[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]
H.R. 2266, THE REASONABLE PRUDENCE IN
REGULATION ACT; AND H.R. 2267, THE
INTERNET GAMBLING REGULATION, CONSUMER
PROTECTION, AND ENFORCEMENT ACT
=======================================================================
HEARING
BEFORE THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
__________
DECEMBER 3, 2009
__________
Printed for the use of the Committee on Financial Services
Serial No. 111-92
----------
U.S. GOVERNMENT PRINTING OFFICE
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Washington, DC 20402-0001
HOUSE COMMITTEE ON FINANCIAL SERVICES
BARNEY FRANK, Massachusetts, Chairman
PAUL E. KANJORSKI, Pennsylvania SPENCER BACHUS, Alabama
MAXINE WATERS, California MICHAEL N. CASTLE, Delaware
CAROLYN B. MALONEY, New York PETER T. KING, New York
LUIS V. GUTIERREZ, Illinois EDWARD R. ROYCE, California
NYDIA M. VELAZQUEZ, New York FRANK D. LUCAS, Oklahoma
MELVIN L. WATT, North Carolina RON PAUL, Texas
GARY L. ACKERMAN, New York DONALD A. MANZULLO, Illinois
BRAD SHERMAN, California WALTER B. JONES, Jr., North
GREGORY W. MEEKS, New York Carolina
DENNIS MOORE, Kansas JUDY BIGGERT, Illinois
MICHAEL E. CAPUANO, Massachusetts GARY G. MILLER, California
RUBEN HINOJOSA, Texas SHELLEY MOORE CAPITO, West
WM. LACY CLAY, Missouri Virginia
CAROLYN McCARTHY, New York JEB HENSARLING, Texas
JOE BACA, California SCOTT GARRETT, New Jersey
STEPHEN F. LYNCH, Massachusetts J. GRESHAM BARRETT, South Carolina
BRAD MILLER, North Carolina JIM GERLACH, Pennsylvania
DAVID SCOTT, Georgia RANDY NEUGEBAUER, Texas
AL GREEN, Texas TOM PRICE, Georgia
EMANUEL CLEAVER, Missouri PATRICK T. McHENRY, North Carolina
MELISSA L. BEAN, Illinois JOHN CAMPBELL, California
GWEN MOORE, Wisconsin ADAM PUTNAM, Florida
PAUL W. HODES, New Hampshire MICHELE BACHMANN, Minnesota
KEITH ELLISON, Minnesota KENNY MARCHANT, Texas
RON KLEIN, Florida THADDEUS G. McCOTTER, Michigan
CHARLES A. WILSON, Ohio KEVIN McCARTHY, California
ED PERLMUTTER, Colorado BILL POSEY, Florida
JOE DONNELLY, Indiana LYNN JENKINS, Kansas
BILL FOSTER, Illinois CHRISTOPHER LEE, New York
ANDRE CARSON, Indiana ERIK PAULSEN, Minnesota
JACKIE SPEIER, California LEONARD LANCE, New Jersey
TRAVIS CHILDERS, Mississippi
WALT MINNICK, Idaho
JOHN ADLER, New Jersey
MARY JO KILROY, Ohio
STEVE DRIEHAUS, Ohio
SUZANNE KOSMAS, Florida
ALAN GRAYSON, Florida
JIM HIMES, Connecticut
GARY PETERS, Michigan
DAN MAFFEI, New York
Jeanne M. Roslanowick, Staff Director and Chief Counsel
C O N T E N T S
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Page
Hearing held on:
December 3, 2009............................................. 1
Appendix:
December 3, 2009............................................. 29
WITNESSES
Thursday, December 3, 2009
Aftab, Parry, Executive Director, WiredSafety.................... 10
Brodsky, Michael, Executive Chairman, Youbet.com................. 18
Dowling, James F., President and Managing Director, Dowling
Advisory Group................................................. 16
Martin, Hon. Robert, Tribal Chairman, Morongo Band of Mission
Indians........................................................ 9
Sparrow, Malcolm K., Professor, John F. Kennedy School of
Government, Harvard University................................. 12
Vallandingham, Samuel A., Chief Information Officer and Vice
President, The First State Bank, on behalf of the Independent
Community Bankers of America (ICBA)............................ 7
Whyte, Keith S., Executive Director, National Council on Problem
Gambling (NCPG)................................................ 14
APPENDIX
Prepared statements:
King, Hon. Peter............................................. 30
McDermott, Hon. Jim.......................................... 32
Aftab, Parry................................................. 35
Brodsky, Michael............................................. 39
Dowling, James F............................................. 44
Martin, Hon. Robert.......................................... 49
Sparrow, Malcolm K........................................... 53
Vallandingham, Samuel A...................................... 156
Whyte, Keith S............................................... 163
Additional Material Submitted for the Record
Bachus, Hon. Spencer:
Written responses to questions submitted to Samuel A.
Vallandingham.............................................. 166
Letter from the FBI, dated November 13, 2009................. 168
Letter from Concerned Women for America (CWA)................ 171
Letter from various sports leagues........................... 172
Letter from Professor John Warren Kindt, with attachments.... 174
Letter from the Coalition Against Gambling in New York....... 186
Letter from CasinoFree PA.................................... 188
Letter from Stop Predatory Gambling.......................... 190
Letter from Focus on the Family.............................. 192
Letter from Citizens Against Casino Gambling in Erie County.. 193
Himes, Hon. Jim:
``Internet Gambling, Issues & Solutions''.................... 195
Map of 2,048 Global Internet Casino Sites.................... 209
Miscellaneous Members:
Written statement of the Alderney Gambling Control Commission
Channel Islands............................................ 212
Written statement of Marie Alexander, President and CEO,
Quova...................................................... 228
Written statement of Jay Cohen, President, Antiguan Online
Gaming Association......................................... 233
Written statement of Rt Hon David Blunkett MP, Former Home
Secretary and Cabinet Member in the United Kingdom......... 239
Written statement of Catania Ehrlich & Suarez, P.C. Law
Offices.................................................... 248
Written statement of the Credit Union National Association
(CUNA)..................................................... 250
Written statement of the European Sports Security Association
(ESSA)..................................................... 251
Written statement of Mary Williams, Chief Secretary, Isle of
Man Government............................................. 253
Written statement of Francesco Rodano, Head of Remote Gaming,
AAMS-Autonomous Administration of State Monopolies (Italy's
Gaming Regulatory Body).................................... 257
Written statement of Keith Marsden, Managing Director,
192business.com............................................ 262
Written statement of the National Association of Federal
Credit Unions (NAFCU)...................................... 280
Written statement of Craig Pouncey, Partner, Herbert Smith
LLP (Brussels)............................................. 290
Written statement of Chris Thom, Chairman, Secure Trading
Inc........................................................ 293
H.R. 2266, THE REASONABLE PRUDENCE
IN REGULATION ACT; AND H.R. 2267,
THE INTERNET GAMBLING REGULATION,
CONSUMER PROTECTION, AND ENFORCEMENT ACT
----------
Thursday, December 3, 2009
U.S. House of Representatives,
Committee on Financial Services,
Washington, D.C.
The committee met, pursuant to notice, at 10:04 a.m., in
room 2128, Rayburn House Office Building, Hon. Barney Frank
[chairman of the committee] presiding.
Members present: Representatives Frank, Maloney, Sherman,
Moore of Kansas, Baca, Green, Cleaver, Perlmutter, Carson,
Adler, Kosmas, Himes, Peters, Maffei; Bachus, King, Biggert,
Capito, Campbell, Posey, Jenkins, and Lee.
The Chairman. The hearing will come to order.
I will recognize myself for 5 minutes to say that it is
nice to be able to think legislatively about things other than
the financial crisis which has consumed this committee to a
great extent since September of last year, 2008. The question
is raised sometimes why this committee is the committee that is
dealing with the questions of gambling. Under a previous
chairman, Mr. Leach, the committee initiated legislation to
deal with the Internet gambling issue by controlling the
payment method, and so that is why it continues to be in our
jurisdiction. There are other committees that have jurisdiction
over other aspects of this, such as the Wire Act, which does
not come before us.
I continue to believe that it is a great mistake for the
Congress of the United States to tell adults what to do with
their own money on a voluntary basis. Some adults will spend
their money unwisely. It is not the business of the Federal
Government to prevent them legally from doing it. They should
be given information, and they should be given consumer
protections. In cases where an accumulation of bad individual
decisions have a systemic impact, and arguably there was an
element to that in the subprime crisis, then we have to step
in. But I think John Stuart Mill got it right in the 19th
Century, when people are making decisions to take actions that
primarily affect them, they ought to be allowed to do that.
I am struck by, frankly, what seems to me an inconsistency
on the part of some of my conservative colleagues who bemoan
the ``nanny state,'' who talk about limited government, who
urge that the government ought to stay out of people's lives,
and who also argue that the Internet ought to be free of
restrictions, but who then single out the Internet for
restrictions on personal choices to be made by individuals. We
have been told that this is just a screen for, or could be a
screen for, terrorists and other activities.
I am encouraged by the strong support for the legislation
repealing this and setting up a regulatory regime instead that
comes from the ranking Republican and former chairman of the
Homeland Security Committee, the gentleman from New York, Mr.
King. No Member of this House exceeds him in his concern for
public policies that protect us against terrorism. His advocacy
for this, I think, is very important.
I am also glad to have the strong support here of the
gentleman from Texas, Dr. Paul, who is acting consistently on
his opposition to government intrusion, unlike others who
appear to pick and choose.
