enforce state law when the Internet 
is involved. The Internet is a truly remarkable medium and we all have 
much to learn about how best to use it as well as what social ills it 
may foster. But in attempting to address what some states believe to be 
a problem, i.e., gambling, the bills that were under consideration by 
the 105th Congress, S. 474 as reported by this Committee and H.R. 2380, 
went too far. Both were overly broad and criminalized conduct that 
should not be criminalized, including fantasy sports leagues, and in 
the case of S. 474, even some laudable educational contests found on 
the Internet. The Players Association opposed both those bills, at 
least in the form they were introduced, because the bills threatened 
the existence of many fantasy baseball games or contests on the 
Internet.
    The interest of the Association in fantasy or rotisserie baseball 
is twofold. First, we currently license eight providers and are in 
negotiations with others. Although the licensing revenue generated by 
these games is appreciated, it is only a very modest part of our 
licensing program and not our principal concern with this legislation. 
Rather, our second and primary concern is that a prohibition of 
otherwise lawful fantasy baseball games would be a disservice to many 
of baseball's most avid fans. We encourage the devotion of these fans 
to the game and would hate to see that interest threatened, 
particularly when we see no countervailing public purpose being served.

                the evolution of fantasy sports leagues

    Let me briefly explain the evolution of fantasy sports leagues and 
how they operate on the Internet. As most sports fans know, fantasy 
sports leagues are not a commercial invention but are instead the 
product of the ingenuity of fans. Long before the Internet, these fans 
chose to test their baseball managerial skills by putting together an 
otherwise nonexistent team, one that played no games, but was 
nonetheless comprised of active players (at least on paper). The fan 
would manage this team over the course of a season and have a 
simulated, but nonetheless somewhat realistic, means by which to 
measure his or her managerial skill against the others in the fantasy 
league and against big league managers.\1\ The only dreaded aspect of a 
fantasy baseball league was the statistical one. Because of the need 
for ongoing and timely statistical analysis, the onerous job of daily 
and weekly number crunching was routinely rotated among the players in 
a league.
---------------------------------------------------------------------------
    \1\ It should not surprise the Subcommittee that numerous fantasy 
sports leagues have been developed and sustained by staff members on 
Capitol Hill for many years.
---------------------------------------------------------------------------
    After these leagues had been in existence for some time, the 
Internet became available to the general public. Soon web sites began 
offering to do number crunching for a modest fee, promising greater 
accuracy, a greater range of information, and also providing the 
opportunity for individuals who might want to play, but who are not in 
a position to be part of a league, to join with other individuals 
through the unique ability of the Internet to link people together from 
all different locations. In other words, whereas before the Internet, 
my fantasy sports league might be comprised only of my friends who work 
inside the beltway, my Internet fantasy sports league may link me with 
friends from Montana, Canada and the UK, or, if I had no one to play 
with, the Internet would link me with enough other interested fans 
(formerly unknown to me) to form a league.
    If that were all the Internet web site sponsors provided, however, 
there would be no need for me to be here today, for all that would be 
involved would be the purchase of statistical and communications 
services on the Internet. What has triggered the casting of the 
gambling net over this harmless hobby of fantasy sports leagues is the 
provision of a prize by some of these web sites for the participant 
demonstrating the most skill over the course of the sports season.
    The willingness on the part of some individuals and public 
officials to subject fantasy sports leagues to the same prohibition as 
on-line casino gambling is, we believe, misplaced. The rationale for 
prohibiting this hobby has never been explained to us in terms of any 
principle of public policy that would be served by doing so. To date, 
the only explanation offered has been that some are willing to label 
this activity gambling without further review and to conclude that if 
it is gambling it must be banned. But labels, without more, are not an 
acceptable basis for making public policy.

