[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]


 
                   RESTORATION OF AMERICA'S WIRE ACT

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

                                HEARING

                               BEFORE THE

                   SUBCOMMITTEE ON CRIME, TERRORISM,
                 HOMELAND SECURITY, AND INVESTIGATIONS

                                 OF THE

                       COMMITTEE ON THE JUDICIARY
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION

                                   ON

                                H.R. 707

                               __________

                             MARCH 25, 2015

                               __________

                           Serial No. 114-19

                               __________

         Printed for the use of the Committee on the Judiciary
         
         
         
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]         


      Available via the World Wide Web: http://judiciary.house.gov
      
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                       COMMITTEE ON THE JUDICIARY

                   BOB GOODLATTE, Virginia, Chairman
F. JAMES SENSENBRENNER, Jr.,         JOHN CONYERS, Jr., Michigan
    Wisconsin                        JERROLD NADLER, New York
LAMAR S. SMITH, Texas                ZOE LOFGREN, California
STEVE CHABOT, Ohio                   SHEILA JACKSON LEE, Texas
DARRELL E. ISSA, California          STEVE COHEN, Tennessee
J. RANDY FORBES, Virginia            HENRY C. ``HANK'' JOHNSON, Jr.,
STEVE KING, Iowa                       Georgia
TRENT FRANKS, Arizona                PEDRO R. PIERLUISI, Puerto Rico
LOUIE GOHMERT, Texas                 JUDY CHU, California
JIM JORDAN, Ohio                     TED DEUTCH, Florida
TED POE, Texas                       LUIS V. GUTIERREZ, Illinois
JASON CHAFFETZ, Utah                 KAREN BASS, California
TOM MARINO, Pennsylvania             CEDRIC RICHMOND, Louisiana
TREY GOWDY, South Carolina           SUZAN DelBENE, Washington
RAUL LABRADOR, Idaho                 HAKEEM JEFFRIES, New York
BLAKE FARENTHOLD, Texas              DAVID N. CICILLINE, Rhode Island
DOUG COLLINS, Georgia                SCOTT PETERS, California
RON DeSANTIS, Florida
MIMI WALTERS, California
KEN BUCK, Colorado
JOHN RATCLIFFE, Texas
DAVE TROTT, Michigan
MIKE BISHOP, Michigan

           Shelley Husband, Chief of Staff & General Counsel
        Perry Apelbaum, Minority Staff Director & Chief Counsel
                                 ------                                

Subcommittee on Crime, Terrorism, Homeland Security, and Investigations

            F. JAMES SENSENBRENNER, Jr., Wisconsin, Chairman

                  LOUIE GOHMERT, Texas, Vice-Chairman

STEVE CHABOT, Ohio                   SHEILA JACKSON LEE, Texas
J. RANDY FORBES, Virginia            PEDRO R. PIERLUISI, Puerto Rico
TED POE, Texas                       JUDY CHU, California
JASON CHAFFETZ, Utah                 LUIS V. GUTIERREZ, Illinois
TREY GOWDY, South Carolina           KAREN BASS, California
RAUL LABRADOR, Idaho                 CEDRIC RICHMOND, Louisiana
KEN BUCK, Colorado
MIKE BISHOP, Michigan

                     Caroline Lynch, Chief Counsel
                            C O N T E N T S

                              ----------                              

                             MARCH 25, 2015

                                                                   Page

                                THE BILL

H.R. 707, the ``Restoration of America's Wire Act''..............     2

                           OPENING STATEMENTS

The Honorable Sheila Jackson Lee, a Representative in Congress 
  from the State of Texas, and Ranking Member, Subcommittee on 
  Crime, Terrorism, Homeland Security, and Investigations........     5
The Honorable Bob Goodlatte, a Representative in Congress from 
  the State of Virginia, and Chairman, Committee on the Judiciary     6
The Honorable John Conyers, Jr., a Representative in Congress 
  from the State of Michigan, and Ranking Member, Committee on 
  the Judiciary..................................................     7
The Honorable Jason Chaffetz, a Representative in Congress from 
  the State of Utah, and Member, Subcommittee on Crime, 
  Terrorism, Homeland Security, and Investigations...............     8