It is true that if things are on the Internet, there is the
possibility that underaged people can get at them. There are a
whole range of things on the Internet which we would not like
underaged people to avail themselves of: the sale of alcoholic
beverages, sex-oriented material, purchases. People who are
underage shouldn't be allowed to freely buy things in the name
of the family.
The notion that because some people will abuse something,
you prevent everybody from doing it, is as great a threat to
the liberty of the individual as any philosophy I have ever
seen. And it also, of course, stops nothing. There are people
who gamble to excess, there are people who drink to excess,
there are people who smoke to excess, there are young people
who play video games to excess, there are people who diet to
excess; they do all manner of things to excess. And again, in a
free society individuals are given information and allowed to
make their choices and not prohibited from doing it.
I do remember an argument that was made on the Floor of the
House by the lead sponsor of the bill, originally the gentleman
from Iowa, when he said, this Internet gambling adds nothing to
the GDP, so we can ban it. Well, whether it does or doesn't is
arguable, but I have to say the notion that if something does
not add to the GDP, we have a right to ban it, is chilling and
it has negative implications for personal freedom.
There are large numbers of people in this country who enjoy
gambling on the Internet. I believe we should do what we can to
regulate this as you regulate other activities. But the notion
that this Congress should tell millions of adult Americans that
we know better than they what they should do with their own
money on their own time on their own computers seems to me to
be a very grave error, and I hope that this whole legislation
is repealed.
The Chairman. The gentleman from Alabama is now recognized
for how much time?
Mr. Bachus. For 10 minutes.
I thank the chairman. I think, as all of us know, Chairman
Frank and I have very different views on this, and we approach
this very differently. He wants to legalize Internet gambling,
and then he wants to tax it. On the other hand, I believe that
Internet gambling is and has been and will continue to be a
substantial threat to our youth, and that any economic benefit
from taxing Internet gambling would be more than offset by the
harm it causes our young people.
And we have had hearing after hearing where experts
testified as to really what we have as a wave of young
Americans who are addicted to gambling and the problems that
causes, which are in many cases heartbreaking. I saw an article
in The New York Times where one mother wrote a letter to the
editor describing the horror that had been created from her son
whom she basically has lost to Internet gambling.
Internet gambling characteristics are unique. Online
players can gamble 24-hours-a-day, 7-days-a-week from home.
Children may play without sufficient age verification, and they
can bet with a credit card. We have had testimony before that
this undercuts a player, particularly a young person's
perception of the value of cash; that the younger you become
engaged in this behavior, the more addictive it is. It actually
wires the brains of some of our young people. It leads to
addiction, bankruptcy, and crime. We have actually had
testimony that one of the most outstanding young football
players from a Florida university, his whole career was ruined,
and that career started with Internet gambling at a young age.
He, in fact, was arrested for burglarizing a business to pay
for gambling debts.
Young people are particularly at risk because if you put a
computer in a bedroom or a dorm room of a young person, it is a
temptation that many fall prey to. It is simply asking too much
of young people that they resist this temptation.
The chairman talks about America and what it stands for,
and one of the things it stands for is not telling adults what
they can and cannot do. But one thing that America also stands
for, and I think every society, whether it is American society
or any other society, I think one of our number one goals ought
to be protecting our youth. We certainly do not allow people to
come into their bedroom and serve them liquor at a young age or
sell them pornography. And the fact that the chairman says,
well, you know, you can buy pornography on the Internet, you
can order liquor on the Internet, you ought to be able to allow
Internet gambling, I think makes no sense whatsoever.
For more than a decade, the majority of this Congress has
worked for and voted for legislation to combat illegal Internet
gambling. It has always been illegal in the United States, but
no one could enforce the law because these criminal enterprises
operated offshore. They operated offshore because that removed
them from the long arm of not only the Justice Department, but
also other law enforcement agencies.
We have had letters from the great majority of attorneys
general telling us that without some legislation such as the
legislation that we passed in 2006, they were powerless to stop
Internet gambling, which was against the law of all their
States. And I will remind anyone who is interested in this
subject that it is the States and the people of the States,
adults in those States, who have gone to the polls or their
legislative representatives have passed laws saying that
illegal Internet gambling should be stopped. The States
prohibit it, and the last time I looked, all of them did it
through a democratic process.
In a nation of law, it only makes sense to try to put these
illegal Internet criminal enterprises out of business and not
reward them as the chairman would do. Congress took a major
step towards protecting our youth and stopping this illegal
activity with the passage of the 2006 Unlawful Internet
Gambling Enforcement Act. It is that Act that the chairman
continues to try to repeal or postpone enactment of, and
obviously he has allies at the Treasury Department and the
Federal Reserve who last week announced that they were again
delaying implementation of the law another 6 months. These
regulations should have been finalized and implemented more
than 2 years ago. This Congress voted; the House voted by an
overwhelming number, over 330 Members, as I recall, over three-
fourths of the Congress, to stop illegal Internet gambling.
And, Mr. Chairman, I think it is time for you, the Treasury,
and the Fed to stop delaying the will of the great majority of
this Congress and the American people. Quit the foot dragging
and enforce this law.
The Fed is not here today. The chairman didn't ask the Fed
or the Justice Department to come in and defend themselves
because they really have no defense. It is they who ought to be
testifying today and not most of the witnesses, many of whose
studies are funded by the gambling industry or their
associations are supported by the gambling industry.
The absence of the Justice Department and the Federal
Reserve is particularly egregious in light of a letter I
received from the FBI earlier this month. Without objection, I
would like to submit that letter for the record now.
The Chairman. Without objection, it is so ordered.
Mr. Bachus. In the letter, the FBI warns that technology
exists to facilitate undetectable manipulation of online poker
games. The FBI warns that technology can be used in peer-to-
peer games to illegally transfer ill-gotten gains from one
person to another. The FBI, in their letter, rejects claims
from vendors who say they can validate age and location.
The witnesses today are going to again testify that
technology is available to keep minors from gambling on the
Internet. The FBI's letter rejects that contention. So the law
enforcement agency, the Federal law enforcement agency,
actually says that these so-called protections won't work.
Before the UIGEA, offshore Internet casinos were
proliferating, raking in more than $6 billion annually from
Americans, $6 billion. We found out through disclosures that
about $40 million of that has been spent right here in
Washington, D.C., hiring lobbyists. One of the first lobbyists
they hired was Jack Abramoff. If Congress repeals the law, we
will continue to have these online casinos.
In the next 5 years, Chairman Frank, I feel that if you are
successful in creating a Federal right to gamble on the
Internet, we will create a generation of tens of millions of
Americans who from their youth will be addicted to Internet
gambling and, therefore, lifelong problem gamblers. That is a
problem for all of us. Gamblers will be able to place bets from
their home computers, but also from their BlackBerries as they
drive home from work, or their iPhones as they wait in line at
the grocery store. One company has already developed an iPhone
gambling software and plans to release it whenever the law is
reversed. They have announced that. I will do everything I can
to make sure this never happens.
In conclusion, Mr. Chairman, supporters of the legalization
of Internet gambling argue that prohibition has sent Internet
gambling underground and left the vulnerable unprotected, but
that was the case before our law. The vulnerable were
unprotected because companies that tap the American market
violated our laws and our protections. No amount of regulation
can begin to protect against this particularly predatory and
abusive intrusion into American homes and the harm it is
causing our youth. No approach to blocking Internet gambling
will ever be perfect, but what we have fashioned is our best
hope.
I yield back the balance of my time.
The Chairman. I yield myself my remaining 5 minutes.
First, when we announced this hearing, a member of the
Minority staff said that if we had a hearing, they would ask us
for official representatives, but I received no such request.
If the gentleman has a record of a request to me--he often
writes me letters and asks for hearings. We had one yesterday
at his request, but I don't recall a request to me for this
one.
Mr. Bachus. I supplied that request. Our staff repeatedly,
over the last week or two, has asked that you call the members
of the committee here. And I will introduce that for the
record.
The Chairman. I was surprised. In writing?
Mr. Bachus. Yes.
The Chairman. We are talking about oral staff-to-staff.
Mr. Bachus. Not only that, but e-mail correspondence.
The Chairman. We got e-mail correspondence asking as of
what date?
Mr. Bachus. I will get that to you.
The Chairman. I haven't seen it. But I will say this: The
gentleman from Alabama, when he was concerned about a hearing,
asked about one or asked about witnesses, he has never brought
this up to me.
Mr. Bachus. Well--
The Chairman. I am sorry, my time. Those are the rules.
The gentleman said he asked this. We had a hearing
yesterday at his request, as he noted. We frequently have
hearings at the request of the Minority. We have a hearing on
covered bonds coming up. I sit next to the gentleman. He is
very vocal when he has things that he cares about, and he never
referred that to me.
Secondly, I do want to say with regard to the delay, the
gentleman said they have been dragging their feet for over 2
years. Let us be clear that the great bulk of that 2 years was
under the Bush Administration. After all, it was the Bush
Administration that was there for most of the time. They did--
and here is one of the reasons why I think they should have
been suspended--issue a midnight regulation. President Bush had
said towards the end of his term that he wasn't going to issue
last-minute regulations, and this one was issued at the very
last minute just before he went out of office, not a practice
that ought to be condoned.
It is also the case that there are two arguments here: one
is about the law; and the other is about the extraordinary
burden it imposes on the banking industry. It co-opts them to
be the antigambling cops. The fact is that overwhelmingly,
people in the financial industry have said that putting the
burden on them to decide what is or isn't a payment for
gambling is a great burden on them at a bad time. And in fact,
when the testimony came, particularly from the Federal Reserve,
the Federal Reserve made it very clear that they didn't think
much of this law, they didn't think--not from the standpoint of
the morality of gambling or not, but from the standpoint of
whether or not it was possible in a reasonable way to enforce
it. And that is a very big issue here with the problems banks
now have, and this is for all banks, big banks, little banks.