          fantasy sports leagues and public policy principles

    In our view, the government has two principal and legitimate 
concerns that would justify the prohibition of certain gaming 
activities in the area of sports. The first is the need to protect 
those who cannot, or will not, protect themselves from risking more 
than money, or other valuables than they can afford to, the so-called 
problem or pathological gamblers. While it is true that playing in a 
fantasy league takes a considerable investment, it is not one of money, 
but of time and interest. Over the course of a season the actual 
monetary investment is de minimis. The Chairman has been quoted, 
accurately or not, on this aspect of public policy. His quote reduces 
this prong of our public policy discussion to a succinct, easily 
understood and easily applied concept of governmental concern: ``Click 
the Mouse, Bet the House.''
    Applying this fitting shorthand of the policy to fantasy sports, 
while participants may ``Click the Mouse,'' they do not ``Bet the 
House.'' There are two reasons for this. First, no bet is made in 
fantasy sports. Rather, consideration is rendered for the statistical 
services and analysis provided by the sponsoring web site and any prize 
awarded is done so on the basis of skill, not chance. Second, even if 
one considers the entry fee and transaction fees to be a bet, which we 
do not, the amount anted by the participant can be likened more 
appropriately to ``Bet a Lunch,'' or at worst a lunch for two. Hardly a 
danger of the kind or magnitude that has prompted the Subcommittee's 
review.
    The second legitimate governmental concern is to protect the 
integrity of the game or contest itself. But, because of the structure 
of fantasy sports leagues, no individual baseball player's performance 
or team's performance can ever be influenced by the existence of a 
fantasy sports league. There is absolutely no incentive for any 
participant to attempt to influence the outcome of a game, or a 
baseball player's performance.
    If these principles of public policy are reviewed in the context of 
fantasy or rotisserie sports leagues I believe the Subcommittee will 
agree with the Players Association that fantasy or rotisserie sports 
leagues are not within the scope of activity that ought to concern the 
government. After reviewing the proposal of Senator Kyl for 
introduction in the 106th Congress, it appears that the Senator has 
reached the same conclusion.
                  senator kyl's 1999 draft legislation
    As we understand it, both the prior bills and Senator Kyl's current 
proposal are attempts to solve the enforcement problem raised by the 
states attorneys general, namely that certain gambling activities that 
would be illegal under state law, or under federal law by virtue of 18 
USC 1084, are avoiding enforcement because of the use of the Internet. 
In particular, the borderless nature of the Internet has created 
significant jurisdictional problems for the state attorneys general.\2\ 
We have no opposition to the enactment of legislation to facilitate the 
enforcement of state law for activities, including gambling, that are 
having an effect within a state's borders and which are unlawful within 
that state. The Major League Baseball Players Association does not 
condone gambling. Sports gambling is a threat to the very sport that 
employs our members.
---------------------------------------------------------------------------
    \2\ It should be noted that the Internet creates new and untested 
challenges for merchants as well. Whereas legal concepts involving 
commerce have always been based on a choice by the merchant of the 
geographical locations in which to conduct business, that premise is no 
longer a valid one when the Internet is involved. The customer now 
controls where business is conducted and the challenge to the merchant 
is to identify those customers it chooses not to do business with 
notwithstanding the mobility of computer and the fact that anywhere 
there is a phone line there is a potential violation of a state law.
---------------------------------------------------------------------------
    But in the past, we have opposed these bills for two reasons. 
First, the Association does not consider participation in fantasy 
baseball leagues to be gambling. Some prior bills have cast a net of 
prohibition too broadly and have, in fact, made illegal some currently 
legal activity for no apparent public policy reason. For that reason, 
we have been greatly troubled by the language in prior bills which we 
thought created a chilling effect on what are today legal Internet 
fantasy sports leagues in many states in order to assist certain other 
states in prohibiting online gambling by individuals within their 
borders. We saw no public policy being served by purposefully, or 
inadvertently, prohibiting such leagues where they are currently 
permitted. Indeed, we see no public policy being served by the 
prohibition of such leagues in those states that currently prohibit 
fantasy sports leagues. As stated above, participation in fantasy 
sports leagues neither threatens the fiscal well-being of the 
participant nor the integrity of any player of the sport or the outcome 
of any game or series of games. What, therefore, is the good that is 
served in prohibiting them?
    We have reviewed Senator Kyl's proposed bill for introduction in 
this Congress. Unlike prior bills, it has been written so as to remove 
the vagueness and doubt about its application to fantasy sports leagues 
on the Internet. It neither legalizes games or contests that may be 
considered to be illegal under the law of some states, nor does it 
criminalize fantasy games or contests that are otherwise legal. In 
other words, it appears to preserve the status quo. It creates no 
omnibus federal law prohibiting fantasy sports leagues, but provides 
necessary enforcement tools for state attorneys general to enforce the 
public policy of their states with respect to activities that would 
otherwise be within their jurisdiction in the normal course, but for 
this new technology.
    That is how it should be. The Internet should not be a safe haven 
for otherwise unlawful activity. Neither should the use of the Internet 
alone, make illegal otherwise lawful activity. Based on this reading of 
Senator Kyl's bill, we have no objection to the legislation and will 
not oppose it. Having said that, it would be inappropriate for the 
Association to comment on the other aspects of the bill that may 
continue to be disputed. But with respect to the interests of the 
Association, our prior objections have been addressed.