                               WITNESSES

John Warren Kindt, Professor Emeritus of Business Administration, 
  University of Illinois
  Oral Testimony.................................................    10
  Prepared Statement.............................................    13
Les Bernal, National Director, Stop Predatory Gambling (SPG)
  Oral Testimony.................................................    25
  Prepared Statement.............................................    27
Michael K. Fagan, Adjunct Professor of Law and Counsel-
  Consultant, Washington University School of Law
  Oral Testimony.................................................    39
  Prepared Statement.............................................    41
Andrew Moylan, Executive Director and Senior Fellow, R Street 
  Institute
  Oral Testimony.................................................    67
  Prepared Statement.............................................    69
Parry Aftab, Esq., Founder and Executive Director, WiredSafety, 
  Inc.
  Oral Testimony.................................................    81
  Prepared Statement.............................................    83

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

Material submitted by the Honorable Sheila Jackson Lee, a 
  Representative in Congress from the State of Texas, and Ranking 
  Member, Subcommittee on Crime, Terrorism, Homeland Security, 
  and Investigations.............................................    98
Material submitted by the Honorable Ted Poe, a Representative in 
  Congress from the State of Texas, and Member, Subcommittee on 
  Crime, Terrorism, Homeland Security, and Investigations........   103
Material submitted by the Honorable Sheila Jackson Lee, a 
  Representative in Congress from the State of Texas, and Ranking 
  Member, Subcommittee on Crime, Terrorism, Homeland Security, 
  and Investigations.............................................   114

                                APPENDIX
               Material Submitted for the Hearing Record

Response to Questions for the Record from John Warren Kindt, 
  Professor Emeritus of Business Administration, University of 
  Illinois.......................................................   128
Response to Questions for the Record from Les Bernal, National 
  Director, Stop Predatory Gambling (SPG)........................   137
Response to Questions for the Record from Michael K. Fagan, 
  Adjunct Professor of Law and Counsel-Consultant, Washington 
  University School of Law.......................................   147
Response to Questions for the Record from Andrew Moylan, 
  Executive Director and Senior Fellow, R Street Institute.......   152
Supplemental Testimony in Response to Questions for the Record 
  from Parry Aftab, Esq., Founder and Executive Director, 
  WiredSafety, Inc.........................................158
                       deg.OFFICIAL HEARING RECORD
      Material Submitted for the Hearing Record but not Reprinted

Material submitted by the Honorable Jason Chaffetz, a Representative in 
    Congress from the State of Utah, and Member, Subcommittee on Crime, 
    Terrorism, Homeland Security, and Investigations:

    http://docs.house.gov/Committee/Calendar/
ByEvent.aspx?EventID=103090

Supplemental Material submitted by John Warren Kindt, Professor 
    Emeritus of Business Administration, University of Illinois School 
    of Law:

        http://docs.house.gov/meetings/JU/JU08/20150325/103090/HHRG-
        114-JU08-Wstate-KindtJ-20150325-SD001.pdf

Additional Supplemental Material submitted by John Warren Kindt, 
    Professor Emeritus of Business Administration, University of 
    Illinois School of Law:

    http://docs.house.gov/Committee/Calendar/
ByEvent.aspx?EventID=103090

Supplemental Statement submitted by Michael K. Fagan, Adjunct Professor 
    of Law and Counsel-Consultant, Washington University School of Law:

    http://docs.house.gov/Committee/Calendar/
ByEvent.aspx?EventID=103090

Extraneous Material submitted for the Hearing Record:

    http://docs.house.gov/Committee/Calendar/
ByEvent.aspx?EventID=103090


                   RESTORATION OF AMERICA'S WIRE ACT

                              ----------                              


                       WEDNESDAY, MARCH 25, 2015

                        House of Representatives

                   Subcommittee on Crime, Terrorism, 
                 Homeland Security, and Investigations

                       Committee on the Judiciary

                            Washington, DC.