With the problems they now have, imposing this duty on them
seems to me very odd.
I also want to say that I was astounded by the gentleman's
prediction that millions of young Americans will become
gambling addicts if they can gamble. I have heard hyperbole in
my years here. The notion that millions of young Americans will
become addicts is based on absolutely no factual evidence
whatsoever. There are addicts to gambling, there are addicts to
video games, there are addicts to cigarettes, and there are
addicts to a lot of things that shouldn't be there.
And the gentleman said, well, it is in the bedroom the
liquor has to be delivered. But pornography doesn't have to be
delivered. Pornography can be accessed directly on the Web.
There are things you can access directly on the Web that we
don't think young people should see.
And I have to be clear and say I don't think this is simply
about protecting young people. That may be the main motivation
from the gentleman from Alabama. We have a lot of people in
this country who think gambling is wrong and want to prevent
adults from doing it, and that is not something to which we
should be giving approval.
And we come back to this general view. Yes, there was a
football player who became addicted, a woman's son became
addicted, there are addictions of various sorts. The notion
that you end the legal ability of adults to spend their own
money on an activity that harms no one at all because some
minority of people will abuse it is a recipe for the
destruction of individual freedom, and that is what we are
talking about. And it is especially done in a way that imposes
great regulatory burdens. Of all the regulatory burdens we have
talked about imposing on the financial industry, this one
appears to be the greatest.
So I simply want to reiterate we are talking here about
personal freedom. And, again, the principle we are adopting--
and, by the way, it is also the principle of Internet freedom.
This would then mean it was easier to do things offline than
online.
You also have the argument, by the way, the poker players.
I think to suggest that the millions of Americans who play
poker and play poker on the Internet, that they are addicts or
about to be addicts or people who are fostering addiction is
both inaccurate and terribly unfair. So I hope we will go
forward with this legislation.
And now let me call on the gentlewoman from West Virginia,
who wanted to introduce one of the witnesses.
Mrs. Capito. Thank you, Mr. Chairman. I would like to
introduce one of the witnesses, Sam Vallandingham, to the
committee this morning. He is currently the vice president and
chief information officer of First State Bank in Barboursville,
West Virginia, and he is testifying today on behalf of the
Independent Community Bankers of America. Sam and his family,
their bank, has had a presence in West Virginia for over 100
years, and I have had the fortunate opportunity to work with
Sam over my 9 years in Congress. He is a tireless advocate for
community banking in West Virginia and in his local community
of Barboursville, and he is a great West Virginian.
Welcome, Sam.
STATEMENT OF SAMUEL A. VALLANDINGHAM, CHIEF INFORMATION OFFICER
AND VICE PRESIDENT, THE FIRST STATE BANK, ON BEHALF OF THE
INDEPENDENT COMMUNITY BANKERS OF AMERICA (ICBA)
Mr. Vallandingham. Thank you, Mrs. Capito.
Chairman Frank, Ranking Member Bachus, and members of the
committee, my name is Sam Vallandingham. I am vice president
and chief information officer of the 104-year-old First State
Bank in Barboursville, West Virginia. I am also vice chairman
of the payments and technology committee for the Independent
Community Bankers of America. Barboursville is an historic town
of 3,200 people in the far western part of the State near the
Kentucky border. Our bank employs 58 people at 3 locations and
holds close to $214 million in assets.
Banking has been in my family for four generations. My
great-grandfather, a Kentucky tobacco farmer, sold his farm to
raise capital to start First State Bank. It was said my
grandfather came to West Virginia in a horse and buggy, and
those two were eventually sold with the proceeds used to set up
the bank. The original charter, dated September 1, 1905, and
the certificate of authority still hang on the wall in the
bank's main office.
I am pleased to represent community bankers and ICBA's
5,000 members at this important hearing on H.R. 2266, the
Reasonable Prudence in Regulation Act, and H.R. 2267, the
Internet Gambling Regulation, Consumer Protection, and
Enforcement Act. ICBA commends Chairman Frank for introducing
this legislation, which would provide greater certainty for all
concerned.
Throughout these deliberations, ICBA has not taken a
position on the appropriateness of prohibiting Internet
gambling. We did, however, express our concerns over the
burdens that the community banking industry and payment system
would face if charged with identifying and blocking unlawful
Internet gambling payment transactions. Payment systems were
not designed for this function, and such requirements would
undermine payment system efficiencies.
The added burden of monitoring all payment transactions for
the taint of unlawful Internet gambling would drain finite
resources currently engaged in complying with antiterrorism,
anti-money laundering regulations, the plethora of new
regulations emerging from the financial crisis, and the daily
operation of community banks to meet the financial needs of
their customers and communities. Therefore, we greatly
appreciate your decision to include the ICBA-supported
provisions granting Treasury and the Federal Reserve authority
to exempt certain transactions when transaction tracking and
blocking is not reasonably practical.
But the law still requires banks to avoid doing business
with unlawful Internet gambling companies. Unfortunately, the
law fails to define unlawful Internet gambling, which is
vitally necessary if banks are to comply with the law. As a
result, the burden of identifying which entities are engaged in
unlawful Internet gambling rests solely on financial
institutions. Community banks are required to determine whether
current or prospective customers are in violation of diverse
Federal, State, and Indian tribal gaming laws.
Obviously this is not workable. Therefore, ICBA strongly
endorses H.R. 2267, the Internet Gambling Regulation, Consumer
Protection, and Enforcement Act, which establishes a Federal
regulatory and enforcement framework for licensing Internet
gambling operators. The certainty provided by this approach is
key to our support. ICBA strongly urges the committee and
Congress to expeditiously pass H.R. 2267.
Mr. Chairman, ICBA greatly appreciates your efforts to
enact this legislation. While you and your colleagues must
decide on the Nation's policy for Internet gambling, we hope
you can all agree that the Nation's community banks, as well as
other participants in the payment systems, should not be put in
the impossible position of making legal judgments about which
individual businesses are or are not engaged in unlawful
Internet gambling. That would create an unnecessary burden and
require nongovernmental entities to make decisions that should
be made by law enforcement agencies and the court system.
Thank you for my time.
[The prepared statement of Mr. Vallandingham can be found
on page 156 of the appendix.]
The Chairman. Before going to the next witness, I would
like to apologize to the ranking member. Apparently on Tuesday
afternoon, at 3:40, we did get an e-mail. I was busy with the
markup on the Financial Services, but that is no excuse for my
not having paid attention to this, so I apologize. We did get
an e-mail. It was late Tuesday afternoon, but it was a request
that Treasury, the Fed, and the Department of Justice should
testify today. Obviously, it would have been better if it had
come out earlier, in the sense that you don't usually give
people 1 day's notice to testify. But I was wrong when I said I
had not heard from the ranking member. Yes, his staff did send
an e-mail on Tuesday afternoon at 3:40 asking for those
witnesses, so I apologize for my comments.
Mr. Bachus. Mr. Chairman?
The Chairman. Yes.
Mr. Bachus. Let me say this. What that e-mail says is that
we want to again reiterate that we hope for them to testify.
The Chairman. I understand that, but I had no previous
iteration.
Mr. Bachus. Right. And I will say this. I think what maybe
we can both agree on is that the Treasury and the Fed at some
later date will come and testify. I think that would be a
solution we could both agree with.
The Chairman. I agree, because they have postponed this for
6 months, and we will be having a legislative hearing later on
as well on--we are having one now, but we will. I got the
reiteration, I didn't get the iteration, but I will accept it.
Mr. Bachus. Thank you. As long as in the next few months,
the Treasury and the Fed do come up.
The Chairman. Let me just say, from my standpoint, the
Federal Reserve gave one of the best cases against this whole
operation I have ever heard, so I certainly have no hesitancy
in having the Federal Reserve repeat that performance.
Mr. Bachus. Right.
The Chairman. Or reiterate it to you.
Mr. Bachus. Thank you. I appreciate it.
The Chairman. All right. We will now go back into the
regular order. Next, we will hear from the Honorable Robert
Martin, who is tribal chairman of the Morongo Band of Mission
Indians.
STATEMENT OF THE HONORABLE ROBERT MARTIN, TRIBAL CHAIRMAN,
MORONGO BAND OF MISSION INDIANS
Mr. Martin. Mr. Chairman and members of the committee,
thank you for providing us with this opportunity to comment on
H.R. 2266 and H.R. 2267. I ask that my written testimony be
made a part of the record.
The Chairman. Without objection. And we have other
statements that have been submitted both through the Majority
and the Minority, and they will all be made part of the record,
so please go ahead.
Mr. Martin. My name is Robert Martin, and I am the tribal
chairman of the Morongo Band of Mission Indians in Riverside
County, California. I am speaking today on behalf of the
members of my tribe, my tribal government, and the thousands of
people we employ. Morongo is a federally recognized Indian
tribe comprised of about 1,000 members, half of whom live on
our 37,000-acre reservation located at the foot of the San
Gorgonio Mountains between Los Angeles and Palm Springs.
H.R. 2266 proposes a safe harbor for those currently
engaged in illegal online gaming from the regulations mandated
by the Unlawful Internet Gambling Enforcement Act for 1 year or
until H.R. 2267 can be enacted. H.R. 2267 would authorize and
create a licensing regime for the use of the Internet for
various forms of online gambling and provides for the
regulation of those games.
We are here today to ask why Congress would want to protect
foreign illegal operators to the detriment of existing American
jobs. In summary, we stand in opposition to these bills because
the legislation will do nothing but legalize offshore gaming at
the expense of American jobs.
