[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]





             INTERNET GAMING: REGULATING IN AN ONLINE WORLD

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

                                HEARING

                               BEFORE THE

           SUBCOMMITTEE ON COMMERCE, MANUFACTURING, AND TRADE

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                           NOVEMBER 18, 2011

                               __________

                           Serial No. 112-105



      Printed for the use of the Committee on Energy and Commerce

                        energycommerce.house.gov


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                    COMMITTEE ON ENERGY AND COMMERCE

                          FRED UPTON, Michigan
                                 Chairman

JOE BARTON, Texas                    HENRY A. WAXMAN, California
  Chairman Emeritus                    Ranking Member
CLIFF STEARNS, Florida               JOHN D. DINGELL, Michigan
ED WHITFIELD, Kentucky                 Chairman Emeritus
JOHN SHIMKUS, Illinois               EDWARD J. MARKEY, Massachusetts
JOSEPH R. PITTS, Pennsylvania        EDOLPHUS TOWNS, New York
MARY BONO MACK, California           FRANK PALLONE, Jr., New Jersey
GREG WALDEN, Oregon                  BOBBY L. RUSH, Illinois
LEE TERRY, Nebraska                  ANNA G. ESHOO, California
MIKE ROGERS, Michigan                ELIOT L. ENGEL, New York
SUE WILKINS MYRICK, North Carolina   GENE GREEN, Texas
  Vice Chairman                      DIANA DeGETTE, Colorado
JOHN SULLIVAN, Oklahoma              LOIS CAPPS, California
TIM MURPHY, Pennsylvania             MICHAEL F. DOYLE, Pennsylvania
MICHAEL C. BURGESS, Texas            JANICE D. SCHAKOWSKY, Illinois
MARSHA BLACKBURN, Tennessee          CHARLES A. GONZALEZ, Texas
BRIAN P. BILBRAY, California         JAY INSLEE, Washington
CHARLES F. BASS, New Hampshire       TAMMY BALDWIN, Wisconsin
PHIL GINGREY, Georgia                MIKE ROSS, Arkansas
STEVE SCALISE, Louisiana             JIM MATHESON, Utah
ROBERT E. LATTA, Ohio                G.K. BUTTERFIELD, North Carolina
CATHY McMORRIS RODGERS, Washington   JOHN BARROW, Georgia
GREGG HARPER, Mississippi            DORIS O. MATSUI, California
LEONARD LANCE, New Jersey            DONNA M. CHRISTENSEN, Virgin 
BILL CASSIDY, Louisiana              Islands
BRETT GUTHRIE, Kentucky              KATHY CASTOR, Florida
PETE OLSON, Texas
DAVID B. McKINLEY, West Virginia
CORY GARDNER, Colorado
MIKE POMPEO, Kansas
ADAM KINZINGER, Illinois
H. MORGAN GRIFFITH, Virginia

                                 _____

           Subcommittee on Commerce, Manufacturing, and Trade

                       MARY BONO MACK, California
                                 Chairman
MARSHA BLACKBURN, Tennessee          G.K. BUTTERFIELD, North Carolina
  Vice Chairman                        Ranking Member
CLIFF STEARNS, Florida               CHARLES A. GONZALEZ, Texas
CHARLES F. BASS, New Hampshire       JIM MATHESON, Utah
GREGG HARPER, Mississippi            JOHN D. DINGELL, Michigan
LEONARD LANCE, New Jersey            EDOLPHUS TOWNS, New York
BILL CASSIDY, Louisiana              BOBBY L. RUSH, Illinois
BRETT GUTHRIE, Kentucky              JANICE D. SCHAKOWSKY, Illinois
PETE OLSON, Texas                    MIKE ROSS, Arkansas
DAVID B. McKINLEY, West Virginia     HENRY A. WAXMAN, California (ex 
MIKE POMPEO, Kansas                      officio)
ADAM KINZINGER, Illinois
JOE BARTON, Texas
FRED UPTON, Michigan (ex officio)

                                  (ii)








                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Mary Bono Mack, a Representative in Congress from the State 
  of California, opening statement...............................     1
    Prepared statement...........................................     4
Hon. G.K. Butterfield, a Representative in Congress from the 
  State of North Carolina, opening statement.....................    11
Hon. Joe Barton, a Representative in Congress from the State of 
  Texas, opening statement.......................................    12
Hon. Charles F. Bass, a Representative in Congress from the State 
  of New Hampshire, opening statement............................    13

                               Witnesses

Hon. Barney Frank, a Representative in Congress from the 
  Commonwealth of Massachusetts..................................    14
    Prepared statement...........................................    17
Hon. Frank R. Wolf, a Representative in Congress from the 
  Commonwealth of Virginia.......................................    24
    Prepared statement...........................................    26
Hon. John Campbell, a Representative in Congress from the State 
  of California..................................................    35
    Prepared statement...........................................    37
Mark Lipparelli, Chairman, Nevada Gaming Control Board...........    44
    Prepared statement...........................................    47
Charles McIntyre, Executive Director, New Hampshire Lottery 
  Commission.....................................................    57
    Prepared statement...........................................    59
    Answers to submitted questions...............................   285
Frank J. Fahrenkopf, Jr., President and Chief Executive Officer, 
  American Gaming Association....................................    62
    Prepared statement...........................................    64
Rachel A. Volberg, Senior Research Scientist, NORC at the 
  University of Chicago..........................................   236
    Prepared statement...........................................   238
    Answers to submitted questions...............................   287

                           Submitted Material

Memo, dated November 7, 2011, from Hon. Alfonse D'Amato to Mrs. 
  Bono Mack, submitted by Mr. Barton.............................   258
Letter, dated November 18, 2011, from Mr. Butterfield to Mrs. 
  Bono Mack, submitted by Mr. Butterfield........................   275
Testimony, dated November 18, 2011, of Robert Martin, Chairman, 
  Morongo Band of Mission Indians, submitted by Mrs. Bono Mack...   279

 
             INTERNET GAMING: REGULATING IN AN ONLINE WORLD

                              ----------                              


                       FRIDAY, NOVEMBER 18, 2011

                  House of Representatives,
Subcommittee on Commerce, Manufacturing, and Trade,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 9:03 a.m., in 
room 2123, Rayburn House Office Building, Hon. Mary Bono Mack 
(chairman of the subcommittee) presiding.
    Members present: Representatives Bono Mack, Bass, Harper, 
Lance, Cassidy, Guthrie, Olson, McKinley, Barton, Butterfield, 
and Towns.
    Staff present: Paige Anderson, Policy Coordinator, CMT; 
Charlotte Baker, Press Secretary; Brian McCullough, Senior 
Professional Staff Member, CMT; Gib Mullan, Chief Counsel, CMT; 
Katie Novaria, Legislative Clerk; Shannon Weinberg, Counsel, 
CMT; Felipe Mendoza, Democratic Counsel; and Will Wallace, 
Democratic Policy Analyst.
    Mrs. Bono Mack. The subcommittee will now come to order. 
Good morning, this is our second cover the waterfront hearing 
on whether Congress should allow Internet gaming to take sail. 
Today we will hear from three of our colleagues as well as from 
a respected panel of experts. Let me be clear about one thing 
from the beginning. I am taking a very careful approach when it 
comes to this issue, and I want to examine all of the relevant 
facts before deciding whether or not to proceed.
    I now recognize myself for an opening statement.

 OPENING STATEMENT OF HON. MARY BONO MACK, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    When it comes to the debate over legalizing Internet 
gambling is it time for Congress to let the genie out of the 
bottle, or is the genie already out, online, with a pile of 
chips playing Texas Hold 'Em? As chairman of the subcommittee, 
this is an important issue which I have been following very 
closely in hopes of making certain that everyone involved is 
dealt a fair hand.
    Today we know this, the vast majority of Americans have 
gambled at some point in their lives, and the number of people 
who tried gambling is going up every year. Currently the only 
two States without legalized gambling are Hawaii and Utah. 
Forty-eight other States allow charitable gaming, 43 States and 
the District of Columbia have lotteries, 40 States permit 
parimutuel betting, 29 States have Indian casinos, while 
another 28 States have standalone casinos or racetrack casinos.
    Today as we continue to look at whether Congress should 
legalize Internet gambling, there are a number of questions we 
will be raising. For example, how effective is the current 
enforcement of online gaming in jurisdictions that have 
legalized it? How are States preparing to deal with the issue? 
What, if any, forms of interstate online gaming should Congress 
consider allowing? What consumer protections exist for online 
gaming, and what new protections are needed? How would any 
easing of legal restrictions on Internet gaming affect American 
consumers and other stakeholders, especially federally 
recognized Native American tribes.
    Gaming policy and regulation is generally handled by the 
States, although the Federal Government has been involved in 
shaping the boundaries of what is permissible under current 
law.
    In 1988, gambling across the United States began to 
proliferate after Congress passed the Indian Gaming Regulatory 
Act addressing the jurisdiction and authority of tribes to 
establish gaming on their lands. Since its passage, tribal 
gaming operations have seen tremendous growth with revenues 
last year exceeding $26 billion. Of the 565 federally 
recognized tribes across the U.S., nearly half of them operate 
casinos which provide a critically important source of funding 
for tribal operations and governance.
    In my own congressional district tribal gaming has been a 
huge plus with seven casinos supporting thousands of jobs 
during these very difficult economic times. The tribes have 
been great neighbors, too, contributing regularly to charities 
and civic events.
    So as this debate continues to unfold, it is very important 
to remember how tribal gaming has improved the lives of 
thousands of Native Americans and I want to make certain that 
they are not adversely impacted by online gambling, legal or 
otherwise.
    Congress has had to step in before. In 2006 to combat 
proliferation of illegal Internet gaming, the Unlawful Internet 
Gambling Enforcement Act was adopted. This effectively outlawed 
interstate online gaming in the U.S. by prohibiting gambling 
related businesses from accepting payments in the form of 
checks, credit card payments or electronic funds transfers 
relating to unlawful Internet gambling. The law also 
establishes fines and penalties for banks and financial 
companies that process such payments.
    In April of this year three of the top poker Web sites were 
shut down and 11 people indicted for bank fraud and for money 
laundering, raising new questions about the law.
    Proponents argue that the statute has not reduced Internet 
gambling, it has simply driven it underground and offshore 
where shady operators play by their own rules.
    Legalizing Internet gaming, they argue, would actually 
allow the government to provide greater protection for 
consumers. But those who want to keep the ban on Internet 
gambling in place argue that repealing the current law will 
expose more Americans to serious problems such as compulsive 
gambling. They are also worried about an increase in fraud, 
money laundering and organized crime. Still others have 
expressed concern that State budgets could be harmed by the 
loss of lottery and gaming revenue, and they point to huge 
potential impact on existing legitimate gaming operations.
    While most States have taken no action regarding online 
gaming, seven States, Illinois, Indiana, Washington, Louisiana, 
Oregon, Montana, and South Dakota, have now enacted express 
prohibitions on Internet gambling. Other States have 
interpreted Federal laws permitting intrastate online gaming, 
and they are beginning to authorize different forms of remote 
gaming. Nevada, for example, has already provided remote 
intrastate sports wagering through BlackBerry enabled mobile 
phone devices, and the State is also forging ahead with plans 
to begin licensing online poker sites.
    So in many respects the genie is already out of the bottle. 
And now it is up to Congress to decide whether Internet 
gambling across State lines should be legal or illegal.
    And I look forward to hearing all of today's testimony.
    With that, I am happy to recognize the gentleman from North 
Carolina, Mr. Butterfield, the ranking member of the 
Subcommittee on Commerce, Manufacturing, and Trade, for his 
opening statement for 5 minutes.
    [The prepared statement of Mrs. Bono Mack follows:]


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OPENING STATEMENT OF HON. G.K. BUTTERFIELD, A REPRESENTATIVE IN 
           CONGRESS FROM THE STATE OF NORTH CAROLINA