                               conclusion

    The Major League Baseball Players Association is strongly opposed 
to gambling on sporting events, and we support efforts to protect 
problem and pathological gamblers. We neither seek nor suggest that any 
gambling prohibited by current law should be permitted because of the 
use of the Internet. Although the MLBPA does not believe that 
participation in fantasy sports leagues--over the Internet or 
otherwise--constitutes gambling, we understand the resolve and 
authority of state attorneys general to enforce the laws of their 
states. Nonetheless we will continue to oppose any effort to 
criminalize what is currently legal activity in other states.
    Senator Kyl's most recent legislative proposal both recognizes our 
position and clearly addresses it. It preserves the status quo. It 
neither legalizes activity on the Internet that would be illegal under 
state law, nor does it make illegal otherwise legal conduct under state 
law simply because Internet is the medium used.
    Moreover, because it applies only to those in the business of 
gambling it would relieve our fans of the threat of prosecution. This 
is a very significant point. And, those businesses providing services 
to our fans, although not in the business of gambling as far as we are 
concerned, can nonetheless protect themselves, as many already do, by 
prohibiting participants from being eligible for a prize in those 
states which consider such games to be illegal gambling. If we 
understand this construction correctly, we have no objection to this 
legislation and support it insofar as it protects the integrity of the 
game of baseball and the performances of baseball players, while 
preserving the rights of fans to continue a popular hobby in these 
states which now permit it.
    We greatly appreciate the Chairman's willingness to listen to our 
concerns and address them in his current proposal and thank him for the 
opportunity to present our views to the Subcommittee.

    Senator Kyl. I appreciate the testimony of all three of 
you. I would note this was last week's USA Today, March 12 
through 14, headline--and, of course, it has to do with the 
NCAA tournament--``Basketball? You Bet. Gambling Finds a Home 
on the Web.'' It is all about how there is a ton of money being 
bet. I think the story says 2.5 million people are estimated to 
be playing NCAA tournament pools online this year. More than 
$300 million was bet on sports online last year, and the 
article goes on to discuss that, which of course illustrates 
the increasing nature of the concern that amateur sports has 
and which, of course, affects professional sports as well, and 
the players that are involved as well.
    So it seems to me that this is a very contemporary problem. 
It is not one that is hypothetical. It is very real and it is 
the reason for our attempt to ensure that what Congress decided 
back in 1961 when it passed the Wire and Telephone Act is still 
good policy today in the year 1999, but needs to be brought up 
to date because of the fact that it is now fiber optic cable 
and microwave transmission that are largely accounting for the 
transmission of this data.
    First of all, I think we can answer the questions, Ms. 
McGettigan, for the record. Obviously, for example, it is 
certainly the case that you would have to have prize 
consideration and chance for gambling. Well, if there is no 
prize, then there can't be gambling. At least that is the way I 
look at it, and that is the way I think any State attorney 
general would look at it.
    Clearly, if it is illegal in a State and there is no prize 
offered, then I see absolutely no reason why anyone would 
contend that it is gambling. But we will make sure we are in 
accord with respect to all three, but your understanding is 
correct as far as I am concerned that we are not attempting to 
make illegal by this legislation fantasy sports activity that 
would be legal in States.
    And so I am pleased that previous opposition has been 
removed, and would also like to insert into the record a couple 
letters that we have. And there will be others that we will get 
as well from other entities that have expressed support. I will 
not read the entire letter, but from James Hickey, a March 22 
letter, ``The American Horse Council is pleased to support your 
Internet Gambling Prohibition Act of 1999,'' and will continue 
to work with us to support the bill and work for its enactment.
    On March 23, the Commercial Internet Exchange Association, 
including US West, America Online, and U.S. Telephone 
Association, expressed their appreciation for the approach that 
we have taken to working with them to resolve the issues that 
they had. And based on that experience, they are confident that 
the remaining service provider liability issues will be 
resolved. Those are the issues that I referred to earlier with 
respect to the obligations that we would place on those 
entities to assist in enforcement of the law, obligations which 
we in no way want to inhibit them either economically or 
technically.
    [The letters referred to follow:]