The Indian Gaming Regulatory Act of 1988 was enacted to
assist tribes in the development of reservation jobs. Under the
1988 law, tribes were restricted to offer gaming only from
Indian lands, and enactment of the legislation being considered
today will place us at a competitive disadvantage relative to
all other nongaming interests and current law. The Unlawful
Internet Gaming Enforcement Act provides a constructive pathway
for those who wish to offer Internet gaming on a State-by-State
basis, and that law should be given time to become effective in
its own right.
Mr. Chairman, I am also troubled by the fact that the
Treasury Department has now granted a 6-month reprieve from the
implementation of the 2006 Unlawful Internet Gaming Enforcement
Act. In a memorandum signed by President Obama on November 5,
2009, the President declared his commitment to fulfilling the
consultation requirement of Executive Order 13175, a directive
originally issued by President Clinton on November 6, 2000.
Executive Order 13175 calls for regular meaningful consultation
in collaboration with tribal officials in the development of
Federal policy. Tribes were not consulted on this extension of
our interest in the law and were not considered. Jobs are being
lost, and capital is fleeing our shores every day that the 2000
Act fails to be enforced.
Tribes generated $25.9 billion in gross gaming revenues.
Tribes also produced another $3.2 billion in gross revenues
from related resorts, hotels, restaurants, and other lodging or
restaurant venues. Tribal gaming has created more than 600,000
jobs nationwide. Tribal gaming has delivered $8 billion in
Federal taxes and saved the government millions more in
unemployment and welfare payments.
We have invested in our operations because we have been
encouraged by the U.S. Government to do so. By following the
law, we are now facing unfair competition as a result of the
threats of these bills. Please allow the current regulatory
scheme to work and protect that which we have so carefully
built.
Thank you for your consideration of our concerns.
[The prepared statement of Mr. Martin can be found on page
49 of the appendix.]
The Chairman. Next, is Ms. Parry Aftab, who is executive
director of WiredSafety.
STATEMENT OF PARRY AFTAB, EXECUTIVE DIRECTOR, WIREDSAFETY
Ms. Aftab. Thank you, Chairman Frank, Ranking Member
Bachus, and members of the House Committee on Financial
Services for giving me the opportunity to testify here today.
It is interesting as I have heard both opening statements,
we agree at WiredSafety that children need to be protected. All
of us are unpaid volunteers in a grassroots organization that
is the world's largest and oldest Internet safety organization.
I have about 16,000 volunteers in 76 countries around the
world. We care desperately about the issues here. We act as an
Internet safety organization and a help group dealing with all
digital risks, all demographics and all digital technologies.
We were appointed as one of the 29 members of the Internet
Safety Technical Task Force that was run by the Berkman Center
at Harvard, and appointed to issue a report to 49 of the 50
States attorneys general, and I was recently appointed as one
of the 24 members of the NTIA working group on online safety
that was commissioned to render a report to Congress in June of
this coming year on child safety issues. We advise local and
Federal and State and international governmental agencies and
nonprofits.
Personally, I am an Internet privacy and security lawyer,
but I haven't practiced law in a long time since creating the
charity and donating my time to running it. In 1997, almost 13
years ago, I wrote the very first book on Internet safety for
parents called, ``The Parents Guide to the Internet.'' My
mother made me do it. It contained a chapter that dealt with
online gambling. It was called, ``Are We Raising Riverboat
Gamblers?''
Three-and-a-half years after the launch of the Web, we
recognized that online gambling was a problem, something
parents didn't understand and weren't sure how to deal with. In
1999, I wrote, ``The Parents Guide to Protecting Your Children
in Cyberspace'' for McGraw-Hill that also contained a chapter,
and it was replicated around the world as the book was
rewritten and published in various jurisdictions.
Most people are aware of the moral arguments against
gambling. A lot of people are aware of the regulatory and legal
issues. Few of them understand that this really is a consumer
protection problem. That is why I am at this table today. I
have been following online gaming issues for a very long time.
They affect not only children and parents, but there are people
who are problem gamblers of all ages. We also have senior
citizens who get online and may be scammed by rogue sites which
take their money and make them promises and never pay on those
bets. And I get e-mails; I get about 1,000 e-mails a day from
people who come to us for help, and many of those are relating
to online gambling.
Now, it is particularly interesting, and I call it ironic,
that I am sitting here today saying that the only way to
protect consumers from online gambling risks is by legalizing
it. And I never thought I would ever say such a thing. But if
we don't legalize it, we can't regulate it. And what I am
finding now is that we are acting a bit like the ``hear no
evil, see no evil,'' and we have taken an approach that the
only way to address online gambling, illegal online gambling,
is by regulating the money systems, the financial systems. And
I think that is an important piece of an entire puzzle, but the
other pieces aren't there yet.
I think we need to both approach this from a holistic
approach. We need to educate parents. We need to provide
security software tools and parental control tools that are out
there. Other countries are doing that. We need to make sure
that if online gambling sites are regulated and licensed, we
know who they are, we know who is behind them. We can look to a
lot of the brick-and-mortar regulatory schemes for making sure
that we are dealing with trustworthy people, and their books
are open so we know what money they are taking in and what
money they are paying out to make sure that their processes are
in place.
We can make sure that we teach the people who are gambling
on these sites who are adults that use the latest technology to
keep out everyone but adults. That means there may be some
adults who aren't going to pass those screening tests, but it
is a multilayer approach. And this technology has changed
dramatically since the Children OnLine Protection Act case was
first determined almost 3 years ago.
There are lots of different systems that you can put in
place which, when combined, will keep most of the kids out. Are
they going to be able to keep a kid out if their father has
opened up their online gambling account and forgot to close it
off? Probably not, unless we put a system in place that closes
that after the end of 15 minutes. Nothing is perfect, but
whatever we do is better than what we have now.
We need to make sure that these sites are also using the
latest methods to keep out malware and spyware, and that they
are protecting our data and the personal information that is
being given to them.
I do not advocate gambling anywhere; I advocate the
protection of consumers and families and children.
Representative Bachus and I are in full alignment, and I have
many volunteers in his jurisdiction. We spend a great deal of
time protecting children. As a citizen and a taxpayer, I would
like us to have tax, but that is not why I am here. I think
that we can put something together if we take the great minds
in this room and outside and come together with something that
will be a holistic approach and will look to the rest.
I thought these things would work. I have been working in
this area for a long time trying to come up with practical
approaches, but rather than putting my opinion out there, we
commissioned a study. It was indeed paid for by gaming
interests, but very carefully done so that no one controlled
the results. I didn't, and neither did they. And we turned to
one of the most respected law enforcement officials and
academics at the JFK Center at Harvard and asked him to look at
existing regulatory schemes and look at all of the 10 risks
that we identified and see if there is something outside of
what I thought would work to put this together. You will be
hearing from Mr. Sparrow shortly, and he can address those.
But I think, if working together, we can address these
issues, all of our common concerns. We can make a difference.
And perhaps the law that exists right now is an important part
of that. I can't opine as to that. I can only tell you we need
to do something, because whatever we have right now isn't
enough.
[The prepared statement of Ms. Aftab can be found on page
35 of the appendix.]
Mrs. Maloney. [presiding] Thank you very much for your
testimony today.
Next, Professor Malcolm Sparrow.
STATEMENT OF MALCOLM K. SPARROW, PROFESSOR, JOHN F. KENNEDY
SCHOOL OF GOVERNMENT, HARVARD UNIVERSITY
Mr. Sparrow. Thank you, Chairman Frank, Ranking Member
Bachus, and distinguished members of the House Committee on
Financial Services. My name is Malcolm Sparrow. I teach
regulatory and enforcement policy and operational risk control
mostly to government regulators at Harvard's John F. Kennedy
School of Government. My background is in regulatory policy and
practice rather than in any extensive prior knowledge of the
gaming industry or gambling behavior per se.
Parry Aftab has described the genesis of the report, and I
think it is available to committee members, released yesterday.
I think I should spend just a few minutes saying what the
report does and what it does not attempt to do.
Our analysis did not directly address whether online
gambling should be legalized. In focusing on managing risks
associated with gambling, we did not weigh moral arguments or
religious objections, nor did we examine broadly libertarian
arguments in favor of allowing adults to engage in pastimes
that they may enjoy. Instead we concentrated more narrowly on
the obligations of government to protect citizens in general
and vulnerable groups of citizens in particular from any
unnecessary exposure to harm. We sought to: first, identify the
specific risks that are associated with or perceived to be
associated with Internet gambling; second, determine what kinds
of regulatory strategies would best control or manage those
risks; and third, determine what we could say in advance about
how effective such strategies might be.
If you have a copy of my written testimony, the list of 10
appears on page 3. I won't run through it now. It also appears
in table 1 at the back of the testimony, where it makes some
comparison between current protections and potential
protections under a legalized and regulated regime.
As Mr. Bachus commented, $6 billion is currently spent by
U.S. residents gambling abroad at the moment. The status quo
produces a situation where many U.S. residents use online
gambling services despite existing statutory restrictions. The
share of the U.S. global market is estimated to be between one-
third and one-quarter of the global trade.
The net effect of the attempts to prohibit online gambling
has instead pushed gambling offshore. Sites are readily
available to U.S. residents through the essentially borderless
medium of the Internet. Some of the foreign sites are well-
regulated, such as those based in the United Kingdom, Alderney
and Gibraltar. And others are less well-regulated or completely
unregulated, such as those in Antigua, Grenada or the Kahnawake
Mohawk territory, Canada.