    Mr. Butterfield. Thank you. I thank the chairman for 
holding this hearing and what I hope will be a series of 
hearings on this very important subject of Internet gambling. 
This is a very important issue. I think we can all agree on 
that, and it deserves careful consideration, as you referenced 
in your opening statement.
    Let me thank the three witnesses, my colleagues, for coming 
today and we will try to make this as painless as possible.
    According to one estimate, any action we take regarding the 
legal status of Internet gambling could impact an estimated 10 
to 15 million people who already participate in Internet 
gambling on a regular basis.
    Serious revenues estimated to be as high at $49 billion 
over 10 years could be realized at both the State and Federal 
levels. But we must remember the policy decisions we make here 
and in the full committee could also impact people who have 
never been exposed to Internet gambling, potentially opening 
the door for dependence and addiction. That is why it is so 
important, so important to address potential consumer 
consequences in any legislation that we consider.
    With estimated revenues in the billions we must set aside a 
portion of that to reduce the social cost of problem gambling.
    In our previous hearing on this topic I was particularly 
struck by Mr. Keith White's testimony. Mr. White indicated that 
6 to 8 million adults and 1/2 million teens meet the criteria 
for gambling addiction, with ethnic minorities more likely to 
become addicted. He also estimated that the annual social cost 
of gambling related addiction at $7 billion, resulting from 
increases in crime, divorce and bankruptcy and other things. An 
ounce of prevention is worth a pound of cure, and any 
legislation must include, must include sufficient funds to 
carry out education, treatment and research services related to 
problem gambling.
    We must also include common sense safeguards for consumers 
like a self exclusion list, gambling time limits, monetary 
deposit limits and privacy, and data security requirements, 
just to name a few.
    Two of our colleagues, Mr. Campbell and Mr. Frank, are here 
today to testify about their bill. The Internet Gambling 
Regulation Consumer Protection Enforcement Act, H.R. 1174. That 
bill would give the Department of the Treasury the 
responsibility of implementing a national licensing regime for 
Internet gambling sites. This bill provides for fair and 
balanced entry into the Internet gambling marketplace and does 
not restrict permitted gaming to just poker. It would also 
would encourage State lotteries, Indian tribes and others to 
innovate their current businesses so they can take part in the 
new industry and further raise revenue.
    H.R. 1174 is just one of the bills currently on the table, 
but regardless of which proposal we are looking at, any 
legislation that moves through this subcommittee and that could 
ultimately become law will involve tasking one or more Federal 
entities with implementation and oversight. It is critically 
important that in addition to the experts we have here today we 
also hear from those Federal entities. These could include 
Treasury and Commerce, the Federal Trade Commission and the 
Consumer Financial Protection Bureau. We need to learn about 
any concerns that these agencies might have and potential 
consequences for them if they are tasked with implementing the 
new framework.
    With an estimated 1,700 international Web sites allowing 
play and accepting wages from individuals in the U.S., it is 
critical that we act to protect American consumers by 
legalizing Internet gambling here. The tremendous revenue that 
would be realized through legalized Internet gambling at the 
local, State and Federal levels would be a tremendous boost to 
our budgets. And most importantly, American workers are poised 
to take advantage of this new industry through well paying jobs 
that could be created, software engineers and financial experts 
and consumer service representatives, web developers, 
scientists and electrical engineers who all would need to be 
supported by the industry.
    Considering the fragile and struggling state of our 
economy, I strongly believe that all potential revenues should 
be considered to spur more robust economic growth. But if we 
are going to do this, Madam Chairman, if we are going to 
recognize gambling as legal, we must do our very best to get it 
right.
    Thank you for listening. I yield back the balance of my 
time.
    Mrs. Bono Mack. I thank the gentleman, and the chair now 
recognizes the chairman emeritus of the full committee, Mr. 
Barton, for 3 minutes.

   OPENING STATEMENT OF HON. JOE BARTON, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF TEXAS

    Mr. Barton. Thank you, Madam Chairwoman. I am delighted to 
welcome our three colleagues here, Mr. Frank, Mr. Wolf, and Mr. 
Campbell. The bill that I have introduced builds on the work 
that Mr. Campbell and Mr. Frank have already done. And with 
regards to Mr. Wolf, I have worked with him on many issues over 
the years and am glad that I am not in the White House Office 
of Science, Space and Technology right now or he would be 
cutting my budget, too, and I am glad he is not.
    Congressman Kenny Hulshof, former Congressman, is in 
audience and I think former Congressman John Porter is in the 
audience. We welcome those two former colleagues.
    I want to make one comment on Mr. Butterfield's opening 
statement. I support everything he said. I want to point out 
that the bill that we are hoping to mark up in this 
subcommittee deals only with Internet poker, it does not deal 
with generic gaming or gambling, it is just Internet poker. And 
as everyone knows, poker is a game of skill. Over time the best 
poker player will win the most money. I am living proof of 
that, having been much poorer by trying to play against players 
better than myself and having them laugh as they take my money.
    We have an interesting situation here in this country in 
that it is legal to play poker online, it is impossible, 
though, to handle the financial transactions winning or losing 
that result from it because of a law called UIGEA. UIGEA in my 
opinion is unenforceable, needs to be reformed. The bill that I 
have introduced will do that, H.R. 2366. I have had a number of 
meetings with all the stakeholders and thanks to the skill of 
our chairwoman and ranking member we are going have a good 
cross-section of those on the second panel today.
    I think there is general agreement there are still some 
things to be ironed out. I would point out the bill I have 
introduced is a States' right bill and it allows the States to 
make the decision whether citizens in their State can play 
poker online. If the State doesn't want to do that or an Indian 
tribe doesn't want to do that, they simply inform the 
Department of Commerce they don't want to participate. We are 
not trying to telling the States how to run their businesses, 
but for those States that do we are trying to have a 
comprehensive plan to make it fair and ethical for everyone.
    So I look forward to the hearing, Madam Chairwoman. I want 
to thank the three Congressmen for taking their time to 
testify. I know how many things they could be doing and to have 
them give time, especially 9 o'clock on a Friday morning, is 
important.
    I also want to welcome Mr. Frank Fahrenkopf, who will 
testify on the second panel. I have dealt with him on some 
political issues for many, many years. When I was a young 
Congressman he helped me quite a bit in some of my political 
travails earlier in my career, so I appreciate that.
    With that, Madam Chairwoman, I yield back.
    Mrs. Bono Mack. I thank the gentleman, and the chair is 
pleased to recognized Mr. Bass for 2 minutes.

OPENING STATEMENT OF HON. CHARLES F. BASS, A REPRESENTATIVE IN 
            CONGRESS FROM THE STATE OF NEW HAMPSHIRE

    Mr. Bass. I thank the distinguished chairwoman for holding 
this hearing, important hearing. I also want to welcome my 
three colleagues to the main hearing room of the most powerful 
and finest committee in the Congress, welcome here. This is an 
important hearing.
    On our second panel, we will be hearing from Charlie 
McIntyre, who is sitting in the front row here, Executive 
Director of the New Hampshire Lottery. As highlighted in my 
comments in a previous hearing, the New Hampshire lottery just 
delivered funding, almost a billion and a half dollars, for our 
State's education. It is the primary form of funding from the 
State level for education since its inception in 1964. So as 
our committee continues to examine online gambling, I believe 
that we should consider fully the experiences of existing forms 
of legal gaming. I am pleased to have Mr. McIntyre and our 
other witnesses available to us today to speak to the 
competencies of our gambling regulators, as well as the 
potential benefits and challenges posed by an online gambling 
world.
    So I am looking forward to both panels and with that, Madam 
Chairman, I yield back.
    Mrs. Bono Mack. I thank the gentleman. And we turn our 
attention to our panels. We have two panels today joining us. 
Each of our witnesses prepared an opening statement and it will 
be placed into the record. Each of you will have 5 minutes to 
summarize that statement in your remarks.
    On our first panel we are very pleased and we welcome the 
Honorable Barney Frank of Massachusetts, the Honorable Frank 
Wolf of Virginia, and the Honorable John Campbell of 
California. We welcome you all to the Subcommittee on Commerce, 
Manufacturing and Trade. We are very pleased you are here.
    At this point we are happy to recognize Congressman Frank 
for 5 minutes for his opening statement.

 STATEMENT OF THE HONORABLE BARNEY FRANK, A REPRESENTATIVE IN 
        CONGRESS FROM THE COMMONWEALTH OF MASSACHUSETTS

    Mr. Frank. Thank you. Thank you for having this hearing.
    Mrs. Bono Mack. Can you make sure the mic is on?
    Mr. Frank. Sorry, it was not.
    I thank you for this hearing and I appreciate the work of 
my colleague from Texas, Mr. Barton, in this. And yes, I will 
say to my neighbor from New Hampshire it is nice to be in the 
Energy and Commerce room and to be seated in front of a 
portrait of John Dingell, which I think is probably older than 
the average Member of Congress--the portrait, not Mr. Dingell.
    I want to begin with the basic principle arguments. 
Obviously once we decide to do this, there are specific 
legislative details, and I think in a bipartisan way we can 
work them out. I will say Mr. Barton, Mr. Campbell and I have 
already had some meetings, and we think it is possible to come 
to an agreement on a lot of these specifics. But I say once we 
decide to do this, let's define what this is. This is allowing 
adult Americans to spend their own money as they wish in a form 
of recreation that they enjoy. I cannot understand how anyone 
would think that it is the role of the Federal Government to 
prohibit them from doing that. Regulating the way in which it 
is done, dealing with abuses, those are inevitable aspects of 
the economy we live in. But let's get to the threshold 
question, is it the business of the government to tell adults 
no, we don't think you should gamble with your own money? That 
is a principle which frankly I would think there should be 
bipartisan support on.
    And I hear people talk about the nanny state. I hear people 
saying we should not be telling 8-year-olds what to eat for 
lunch. Leaving that aside, if we don't want to tell an 8-year-
old what to eat for lunch, why are we telling the 8-year-old's 
parent, a 28-year-old, no, you can't gamble, we don't think 
that is appropriate?
    Some of it I must say is moral disapproval, I know that 
creeps in sometimes. Apparently there are people who are better 
biblical scholars than I who have found somewhere in the Bible 
a prohibition on gambling. I haven't found it myself nor have I 
found a footnote to it which exempts bingo. But the fundamental 
principle remains the same.
    The second problem we have here is that it violates a 
principle, I thought held very strongly, frankly even more so 
by my friends on the Republican side; namely, hands off the 
Internet. As somebody said, we are putting special restrictions 
on things done on the Internet. I thought that was the reverse 
of what people were talking about, because the legislation that 
unfortunately passed the Congress came out of the Committee on 
Financial Services enforces the prohibition on gambling, 
telling adults how dare you gamble with your own money, by 
restricting the use of the Internet. And again I am shocked by 
that.
    Finally, the current regime is one of the most intrusive 
regulations on the banking industry that you can find. If you 
talk to the bankers, they very angry at this because the way in 
which we now make it illegal is to impose on financial 
institutions an impossible obligation; namely, to figure out 
what the payment was for. So again from the principles of my 
Republican friends, don't have a nanny state, don't interfere 
with the Internet, don't unduly burden private sector, I am 
very surprised that this is maintained.
    Now, one of the arguments against making it illegal, some 
adults will abuse it and some children will do it. Let me start 
with the latter one. As I understand it, we have alcohol made 
available on the Internet, we have cigarettes made available on 
the Internet. The notion there are sex oriented materials that 
are for adults only, the notion we should ban in a society for 
everybody things that are OK for adults because children might 
get to them is the end of freedom. If we aren't able to 
maintain some distinction between adult permitted activity and 
things we want to prohibit to children, then a lot of us will 
have a lot of time on our hands because we will have banned a 
lot of things that adults ought to be able to do and it is in 
fact inconsistent. That is why I go back to say that inevitably 
it seems to me that an element of this notion that we should 
make gambling illegal altogether is a moral disapproval, which 
I think is inappropriate.
    I have had people say, well, are you for the government 
being pro-gambling? No, let's be clear what the role of the 
government is in a free society. There are some things that are 
damaging to others and the government should prohibit. There 
are some things which are especially beneficial and the 
government should want to encourage. But the great mass of 
human activity is none of the government's business. We should 
neither encourage it nor discourage it. And not making 
something illegal is not an encouragement of it or an 
endorsement of it.
    And I note the gentleman from New Hampshire mentioned a lot 
of reasons. I appreciate that, and we want to make sure that we 
draw on their experience. But some suggested that we should not 
allow this because it would detract from the revenues that 
lotteries get. The gentleman did not suggest that, I don't even 
put that word in his mouth, but again from the standpoint of my 
Republican colleagues any suggestion that we should ban private 
sector entities from engaging in activity because it might 
detract from the revenue that public sector entities get; in 
other words, we should give a monopoly to the public sector, 
would seem to be quite far from what I would hope would be the 
prevailing philosophy here.
    I think we can deal with the addiction issue here. I will 
say that the addiction issue here does not seem to me different 
from the addiction issue with alcohol and other things.
    And finally, I would say with regard to college students, 
there was an argument when we did it in our committee that 
somebody cited a study how terrible this was for college 
students and leading to suicides. The author of that study 
said, no, that is not what I said. And if we were going to ban 
things because students might get addicted to them, my guess is 
we would probably not start with Internet gambling, we would 
start with video games. There is a great problem of addiction 
of video games and the way a rational, free society deals with 
addiction is to allow the great majority of people to do it and 
to try to treat and help the people who are addicted.
    So I hope this committee will go ahead with the basic 
principle, and I look forward to our working out the specifics.
    [The prepared statement of Mr. Frank follows:]


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    Mrs. Bono Mack. Thank you, Congressman Frank. And at this 
point, Mr. Wolf, thank you very much for coming today and you 
are recognized for 5 minutes.