                                                    March 23, 1999.
Hon. John Kyl,
Chair, Subcommittee on Technology and Terrorism,
Hart Senate Office Building, Washington, DC.
    Dear Senator Kyl: We are unable to testify at the March 23rd 
Subcommittee hearing on your Internet gambling bill. We write, however, 
to express our appreciation for the cooperative, open approach that you 
and your staff have taken to revising the service provider liability 
portions of the bill.
    We received the latest draft of your new bill today, and appreciate 
in the context of this particular issue the basic approach it takes to 
service provider liability related to illegal Internet gambling.
    The technological and practical issues related to the role of 
service providers in Internet communications are complex, and we very 
much appreciate the time and effort that you and your staff have 
already devoted to listening to our concerns and working with us on 
them. We look forward to continuing to work cooperatively with you and 
your staff on several refinements before the bill moves forward to 
Subcommittee mark-up. Based upon our experience working on the bill 
thus far this year, we are confident that these remaining service 
provider liability issues will be resolved in a form that merits Senate 
passage.
            Sincerely,
                                   Commercial Internet eXchange 
                                       Association,

                                   United States Telephone Association,

                                   America Online,

                                   USWest.
                                 ______
                                 

 Prepared Statement of Ralph Sims on Behalf of the Commercial Internet 
                          Exchange Association