As a result of the global gaming industry's adaptations to
existing U.S. strategy, the United States finds itself in this
position: The United States incurs all of the social costs
related to U.S. residents gambling online. The United States
exercises no jurisdictional control over the gaming sites that
serve U.S. residents. The United States is unable to offer its
own residents who choose to gamble on overseas sites any
consumer protections or to implement any other harm-reducing
strategies. And the United States is not able to qualify
industry participants or even to exclude organized criminal
groups from competing for the business of U.S.-based customers.
The net conclusion of this report is that legalization with
regulation would provide U.S. authorities the power to grant or
deny licenses and to impose significant sanctions on non-
compliant licensees. Such licenses would be extremely valuable
to site operators. Compliance with any regulatory requirements
and strict licensing conditions that Congress chooses to impose
in return for the privilege of a license would therefore become
a core business imperative for the gaming industry. I have
examined the proposed legislation and believe it provides an
adequate framework within which necessary safeguards could be
designed and implemented.
If the United States decides to legalize and regulate
online gambling sites, we would expect that most U.S. resident
gamblers would be diverted eventually from overseas sites
towards reputable and trusted domestic operators. In the long
run, reputable gambling operations under American control
should come to dominate online gambling opportunities selected
by U.S. residents. And if that happens, all categories of risk
would be better controlled than they are at present, and I
believe that U.S. consumers would be better protected.
I am happy to assist the committee in any way that I can.
Thank you, Mr. Chairman, for the opportunity.
[The prepared statement of Mr. Sparrow can be found on page
53 of the appendix.]
The Chairman. Thank you.
Next is Keith Whyte, who is executive director of the
National Council on Problem Gambling.
STATEMENT OF KEITH S. WHYTE, EXECUTIVE DIRECTOR, NATIONAL
COUNCIL ON PROBLEM GAMBLING (NCPG)
Mr. Whyte. Chairman Frank, Ranking Member Bachus, and
members of the committee, thank you for the opportunity to
testify on these bills.
The National Council on Problem Gambling is the national
advocate for programs and services to assist problem gamblers
and their families. As the advocate for problem gamblers, NCPG
does not take a position for or against legalized gambling, but
concentrates on the goal of helping those with gambling
problems. We were founded in 1972 and have a 37-year history of
independence and neutrality that makes the National Council on
Problem Gambling the most objective and incredible voice on
problem gambling issues. We are a 501(c)(3) not-for-profit
corporation, and we do not accept any restrictions on our
contributions.
The National Council on Problem Gambling neither supports
nor opposes H.R. 2266 or H.R. 2267. My purpose here today is to
provide a broader perspective on problem gambling to assist the
committee in its consideration of these matters, as problem
gambling frequently comes up in the discussions of both
proponents and opponents of the legislation.
Problem gambling is an important public health disorder
characterized by increasing preoccupation with and loss of
control over gambling, restlessness or irritability when
attempting to stop gambling, and/or continued gambling despite
serious negative consequences. Approximately 2 million adults,
which is 1 percent of the population, meet criteria for
pathological gambling in a given year. An additional 4 to 6
million adults, another 2 to 3 percent, plus 500,000 youth
between the ages of 12 to 17 show less severe but still serious
symptoms of a gambling problem in a given year.
The estimated social cost to families and communities from
gambling-related bankruptcy, divorce, crime, and job loss was
almost $7 billion last year. Problem gamblers also have high
rates of other health problems and disorders. But regardless of
the legality of Internet gambling, millions of Americans today
right now are experiencing gambling problems devastating
themselves, their families, and their communities.
The only research information we have on Internet gambling
shows that Internet gambling in the United States, Canada, and
the United Kingdom has the lowest participation rates of any
form of gambling, whether legal or illegal.
Internet gamblers are also extremely likely to gamble in
multiple traditional forms, if you will, to the extent that it
appears that Internet gambling is an add-on for people already
involved in gambling. Internet gamblers who spend significant
amounts of time and money, while relatively rare, are, of
course, more likely to meet problem gambling criteria.
While participation in Internet gambling by U.S. residents
appeared to decline after the passage of the Unlawful Internet
Gambling Enforcement Act, UIGEA, we did not see a decrease in
indicators of gambling problems, such as helpline calls. If you
will refer to my written testimony, we have a chart of the last
10 years of helpline calls to the national helpline number,
which is the largest problem gambling helpline in the world.
There are a number of possible explanations, of course, for the
continued rise in these statistics, including the fact that our
timeframe is too short to see what impact UIGEA may or may not
have had on rates of problem gambling in the United States or
rates of help-seeking for problem gambling in the United
States.
It is likely that individuals with gambling problems will
find the Internet attractive for pursuing their addiction. Risk
factors for gambling problems on the Internet include high
speed of play, perceived anonymity, social isolation, and, of
course, the use of credit or noncash means to finance the
gambling, as well as the 24-hour access. However, it is
important to note many of these factors can also be found in
more traditional forms of gambling. These factors are mutable
and are not specific to any one form of gambling or one
delivery system of gambling.
The graphical interactive structure of the Internet
provides an opportunity to create informed consumers with
access to a variety of information designed to encourage safe
choices and to discourage unsafe behavior. The technology also
exists to allow players and operators to set limits on time
wagers, deposits, as well as to exclude themselves. These
programs can be improved by utilizing the data collected by
these Web sites to develop profiles of general online wager and
behavior.
We urge the committee to add language to require operators
as a condition of licensure to provide public access to de-
identified data on player behavior for research purposes. It is
important in that the gambling regulation is only a small part
of a comprehensive solution for underage and problem gambling.
A comprehensive solution would, of course, include funded
programs for prevention, education, treatment, enforcement, and
research to effectively address the mental health disorder
problem gambling. It is regrettable that H.R. 2267 does not
contain any funding for such programs.
We call the committee's attention to H.R. 2906, the
Comprehensive Problem Gambling Act of 2009, which would amend
the Public Health Service Act to authorize Federal health
agencies to address problem gambling and would appropriate a
total of $71 million over 5 years for competitive grants to
States, tribes, universities, and nonprofit organizations for
the prevention, treatment, and research of problem gambling. We
appreciate that Chairman Frank and several committee members
are cosponsors of the bill, and urge all Members to support
this groundbreaking legislation as--because, as Ranking Member
Bachus said, problem gambling is a problem for us all.
There is not a single cent of Federal money that is
dedicated to the prevention, education, treatment, enforcement
or research of problem gambling. We believe the most ethical
and effective response to problem gambling issues raised by
gambling and by Internet gambling regardless of the legality is
a comprehensive public health approach. Problem gambling, like
other diseases of addiction, will likely never be eliminated,
but we can and must make better efforts to minimize and
mitigate the damage.
Chairman Frank and members of the committee, thank you for
the opportunity to testify.
[The prepared statement of Mr. Whyte can be found on page
163 of the appendix.]
The Chairman. Thank you.
Next is Jim Dowling, who is representing the Dowling
Advisory Group.
STATEMENT OF JAMES F. DOWLING, PRESIDENT AND MANAGING DIRECTOR,
DOWLING ADVISORY GROUP
Mr. Dowling. Good morning. I would like to thank Chairman
Frank and Ranking Member Bachus for the opportunity to come
testify here today. My name is Jim Dowling, and I have
dedicated my entire adult professional life to fighting fraud
and anti-money laundering and now terrorism financing.
As a special agent with the Criminal Investigation Division
of the Internal Revenue Service, I conducted numerous complex
fraud and money laundering investigations. As an undercover
agent, I infiltrated criminal organizations that were
laundering money in an attempt to take them down and dismantle
them.
Later, as the anti-money laundering advisor to the White
House Drug Policy Office, I provided anti-money laundering
advice to ONDCP, Federal law enforcement agencies, Federal
regulators, and the Intelligence Community. After retiring from
government service, I now work with financial institutions and
casinos to help them improve their anti-money laundering and
anti-terrorism programs, along with those of casinos and
financial institutions.
I come here today as neither a friend nor a foe of the
current legislation pending before this committee. I am here to
talk about some of the perils from both fraud and anti-money
laundering and terrorism financing here.
Under the Unlawful Internet Gaming Enforcement Act, the
burden placed upon financial institutions to identify and stop
and block transactions relating to online gaming associations
places them in a difficult position. It makes them become the
law enforcement agency, and at times, the judge and jury as to
what they are going to be doing there.
I understand the reluctance of the Department of Justice to
provide them with such a list which would, in effect, be out-
of-date as soon as that list is published. And that is one of
the perils that we have regarding Internet gaming.
As you can see from my written comments on this matter,
there are wildly exaggerated figures on one side and down to
some more conservative figures as to how much is involved in
Internet gaming. The reason that those figures vary so widely
is because it is right now illegal and people are reluctant to
tell you how much they are making. But nonetheless, it is safe
to say that there are billions of dollars at stake here.
If you take a look at some of the advisories that have come
out from the Financial Action Task Force, also known as FATF,
it is recognized as the global leader and benchmark for all of
the governments in the world to identify fraud, money
laundering, and terrorism financing. FATF has issued three
advisories relating to the perils and pitfalls of not only
Internet gaming, but gaming in particular in the threats for
money laundering and terrorism financing.
If you look at some of the specifics that they mention in
that report, they identify some of the challenges that would be
met by someone trying to regulate Internet gaming. And some of
those challenges, I would have to say, are rather significant.
In addition to that, several years ago, the GAO presented a
report to this very committee which talked about the challenges
in trying to regulate an online gaming industry. Some of those
challenges still exist today, but have only become exacerbated
because of the advances in technology and the perils that would
be caused because of that.