 STATEMENT OF THE HONORABLE FRANK R. WOLF, A REPRESENTATIVE IN 
           CONGRESS FROM THE COMMONWEALTH OF VIRGINIA

    Mr. Wolf. Thank you, Madam Chair. I know that some members 
of the committee are aware of my strong concerns about the 
spread of gambling in our society. I can spend all day 
cataloguing story after story of ruined families, bankruptcies, 
suicides and official corruption. Gambling is harmful activity, 
and study after study has shown that many in our society there 
is no question it is strongly addictive. Following the 
enactment of the hard fought ban on Internet gambling in 2006, 
I never thought I would see a day that a Republican House would 
even consider weakening this law. For a party that champions 
families and traditional values, I assure you that Internet 
gambling is contrary to those values.
    The legalization of Internet poker will enable the spread 
of gambling to every computer, every iPad, every iPhone, every 
BlackBerry, every Android and Windows phone in the country. It 
will send a signal to Americans that gambling is to be 
encouraged. It will be a windfall to the most powerful gambling 
interests in the country at the expense of American families 
and taxpayers.
    There is no question that social and economic effects fall 
disproportionately on three groups, the poor, the elderly and 
the young. Notably these are the same groups of Americans that 
have been hardest hit by the recession.
    Although some have championed this legislation as a 
potential budget windfall, I assure you that what tax revenues 
it will generate will overwhelmingly come out of the pockets of 
the vulnerable population. Gambling is no budget panacea. What 
little tax revenue it will generate taxpayers will pay out far 
more in the criminal justice systems, gambling treatment 
program and social services.
    The New York Times July 2010 article said the social cost 
of gambling outweighs the revenue by 3 to 1. Reports done in 
both the 1990s and 2000s have shown the increase in legalized 
gambling have led to a significant increase in suicide rates. A 
2008 report by a sociologist at Temple University found that, 
``The odds of suicide among Las Vegas residents was at least 50 
percent greater than among residents elsewhere in each of the 3 
decades we observed.''
    Gambling, according to the July 20, 2011, Daily Finance 
article:When it comes to severity, Americans' gambling 
addiction is not too far behind the Nation's drug problem. And 
it is growing. It says in 2007 Americans lost more than $92 
billion gambling, about 9 times what they lost in 1982, and 
almost 10 times more than what movie goers in the U.S. Spent on 
tickets that year.
    Bell University Professor Earl Grinols estimated that 
``addicted gambling cost the U.S. Between $32 billion and $58 
billion a year.
    I have long been concerned about the predatory nature of it 
and I strongly support the recommendations of the National 
Gambling Commission, including the 2006 Internet gambling ban.
    This law was important because it dramatically limited 
convenience, I use the word ``convenience'', gambling in the 
U.S. The important distinction between destination gambling and 
convenience gambling is that by its very nature destination 
gambling is entertainment and is generally limited to vacations 
for most Americans. This limits the opportunity for addiction 
to develop and reduces the risk of regular gambling. However, 
online gambling is the ultimate, it is the ultimate in 
convenience gambling. Internet gambling is the crack cocaine of 
gambling, according to the CEO of Promises Treatment Center, 
the crack cocaine of gambling. It is like having a casino at 
your fingertips 24 hours a day, 365 days a year. People can 
gamble in their bathrobes, in their family rooms, at work or in 
college dorms.
    And with the explosive growth of smart phones, tablets, 
mobile broadband, the potential availability of Internet poker 
has grown exponentially in the last 5 years since it was 
outlawed. People will be able to gamble whenever and wherever 
they want. In addition, pathological gamblers will become 
easily addicted to online gambling because of the Internet's 
easy access and instant results. It will result, it will result 
in an epidemic. We will read stories about this if this bill 
passes. It will be a constant theme.
    According to CitizenLink, should the current law be 
overturned, ``The estimated cost of Internet problem and 
pathological gambling addictions among adults each year in the 
U.S. will be 18 billion. It would be a total cost $7 billion 
for those under age 16.
    Gambling leads to increases also in public corruption. Has 
this Congress forgotten the Abramoff scandal? Gambling was 
involved in the Abramoff scandal. Has the Congress learned 
anything from it or is it just like the Simon & Garfunkel song, 
man hears what he wants to hear and disregards the rest?
    I have more, Madam Chairman, but in respect to the 
committee I see my stop sign has come in. I think the passage 
of this will increase addiction gambling and I think it will 
increase suicide and I think the Congress will rue the day if 
it ever passes.
    I yield back.
    [The prepared statement of Mr. Wolf follows:]


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    Mrs. Bono Mack. Thank the gentleman. The chair is pleased 
to recognized my colleague from California, Mr. Campbell, for 5 
minutes. Welcome.

 STATEMENT OF THE HONORABLE JOHN CAMPBELL, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Mr. Campbell. Thank you, Madam Chairwoman, Mr. Butterfield, 
members. I appreciate the invitation to be here. It is kind of 
funny that I am here because I actually don't gamble. Not 
because I think there is any evil about it, I just don't find 
any fascination with it. I don't even know the rules of poker, 
what is better than what, which means Mr. Barton wants to play 
with me all the time and thus far I have resisted those 
invitations.
    But you know, we are not here to talk about what we 
personally want to do, we are always here to do what Americans 
want to do. The fact is that millions and millions, hundreds of 
millions of Americans enjoy gambling and they want to do it and 
they are doing it. And in 2006, as was mentioned, we passed 
UIGEA and basically banned or tried to ban Internet gambling. 
Since that bill was passed, and Mr. Wolf mentioned this in his 
comments, he said the availability of Internet poker and other 
things have exploded. More than the availability has exploded, 
the actual amount of Internet gambling has exploded. I think 
Mr. Butterfield mentioned 15 million people. There are millions 
and millions, tens of millions of Americans gambling online now 
after we passed a bill supposedly banning it. And what they are 
doing is they are using illegal offshore sites. When they do 
that, there is a lot of talk about revenue, not only do we 
obviously not get any revenue, but these people are 
unprotected. There is no regulation, there is no oversight. 
They don't know if they are going to get the money they are 
betting, they don't know if the game is fair, they don't know 
all kinds of things. But they are doing it and they will 
continue to do it because they want--it is an activity they 
want to do and they can access it online regardless of what we 
do or don't do here. And so we actually by banning it have 
expanded what is going on.
    Now Mr. Wolf talks about problem gambling and I get that. 
In fact I am a cosponsor of his bill relative to problem 
gambling. There is problem gambling and there will be problem 
gambling whether we make Internet gambling legal or illegal. 
But we can deal with it much better if it is legal, if it is 
regulated, if it is understood, and if we know whose doing it, 
then in the current situation where people are going off on 
these totally unregulated sites--I mean there is been a lot of 
talk about this Full Tilt Poker and the recent Department of 
Justice invasion there. To me that is the reason we ought to be 
legalizing this, because millions of Americans were on that 
site and they were not being treated fairly. And we can make 
sure that they are going to be treated fairly.
    Now when Mr. Wolf comments that we shouldn't allow this 
because there is problem gambling, you can look at drinking and 
many Americans don't drink, most drink responsibly, some have a 
problem. We tried making that illegal. We tried prohibiting it. 
It didn't work. We forced a lot of honest Americans, because 
they were going to do it anyway, into a dishonest and illegal 
practice. And so prohibition was ended. We essentially have 
that kind of prohibition now. And we will have a better handle 
on the situation if we legalize it and regulate it than if we 
leave the current situation as it is.
    And I understand the protections we can have online. You 
can have better protections than you do with brick and mortar 
gambling. If someone is a problem gambler you can put them on a 
list and you can have the Web site, the name, the credit card, 
various things on a list so that your regulated gambling sites 
have to not allow those people on their sites. We can verify 
age. There is technology now where we can verify the location, 
so those States, as the chairwoman mentioned, who wish to not 
have gambling in their States can not have gambling from their 
residents because the regulated sites can stop that from 
happening.
    And they can be audited. In the bill that Mr. Frank and I 
have proposed the servers are required to be in the United 
States specifically so they can be audited, so that we know 
that the games are fair, that the amounts that gamblers are 
promised are being paid out, et cetera.
    In conclusion, I want to give you four reasons I think 
whether it is the bill Mr. Frank and I have, the bill Mr. 
Barton has or something we have in between, that this committee 
should pass. First of all freedom. This is really about 
allowing adult Americans to do a practice that they have done 
for eons and want to do and will do.
    The second is protection. They are going to do it, they 
ought to be able to do it in a protected and fair manner where 
they know what they are getting into and they understand the 
risks and rewards.
    The other thing is jobs. We are talking about jobs around 
here. Right now all these things are off site. If we do this 
where the servers and everything has to be in the United 
States, which we can do in our bill and under WTO regulations, 
then we are actually going to create jobs in the United States.
    And then the final reason is the one everyone mentions is 
revenue. I don't think it is the top reason, but it is one. 
There is no question that if you do this you can't tax it. 
Gambling in every jurisdiction it is, is taxed and that will 
bring in revenue to the Federal Government.
    And with that, I appreciate being here and thank you, Madam 
Chairwoman.
    [The prepared statement of Mr. Campbell follows:]


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    Mrs. Bono Mack. I thank all of our colleagues for your 
testimony this morning, and I will turn to the panel if any 
members have any questions for our panel. Mr. Barton, you are 
recognized for 5 minutes.
    Mr. Barton. Thank you. I will try to be brief.
    Mr. Wolf, in your comments you repeatedly said gambling, 
you never once said poker. I mean you do recognize that poker 
is a game of skill I presume.
    Mr. Wolf. If the gentleman would, I also want to say that 
in the testimony which I didn't finish, it said according to 
the Annenberg Public Policy Center within 1 year of the 
Internet gaming ban enactment card playing for money among 
college age youth 18 to 22 has declined; weekly use of the 
Internet for gambling also has declined among this age group. 
Both declines are statistically significant.
    And it will not stop with this. If this bill passes, in 5 
to 10 years you will now have come in fourth as many States----
    Mr. Barton. My question is do you understand----
    Mr. Wolf. I think it will lead to other broader aspects and 
I think there will be problems with regard to corruption. And I 
think there will be a lot of problems.
    Mr. Barton. But that is not the answer to my question. You 
and I play poker. I don't know how good a poker player you are, 
but over time whichever one of us is the best----
    Mr. Wolf. Actually I don't, but I don't think--let me just 
take the question. I am not here to tell you that poker is 
wrong. That is not my ability. What I am here to say is if you 
put this on Internet gambling in college dorms and people will 
literally in a few short minutes will be bankrupt and broken. 
And I believe, and I remember the case of the young kid from 
Lehigh University up in Allentown that committed suicide. It is 
not my role to say poker is not right or wrong. And God bless 
you, Joe, I think you are a fine Congressman. And so I am not 
in the position to be the judge. I think that Internet gambling 
will bring about suicide and problems, and so I hope you win 
the next time you play poker and I hope you can bring this guy 
in to play with you.
    Mr. Barton. Mr. Frank.
    Mr. Frank. Let me tell you first, I am not going to praise 
you because I agree with you. Around here you only praise 
people when you disagree with them. So there are no negative 
inferences. I just don't have to say how wonderful you are 
before I say you are wrong. But I would just make the point----
    Mr. Barton. You and I agree that each of us disagree about 
98 percent of the time.
    Mr. Frank. On this issue, though, and obviously poker is 
different than other forms of gambling and it is much more 
skill and much less luck. But I would say I just want to 
emphasize what Mr. Wolf is saying. I had thought there was a 
consensus in this Congress, particularly strongly held by my 
Republican colleagues: Hands off the Internet, don't interfere 
with the Internet. The premise of this, as Mr. Wolf makes 
clear, is that there are activities that may be OK elsewhere in 
this society, but we should particularly ban them from the 
Internet, and he talks about convenience gambling. Well, I am 
not around here to make life inconvenient for the people I 
represent, but that I want to make clear is the nub of this. Do 
we single out the Internet for specific prohibitions and 
restrictions? As I said, I thought that went contrary. By the 
way if you are going to do that for gambling, my guess is there 
are other things that people would say, well, it may be OK in 
general but don't we don't want them to be too convenient. And 
that is the major precedent that is set here. You set the 
precedent of putting specific and harsh restrictions on the 
Internet more than anywhere else in the society.
    Mr. Barton. Well, I am going to yield back, Madam 
Chairwoman, because I know we want to get to the second panel. 
But to the extent we have studies on problem gamblers and 
addictive gambling, it is somewhere between 1/2 of a percent 
and maybe as high as 2 percent. So it is an issue. Congressman 
Wolf is totally right to make it an issue, but it is not an 
overwhelming issue that cannot be dealt with, in my opinion. 
And this at least my bill is simply on Internet poker, it is 
not slot machines and roulette and scratch lotteries and all 
that. It is just Internet poker.
    I yield back.
    Mrs. Bono Mack. I thank the gentleman. The chair now 
recognizes Mr. Butterfield for 5 minutes.
    Mr. Butterfield. Thank you very much, Madam Chairman. And 
again let me thank the three witnesses for their testimonies. I 
am going to start on my left. Mr. Frank is always on my left 
and so I am going to start with you and maybe end with you. But 
Mr. Frank. The bill that is proposed by our friend from Texas, 
Mr. Barton, would legalize only one form of Internet gambling 
and that is poker, and he painfully explains that every time 
that he speaks. His bill speaks to one, one form and that is 
poker.
    The bill introduced by you and Congressman Campbell allows 
Internet sites that are licensed to accept bets and wagers 
without limiting it to poker. Only bets or wagers on sports 
events would be prohibited under your bill. The scope of 
gambling activities authorized under your bill is obviously 
much broader. Can you please discuss with us the broader scope 
of your bill and why you think allowing bets and wagers on 
activities other than poker is the preferred approach?
    Mr. Frank. Thank you. That is a very important question. 
First, let me say I agree with Mr. Barton and others. And I 
don't gamble myself and I don't play poker myself, but I am for 
letting other people do a lot of things I don't do. The fact is 
that I don't think we should ban either poker or anything else 
that is voluntary, doesn't hurt anybody else, including 
gambling.
    Now, it does have a prohibition on sports betting. Frankly 
that was a practical fact. I was pushing this bill in the 
committee I chaired. We couldn't get it through over the 
objections of mostly the National Football League. I will 
report to you that the National Football League believes that 
if we were to allow Internet gambling people might start 
betting on football games. You might find that a shocking 
possibility, but I will tell you that that is the position of 
NFL. Let us not get into the position where people might start 
betting on football games. At any rate, I accepted that 
reality.
    But beyond that, yes, our bill, Mr. Campbell's and mine, 
does say, as Mr. Campbell said, adults should be allowed to do 
on the Internet what they prefer to do and I don't see any 
reason for banning gambling. There is a narrower issue on 
poker. I will say I am for as much freedom as I can get for 
people as long as they are not hurting others. If all we could 
get is poker, I would be for it. I am for the broader issue. I 
don't think we should be restricting people's freedom to do 
other things.
    Mr. Butterfield. Thank you. Also, Mr. Frank, let's talk 
about oversight. The bill proposed by you and Mr. Campbell puts 
the responsibility for regulation on the Department of the 
Treasury. Under Mr. Barton's proposal it is the Department of 
Commerce that is tasked with this responsibility. Will you 
speak to that, please? Which is the preferred agency for 
oversight?
    Mr. Frank. Let me be very honest. The chairman of the 
Committee on Financial Services, which has jurisdiction over 
the Treasury Department, hates this bill and won't let it come 
up. The Department of Commerce is under the jurisdiction of 
this committee. And frankly I don't think it makes a great deal 
of moral or practical difference which agency does it. The 
reason, by the way, we originally talked about Treasury, is the 
concern here was that Internet gambling, like other Internet 
activities, could be a front for money laundering, for 
terrorism. I should note, by the way, as to that fear that it 
could be a front for international illegal activities, 
terrorism, et cetera. The chairman of the Homeland Security 
Committee, the gentleman from New York, Mr. King, is a strong 
supporter of our bill. So he believes that we have in fact 
solved that.
    But the reason for doing Commerce rather than Treasury 
frankly is committee jurisdiction. I think it can be done as 
well in one place as another. I did it with Treasury because we 
did have this situation where there was a concern about money 
laundering, and that is under Treasury. Later on when it goes 
to the floor, committee jurisdiction is not binding, an 
amendment could be made in order if people thought it made more 
sense with Treasury. But it is in Commerce to get it before 
this very distinguished panel. Mr. Paul says this is the best 
committee that ever existed and I just was glad to have a 
chance to come here.
    Mr. Butterfield. Thank you, Mr. Frank. This is my third 
question. A key concern for many online gamblers is that they 
be treated fairly and that operators minimize the risk that 
they will be defrauded by other players. After reviewing the 
testimony of another gentleman, it appears that the American 
Gaming Association is confident that the technology exists to 
prevent automated programs or poker bots from being used 
against unsuspected human players. It also seems judging from 
last month's testimony that site operators are similarly 
confident that their software can determine when collusion or 
fraud is taking place.
    The Campbell-Frank bill indicates several requirements to 
ensure the integrity and fairness of the Internet gambling.
    You have 20 seconds to respond.
    Mr. Frank. Well, first, I would say that we were so careful 
to put this kind of regulatory oversight in that I lost Mr. 
Paul's vote in committee because he as a libertarian thought we 
were getting too pushy with regulation, or he voted present. 
But secondly, yes, we do think, as Mr. Campbell said, a lot of 
this is going to go on, we do know when you try to prohibit 
adults from doing what they want to do you to some extent just 
push it into illegal channels, et cetera. Prohibition of an 
entirely voluntarily activity rarely works in a free society, 
certainly with something as expansive and accessible as the 
Internet. We believe you will get much better consumer 
protection, you never get perfect, if it is lawful and 
therefore regulated than if it is totally unlawful.
    I will say a lot fewer people die from bad booze today than 
died from bad booze in the twenties when we had prohibition. 
That doesn't mean there was never a problem, it does mean that 
legalization is the prerequisite for effective consumer 
protection regulation.
    Mr. Butterfield. Thank you.
    Mrs. Bono Mack. Are there members seeking time? With that, 
we thank our panel very much for being here today, and the 
subcommittee will take a very brief recess while we seat the 
second panel, and thank you to our colleagues for their 
testimony.
    [Recess.]
    So with that, we will resume the hearing. It was very, very 
brief. We welcome our second panel. Each of our witnesses has 
prepared their opening statement and it will be placed into the 
record. Each will have 5 minutes to summarize that statement in 
your remarks and we do try to stay as close to the 5-minute 
mark as humanly possible.
    Joining us on our second panel are Mark Lipparelli, 
Chairman of Nevada Gaming Control Board; Charles McIntyre, 
Executive Director, New Hampshire Lottery Commission; Frank 
Fahrenkopf, Jr., President and CEO of the American Gaming 
Association; and Dr. Rachel Volberg, Senior Research Scientist 
at the University of Chicago.
    Good morning to each of you, and thank you again for 
coming. You will be recognized for the 5 minutes. I think you 
can see the timers there and when it hits yellow that means to 
start getting close to wrapping it up. And please remember to 
turn your microphone on and bring it close to your mouth so 
that the TV audience, and C-SPAN or whoever might be viewing it 
eventually can actually hear you at home.
    So with that, Mr. Lipparelli, we are pleased to recognize 
you for 5 minutes.