                            i. introduction
    Mr. Chairman and members of the Commission, my name is Ralph Sims. 
I am pleased to appear before you to testify on behalf of the 
Commercial Internet eXchange Association (CIX), which includes over 150 
members, as well as the Oregon Internet Service Providers Association 
and the Washington Association of Internet Service Providers, 
collectively representing 100 independent Internet service providers 
serving approximately one million users. Also appearing with me today 
is Jim Halpert of Piper & Marbury L.L.P., who is counsel to CIX. I am 
Director of Research and Development for WinStar Broadband Services and 
have been a provider of Internet services since 1987.
    I would like to take a few moments today to offer some information 
about the difficulties and realities involved in attempting to prevent 
illegal gambling traffic on the Internet. The associations of which I 
am a member in no way condone illegal Internet gambling. Their member 
companies, who are primarily small businesses, take action against 
customers whom they learn are using their services for such activities. 
However, there are clearly defined limits to what service providers can 
do in this regard.
    For your information, I attach a memorandum that provides 
additional detail concerning the technological limitations I will 
discuss today.
                  ii. blocking illegal gambling sites
A. It is not possible to block illegal traffic
    Many people have the mistaken impression that Internet service 
providers, or ISPs, act as a traffic officer that can easily block or 
otherwise control information travelling to or across their networks. 
They imagine that problems of illegal content on the Internet could be 
resolved if ISPs assumed the role of traffic cop. This could not be 
further from the truth. Unless content is stationary and publicly 
displayed on an ISP's network (for example on a web site), the ISP has 
virtually no ability to control it. The difficulty lies in the fact 
that the Internet is highly flexible and dynamic. While this is one of 
its principal strengths as a communications medium, it is also the 
primary reason that providing ``traffic control'' is essentially 
impossible.
    The various computers on the Internet--whether the one that hosts 
the National Gambling Impact Study Commission's web site, the 
supercomputers at research facilities, or your laptop--are all assigned 
numerical addresses when they access the Internet. These numerical 
addresses are issued to an organization (such as an ISP) for use by 
those using its services. These addresses are known as Internet 
Protocol or ``IP'' addresses, and are the means by which the computers 
communicate with each other.
    While the machines that make the Internet function can handle these 
numbers quite effectively, people can't. Hence a system was developed 
to translate or ``map'' these IP addresses to actual names that can be 
easily identified by the users of those machines. For instance, a 
computer's IP address may be 152.163.210.10, but it might be known to 
users as ``www.aol.com.'' This mapping is part of what is known as 
Domain Name Service, or DNS. It can be compared to an open global 
telephone book in which anyone can make changes to any entry with 
minimal effort and without knowledge from the organizations tasked with 
maintaining the entries.
    Furthermore, a single Internet domain can map to a large number of 
IP addresses. For example, in reality, www.aol.com has 18 IP addresses 
that other computers on the Internet recognize. Similarly, a single IP 
address may map to a large number of Internet domain names.
    While a gambling site may be located at one Internet address one 
day, it can be at another on the next. Simply, put, sites--legal or 
otherwise--move. And they can move quickly--often within minutes. To 
use the telephone book analogy further, it's as though you could change 
your telephone number repeatedly in a single day without the 
permission, or even the knowledge, of your local telephone company, and 
the telephone network would automatically send calls to these changing 
phone numbers so that your friends could continue to reach you.
    The techniques to do this are readily available today as commercial 
products from IBM, F5 Labs, Cisco Systems, and others. They are used by 
reputable companies to provide extremely high reliability and 
redundancy in the event access to a particular Internet address--either 
its IP address or its domain name--is interrupted or severed. For 
example, IBM's product came out of its method used to keep the web 
sites of the Atlanta Olympics highly accessible during times of severe 
network congestion and overload. An illegal gambling site would have no 
difficulty obtaining and implementing these techniques to evade 
blocking attempts by Internet service providers.
    These techniques--and there are many of them--make it impossible 
for Internet service providers to block sites effectively. As soon as 
the blocked site moves to another Internet address, the original filter 
is no longer useful.
    Furthermore, an ISP's blocking efforts would work only for its 
network. Thus, if an Internet service provider's blocking efforts could 
somehow overcome these obstacles, they would be effective only on that 
service provider's network. Unless all ISPs in the United States took 
the same steps, millions of others users would still have access to the 
illegal site.
B. Blocking efforts impose unjustifiable costs on lawful users and ISPs
    Although blocking is ineffective against sites (such as illegal 
gambling sites) that expect to be the targets of blocking efforts, it 
can impose significant costs on lawful users of the network, as well as 
on Internet providers who might be asked to implement blocks.
    First, blocking efforts can prevent users from obtaining access to 
unsuspecting legitimate sites that share the same IP address or 
Internet domain with an illegal, blocked site. For example, if one AOL 
user decided to run an illegal NCAA pool from his personal home page, 
and all other Internet providers were ordered to block that address, 
the home pages of nearly a million innocent AOL users would likely also 
be blocked.
    Second, blocking efforts slow down a network for all users. The 
more blocks an ISP must put in place, the slower the ISP's network. 
Every time an Internet user requests access to a site, the network must 
cross-check that site request against the blocked site list. As you can 
imagine, it would not take very long before the blocked site list gets 
quite large trying to keep up with the shifting list of addresses that 
illegal gambling sites will use. Soon, valuable time will be lost on 
each site selection to process the cross-check--without any assurance 
that the blocking effort will even be effective. In extreme cases, a 
very long list of sites to block could cause network failure. As a 
growing number of users are coming to rely upon the Internet for 
important business communications--even for telemedicine and other uses 
connected with human safety--it is very hard to justify reducing the 
performance of the network in order to engage in the futile task of 
attempting to block illegal sites.
    Finally, programming computers on an ISP's network to implement and 
update blocks--not to mention the difficult and costly exercise of 
trying to figure out which Internet domains and IP addresses illegal 
gambling sites are using--is expensive and time-consuming. These sorts 
of costs are ordinarily borne by law enforcement, not by commandeering 
the resources of innocent private parties.
        iii. gambling material posted to isp's computer servers
    The possible effective means of preventing illegal gambling on the 
Internet are:

  (1) Prosecuting those engaged in illegal gambling activities; and

  (2) Obtaining removal of illegal gambling material at its source--the 
    Internet sites and the computer servers at which the illegal 
    gambling material is posted and originates.

    It is not possible to prevent third parties from posting such 
illegal content in the first place. There are a great number of fora on 
the Internet--including web sites, chatrooms, and newsgroups--where 
millions of users are able to post material of their choice without 
editing by the service provider. The only way to stop such postings is 
almost always to close down these fora completely. For example, AOL 
alone has tens of thousands of chatrooms and provides its customers 
with the opportunity to create their own web sites. Furthermore, ISPs 
that ``host'' websites (provide computer server space to others who 
decide what content they want to place on the site), typically host 
tens of thousands of sites and do not know what content will be or has 
been placed on the site.
    There are over 6,000 ISPs in this country, most of whom are small 
businesses who compete in a highly competitive market by providing low-
cost service with lean staffing. These providers have neither the staff 
nor the resources to monitor posting that others have made to their 
computer servers.
    However, when ISPs are notified by law enforcement that illegal 
gambling content has been posted on their servers and of the location 
of that content, they stand ready to act to remove the content from 
their servers. Where the illegal content was posted by an ISP's 
subscriber who turns out to be operating a gambling business, the ISP 
also can terminate the account of this illegal business. This approach 
can ensure that illegal gambling content is promptly and effectively 
removed at its source. At a minimum, it should make possible the 
removal of illegal gambling content from all computer servers in the 
United States.
                             iv. conclusion
    In conclusion, Mr. Chairman and members of the Commission, Internet 
service providers are willing to play a constructive role in helping 
law enforcement address illegal gambling activity. Many ISPs already 
work with law enforcement and government agencies to prevent other 
illegal activities over the Internet. However, it is impossible for our 
industry to stop illegal Internet gambling traffic for the reasons I 
have outlined. We could not comply with legislation that required a 
technical solution to prevent illegal gambling, or other illegal 
activities, on the Internet. We would welcome the opportunity to 
discuss this dilemma further, and to respond to any questions you may 
have.
                                 ______
                                 
                                    American Horse Council,
                                                    March 22, 1999.
The Hon. Jon Kyl,
Hart Senate Office Building, Washington, DC.
    Dear Senator Kyl: The American Horse Council (AHC) is pleased to 
support your Internet Gambling Prohibition Act of 1999. The AHC 
includes the major associations of race tracks, breeders groups and 
horsemen's organizations, which collectively comprise the pari-mutuel 
horse racing and breeding industry in the U.S.
    We commend you for both your initiative in proposing the 
legislation to address the important social issues presented by 
Internet gambling and for your willingness to work with the horse 
industry in addressing our concerns regarding regulation in this area.
    The proposed legislation addresses the use of interactive 
technology with respect to live horse racing in a manner that we 
believe will advance the goals of the legislation, while taking into 
account the unique structure of regulation to which our industry is, 
and has long been, subject to under both State and federal law, 
particularly the Interstate Horseracing Act of 1978 (15 U.S.C. 1301 et 
seq.).
    We would like to thank you and your staff for reaching out and 
responding to the concerns raised by this important industry and sport, 
which has a $34 billion economic impact on the U.S. economy, supports 
nearly a half-million jobs and involves more than 700,000 horses. On 
behalf of the AHC, which represents all segments of this industry, we 
pledge to support your bill in its present form in its entirety and are 
committed to working for its enactment in both houses without any 
material change.
            Sincerely,
                                      James J. Hickey, Jr.,
                                                         President.