In addition to that, FinCEN has recently issued an advisory
regarding land-based casinos and some of the challenges that
are faced there and some of the money laundering threats that
would come from there.
If you take a look at land-based casinos, whether they are
tribal or other types of casinos, they have very good policies
and procedures in place regarding customer identification
programs which is required under 31 CFR Part 103.
If you take a look at some of those things that casinos do
now, they have very sophisticated electronic systems that help
them identify people who are actually conducting the gaming in
their institution. That is supplemented by actual foot
surveillance that is in casinos. And that is usually backed up
by a strong compliance department which does transactional
monitoring to determine what the particular gamblers are doing
there.
Supplementing all of those systems is an independent State
regulatory agency that each casino has, whether it is tribal or
other, and those individuals are on the casino floor 24-hours-
a-day, 7-days-a-week, 365-days-a-year to supplement what the
casino's doing to prevent money laundering, terrorism
financing, and fraud issues in their casinos. This is something
that casinos on the Internet would not be allowed to do and
could not possibly do.
If you take a look at the fact that a casino could not do
proper customer identification and to make a valid
determination as to who was actually doing the transaction, who
is actually doing the gambling, it is impossible also for them
to conduct an OFAC check, which as we know is something that we
need to pay particular attention to here in the United States.
And then the other issue about this--
The Chairman. Mr. Dowling, you are over your time, so could
you wrap it up, please?
Mr. Dowling. --would be the regulator being able to
regulate foreign companies. I would like to thank the committee
for the opportunity to testify here today, thank you.
The Chairman. Thank you, we can explore those issues
further in the questions.
[The prepared statement of Mr. Dowling can be found on page
44 of the appendix.]
The Chairman. Finally, Mr. Michael Brodsky.
STATEMENT OF MICHAEL BRODSKY, EXECUTIVE CHAIRMAN, YOUBET.COM
Mr. Brodsky. Good morning, Mr. Chairman, Ranking Member
Bachus, and members of the committee. My name is Michael
Brodsky, and I am the executive chairman of Youbet.com. We are
one the largest legal online wagering companies in the United
States. Our company operates under the Internet Horse Racing
Act of 1978, and we only accept wagers on parimutuel horse
races. I should also note that 2 weeks ago, Youbet and
Churchill Downs, owner of the Kentucky Derby, announced that
Churchill would acquire Youbet, but that deal has not yet
closed. I am appearing here today solely on been behalf of
Youbet.com.
In my testimony today, I will address the scope and scale
of current illegal Internet gambling, discuss why I believe
legalization is the only plausible solution to this problem,
and how technology that exists today can be utilized to
successfully regulate online gambling. But first, Mr. Chairman,
I want to thank you for your strong support of a rational
approach to legalize Internet gambling and for holding this
hearing today.
I have long admired your stance on this issue, Mr.
Chairman, because you have accurately described it as a
question of personal freedom and of common sense. You need only
look at lottery sales, bingo halls, charitable gaming
festivals, and parimutuel and casino gambling facilities
throughout the country to see that legal forms of ``brick and
mortar'' wagering are established, accepted, and regulated in
our country. Why should most forms of online wagering be
illegal?
Illegal Internet gambling in the United States is happening
now and it is growing. It is a big business involving billions
of dollars a year, and with the exception of parimutuel horse
racing, U.S. Internet gambling is all underground, it is
untaxed, and it is unregulated. These billions upon billions of
dollars are leaving our country, totally untaxed with U.S.
regulatory authorities having no control or knowledge of where
their money is going.
Today's illegal online gambling is a ``wild west'' affair.
No meaningful curbs on underage gambling, no recourse for
misdirected funds, no attempts to aid problem gamblers and no
tax revenues for the United States. As with prohibition,
illegal online gambling is thriving as an underground economy.
The vast majority of the people who gamble online are law
abiding citizens who want to wager on a system that has
integrity and security. The only way to put any controls on
Internet gambling is to legalize it and regulate it.
At Youbet, we are first and foremost technology people. We
understand how to run an E-commerce business, what works and
what doesn't. And let's be clear about this, in this Internet
age, trying to maintain a U.S. ban on Internet gambling is a
losing proposition. It is virtually impossible to slow it down,
much less stop it. Other members of our Youbet senior team and
I have been executives at leading edge technology companies
such as Orbitz, Ticketmaster, CareerBuilder and Network
Solutions. And we understand how technology can be used to
safeguard consumers.
I understand the concerns about underage gambling. As a
parent, I want to see online gambling legalized. Why? Because I
want it managed. As a society, we can make Internet gambling
operators subject to U.S. supervision, holding operators
accountable. The fact is that enacting H.R. 2667 is the most
effective way to achieve the stated goals of the some of the
bill's harshest critics.
Today's out of control Internet gambling situation was made
possible by the revolution of technology and it will take
technology to fix it. Today at Youbet, we use technology that
would ensure effective regulation of Internet gambling. The
already-existing, totally legal, online parimutuel horse racing
wagering industry is a U.S.-based model of how to provide a
responsible, online wagering experience for adults, one that is
clean, regulated, and scrupulous about both collecting and
paying taxes. Youbet.com is a public Sarbanes-Oxley-compliant
company that uses the latest technology and vigorously
maintains its own Youbet responsible wagering program that we
have developed over the past 13 years.
It is designed to prevent underage gambling and to combat
problem wagering. This technology enables us to conform to all
Federal laws and the laws of those States in which we operate,
including meeting all tax withholding and reporting
requirements.
Regarding money laundering, the proposed legislation has
strict requirements in order to gain and keep a license. All
companies will need to have a robust system in place to combat
this money laundering. Existing technology would allow
operators to track and monitor for it and licensees would work
closely with Federal authorities to combat it. Operators have a
tremendous incentive to fight vigorously against money
laundering, because consumers will strongly prefer to do
business only with companies they trust, ones with safe and
secure systems. As an operator, we would run a great risk of
destroying our own business if there is the slightest
perception that our systems lack this integrity. I would also
add that in today's offshore unregulated world, there is little
incentive on the part of current illegal operators to detect
and deal with money laundering.
The Chairman. Your time is running out.
Mr. Brodsky. Mr. Chairman, Congress today faces a stark
either/or public policy choice. We can either legalize and
regulate online gambling or allow it to continue to flourish in
an offshore black market that allows easy access. Thank you for
the opportunity to testify today, and I look forward to
answering any questions.
[The prepared statement of Mr. Brodsky can be found on page
39 of the appendix.]
The Chairman. I will begin the questioning.
Mr. Martin, I understand your concern about discrimination
and let me say that my intention would be, if we do this, to
remove any restrictions so that if there is an opportunity
there, you could be fully involved. Now I understand that might
involve the Indian Gaming Act, which we don't have jurisdiction
over, but it would be my intention to work to do that. As I
understand it, and as I read what the tribe is trying to do,
you are not opposed to Internet gambling, you are opposed to a
situation in which you are at a competitive disadvantage to
others; is that correct?
Mr. Martin. Yes, that is correct.
The Chairman. I appreciate that, because the criticisms
that have been made of Internet gambling, obviously you don't
agree with them, in fact, the tribe would like to do Internet
gambling and I think that is right. So I will just tell you
that there is certainly nothing conscious in our legislation to
discriminate against you. I gather it is the effect of existing
legislation that might do that, and I would work very hard to
try and deal with that.
And I know there are people who deal with the matters of
the tribes--Congressman Kildee, who is a great friend, and
others who would be sympathetic. So I would undertake to work
them to say that whatever was allowed was allowed for you as
well as for anybody else. No objection.
Mr. Martin. But that does affect the job issues.
The Chairman. If you are able to participate, you want to
be able to do it and have nobody else do it, is that the issue?
Mr. Martin. Well, no. Our concern is jobs being shipped
overseas or off the shores.
The Chairman. So you have no objection to Internet
gambling, in fact, you would like to be involved in Internet
gambling, the tribe would, correct? I gather the tribe has been
working to try to get Internet gambling made legal.
Mr. Martin. Yes, that is correct in certain forms, yes.
The Chairman. So the question is the anti-competitive
effect. And there was always this issue of whether we can do
something in a way that--the jobs impact, I agree, is a
separate question, but I did want to make clear there was no
objection to Internet gambling.
Let me just go down to the question of other legislation.
Mr. Whyte, there is nothing in this bill that provides funding
because we don't have the jurisdiction to provide funding. I am
a cosponsor of the bill that you mentioned that Mr. Moran of
Virginia supports and we would be supportive of doing that. Let
me ask you, one of the problems that people in the banking
industry have told us is Mr. Brodsky talked about horse racing,
and there appears to be a difference of opinion as to the
extent to which betting on horses would be or wouldn't be
covered. Does anyone here have any opinion on what the state of
the law is and whether that needs to be clarified?
Let me ask Mr. Vallandingham: Are the banks that you are
representing here today clear on what would or would not be
prohibited if the law is allowed to take effect?
Mr. Vallandingham. In all honestly, in response, Chairman
Frank, right now we would have the responsibility of
determining what is legal and what is illegal. If you--
The Chairman. What about horse racing and betting on
horses, is that in your--in the view of the people advising
you, is that legal or illegal? I gather you can get different
opinions depending on which Federal agency--
Mr. Vallandingham. We do. In the 2006 testimony that I
participated in, DOJ said it was illegal. I have no reason to
believe that it is not legal. But with the license--
The Chairman. The Department of Justice said it was
illegal?
Mr. Vallandingham. At the time, yes.
The Chairman. Nothing has been done to change that since
then.