STATEMENTS OF MARK LIPPARELLI, CHAIRMAN, NEVADA GAMING CONTROL 
  BOARD; CHARLES MCINTYRE, EXECUTIVE DIRECTOR, NEW HAMPSHIRE 
  LOTTERY COMMISSION; FRANK J. FAHRENKOPF, JR, PRESIDENT AND 
 CHIEF EXECUTIVE OFFICER, AMERICAN GAMING ASSOCIATION; AND DR. 
   RACHEL A. VOLBERG, SENIOR RESEARCH SCIENTIST, NORC AT THE 
                     UNIVERSITY OF CHICAGO

                  STATEMENT OF MARK LIPPARELLI

    Mr. Lipparelli. Thank you, Madam Chair, members of the 
committee. My name is Mark Lipparelli. I am Chairman of the 
State Gaming Control Board in Nevada, and I appreciate the 
opportunity to come and comment on what has become a very 
important topic in our State as well as the gaming industry in 
general.
    My perspective is one from a regulator. I have been on the 
Gaming Control Board for 3 years now, appointed 3 years ago by 
our governor, and no sooner did I get appointed that the topic 
of Internet gaming became of high importance, given the 
interest in our industry and the potential for partnerships of 
our licensees in foreign markets.
    It has been my experience in the last 3 years, traveling to 
many of the relevant jurisdictions that are known for Internet 
gaming, that there is a substantial amount of gaming going on 
in the United States today. As much as we would like to think 
that the laws that are passed today prevent such activity from 
occurring, the U.S. is seen as a robust marketplace for these 
Internet operators. And ironically from our experience as 
regulators, when we put our licensees through rigorous 
standards, rigorous audits, many of the operators in these 
foreign markets don't have the same kinds of obligations, nor 
do they have the same kinds of voluntary compliance that is at 
the bedrock of our activities as regulators.
    In the State of Nevada in my comments I pointed out that 
almost $140 billion a year is put at risk in Nevada casinos 
that results in $10 billion in revenue. And over a span of 
time, over 30, 40, 50 years, we have enjoyed great success and 
increasing sophistication in the way we approach gaming 
regulation. I have found in my travels overseas that many of 
the fundamental kinds of regulations that we have in place 
don't exist in these foreign markets. Robust audits, 
suitability investigations of primary owners, and the 
protection of people from problem gaming, compulsive gaming, 
don't exist in the robust forms we have them today.
    The challenge for our operators as they try to consider how 
to enter these markets is to compare how they will approach 
these marketplaces with that as part of their corporate 
culture, that as part of what they have developed with their 
patronage and bring those kinds of talents to the marketplace.
    I just returned from a meeting with the International 
Olympic Committee just 2 days ago where the subject of Internet 
gaming was part of our conversations. The concern of the 
International Olympic Committee and many other sports leagues 
around the country, or around the world relates to how can they 
get a better handle on these Internet sites that are illegal. 
They are impressed by the controls that we have in place in 
regulated markets. And they were asking us as regulators how to 
impose those same kinds of standards on the sports leagues. So 
it is ironic that that meeting just occurred 2 days ago.
    I think there was a comment made about Nevada's efforts to 
legalize Internet gaming within the State of Nevada, and it is 
true we have begun that process. We began through legislation 
10 years ago legalizing Intranet gaming but there had never 
been an impetus to drive regulatory efforts to actually bring 
that about. Approximately a year ago, 2 years ago, our 
legislature actually passed a mandate that we adopt 
regulations. I am confident that the work we have put in to 
establishing regulatory reform, internal controls and technical 
standards that we have as part of our regular businesses in 
Nevada will be the basis for sound regulatory control of 
Internet gaming in the future.
    A lot of questions have been raised about whether the areas 
of concern around Internet gaming can be effectively 
controlled. In my travels one of the things become noticeably 
interesting to me is that Internet gaming provides detailed 
information about gambling activity at the transaction level. 
When you get down to that level the ability for regulators to 
impose standards and requirements on operators is very robust. 
You can identify customers, you can identify play patterns, you 
can identify the people who are accessing the Internet from 
what device they are accessing the Internet. In the brick and 
mortar businesses that is very difficult. Gaming is a voluntary 
activity, it is often an anonymous activity, and we have 
substantial controls in place to look in large measure at what 
goes on in a casino environment.
    In an Internet world it is down at the transaction level. 
Accounts are established, internal controls have been developed 
among Internet operators today to identify where someone is 
playing, from what machine or device they are playing. They can 
establish the play patterns of an individual from time of day 
to amount wagered. There is an ability to set up individually 
self-regulated controls over how much money can be wagered in a 
week, how much money can be lost in a day, how much money can 
be lost over a period of time. Those kinds of tools do not 
exist generally in the brick and mortar businesses.
    My observations are with the combination of regulatory 
control, compliance programs, and sound regulation that these 
kinds of things can be done very successfully.
    [The prepared statement of Mr. Lipparelli follows:]


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    Mrs. Bono Mack. Thank you very much. Mr. McIntyre, you are 
recognized for 5 minutes.

                 STATEMENT OF CHARLES MCINTYRE

    Mr. McIntyre. Good morning, Madam Chair. Good morning, 
Ranking Member Butterfield. If it please the subcommittee, I am 
Charlie McIntyre and I have the honor and privilege of being 
the Executive Director of the New Hampshire Lottery.
    Let me boast for a second about the State I call home. New 
Hampshire is a state of firsts, the first presidential primary, 
and they hold that first in the Nation status religiously, 
fervently. To suggest that they are proud of it is an 
understatement.
    In my area it is the first modern lottery in the U.S. the 
State representative from Keene, New Hampshire, after 5 tries 
and 10 years of efforts, passed a law in 1963 signed by 
Governor King to have the first lottery in the U.S., first 
modern lottery in the U.S.
    Governor John King bought the first ticket which I brought 
with me, show and tell. This is the first lottery ticket in the 
U.S. that was purchased. Governor King bought it. Unfortunately 
he did not win. The director that sold it to him was named Ed 
Powers, a retired FBI agent. And he started what is a long 
tradition in the lottery world to have law enforcement, current 
or retired, serve as lottery directors, which I myself am a 
proud member of law enforcement. I served as senior state 
prosecutor of the State of Massachusetts with organized crime 
as my focus under District Attorneys William Delahunt and 
Willaim Keating, both having been, one, a former Member of this 
body and the second being a current Member of this august body.
    Since 1964, when the lottery became enacted, New Hampshire 
has realized $1.5 billion in education funding, as Congressman 
Bass correctly out. And 100 percent of our profits go to 
education, 100 percent of our profits go to education.
    When we needed to add liquidity to games, we joined with 
Maine and Vermont and created the first multi-state game in 
1985, 26 years ago, and that game still exists today and we 
still run it today. New Hampshire now finds itself engaged in a 
casino debate in the right place, and it is now the twelfth 
year of the sixth legislative session in which that debate is 
being engaged. And whether it passes or it fails, it is being 
waged in the correct place, in the statehouse of New Hampshire; 
similarly, the question whether to expand gambling offerings on 
the Internet and via mobile devices should be decided by each 
individual State.
    This belief and ideal has long roots within the confines of 
codified law regarding gambling. But its roots are even more 
basic than that. A State should maintain its right to determine 
its level of tolerance for the expansion of gambling within its 
own borders, being the moving party for that expansion.
    As the history of New Hampshire points out, it took 10 
years to become a lottery. Maybe the answer is no for a while 
until it is yes. But it should be posed to those whose lives it 
most directly affects, citizens of that State and those elected 
directly, which New Hampshire is quite large, being 40 members 
in the House of Representatives in New Hampshire.
    Internet access is global. New Hampshire has the second 
highest penetration in the U.S. So each State, given that, 
should decide its own time and pace, its tolerance for that 
expansion. And as for the question of whether it is yes or no 
for the State of New Hampshire, then the operational questions 
can be asked related to payment, PCI compliance, age 
verification, compulsive gambling and geolocation.
    The New Hampshire lottery for almost 50 years has been in 
control of lottery gambling within its own boards and all 
manner of operation and consistent with wishes of the State 
without significant controversy or issues. The lottery has 
adopted and integrated changes in technology over that time, 
and if the State of New Hampshire elected officials allows we 
will consider the Internet the next step on that path.
    An important point not to be overlooked. Please. As 
director of the State lottery in New Hampshire, I am required 
to transfer $70 million of net profit by this fiscal year, $72 
million next fiscal year. Any impact, any encroachment upon 
that gambling space in New Hampshire without execution and 
planning materially places those revenues at risk.
    Mr. McIntyre. Finally, this committee is an excellent 
example of the tolerance, the spectrum upon which gambling 
exists--Utah, having no lawful gambling within her borders, and 
New Jersey having robust gambling presence. But both exist 
within each State's determination as to what is best for the 
citizens.
    I certainly thank the committee for its time here today and 
certainly welcome any questions or comments you may have. Thank 
you, Madam Chair and Ranking Member.
    Mrs. Bono Mack. Thank you, Mr. McIntyre.
    [The prepared statement of Mr. McIntyre follows:]


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    Mrs. Bono Mack. Welcome, Mr. Fahrenkopf, you are recognized 
for your 5 minutes.