    Senator Kyl. I would like to ask Senator Feinstein if she 
would like to begin the questioning.
    Senator Feinstein. Well, believe it or not, Mr. Chairman, I 
have no questions, but really just a comment. I think you are 
to be commended on this bill. I think this hearing is about as 
good as it gets in terms of revealing a very substantive block 
of support for the legislation.
    Ms. McGettigan, I think your comments were particularly 
helpful today because you indicated that one kind of 
outstanding area had been settled, and that was the fantasy 
sports area. I think now having the attorneys general, the 
National Football League, the NCAA, the NFL--I think all of 
that indicates that there is a very strong bulwark of support.
    I think one of the puzzling things to me has been that you 
can pass something through the U.S. Senate by a 90-10 vote and 
then all of a sudden it disappears. So we have to be alert. But 
I think the need is very clear. I think the dilemma here is 
clear. I think Ms. McGettigan's comments that this essentially 
doesn't disturb the status quo, that what is legal remains 
legal in the States, what is illegal remains illegal in the 
States--this really brings into tune a whole medium in this, 
and that is the Internet, in a meaningful way.
    So I think you are to be congratulated, and I am very happy 
to be supportive of the effort.
    Senator Kyl. Thank you, Senator Feinstein. I really 
appreciate your assistance and help on this as well, and our 
entire subcommittee. And I think the full committee will be 
acting on this legislation fairly quickly, as I said before.
    The reason, by the way, that this isn't law today, I think, 
is that our action was taken late enough in the game that when 
the House Judiciary Committee took it up, they were about to be 
embarked upon another activity, which some of you remember 
occurred last fall, and they did not have time to move this 
bill out of the House, onto the House floor, and to get into 
conference with us.
    There are just a couple of questions. Ms. McGettigan, I 
might ask you one question and it doesn't really have to do 
with the legislation because of the way that we have worked out 
the resolution with respect to fantasy sports. But one of the 
valid points I think that fantasy sports leagues make is that 
generally--and as far as I know, totally right now--the leagues 
are based upon competition over time, over a long enough period 
of time that it would be very difficult to influence the final 
result by any particular player's actions.
    It is not like fumbling the ball in a key football game or 
shaving points and underperforming in a basketball game. If you 
are betting on a season, for example, with a baseball league, 
it would be very, very difficult for a sports figure to 
adulterate the purity of the sport.
    But one of the questions I have always had is at what point 
does that become a problem, when you have a week of activity or 
a month of activity or a couple days of activity, and what will 
the fantasy sports--and I realize you don't have total control 
over this, although through licensing you have significant 
influence over it. What is your idea about how you would 
prevent that issue from ever arising?
    Ms. McGettigan. I would like to reserve the right to 
supplement this because you have given me quite a----
    Senator Kyl. Sure, yes. I know I am hitting you cold with 
it, but I think it is worth thinking about.
    Ms. McGettigan. It is a great question. When you get down 
to--as you know, in fantasy sports there are a couple of things 
at work. First of all, your team doesn't resemble any team that 
currently exists. So the Yankees may place the Red Sox and as 
far as my fantasy sports team is concerned, I don't care who 
wins because it may depend on how someone on the Red Sox 
performs in that versus someone on the Yankees, and over time. 
And as you said, what happens when you collapse that time, for 
instance, to a World Series? Are you going to get a Black Sox 
scandal?
    Given the way this is currently set up--and part of this is 
I think we need to know more about how the Internet is going to 
work out. Most of the games we license are ones you would 
recognize--ESPN, CBS Sports Line, the Sporting News, those 
types of web sites where you are trying to draw people in and 
you are also advertising other things, like sporting products, 
et cetera.
    They do offer a prize. At the moment, the prize is so small 
I cannot imagine anyone seeking to win the trip for two to the 
World Series being enough for them to say to David Cone, you 
know, please don't pitch your best in the sixth game of the 
World Series.
    Senator Kyl. But just because you recommend those that are 
licensed doesn't mean that an unlicensed--that is to say a 
fantasy sports league that isn't licensed by your organization 
couldn't operate legally under the definition that we have 
crafted here.