Mr. Vallandingham. Correct. With the licensing scenario
where the Treasury would be responsible for deeming who is
licensed and who isn't licensed, that takes the onus off the
financial institution, because we could simply say, you either
have a license and we will open an account for you or we won't.
The Chairman. Let me ask Mr. Brodsky, we were told Treasury
said one thing, and Justice said another about the law. To tell
private citizens they have to carry out the law when the
Federal agencies can't tell them what it says seems to be a
problem. How does that affect your operation?
Mr. Brodsky. Well, certainly the confusion associated with
whether or not what we are engaged in is legal adds to the
complication of our conducting our business. I will tell you
that 88 percent of all the wagers placed on parimutuel handling
in the United States are transmitted across State lines
electronically.
The Chairman. And that is illegal according to the
Department of Justice?
Mr. Brodsky. Assuming that interpretation is correct.
The Chairman. Well, that is what the Department of Justice
says.
Mr. Brodsky. Eighty-eight percent of the entire parimutuel
industry is conducted electronically across State lines.
The Chairman. Well, let me say, that is another reason why
I don't like the whole wall, but for domain and regulations to
impose regulations for financial institutions, when that
fundamental uncertainty hangs over them, in and of itself, that
is the reason for the delay. The gentleman from Alabama.
Mr. Bachus. Ms. Aftab, you commissioned the study, your
organization, and then Professor Sparrow, you conducted the
research?
Mr. Sparrow. Yes, I was part of a team pulled together by
the Brattle Group who took the job from WiredSafety.
Mr. Bachus. Who paid for the study? Did your organization
pay for it, Ms. Aftab?
Ms. Aftab. WiredSafety paid for it and that was funded by
the Poker Players Association of America and Harris, it was a
pass-through direct cost.
Mr. Bachus. So the gambling industry paid for the study?
Ms. Aftab. They made a donation to WiredSafety and we paid
for the study, but yes. Also the retain agreement with Brattle
Group was very clear that there was no influence that was to be
made by the people funding it.
Mr. Bachus. No, no, no, I am just saying that it was paid
for by the gambling industry.
Ms. Aftab. It absolutely was. But our position on this--oh,
I am sorry.
Mr. Bachus. Some of what you concluded, I am looking at a
study conducted and I am going to introduce it for the record,
this is a letter I received December 2, 2009, from a coalition
of researchers at the University of Illinois, the University of
South Carolina, Notre Dame, Iowa State, the University of
Nevada, Emory University, Baylor, and the University of
Pennsylvania, and others and they make these conclusions,
Professor Sparrow, and I just want to know if you would agree
with them. This was part of the United States international
gambling report.
Are you familiar with that study? Some of their conclusions
I am going to go with their subtitle conclusions, number 1, new
addicted pathological gamblers and problem gamblers caused by
decriminalizing Internet gambling. The percentages for teens
and young adults has increased by 200 percent. Do you agree
with that? Or do you think they were wrong in their conclusion?
Mr. Sparrow. I don't have any data either to support or
refute specific figures of that kind. The experts on gambling
addiction that we interviewed have reported that addictive
gambling rates have been holding roughly steady at 1 percent
not only in the United States, but abroad for quite a long
time.
Mr. Bachus. I think that Annenberg also said that since of
passage of our 2006 Act, that is when they leveled out, right?
Mr. Sparrow. Well, I believe, I don't have the reports with
me, but if I recall, there was a dip shortly after the passage
of that.
Mr. Bachus. So what we passed did cause a dip?
Mr. Sparrow. It was in the public mind for a while, and
then I believe it came back up again.
Mr. Bachus. It did, in fact, come back up when the Treasury
is not enforcing it. Let me say this, number 2, the second
conclusion, gambling addiction is the fastest growing addiction
among young people. Do you, Ms. Aftab or Mr. Sparrow or Mr.
Whyte, do you think this was a correct assumption by that
universities?
Ms. Aftab. I think Mr. Whyte is probably the best one to
address that. I am not an expert in other types of addiction.
Mr. Whyte. Thank you, we do believe that gambling addiction
is growing among young people and adults, although the rate
still seems to be at roughly 5 percent of kids between 12 and
17 would meet criteria for at least one gambling problem in a
given year. Again, the research we have to date seems to show
that rate, while it does seem to be trending upwards, is still
within the same 5 percent rate. It is a serious concern.
Mr. Bachus. Right. Now I notice you are the National
Council for Problem Gambling.
Mr. Whyte. Yes, sir.
Mr. Bachus. And I think that Harrah's provided you with
your initial funding for your online council counseling
services; is that right?
Mr. Whyte. I am not entirely sure. Harrah's is one of our
corporate members, yes.
Mr. Bachus. And on their Web site, they talk about how they
are one of your chief benefactors.
Mr. Whyte. They give us $5,000 a year, but yes, you are
correct, they are certainly a long-term corporate member.
Mr. Bachus. Let me ask you this, Internet gambling
activities exemplify the most dangerous aspects of gambling.
Would you agree with that?
Mr. Whyte. Yes, we think that some of the features of
Internet gambling, as I mentioned in my testimony, such as a
high rate of play, use of credit or non-cash, 24-hour access,
perceived anonymity, and social isolation are risk factors that
are known in the gambling literature in general to be
associated with problem gambling.
Mr. Bachus. If I could say one final thing. One of their
other five conclusions was increased legalized gambling
increases suicide by creating new gambling addicts among
adults, young adults and teenagers. Is that consistent with
what you found?
Mr. Whyte. Respectfully, there are many drivers of the
suicide rates. We have never found a correlation on a national
level. On an individual level, pathological gamblers are much
more likely than others to consider and commit suicidal
behavior. However, they are a small percentage of the
population. It is hard to see their impact on national suicide
rates, which vary greatly by many factors. So problem gamblers
certainly have major suicidal concerns.
Mr. Bachus. Thank you.
The Chairman. The gentleman from Kansas.
Mr. Bachus. Mr. Chairman, I ask unanimous consent to submit
items for the record.
The Chairman. Without objection, it is so ordered.
Mr. Moore of Kansas. Ms. Aftab, I note that what you said
on page 2 of your written testimony, ``After more than a decade
analyzing the risks posed by unregulated Internet gambling it
may be ironic, but I have reached a conclusion that the best
way to protect the families and consumers in connection with
cyber gambling is by legalizing it not outlawing it entirely.''
As a former district attorney for 12 years, I know that
protecting consumers, especially our children, is a top
priority for most law enforcement officers and I think for
people in our country generally. I appreciate your candor.
Again, I agree with your conclusions, and I think our
society is very interested in protecting consumers, especially
our children, however best that can be achieved. It would seem
to me that this kind of online gambling, given the use of
technology and the Internet today will happen, whether we like
it or not. Maybe not in this country, but in other places
around the world. I am not a gambler and I really could not
care less about gambling; it is not of any interest of to me.
But I recognize there are people in this country and around the
world who do. And if we are able to drive this activity into
sunlight through a license regime, as the bill drafted by the
chairman would do, I would think from a law enforcement
perspective, we would be better able to keep track of scams and
fraudulent activities; would you agree or disagree with that?
Ms. Aftab. Sir, I am a big fan of the work that you have
done in law enforcement over the years, and I absolutely agree
with you.
Mr. Moore of Kansas. Thank you. Mr. Vallandingham, thank
you for your testimony as well.
Mr. Vallandingham. Thank you.
Mr. Moore of Kansas. Thank you, Mr. Chairman. I yield back.
The Chairman. The gentleman from New York.
Mr. Maffei. Thank you, Mr. Chairman. I wanted to just
state, I have been a cosponsor of this legislation, and I, too,
have never had any interest particularly in gambling, but it
does seem to me that some of the difficulties where the
gentleman from Alabama's arguments are, not that gambling
doesn't have a lot of destructive effects, but what is the
solution to that? How do you avoid those to the extent possible
while still retaining freedom in our society? Indeed, we have
had experience in our past with banning liquor.
Certainly, alcohol creates far more destructive effects and
yet that didn't work. It wasn't enforceable and it didn't work.
So now we have a system of both selling liquor, it is highly
regulated with wholesalers, etc., that I also support and think
has worked well. This is the best analogy I can find to doing
the same thing with online gambling, bringing it out in the
open.
I did want to ask Mr. Whyte in particular, but anybody who
has an opinion I would take it. Mr. Whyte, in particular, what
are the strategies that you would advocate if this were to
become law and we are able to have these Web sites identify
problem gamblers sooner? First, how would we identify some of
the problem gamblers by having this regulation in place? And
second, what could we do for them?
Mr. Whyte. Thank you, Congressman Maffei. I think on your
first question, how would the regulation be done, it is a
little beyond the scope of our experience now, but we would
look to the United Kingdom, which has had a regulatory system
in place for a number of years. The rates of problem gambling
do not appear to have dramatically increased during that time,
although there is a concern about heavy usage among young
males. We would look to the United Kingdom's experience and try
to improve upon that, but I think the real heart of this and
the point of your second question is that there is no public
health safety net for problem gamblers right now in the United
States.
There is an immense amount that we need to do right now to
prevent problem gambling, to educate people who do choose to
gamble that gambling is an addictive activity, and to treat
those for whom prevention education does not work. Enforcement
is, of course, an important part and clearly laws like H.R.
2267 would be part of the enforcement efforts. We also need
research to close the loop and tell us what is working and what
is not in the other four categories.
Again, these are principles that are encompassed in H.R.
2906, but we would just note that the safety net right now for
problem gamblers is weak or nonexistent in many States,
including New York. And whether or not this bill passes, that
is where we have to start as a public health approach, we have
to look at this like we look at substance abuse.