             STATEMENT OF FRANK J. FAHRENKOPF, JR.

    Mr. Fahrenkopf. Thank you, Chairman Bono Mack and Ranking 
Member Butterfield for the opportunity to provide testimony 
today on behalf of the American Gaming Association which 
represents the commercial casino entertainment industry here in 
Washington.
    Our industry operates in 22 States, directly and indirectly 
is responsible for the employment of 875,000 men and women, and 
accounts for about $114 billion in spending last year, which 
equaled nearly 1 percent of the entire 14.5 trillion U.S. GDP. 
We support Federal legislation that will allow States and other 
appropriate authorities to license and regulate online poker, 
while also ensuring that each State, such as New Hampshire, has 
the right to determine whether such activity should be 
permissible by residents of their State.
    We believe the best approach to making that happen is to 
modernize and strengthen the Wire Act of 1961 with conforming 
amendments to the Unlawful Internet Gaming Enforcement Act to 
unambiguously outlaw and hopefully eliminate illegal Internet 
gambling. The AGA asks that any gambling legislative proposal 
establish Federal guidelines so there are consistent 
regulations for online poker in all jurisdictions that choose 
to have them.
    In addition, the AGA asks that the legislation pass three 
tests. Number one--and I think this is very important--it must 
not create competitive advantages or disadvantages between and 
among legal commercial casinos, Native American casinos, State 
lotteries, and parimutuel wagering; no form of gaming that is 
currently legal should be made illegal; and the legislation 
must respect fundamental States rights in an appropriate 
manner.
    Now, we for many years were opposed to all forms of 
Internet gambling because we did not believe the technology 
existed to properly regulate it with appropriate law 
enforcement oversight. That has changed in the last few years. 
There are now new technologies and processes that have proven 
effective for regulating and overseeing Internet gambling in 
First World Nations such as Great Britain, France, Italy; 
within the next month, Spain and Denmark, and in provinces of 
Canada today.
    The registration processes and advanced technologies used 
are very similar to those used by Major League Baseball and 
CBS, for example, to determine game blackout areas as well as 
Apple, Amazon, and the online banking industry to facilitate 
secure eCommerce. These new registration processes and advanced 
technologies allow the online poker company to determine where 
the player is located via advanced geolocation technology and 
determine whether the person playing is who they say they are, 
using advanced biometrics or other tools to prevent underage 
gaming.
    There is urgency to this issue, as you have heard from a 
number of the witnesses already, because 10 to 15 million U.S. 
consumers annually bet online and are at risk and have been 
exploited, as we know from the full-tilt activity against them 
by the Justice Department. By these unregulated offshore 
companies, licensing and regulation would ensure U.S. residents 
areprotected.
    Now our member companies who are interested in providing 
these services have agreed to abide by a code of conduct which 
incorporates the key elements of the successful regulations 
which are followed now by U.S. land-based casinos. That code 
requires companies to do the following: submit to extensive 
background investigations of the company and key personnel; 
ensure proper identification of every U.S. online poker player; 
submit to regular testing and auditing of online poker 
software; implement effective player exclusion processes; 
incorporate the effective, responsible gaming protections; and 
implement effective anti-money-laundering procedures.
    I would like, before I conclude my testimony, to take the 
opportunity to address this question of problem gambling that 
came up with the earlier panel and which was before you in the 
last hearing.
    It is settled science--and I say that again, it is settled 
science--that at any given time about 1 percent of the U.S. 
adult population are pathological gamblers, and that is a 
figure that has not changed despite the dramatic expansion of 
gaming opportunities during the last 35 years. Researchers also 
have found no evidence that online gamblers are more likely to 
be pathological gamblers when appropriate allowances are made 
for participation in other gambling activities.
    In fact, a major British study found no increase in the 
rate of pathological gambling between 1999 and 2007, even 
though Internet gambling became widely available during that 
period. Similar studies emerged in a study of Swedish gamblers, 
but the most definitive and recent research on this topic has 
been conducted by the Division of Addictions at the Cambridge 
Health Alliance, an affiliate of Harvard Medical School.
    Their study of the actual transactions and behaviors of 
40,000 online gamblers directly contradicts the belief that 
Internet gambling breeds excessive and problematic gaming 
behavior. This comprehensive research, the largest study of its 
kind, found that the mast majority of online gamblers play 
responsibly and can moderate their behaviors.
    Researchers have also found that online gaming 
participation decreases over time, saying that they did not 
find evidence to support claims that Internet gambling will 
cause escalated or even sustained rates. I have got more, but 
my time is up and perhaps during the questions and answers we 
can get to them.
    Mrs. Bono Mack. Thank you, Mr. Fahrenkopf.
    [The prepared statement of Mr. Fahrenkopf follows:]


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    Mrs. Bono Mack. And Dr. Volberg, it is your 5 minutes.

                 STATEMENT OF RACHEL A. VOLBERG

    Ms. Volberg. Good morning, Madam Chairman, Ranking Member 
Butterfield, and members of the subcommittee.
    Mrs. Bono Mack. Can you please pull your microphone a 
little closer?
    Ms. Volberg. OK, is that better?
    Mrs. Bono Mack. Yes, thank you.
    Ms. Volberg. My name is Rachel Volberg. I am a sociologist 
at NORC at the University of Chicago, and I have been doing 
research on gambling and problem gambling for 26 years.
    The Internet gambling market is large and growing rapidly. 
Poker is the most popular form of online gambling, and accounts 
for 60 percent of online gambling activity but for only 23 
percent of online gambling revenues. The majority of Internet 
poker players are young men with relatively high levels of 
education, and perhaps a few older men as well.
    With regard to problem and pathological gambling, there is 
substantial research showing that prevalence rates are three to 
four times higher among Internet gamblers compared to non-
Internet gamblers. Now, critics argue that Internet gambling 
does not cause problem gambling, but that instead problem 
gamblers are attracted to Internet gambling and add it to a 
repertoire of other gambling activities.
    Results from a new longitudinal study in Canada show that 
while both of these things happen, the most common pathway is 
actually for Internet gamblers to develop problems subsequent 
to beginning to gamble on the Internet.
    Now, most things that go up usually come down, and this is 
true in epidemiology as well. Research shows that problem 
gambling prevalence does eventually level out and decline, even 
if accessibility does continue to increase. Among the likely 
contributors to such declines are greater public awareness, 
decreased participation once the novelty has worn off of a new 
form of gambling, increased government and industry efforts to 
provide gambling more safely, expanding services for problem 
gamblers, the increased age of the population, and, 
unfortunately an outflow of problem gambling cases due to 
severe personal or financial crisis, criminal charges or, in 
extreme cases, suicide.
    H.R. 2366 provides for Federal oversight of State and 
tribal agencies that will issue licenses for online poker, but 
leaves responsibility for setting consumer protection standards 
to the States and tribes. This arrangement virtually guarantees 
that programs to prevent and mitigate problem gambling will 
vary significantly across jurisdictions. And while the 
competition among online gambling providers will ensure a cost-
efficient and appealing consumer product, a free market is 
likely to come at the cost of less player protection.
    Beyond requiring licensees to establish self-exclusion 
programs, I believe some additional minimum requirements are 
needed. These include a requirement for players to set limits 
with regard to time and money, a 24-hour cooling off period 
before changes to limits can be made, monthly financial 
statements, and self-assessment tests.
    It would be best if these measures, as well as the self-
exclusion program, were operated by a third-party independent 
organization. Such an approach offers many advantages. One 
significant one is that it would allow players who wish to 
self-exclude to visit a single site and exclude themselves from 
all of the domestic sites at one time, rather than having to go 
to each gambling site individually.
    Finally, even these measures will be insufficient without a 
mechanism to adequately fund prevention, treatment, and 
research on problem gambling in the United States. I agree with 
the National Council on Problem Gambling that a minimum of $50 
million in new Internet gambling revenue must be dedicated to 
these programs.
    Unfortunately, the United States lags far behind other 
countries in this regard. State funding for problem gambling 
services per capita is approximately one-twentieth the level it 
is in countries such as Australia and Canada, and there has 
never been a Federal agency with primary responsibilities to 
address problem gambling. I therefore also urge you to support 
H.R. 2334, which designates SAMHSA as the lead Federal agency 
on problem gambling.
    Online gambling is here to stay and will continue to 
evolve. The question is what governments can and will do to 
create a safety net for their citizens, to minimize the likely 
increase in the number of problem gamblers, to provide 
treatment for those afflicted, and to ensure that research is 
undertaken to understand the impacts of Internet gambling on 
society.
    Thank you for the opportunity to testify, and I look 
forward to answering your questions.
    Mrs. Bono Mack. Thank you, Dr. Volberg.
    [The prepared statement of Ms. Volberg follows:]


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    Mrs. Bono Mack. And I thank the entire panel, and we will 
now turn to questioning, and I will recognize myself for 5 
minutes.
    And I would like to ask Mr. Fahrenkopf this question first. 
If Congress were to enable Internet gaming, do you support the 
right for States to opt-out of such a system and to limit any 
online gaming participation by their residents to entrust State 
online operations under that State's own control?
    Mr. Fahrenkopf. Absolutely. We are supporters, and always 
have been, that the Tenth Amendment States rights must be 
recognized. States should always have the right to determine 
what type of gaming they are going to allow in their State, how 
they are going to regulate it, how they are going to tax it. So 
we have no problem with States opting out if they don't want to 
participate.
    Mrs. Bono Mack. And then once they're opted out again, just 
to be clear, that you can opt out and offer intrastate solely?
    Mr. Fahrenkopf. Well, some of the discussion, Mr. Campbell 
was saying that UIGEA was the purchase--the purpose of that was 
to outlaw Internet gambling. It really wasn't. The purpose of 
UIGEA, or UIGEA, as we call it, was to interfere with the 
financial transactions that went on. The bill clearly did not 
say what was legal or illegal.
    But there is within UIGEA an intrastate exemptionfrom 
UIGEA. There would still be a determination, as you know. The 
Justice Department to this day says that Internet wagering of 
any sort is illegal under the 1961 Wire Act. I don't 
necessarily agree with them. It is hard for me to believe that 
anyone in this august body who was serving here in 1961 ever 
thought that there would be a worldwide Web, that there would 
be the intent. So clearly there is is an intrastate exemption 
from UIGEA for States to do intrastate activity, which would 
not violate that law. I am not going to pass judgment on what 
the Justice Department is going to say. I happen to disagree 
with their interpretation that that would be illegal.
    Mrs. Bono Mack. Thank you. And much of what you are talking 
about, you are speaking to the ability to regulate, to have 
particular Web sites and those Web sites only. Yet in Congress 
we are often dealing with rogue Web sites that are selling, you 
know, bad prescriptions, bad pharmaceuticals. There are rogue 
Web sites that are selling pirated intellectual property.
    How do you propose that you make sure that the consumer can 
truly know that this is a real Web site and a safe Web site, 
because we are are dealing with this in so many other areas 
right now?
    Mr. Fahrenkopf. Well, as I said in my remarks, I think that 
the way to go about this, in the wisdom of Congress, Internet 
poker should be legalized. We have got to back, reiterate the 
1961 Wire Act, as well as adjust UIGEA to make sure that it can 
be used as the vehicle to keep track of what, you know, other 
Web sites there are. Now, I happen to believe that the free 
market will make a determination.
    Mrs. Bono Mack. But the free market right now is suffering 
from rogue Web sites and from all of the bad prescription drugs 
again, and from rogue Web sites that are coming from offshore 
where the consumer has no concept whether it is a legitimate 
Web site or not.
    So let me move on to Dr. Volberg, though, because time is 
so limited. All of you have expressed a desire to keep children 
and problem gamblers from gambling online. If Congress chooses 
to legalize any particular or all online gaming, how would you 
prevent problem gamblers or minors from continuing to go 
wherever they can place the wager, including the unregulated 
offshore operations I was just talking about? Wouldn't the 
dangers for these vulnerable segments still persist?
    Ms. Volberg. Well, the dangers would persist, but there are 
ways to mitigate the dangers by placing sort of roadblocks in 
the way. Certainly I am not an expert on how to do age 
verification. You heard a speaker, or someone testified last 
time on that front.
    The issue that I am most familiar with is the question of 
exclusion programs and pre-commitment programs. And the thing 
to do, or the step that we believe is most effective, is to get 
people before they begin to gamble, to set up the constraints 
in terms of how much money per day or per week or per month 
that they want to spend, how much time they want to spend on 
those particular Web sites, and to set that up ahead of time so 
that in the middle of sort of the excitement of the action, 
they are not sort of going to lose control and keep going 
longer than they wanted.
    Mrs. Bono Mack. Mr. Lipparelli, I would like to change the 
subject a little tiny bit toward travel gaming. I believe you 
have some travel operations in Nevada.
    Mr. Lipparelli. We do, in fact.
    Mrs. Bono Mack. OK. Can you explain briefly how they are 
regulated?
    Mr. Lipparelli. Each of the tribes, I believe there are 
two, have entered into State compacts where they have agreed to 
abide by the State regulatory structure, so they follow our 
State regulatory regime.
    Mrs. Bono Mack. Thank you.
    Mr. Fahrenkopf, back to you. Should online gaming sites be 
required to help pay for the services needed to treat problem 
gambling, or should the State use the revenue it receives to 
pay for the services, or both?
    Mr. Fahrenkopf. Well, most of the experience that we have 
had with land-based casinos as well as lotteries and the 
parimutuel industry, it varied State by State. In some States 
there is a--for example, in the States that have river boat 
gaming, you have to pay a fee to go on the boat, and a portion 
of that fee is set aside for responsible gaming work.
    So it varies from State to State, but either way it could, 
you know, be effective if it was clearly drawn as a means to 
develop the revenue. I might say that there is some real 
question, however, of what adequate treatment is, and Rachel 
has been involved in this business, as others, for 20 or 30 
years as to what the proper treatment must be.
    For example, you have a State like Iowa that has had casino 
gaming since 1989, they have raised a tremendous amount of 
money, but in some cases they don't know how to effectively 
spend it. And that is why research is really the key where most 
of the money should go, at least in the immediate future, along 
with some of the programs that Rachel has talked about.
    Mrs. Bono Mack. Thank you. And my time has actually expired 
a while ago, so I am happy to recognize Mr. Butterfield for his 
5 minutes.
    Mr. Butterfield. I thank the chairman. Both bills that we 
are talking about here today seek to prevent children from 
accessing gambling sites, and that is certainly a good thing 
and we can all agree on that. However, these two bills take 
different approaches toward achieving the goal.
    Mr. Franks' bill and Mr. Campbell, 1174, gives the Treasury 
Secretary broad regulatory and enforcement authority to 
implement a licensing program for Internet gambling sites. This 
authority includes a requirement that the Secretary make sure 
that those licensees have various processes in place to prevent 
underage gambling.
    Mr. Barton's bill, 2366, allows States to license gambling 
sites. The bill requires the relevant State agencies to, quote, 
ensure to a reasonable degree of certainty that the individual 
placing a bet or wager is not less than 21 years of age, end of 
quote.
    Let me this time go to my right. Dr. Volberg, would you 
have any concerns with a State by State or even a tribe-by-
tribe approach to preventing children from accessing gambling 
Web sites?
    Ms. Volberg. Well, I think actually the issue of preventing 
children from gaining access to Internet gambling Web sites is 
an important one, because while the technology may exist on a 
State-to-State level to implement those steps--and this applies 
to problem gambling as well--there is not equal political will 
in every State to implement those measures.
    And so what you will get, as I mentioned in my testimony, 
you will get variability across the States in terms of what 
they are willing to do, what they are able to do. And as a 
result, I think that some States will do a very good job, but 
other States are going to do a much less good job of protecting 
both underage gamblers and problem gamblers or people who are 
at risk.
    I think another issue that I have great concern about 
because I have done a number of adolescent surveys, is the 
number of youth that access the Internet to gamble is 
extraordinarily high. In the survey that we did in Oregon, 30 
percent of our adolescents had actually gambled on the 
Internet. But most of those had gambled for entertainment and 
not for money. And so when you are talking about sort of 
educating young people about gambling, part of it is occurring 
on the Internet, and I would like to see some prevention 
measures and some education that goes along with, you know, 
preventing them from actually gambling for money.
    Mr. Butterfield. Do you think that this issue could be 
addressed through consistent across-the-board requirements at 
the Federal level? And if it should be at this level, would you 
have concerns if more than one agency provided oversight?
    Ms. Volberg. I think when it comes to prevention and 
treatment, or certainly prevention and research, that we have 
not seen the States step up to the level that they have or that 
governments have in other countries around the world. So I 
would say that those two areas in particular do require a 
stronger Federal voice.
    Mr. Butterfield. We are going to have to have oversight if 
this goes into law, I am just trying to find out what agencies 
should be involved and could it be multiple agencies?
    Ms. Volberg. I absolutely think it should be multiple 
agencies. I think that--I have seen models internationally 
where that does happen very effectively, but it does require 
the legislation to actually say that you have to coordinate 
these--you know, these departments have to coordinate.
    Mr. Butterfield. Should any proposal in this area include 
some additional minimum requirements to ensure that licensees 
don't target children? For example, should any legislation 
include standards for general advertising and marketing 
practices and online sites, the specific targeting of minors, 
the system used by the site to verify that the user is of legal 
age before they are allowed to sign up? Would you quickly speak 
to that in 30 seconds?
    Ms. Volberg. Yes, I believe there is a need for that.
    Mr. Butterfield. All right, thank you.
    Mrs. Bono Mack. I thank the gentleman and recognize Mr. 
Barton for 5 minutes.
    Mr. Barton. Thank you, Chairwoman. I have a letter from 
Alfonse D'Amato that was written to you on November 7, 2011, 
and it is copied to all members of the subcommittee. I would 
like unanimous consent to put that in the record. It has been 
shared with the minority.
    Mrs. Bono Mack. Without objection.
    [The information follows:]