    Ms. McGettigan. That is correct. What I was saying is I 
would hope that those who participate would understand the 
significance of our licensing logo, that that would give them 
certain protection. But even for unlicensed sites, the way 
fantasy sports works at the moment, there simply isn't the 
incentive there as a matter of monetary fact for anyone to 
change their performance.
    And I think you would have to get to a single performance, 
a single game, and you are essentially saying would there be 
another Black Sox scandal. And I simply don't see factually a 
significant incentive there for anyone to change their 
behavior. As I say, I would like to consider it because I may 
be voicing it incorrectly. It may be that as a matter of 
construction, I could better state why it isn't a problem, but 
I do not believe it is a problem even with a single event.
    Senator Kyl. Well, I don't mean to put you on the spot. 
Let's talk about it and maybe we can both clarify our thinking 
on it so that as the issue continues to evolve, we both have a 
better understanding of it because when you are having fun 
doing something like this--and there is no intention on my part 
to disrupt that--there is always an opportunity for the 
unscrupulous to enter into it in a way that we don't intend, 
but which then becomes problematic. And that is all that I had 
ever been concerned about with respect to this activity when 
there really is consideration and there really is a prize.
    I think there is a question as to the issue of chance and 
one can interpret that different ways, but that would then 
begin to submit that activity to regulation. So I think it is 
important for us to have a clear understanding and that is why 
I welcome your questions. And we will try to continue to visit, 
but I think in terms of intentions and goals there is no 
difference here, and therefore I am confident that the position 
you have taken can remain not in opposition to our legislation, 
and hopefully it will even be supportive, given the importance 
of keeping sports, both professional and amateur pure both from 
the league and the players' point of view. I know the players 
have just as much interest in this as the owners do.
    Ms. McGettigan. Senator, could I add a clarifying point? We 
certainly support the bill insofar as it would preserve the 
integrity of the game and individual performances. We just got 
the bill last week. There are, as you know, aspects of the 
bill--for instance, the Indian issue--that we are not 
necessarily fully familiar with, and my client at the moment 
has not had a chance to decide whether or not it is appropriate 
for us to take a position on that. But certainly for this 
aspect of the bill and the aspect that would help enforcement 
on illegal gaming with regard to sports, we are fully 
supportive.
    Senator Kyl. Great. Well, I certainly appreciate that. I 
also support both professional and amateur organizations for 
their assistance in educating myself and my colleagues. I think 
that is going to continue to be very important. The fact is 
that people are focused on a lot of different things and when 
this legislation comes up, members may not be familiar with it. 
They may not have focused on it, and it is important for those 
in the audience who I know are engaged in this and have a view 
on it to let your Senators know and to let your Representatives 
know because they are not as familiar with it, obviously, as I 
am. So I appreciate the efforts that you have undertaken in the 
past to do that.
    There isn't a single Senator that I know that doesn't 
appreciate sports of some kind, and you represent some of the 
major organizations here. And I would also note for the record 
that the other major league organizations, the other major 
league professional organizations, are also in support, have 
been in support in the past, and we appreciate their support.
    I would state for the record that if there are any 
questions from any of my colleagues, we will submit those. They 
can be submitted up until 5 o'clock, Tuesday, March 30, and we 
will get those questions to all of you. Moreover, if you have 
any additional statements that you would like to make, feel 
free to do that.
    Unless any of you have anything else to say, since I have 
lost my audience here and I am fully in accord with what you 
have to say, I will not ask you any additional questions, but 
again just thank you all for being here. And I recognize many 
of you in the audience as strong supporters of the legislation, 
representing other organizations. I very much appreciate your 
support and I hope you will continue to work with us on this 
important legislation.
    If there is nothing else to come before the subcommittee, 
we will stand adjourned.
    [Whereupon, at 11:45 a.m., the subcommittee was adjourned.]
  

                                
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