Enforcement plays a role, but prevention, public health,
education, and treatment, those are the best ways, especially
to prevent youth from developing problems in the first place.
Ms. Aftab. And we looked at this in the study, and if Mr.
Sparrow would comment a bit, the technology could do a great
deal to help problem gamblers.
Mr. Sparrow. If it is useful to you, you will find a
section of the report, pages 69 through 71, that actually lists
a whole different set of technologies and approaches that other
jurisdictions have used and refers to a series of reports that
the European Union has laid out a set of up to 50 different
systems or technologies that can be implemented on Web sites to
help control it, but the most common ones are links to problem
gambling, helplines, and Web sites mandated when you enter a
site, self-exclusion programs, self-imposed time and money
limits and mechanisms to set your own betting limits, rate of
loss, etc., etc.
One of the criticisms of such technologies is that you
might have to first of all admit that you are a problem gambler
before you called on any of these for help. But actually many
of them can be framed without requiring such an admission so
that when you first register with a site and without any kind
of diagnostic or admission required up-front, you can, at that
point, set any limits that you would choose to apply to all of
your sessions.
Mr. Whyte. One final note on the identification of problem
gamblers, if I may. Internet gambling sites compile a massive
amount of information. Every interaction is tracked, and these
databases which are in the billion of transactions now can
provide some enormous predictive power for researchers. This is
why, following the model from the Swiss government, we call on
the committee to consider adding a provision that as a
condition of licensure, operators would make de-identified data
publicly available to researchers, because when you comb
through billions and billions of records, you will find
predictive patterns, so you are not relying on the individual,
but you are looking at things like time on sites, variation in
bets, speed between bets. There is almost an unlimited set of
parameters that you can apply to over billions of transactions
to help us develop predictive profiles just as we do with the
credit card industry.
Mr. Maffei. Thank you very much.
Mr. Brodsky. If I could just add something?
Mr. Maffei. I am out of time, it is up to the chairman.
The Chairman. Quickly.
Mr. Brodsky. The only comment I would make is we have our
own real life experience with problem gambling at Youbet. In
the event, under any circumstance, we are aware that anyone has
a problem, a gambling problem, we lock them out of our system.
They are uniquely identified by a Social Security number.
The Chairman. We appreciate that, and you can elaborate on
that in writing. The gentleman from New York, Mr. King.
Mr. King. Thank you very much, Mr. Chairman. Let me thank
you at the outset for your cooperation on this issue and let me
also express my regret that I was not here for the beginning of
the hearing, and I have to leave very quickly. I am the ranking
member on the Homeland Security Committee, which is right now
holding the hearing on the White House crashers.
Mr. Chairman, it is a hearing in which your talents would
be ideally suited. It goes from reality TV to the most
important constitutional issues, and a debate of separation of
powers is going on right now. So we need someone who has a
flair for expressing a point and also is well-versed in the
Constitution. And so I have to go back, I am not as well-versed
in the Constitution and not as nuanced as you, but I am giving
it my best over there.
Thank you for scheduling this hearing. And I also want to
thank Ranking Member Bachus for his forbearance in putting up
with me over the last several years on this issue. We don't
entirely see eye-to-eye, but he has been a true gentleman in
every sense of the word. And I will just make a brief
statement, it would be inappropriate to come in and ask
questions after so much has already gone on.
But Mr. Chairman, we all know that when the Internet
gambling prohibition was enacted in 2006, many voting for it
meant well and thought it was the right thing to do, but it
certainly has unintended consequences. And that means the
purpose of today's hearings and why I so strongly support H.R.
2266 and H.R. 2267, which I believe are essential to correct
the situation that has developed.
By licensing and regulating Internet gambling, it allows
Americans to bet online by creating exemptions for operators to
license and regulators, the Treasury Department would establish
these regulations and license these Internet operators subject
to various conditions, including criminal and financial
background checks and the legislation also would not preempt
State or tribal laws prohibiting Internet or sports gaming. All
prohibitions are well-intended, sometimes they work, sometimes
don't, usually they don't.
In this case I don't believe it is, we are losing revenue
and we are not achieving the social purpose that was intended.
And we can go from pragmatic aspect of it of getting revenues
that we should be having in our government today of actually
regulating an industry where many people are involved offshore
or the libertarian aspect of my good friend, Mr. Paul, who
feels we should not be interfering in people's personal lives.
So with that, Mr. Chairman, I certainly strongly support
the legislation. When a markup comes, I will certainly support
it and vote for it. I thank all the witness for being here and
I really do regret not being able to stay. Again, there is a
very intense hearing going on, on the other side.
The Chairman. Does the gentleman yield?
Mr. King. Yes.
The Chairman. I appreciate his kind words and I noted in
his absence as the former Chair and current ranking member on
the Homeland Security Committee to the extent that there is a
concern about money laundering, we will be drawing on his
expertise, so I think many of us are reassured by his being
here to participate when we put the right safeguards in.
Mr. King. Thank you, Mr. Chairman. I appreciate that, and
again, I agree with you, I see no Homeland Security or
terrorist threat, however. If anything, regulation makes it
less likely that there will be any significant threat. With
that, I ask to submit my entire statement into the record. I
yield back the balance of my time.
The Chairman. Without objection. The gentleman from
California, Mr. Sherman. And then I think if we all move
quickly, we get to Mr. Lee, and then we can go to the vote.
Mr. Sherman. I am a bit more skeptical than others of
Internet gambling, traditionally we allowed the sovereign to
decide what gambling goes on within its territory. Like
alcohol, we have wet counties and dry counties, we have had wet
States and dry States. If I was a member of a State
legislature, I might well be for gambling and alcohol
everywhere. As a Federal legislator, I have tended to grow up
in a system in which that is decided at a State level. And when
you are on cyber and tribal lands, at the tribal level.
We now have a combination of technology, perhaps
facilitated by Federal law, that will shift that and allow
anyone anywhere to gamble legally whether the sovereign of that
particular locality wants them to or not.
As a matter of practicality, what we have done for most
people in this country is we have made gambling something you
have to take a road trip to do. You have to leave your house to
lose your house. That has been a policy, I guess, and a lot of
States have found that to be a good one. Now, you will be able
to gamble in your own home. On the other hand, I am not sure
that we can stop this anyway.
With that, I would like to question Chairman Martin. I
understand that you are opposing the legislation and Internet
gambling here at the Federal level, but you are asking the
California legislature to legalize online poker and perhaps you
want to clarify that for us?
Mr. Martin. Well, thank you. Yes, we are, that is correct.
We are doing that along with several licensed card groups and
additionally some other tribes are considering coming on board
with us in a consortium of tribes and it is going to be--since
we don't have--that is outside of our compact and that is--so
that will be how is that actually going to work? That is
outside of the Gaming Regulatory Act, that is what I was trying
to say. And tribes don't currently have an exclusive right to
online poker in California. So that will be looked at outside
and the State will just look at it as another vendor, as just
another business.
Mr. Sherman. I will ask you a question where I kind of
actually know the answer. Can you describe what kinds of fixed
costs you have in operating your operation? I have been there,
I have seen it and perhaps speak to what the other tribes have
in the way of fixed costs that the online gambling industry
does not have.
While you are looking at your notes, I will point out that
as far as I know, no one from Nevada is represented here, but
Las Vegas is the epicenter of the foreclosure problem. I hope
we don't do anything in the next couple of years that adversely
affects what is the most struggling part of the country.
Chairman Martin?
Mr. Martin. Yes, I have the answer for you here. Congress
must understand that while, in theory, the Indian Gaming
Regulatory Act prohibits States from taxing tribes, in
practice, States impose a tax on tribes under the terms of our
tribal State compacts. The Morongo case, the tax imposed on us
by the State for the privilege of securing our compacts is
based on a rate of $3 million per month irrespective of the
volume of business we do. That means every day we have to pay
the State $100,000.
Should Congress authorize full-scale Internet gambling to
enter the marketplace that will bring competitive pressure that
was not factored into our business decision and will make it
very hard for us to meet the obligations we have and the
business decisions we will make--excuse me, I missed that. For
us to meet the obligation we have to the State. Not to mention
our ability to provide for our tribal members and services, our
outstanding debt obligation.
Mr. Sherman. Mr. Brodsky, you are here from--
The Chairman. Your time has expired.
Mr. Sherman. My time has expired.
The Chairman. Mr. Lee will ask the last question.
Mr. Lee. I will be very brief. I apologize that I missed
part of the hearing. I don't know if anyone out of the group
can give me an idea on the online gambling, what percentage is
done via credit card? Does anybody know what that number is, do
you have an idea?
Philosophically, my only point on this issue, because I am
not here to weigh in on the rights or virtues of whether or not
you should gamble online, I have my own personal views on that.
One thing I don't believe that we should be allowing in
Internet gambling is to allow someone to gamble with an
unsecured loan, that being a credit card. If people choose to
gamble their own money, that is one issue, philosophically. But
when people are allowed to use an unsecured loan and ultimately
other taxpayers are on the hook when they don't pay, then that
is when people get themselves into trouble.
I think if this market was limited strictly to, be it a
debit card, but when you are allowing credit cards to go, and
money you don't have to gamble, that, in my mind, is reckless.
And that is the only comment I wanted to make sure got put in
the record.
I think that would be an interesting number to know, what
percentage of the gambling is done by credit cards. Thank you,
Mr. Chairman.
The Chairman. Thank you. Let me ask if any of the members
of the panel could find--would have information like that, they
could send it to us. And with that, the hearing is adjourned.
We will be returning to this subject next year.
[Whereupon, at 11:37 a.m., the hearing was adjourned.]
A P P E N D I X
December 3, 2009
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