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    Mr. Barton. I want to ask my first question to Professor 
Volberg. You kind of just alluded in passing that your study of 
people that play poker on the Internet, they often tend to be 
young men with high educational levels; and then you looked 
directly at me and said, ``and a few older men.''
    And I want the record to show that I am 62.
    Mrs. Bono Mack. With objection.
    Mr. Barton. That classifies as old, I guess, but I have 
never played online for money. I play online for play money, 
but not for money. But I respect those that do play for money, 
and a number of young men in my district play professionally 
and make a living.
    Could you comment a little bit more on the demographics of 
the average online poker player?
    Ms. Volberg. Well, I will be happy to do that. I would just 
would like to say that I said older, rather than--I did not 
mean any disrespect.
    In terms of the characteristics of online gamblers, this is 
not actually a study that I have done, it is a study that--a 
number of studies that have looked at online gamblers and 
online poker players as a subclass of online gamblers. And the 
E. Koeger study is the specific one that I was referring to 
here, where they found that--they looked at the demographic 
differences between online poker players and online casino 
gamblers. And what they found, that while the online poker 
players tended to mostly be, or the majority of them were young 
men between the ages of 18 and 24 with relatively high levels 
of education and income, in contrast the online casino gamblers 
were primarily or a majority were older women with relatively 
lower levels of income and education.
    Mr. Barton. But on the poker player demographic online, my 
experience is that they tend to be very sharp. They all know 
the probabilities, they all know the permutations. Most of them 
excel in math.
    If you watch the World Series of Poker, which is not 
online, but if you watch the World Series of Poker on ESPN, 
they all appear to be MIT engineering people. I mean, they are 
not people, though, that you would tend to say could be taken 
advantage of, that don't know what they are doing, that need to 
be protected. I mean, they are folks that are fully aware and 
feel that they have the ability to have a competitive edge. 
Wouldn't you agree with that?
    Ms. Volberg. I think that that is certainly characteristic 
of the individuals that you described as professional poker 
players, people who make a living.
    I think there are lots and lots of young men out there and 
some young women who also are very smart and also are very well 
educated.
    The issue is not so much the folks who, you know, know the 
odds and know what they are doing, it is people who are coming 
into an activity where they sort of think that they have gotten 
pretty good because they have been playing on a free play site, 
and then they decide to do it for money and they go in and 
their expectations are a little unrealistic because the free 
play sites are set up differently.
    Mr. Barton. I have only got about a minute left. I want to 
ask the chairman of the Nevada Gaming Commission, in your 
opinion would online poker, would it hurt or help mainline 
brick-and-mortar casinos?
    Mr. Lipparelli. I think it is been our experience that if 
there is an impact, it is already reflected in operations. 
Clearly there is a lot of online gaming happening now. It has 
exploded in the last 7 years, so if there has been a direct 
impact, it is probably already being felt.
    I think the industry participants that we talk to 
frequently see an opportunity there, but they see it as a 
compliment rather than something that would impact their 
businesses directly.
    Mr. Barton. OK. And my last question to Mr. Fahrenkopf. 
There obviously are some very delicate issues in terms of 
sovereignty of the Indian tribes and their casino operations 
and their regulatory approach versus for-profit casinos.
    Do you feel that those issues can be handled in a fair 
fashion so that the Indian tribes concerns, because of their 
status, can be addressed in a fair way?
    Mr. Fahrenkopf. We totally respect the sovereignty of the 
tribes, and that is why, as I indicated in my initial remarks, 
I have been doing this for 17 years, and for 17 years I have 
been saying that no law should treat any type of legal gaming 
different than the others. So no one should get a leg up or be 
hurt between whether you are talking about our industry, 
whether you are talking about Native American gaming, whether 
you are talking about the parimutuel industry, or whether you 
are talking about the lottery business.
    Mr. Barton. OK. Thank you, Madam Chairwoman.
    Mrs. Bono Mack. Thank you Mr. Barton. The chair recognizes 
Mr. Towns for 5 minutes.
    Mr. Towns. Thank you very much, Madam Chair. And of course 
I want to thank you and Mr. Butterfield for having this hearing 
in terms of bringing the very stakeholders together to have a 
discussion to determine whether, you know, whether we move 
forward or not, and if we do move forward to make certain that 
we are doing it in a very effective manner.
    Let me begin with you, Mr. McIntyre. I want to make certain 
I understood your testimony. You appear to be concerned about 
the loss of State revenue, you know, being diverted from the 
lottery play to online casino play. Wouldn't ensuring that the 
share of tax revenue from online poker make up the difference?
    Mr. McIntyre. One of the difficulties is, Mr. Congressman, 
is there is no State tax in New Hampshire, so there is that 
issue. There is no State income tax and there is no gaming tax 
in New Hampshire.
    But one of the difficulties we have is our research 
suggests that 32 percent of our players--strike that--30 
percent of the New Hampshire citizens visit a casino once a 
year, 45 percent of our players have visited within the last 
year, and 53 percent of our regular players have visited one or 
more times a year. So I firmly believe they draw from the same 
wealth.
    I don't think it would have an impact directly, 
immediately. I think it would be over the long term, given the 
statistics suggested, in terms of the demographic that it is a 
younger player. Lottery lives and breathes in the demographic 
of 35 to 60 years old, and that is not where even a poker 
player is now. It is where the folks who are in Internet poker 
will be in 20 years.
    So it is not for me that I make this case. It is for my 
successor or my successive successors in terms of the impact on 
lottery revenues, Congressman.
    Mr. Towns. Thank you very much. Let me go to you, Mr. 
Lipparelli.
    Given the longstanding role of States authorizing and 
regulating gaming within their own borders and the fact that 
New York State, which I come from, has a very sophisticated 
regulatory structure for gaming, are the States best positioned 
to handle this new formal wagering?
    Mr. Lipparelli. I think it has been our consistent position 
since this topic came up that we actually support a national 
model that gives the States some degree of framework to 
regulation. Given that this is an activity that crosses State 
borders, it is important to have some amount harmonization 
among those States. I think there can be particular levels of 
additional scrutiny that any State might want to impose, that 
there ought to be some ability to try to harmonize what would 
be a national business. Today, as you might know, there are 48-
some different regulatory structures. And from a private 
industry perspective, many of which operate in our State, it is 
become increasingly problematic and increasingly expensive to 
be responsible, to be answerable to 48 different regulatory 
regimes. So our position from the State of Nevada is that we 
clearly support some kind of national solution.
    Mr. Towns. To you, Mr. Fahrenkopf. Again, a little over a 
minute left. Has the ban on online gambling prevented Americans 
from gambling online? Has there been any----
    Mr. Fahrenkopf. No. I think, Congressman, as the testimony 
from actually all three of them, your fellow Members of the 
House who were here on the earlier panel, Internet wagering has 
just exploded. It actually started back early around 2003 and -
4. The passage of UIGEA, which was with all good purpose trying 
to put a dent in that, we have seen has really not been as 
effective as it should be. And that is why we believe that has 
to be amended to make very clear what is legal and not legal. 
And regulation, taxation, is the best way to protect those 
people who might be vulnerable to the things that Dr. Volberg 
is talking about and what Congressman Wolf is concerned about.
    Mr. Towns. Let me announce I am not a poker player, but how 
would I know, if I am playing, that I am not playing against a 
machine?
    Mr. Fahrenkopf. We submitted some additional testimony to 
the panel after the last hearing that got into that question, 
because there was some discussions of the use of bots and other 
types of mechanical, if you will, players, rather than regular 
players.
    And the technology that we have seen from those 
jurisdictions primarily in Europe, they have developed software 
which can--and Mr. Lipparelli probably knows more about this 
than I do--software that can monitor the way bets are being 
placed--actually, believe it or not, where the mouse is and 
where it is being pushed on a certain period of time to 
determine whether or not there is a problem.
    But interestingly enough, most of the bots that have been 
discovered have been discovered because other players, human 
players, have realized that something id not right with the way 
the game is going and report it.
    But maybe Mr. Lipparelli can tell you a little more about 
how the bots can be handled.
    Mr. Lipparelli. Mr. Towns, I spent a better part of 2-1/2 
years looking at the various technologies that exist, and one 
thing that is becoming abundantly clear to me is that you can 
probably get away with trying to cheat a system or trying to 
play as an underage gambler or trying to utilize the services 
of the bot, but you will be uncovered fairly quickly. The 
analytical tools that are now being deployed as part of these 
systems have become very robust, so you might be able to get 
away with it once, but you are going to leave big fingerprints 
behind.
    Mr. Towns. Thank you, Madam Chair.
    Mrs. Bono Mack. Thank you, Mr. Towns, I appreciate it. And 
recognize Mr. Bass for 5 minutes.
    Mr. Bass. Thank you, Madam Chairman, this is a quick 
follow-up to Mr. Towns' question. Are bots illegal?
    Mr. Lipparelli. Well, I think the only way I could answer 
that is depending on what that it is. You would have to define 
it. There are many people that will use the player's aid on 
another computer to give them basic strategy play. That would 
probably not be illegal in most people's mind. The use of some 
kind of an electronic device to gain an advantage, which is how 
we define cheating a game in Nevada, would probably be illegal.
    Mr. Bass. But the bill wouldn't address that, would it? Or 
does it?
    Mr. Lipparelli. I am not sure whether it does or doesn't.
    Mr. Bass. I have a general question for all the witnesses. 
I believe that Mr. Barton's bill limits licensees to gaming 
facilities, I don't know what the definition is, casinos and so 
forth.
    Mr. McIntyre is here today from the New Hampshire Lottery. 
Lotteries, as he testified, have been around a long time. They 
have their own infrastructures and so forth that guard against 
cheating and fraud and corruption and so forth. Why shouldn't 
they be able to run online poker if they chose to do so? I am 
directing that to any member of the panel.
    Mr. Fahrenkopf. As I said, any piece of legislation must 
treat all the legal gaming entities the same, lotteries as well 
as land-based casinos, Native American tribes and the 
parimutuel industry. So if the State wants to have their 
lottery offer online poker, I have no objection with that. I 
don't think that that would violate the rule.
    Mr. Bass. Others?
    Mr. McIntyre. Congressman Bass, certainly I thank you for 
your comments and I certainly believe that we would be able to 
handle that function similar to our neighbors to the north, the 
two Canadian lotteries that run this now, the Atlantic Lottery 
Corporation, representing our neighbor directly to the north, 
as well as the British Columbia Lottery, which runs that 
function very well.
    Mr. Bass. Mr. Lipparelli.
    Mr. Lipparelli. Yes, I share the views of the panelists, 
that I as a regulator--we abide by what our State law says. So 
in our case we would obviously follow that.
    The only comment that I would add to the question posed by 
Mr. Towns and McIntyre, there are several foreign markets that 
are experiencing the impact of a failure to regulate on 
existing money-raising kinds of organizations. There are 
several lotteries and other kinds of organizations that in 
large measure rely on the proceeds of gaming activity and have 
highlighted the fact that illegal gaming activities are 
starting to have a real negative impact on their revenue flows. 
So given, you know, the kinds of organizations that are out 
there that benefit from gaming, it is a huge question to them 
as to why not regulate.
    Mr. Bass. So, in conclusion, none of you have any objection 
to amending the bill to expand the scope to allow or to give 
the opportunity for State lotteries to participate on an equal 
level and not have the 2-year hold-harmless period before they 
could be involved in the same online poker activities as the 
casinos would be allowed to do upon enactment of the bill?
    Mr. Fahrenkopf. Well, I am not here representing anyone 
supporting either of the pieces of legislation. We have not 
made a determination--I would say, however, that one of the--
anyone who knows anything about online poker knows that for it 
to be successful there must be liquidity, which means you have 
to have a lot of players.
    And whether or not a State as small as Nevada or New 
Hampshire or other States could generate the liquidity with an 
intra-State online poker operation to really make it worth 
their while is a real question that is out there. Now maybe 
States as California, Florida, some of the bigger States, you 
would have that liquidity. But again, as I say, I have no 
opinion on either of the pieces of legislation that are now 
being considered.
    Mr. Bass. Well, any other comments?
    Mr. McIntyre. Certainly if the legislature of New Hampshire 
authorizes us to do so, we would welcome it. And liquidity is a 
matter to be determined based on the players of New Hampshire. 
But about 5 percent of our players and 5 percent of the State 
play now online currently, so it is about 60,000 people. So I 
imagine, based off of our brand recognition, which is 72 
percent favorable amongst the citizens of New Hampshire and 85 
percent favorable rating amongst our players, I would imagine 
that would increase.
    Mr. Bass. Thank you, Madam Chairman.
    Mrs. Bono Mack. Thank you, Mr. Bass. Mr. Harper, you are 
recognized now for 5 minutes.
    Mr. Harper. Thank you, Madam Chairman. And I appreciate the 
witnesses being here and taking their time to enlighten us.
    And if I may start with you, Mr. McIntyre, I believe you 
said earlier that the State of New Hampshire received, I 
believe, $1.5 billion towards education since the lottery 
began; is that correct?
    Mr. Fahrenkopf. That is correct, sir.
    Mr. Harper. OK. And how much money has been sold or 
received for the sale of the lottery tickets, the total amount 
spent?
    Mr. McIntyre. Within State?
    Mr. Harper. Out of the 1.5 billion that went to education, 
what was the total amount bought or spent on lottery tickets 
during that time?
    Mr. McIntyre. It is difficult to characterize because the 
amount of prizes going back to the players has varied over 50 
years. But currently, of a dollar spent, 67 cents goes back to 
the players in terms of prizes. We keep about 25 cents on the 
dollar in terms of profit.
    Mr. Harper. Just a curiosity. Do you have to physically go 
to a vendor to purchase the lottery ticket, or is that done 
online?
    Mr. McIntyre. It is done through a computer system that 
communicates through multiple methods, and you purchase it at a 
convenience store, supermarket, and the rest.
    Mr. Bass. Will the gentleman yield?
    Mr. Harper. Certainly, I will yield to the gentleman from 
New Hampshire.
    Mr. Bass. Mr. McIntyre defines online as being on a 
telephone line. You are talking about the Internet. Internet 
sales are not----
    Mr. Harper. I will certainly clarify my question. Are there 
Internet sales, or does an individual buying a lottery ticket 
in New Hampshire have to go to a store vendor to buy it?
    Mr. McIntyre. 99.6 percent of our sales are through a 
store. A very, very, small portion of our sales, what we call 
subscription sales, which are done through the Internet, and it 
represents less than half of 1 percent of our overall sales.
    Mr. Harper. Thank you. You know, one of the concerns, as we 
look at this, is, for instance, in my district we have the 
Mississippi Band Chocktaw Indians, who have land-based casino 
gambling. And it is hard for me to envision how opening this 
up, which would require more players, would require folks to do 
that for it to be a profitable venture, how that will not have 
a negative impact upon destination gambling. And I would like 
to hear a response on that from whoever would care to answer?
    Mr. Fahrenkopf. Congressman, some years ago we at the 
American Gaming Association, which is most of the land-based 
casinos in the country in the commercial area, looked very 
closely at this. The question is cannibalization. If, in fact, 
Internet poker was allowed, would it cannibalize the business 
of the brick-and-mortar companies?
    We looked at, for a very, very long time, we came to the 
conclusion that it would not; or if it did, it would be very 
marginal because we are only talking about poker. Our position 
is it should only be poker.
    We are more in line with the Barton bill's approach than we 
are with the Frank-Campbell bill's approach.
    Mr. Harper. OK. Well, let me stop you for just a moment. If 
we are looking over all at a broader bill, more than just 
poker, would that not expand or increase the probability that 
it is going to hurt destination gambling?
    Mr. Fahrenkopf. It could, although the demographics of the 
people who play online, as Dr. Volberg has talked about, 
particularly young men who are between the ages of 18 and 24, 
higher education, they tend to not be the same people who go to 
land-based casinos.
    Mr. Harper. OK.
    Mr. Fahrenkopf. So our position was that the end result 
would be it would be a new profit center rather be very much of 
a deterioration in the business of land based.
    Mr. Harper. All right. One of the arguments that has been 
used to support Internet gambling in the U.S., legal, is that 
we have these offshore sites that can't be controlled.
    Well, if we do this, how--are we still in the situation of 
not controlling what is that problem? How are we controlling 
that? Why shouldn't we first look towards coming out with a way 
to perhaps block all payments to them before we look at 
expanding it here, because I don't see how we are going to do 
that. And Dr. Volberg, I believe, has had some, maybe in your 
written testimony, is you are going to have a higher cost for 
the regulated version versus the offshore unregulated version, 
and what is to keep players from still going offshore?
    Mr. Fahrenkopf. I would answer that in two ways. As I 
attempted to answer earlier to the chairperson's question, the 
market will take care of some of that, not all that. In other 
words, people who are going to gamble online, whether or not 
they would rather gamble with the brands they know, U.S. 
companies that they know, rather than going offshore to some 
outfit that is located in the Caribbean island or somewhere. So 
the marketplace will take care of some of that.
    The other step will be going back and strengthening UIGEA. 
The original purpose of UIGEA was exactly what you pointed out: 
how to block these transfers offshore. We have to go back and 
strengthen that act by making clear what is legal and what is 
illegal to give guidance to American banks and financial 
institutions so they can effectively block those.
    Mr. Harper. Shouldn't we do that first before we proceed 
with anything else?
    Mr. Fahrenkopf. Well, I am not sure which should be first. 
I think you can both do it at the same time.
    Mr. Harper. Thank you, I yield back.
    Mrs. Bono Mack. Thank you Mr. Harper. Mr. Lance, you are 
recognized for 5 minutes.
    Mr. Lance. Thank you very much and good morning to you all. 
This is very interesting to me, and I want to thank the 
director from New Hampshire regarding his remarks concerning 
New Jersey. And New Jersey certainly has learned a great deal 
from New Hampshire.
    And to Director McIntyre, it is my understanding that 
regulatory bodies here in this country and also abroad often 
rely on the independent testing laboratories for confirming 
that equipment used in gaming is fair for consumers. I am also 
told that some foreign jurisdictions that currently allow 
Internet gaming have similar testing requirements, not only for 
fairness issues but also for verification and location matters.
    My question to you, and perhaps to others on the panel as 
well, is to what extent, if at all, do you think that statutory 
change here should include such requirements?
    Mr. McIntyre. I mean, certainly--Congressman, thank you for 
your comments and you have a wonderful lottery. One of the 
concerns we have is integrity, and we test and retest and 
retest, and we use outside testing firms. We use outside 
testing firms to test the testing firms for that very reason, 
sir.
    So I think in terms of an outside firm like Gaming 
Laboratories or the rest that offer the services and the 
protocols to test systems, I think that is actually an 
excellent idea.
    Mr. Lance. Yes, thank you. And would others on the panel 
have a opinion, the director in Nevada?
    Mr. Lipparelli. Certainly, Mr. Lance. I spent 20 years in 
the industry, 18 of which was submitting products to testing 
labs around the country. And I have some colleagues that 
operate in other jurisdictions that don't see as much value in 
pretesting. I see incredibly high value in that, and I don't 
think there would be any regime that we would consider that 
would allow someone to deploy gaming technology that is not 
subjected to high assurance and pretesting.
    Mr. Lance. Thank you. That was my view as well, and I would 
hope it might be included in the legislation or at least in 
some provision that would permit that based upon rule and 
regulation.
    On another area, on cannibalization, I am concerned to some 
extent whether this would be competition, not only for various 
aspects of the regime but also, for example, for State 
lotteries.
    And to the two gentlemen who are certainly involved in 
this, do you think that there might be only a certain gaming 
amount, a pie, and would this lead to cannibalization of 
lotteries, obviously an issue of importance to those of us in 
New Jersey who rely on our State lottery?
    Mr. Lipparelli. Well, I guess it is more my personal views 
than my role as a State regulator, but as a State regulator we 
do have the economic health of our industry to consider. I 
think what is ironic about the circumstances that exist today, 
the legitimate licensed operator who cares for their patrons 
and establishes policies, is that this distinct disadvantage to 
those who are really under no penalty of prosecution for 
playing in this field today.
    So we have got this incredible imbalance, people we enjoy 
great relationships with, people who take lots of time and 
energy and money to keep their operations aboveboard, competing 
against those that have no view of that. And so I think to the 
extent that there is, again, an erosion of market share, that 
is occurring today without abatement.
    Mr. Lance. Thank you. Mr. McIntyre, Director McIntyre.
    Mr. McIntyre. Yes, Congressman. I certainly use the example 
frequently related to the gambling pie and suggest that Nevada, 
in its own decisions, has no State lottery. And they have 
avowed repeatedly that it is because they don't want to 
compete. So I certainly believe that in terms of there being a 
finite number of dollars, I believe that to be true.
    Mr. Lance. Thank you. And Chairman Fahrenkopf?
    Mr. Fahrenkopf. Congressman, if a State is concerned about 
cannibalization of the lottery, its State legislature and 
Governor can make a determination to opt out and therefore 
their lottery will not be in danger.
    Mr. Lance. Yes, thank you. That would be my view as well. 
And regarding pies, to all of you, a happy Thanksgiving.
    Thank you very much, Madam Chair. I yield back the balance 
of my time.
    Mrs. Bono Mack. I thank my sentimental colleague and 
recognize Mr. Guthrie for 5 minutes.
    Mr. Guthrie. Thank you, Madam Chairman. I was kind of 
interested, and I have looked through the testimony written, 
and Mr. Fahrenkopf and Dr. Volberg, both of you cite credible 
studies, looks like the people who did the studies have good 
curriculum vitae, but you come to different conclusions about 
expanded online gambling and expanded access for problematic 
gamblers or people who are addicted to gambling.
    Could you gentleman explain, you both had studies that 
showed completely two different results. Do you want to explain 
your study, and then your study, Dr. Volberg----
    Mr. Fahrenkopf. Well, I think the important words that I 
said with regard to online gamblers, they are not more likely 
to be pathological gamblers.
    If you take into consideration what I call the allowances 
that are made for participation in other gambling activities, 
and that is one of the problems with some of the studies that 
have been done and have been cited by Dr. Volberg.
    I also realize that her studies, one of her studies had 139 
people or 135 gamblers, another had 179, and that is why I used 
the Harvard studies, 40,000 gamblers online in Europe who have 
been examined. And I just think the weight of the evidence goes 
that way.
    But Dr. Volberg herself admits that you have got to be 
careful with your sample to make sure that you don't oversample 
with young men who are more likely to be those individuals 
included. And I am not sure whether in those surveys that she 
cited in her written documents----
    Mr. Guthrie. The 40,000 Harvard study had the same 
percentage of psychological gamblers; is what you are saying 
they had the same percentage? So there was not an evidence of 
an appreciable different percentage of problem gamblers online 
as it is in a casino.
    Mr. Fahrenkopf. I think the numbers were very different 
with regard to the conclusion as to whether or not just 
Internet gaming itself is going to create more problem gamblers 
or whether or not, as Dr. Volberg has quoted in a number of her 
studies, it is just another element that a problem gambler is 
going to play; in other words, they are going to----
    Mr. Guthrie. Dr. Volberg, do you want respond?
    Ms. Volberg. With all due respect to Mr. Fahrenkopf, the 
very small sample that he cited there, it looks like those 
results are from the Nevada survey that we did in 2002.
    Mr. Fahrenkopf. No, it was a California study, 135 Internet 
gamblers.
    Ms. Volberg. One hundred thirty-five Internet gamblers out 
of a total sample of 7,121.
    The part that, you know--it is very difficult in a forum 
like this to get down into the nitty-gritty of research 
studies, and I would invite all of you to come to the National 
Council's annual conference and listen to these things be 
debated.
    I think that in my mind, there is very clear evidence that 
problem gambling rates amongst Internet gamblers are extremely 
high. They are three to four times higher than they are amongst 
people who do not gamble on the Internet but do other forms of 
gambling.
    The issue is that most people who gamble on the Internet 
also do other types of gambling. They are casino players, they 
play the lottery, many of them are horse betters, and so on and 
so forth. And so when you do an analysis it is very important 
to control for those things.
    In the California survey that Mr. Fahrenkopf has just 
referenced, we found that only that very small number or very 
small proportion of about 2 percent of our sample had gambled 
on the Internet, but 11 percent of them scored as pathological 
gamblers and an additional 20 percent of them or 19 percent of 
them scored as subclinical problem gamblers.
    And when you did a statistical analysis that controlled for 
the demographics for co-morbid disorders, for other types of 
gambling, the Internet gamblers were actually 10 times more 
likely to have a gambling problem than the people who were not 
gambling on the Internet.
    Mr. Guthrie. Wouldn't you say that because you can do that 
anonymously, because some people do things on the Internet they 
don't do in public--I mean, that is what we--is it because they 
can do it anonymously? Is that why you see it at higher rates 
or access, because nobody sees you walking into the casino and 
gambling, see you are on the Internet, and other forms of 
behavior people have done on the Internet you can't believe 
they have done. We have had a problem in Kentucky State 
Government where people are doing stuff on the computer that is 
just unbelievable. And is it because of the anonymity of it all 
that you don't think somebody can find you?
    Ms. Volberg. I think it is the anonymity. It is also the 
ease of access. It is the fact that, you know, there are no 
external controls in terms of, you know, being socially visible 
to other people. I think that there is a number of different 
features of the Internet gambling that are of great concern to 
people who are concerned about the issue of problem gambling.
    Mr. Guthrie. Thank you. I see my time has expired. I yield 
back.
    Mrs. Bono Mack. Thank you. Dr. Cassidy, you are recognized 
for 5 minutes.
    Mr. Cassidy. Again, this has been a very informative panel. 
I think at least a couple of you must have read some of the 
questions I had last time. If not, you are incredibly 
intuitive, in which case I want to gamble with you on your 
side, not against you.
    On the other hand, Dr. Volberg, you and Mr. Fahrenkopf 
actually pose some different conclusions. I think I read in 
your testimony that worldwide there is about 4 billion played 
on Internet gambling, and Mr. Fahrenkopf estimates that there 
would be 2 billion in tax revenue generated. Now, those numbers 
seem incompatible unless you are imagining, Mr. Fahrenkopf, 
that there would be a dramatic escalation in the amount of 
online gambling, or if you disagree with Dr. Volberg's 
statement that there is 4 billion only.
    Mr. Fahrenkopf. One of the problems with anyone 
guesstimating what the tax revenue that is going to be 
generated is, is we are dealing with an unregulated industry. 
So what we are doing, any of us who are trying to estimate it, 
would be we are dealing with offshore companies that are trying 
to give us estimates.
    For example, there was a PriceWaterhouseCoopers report that 
was actually filed in the Financial Services Committee in the 
last cycle that said there would be $49 billion in revenues. 
Well, there were a lot of assumptions you had to make. It was 
that every State would opt in. I mean that it would include 
sports wagering. I mean, you have got to look at it carefully.
    I tend to go on the low side because I just don't feel 
there has been sufficient evidence out there of exactly what 
the bottom line would be, plus we don't know what the tax 
structure would be if legislation would be passed.
    Mr. Cassidy. But if it were taxed too much, it would drive 
people to the illegal offshore sites. So, that is----
    Mr. Fahrenkopf. That is the problem they are have right now 
right now, Congressman, for example, in Great Britain. In Great 
Britain, they put in place such a high level of taxation on 
Internet gaming companies that most of the companies have left 
and have gone to the Isle of Man, have gone to Gibraltar, have 
gone to other places to locate because----
    Mr. Cassidy. Now, that is a nice segue, just because I am 
out of time, and I am going to be out of time.
    Dr. Volberg, your testimony also points out that in places 
like France and in Britain, 25 to 33 percent of the people 
still are offshore, if you will, at illegal sites.
    Ms. Volberg. It is actually the opposite way around. It is 
only about 25 to 40 percent of domestic players in those 
markets who play exclusively with the domestically provided and 
regulated sites, and it is the remainder of the market, as I 
understand it, or the remainder of the players who actually 
continue to play either on out-of-jurisdiction sites or use a 
mix of domestic and nondomestic.
    Mr. Cassidy. So we really shouldn't view this as a cash cow 
for State treasuries because if we tax it too much we will just 
drive people offshore. That is a fair statement?
    Mr. Fahrenkopf. Well, I think--that is why I say we have to 
tighten up UIGEA and give the banking facilities in this 
country the guidance that they will need to stop financial 
transactions with those offshore operations. That will stop it.
    Mr. Cassidy. Although going back to what Mr. Frank said, if 
people wish to do so in this age, it is hard to imagine you can 
somehow keep them--although I enjoyed some of your testimony 
about the online protections you could create, and thank you 
for adding those.
    There is also a little discrepancy. Dr. Volberg, you 
mentioned, one of the things--I don't have my glasses on, I am 
sorry, I can't see. Fahrenkopf?
    Mr. Fahrenkopf. Yes, it is.
    Mr. Cassidy. I apologize. Mr. Fahrenkopf, you mentioned 
that in one of your references that only 2.5 percent of college 
students play online Internet. But Dr. Volberg, I thought maybe 
you or someone else I saw referenced said 30 percent of high 
school--of college males are online. Do I have my numbers 
totally confused?
    Ms. Volberg. I think there might be some confusion about 
the numbers because----
    Mr. Cassidy. What is the prevalence of Internet gambling 
amongst college males?
    Ms. Volberg. I wish I could answer that because we do not 
have any recent surveys that tell us what Internet gambling 
participation rates are in the U.S. population.
    I would estimate, based on what we have seen in some of the 
recent State-level studies, like the California study that came 
up earlier, is that probably while about 2 percent of the 
general population gambles on the Internet, amongst college-age 
males it is probably going to be closer to 8 to 10, possibly up 
to 15 percent.
    Mr. Cassidy. OK. It is different from the 2.5 percent of 
all students, even if it is 50 percent female/male.
    Mr. Fahrenkopf. There has been a recent study of 10,000 
college students.
    Mr. Cassidy. That is the one I am quoting.
    Mr. Fahrenkopf. Yes, they found that almost 2.5 percent had 
gambled on the Internet and only six-tenths of a percent did so 
monthly or more frequently. That is from LaBrie.
    Mr. Cassidy. Now that prevalence is far lower. That is why 
it seemed odd.
    Ms. Volberg. No, that is 2003 that it was published.
    Mr. Fahrenkopf. 2003. That is right.
    Mr. Cassidy. I see. That is dated data, if you will.
    Mr. Fahrenkopf. Yes.
    Mr. Cassidy. Well, I have other questions, but I am out of 
time. I yield back.
    Mrs. Bono Mack. Thank you, Dr. Cassidy. And the chair 
recognizes Mr. Olson for 5 minutes.
    Mr. Olson. I thank the chairwoman for hold this hearing and 
also thank the witnesses for your testimony, your time, and 
your expertise. It is almost over.
    I would like to limit my comments this morning as to what 
is going on in my home State of Texas in regards to legalizing 
gambling, issues with UIGEA, and one question, as my colleagues 
have touched on most of my questions previously.
    In March of this year the Texas House Committee on 
Licensing and Administrative Procedures held a hearing on nine 
bills which propose a variety of options for legalizing gaming 
in Texas.
    Currently, gambling in Texas is limited to State lottery, 
three federally recognized Native American tribes, and gambling 
at horse and Greyhound racetracks. Supporters of gambling in 
Texas point to legalizing poker, casinos, and slots as a way to 
help with State's budget issues in the form of nontax revenue, 
as you allude to up there, the success you have had in New 
Hampshire.
    Many folks in Texas also talk about the potential for 
thousands of new jobs that could be created. Others argue that 
gambling preys upon the poorest Texans and creates bigger 
social problems. This is an important debate that my State is 
having, and I also appreciate our committee is exploring this 
issue of interstate online gaming and the current issues with 
UIGEA.
    Mr. Olson. [Continuing.] I have heard from a very, very 
vocal and savvy group of Twitter and Facebook constituents in 
the 22nd District who are very much in favor of legalizing 
online poker. I would like to read one email from one of these 
constituents. This is from Valerie in Houston, Texas. And she 
said, Dear Representative Olson, the UIGEA slaps the Internet 
with unnecessary government regulation and oversight that 
limits innovation and growth. The act may have been intended to 
stop unlawful Internet gambling, but because it never actually 
spelled out what that meant, UIGEA ushered in unintended 
consequences that put the government in the role of Big 
Brother. In particular, the act has the effect of turning 
online payment transaction companies into informants and 
enforcers for the Federal Government, raising privacy concerns 
as well as cost to consumers. Sincerely, Valerie, from Houston, 
Texas.
    Many people believe that if you are going to play Internet 
poker you should not follow the Federal Government's model of 
managing your budget.You should do it with money you have 
earned and not money that you expect to earn or hope to earn. 
As you know, legislation has been introduced in the House which 
would prohibit the use of credit cards from making deposits in 
Internet gaming accounts.
    My question is for you, Mr. Fahrenkopf and any of the 
witnesses who wants to get involved, do you think most 
companies would be willing to limit themselves to debit cards 
and electronic checks?
    Mr. Fahrenkopf. I mean we haven't taken a position on the 
whole question of credit cards. It was a major issue in the 
Frank bill in previous legislative sessions. The original bill 
did provide for the use of credit cards. However, when the bill 
was being voted out of committee, that was removed. At this 
point in time, we don't have a position one way or the other on 
that from the standpoint of the American Gaming Association.
    Mr. Olson. Anyone else want to comment? Mr. Lipparelli.
    Mr. Lipparelli. In the State of Nevada the use of credit 
cards is illegal for gaming.
    Mr. Olson. Mr. Fahrenkopf, any comments?
    Mr. Fahrenkopf. I already did.
    Mr. Olson. I apologize. Mr. McIntyre.
    Mr. McIntyre. Certainly I am under the direction of the New 
Hampshire legislature and the governor's office, so whatever 
they would say to do I would do heartily.
    Mr. Olson. Sounds like my marriage, yes, sir. And Dr. 
Volberg. 
    Ms. Volberg. I think that there would be a lot of arguments 
in favor of prohibiting the use of credit cards for Internet 
gaming. So I would be in favor of that.
    Mr. Olson. Thank you very much. That is all my questions. I 
yield back.
    Mrs. Bono Mack. I thank the gentlemen, and the chair now 
recognizes Mr. Butterfield for the purposes of a unanimous 
consent request.
    Mr. Butterfield. Thank you very much. I am going to ask 
unanimous consent to have this letter dated November 18th, 
2011, included in the record. The letter simply reiterates the 
necessity to hear from Federal agencies who will be impacted by 
any bill we pass relating to the legalization of Internet 
gaming.
    Thank you.
    [The information follows:]


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    Mrs. Bono Mack. Without objection, and I, too, have 
received written testimony from Mr. Robert Martin, Chairman of 
the Morongo Band of Mission Indians, that has been shared with 
minority counsel. I understand they have no objection to 
including it in the record of today's hearing. Therefore, I ask 
unanimous consent that it be included in the record of this 
hearing.
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    Mrs. Bono Mack. With that, I am happy to thank my 
colleagues for their participation today. I thank the panel 
very much for your help in shedding light on what is clearly a 
very complicated issue. I look forward to our work together if 
this moves forward.
    As we conclude our hearing today and prepare to depart to 
the four corners of our great Nation to celebrate Thanksgiving, 
please permit me to say what a blessing and an honor it has 
been to work with all of you this year on so many issues which 
are so important to so many people. Travel safely and I hope 
everyone enjoys our unique American holiday.
    I remind members that they have 10 business days to submit 
questions for the record, and I ask the witnesses to please 
respond promptly to any questions you might receive. And with 
that, the meeting is now adjourned. Thank you.
    [Whereupon, at 11:09 a.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]


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