    The Subcommittee met, pursuant to call, at 4:56 p.m., in 
room 2237, Rayburn Office Building, the Honorable Jason 
Chaffetz presiding.
    Present: Representatives Chaffetz, Goodlatte, Chabot, Poe, 
Buck, Bishop, Jackson Lee, Conyers, and Richmond.
    Staff present: (Majority) Allison Halataei, Parliamentarian 
& General Counsel; Robert Parmiter, Counsel; Alicia Church, 
Clerk; (Minority) Joe Graupensperger, Counsel; Vanessa Chen, 
Counsel; and Veronica Eligan, Professional Staff Member.
    Mr. Chaffetz. The Committee will come to order. I thank you 
for being here, appreciate your patience as we have a hearing 
today on H.R. 707, the ``Restoration of America's Wire Act.'' 
We appreciate your patience and understanding.
    We have critical votes that are on the floor of the House. 
We will have another set of votes. We do hope to get through 
opening statements prior to the next set of votes, but we will 
have to recess again. It is the intention of the Committee to 
come back into order after this next series of votes.
    This is an important issue. It is an important topic. I 
happen to be the one who had introduced H.R. 707. I know there 
are various thoughts and perspectives on that.
    [The bill, H.R. 707, follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
          
                                   __________
    Mr. Chaffetz. In the spirit of timeliness, I am going to 
first recognize the Ranking Member, Ms. Jackson Lee, for her 
statement.
    Ms. Jackson Lee. Mr. Chairman, thank you so very much, and 
thank you for your thoughtfulness in introducing a piece of 
legislation that will give us the opportunity to review some 
very important issues.
    Let me also thank the Chairman of the Committee, Mr. 
Sensenbrenner, for calling this very timely hearing.
    I want to add my appreciation to all of the witnesses for 
their patience as we try to do the people's business, and also 
for your astuteness on this issue, because obviously that is 
the case that we have called you as witnesses because we want 
to hear your testimony.
    There are 143 million smartphones in operation in America, 
and at least 75 percent of all U.S. households have computers.
    Again, I want to acknowledge, as I see both the Ranking and 
the Chairman in the Committee of the full Committee. Let me 
acknowledge our Ranking Member, Mr. Conyers, who is here, and 
Mr. Goodlatte, the Chairman of the full Committee, who is here 
as well.
    Each of these Internet-connected devices is a potential 
slot machine or roulette wheel, and every home in America is 
potentially a casino. That is why it is critical today that we 
address important issues concerning Internet gaming, including 
not only statutory interpretation but also questions related to 
law enforcement and the appeal of online gaming to minors.
    Traditional offline gaming revenues in the United States 
total $35 billion annually. As the Internet continues to offer 
new possibilities for gaming online, it has been estimated that 
the American market for online casinos in total could be worth 
as much as $12 billion per year. Gaming is big business, but we 
must ensure that our laws governing all forms of gaming reflect 
a careful weighing of the related costs and benefits.
    Illegal gambling has long been a source of revenue for 
organized crime. In 1961, then-Attorney General Robert F. 
Kennedy's Justice Department worked with the 87th Congress to 
enact a series of laws targeting organized crime operations. 
One of these statutes, the Wire Act, was passed to prohibit the 
use of interstate telephone and telegraph wagering services 
which processed bets that provided substantial revenues for 
criminal organizations.
    However, the advent of the Internet in the 1990's allowed 
greater remote interactions with bettors and expanded the types 
of games that could be played from a distance. These evolving 
circumstances led to increased focus on the scope of the 
prohibitions under the Wire Act.
    Prior to 2011, the Department of Justice interpreted the 
Wire Act to prohibit wagering of any kind over interstate 
telecommunications. In 2011, the Department reexamined the text 
and legislative history of the statute and developed its 
current position, that the law was meant only to apply to bets 
placed on sporting events. Some fear that this change will lead 
to the proliferation of non-sports Internet gaming and possible 
related harms to our citizens, which all of us are concerned 
about.
    Others assert that because Americans already spend an 
estimated $2.6 billion on illegal offshore gambling websites 
per year, the better course is to encourage them instead to 
participate in legal, regulated Internet gaming in the states 
that allow it. So far Delaware, New Jersey and Nevada have 
amended their laws to allow either poker or casino-style gaming 
over the Internet, and several other states allow the online 
sales of lottery tickets.
    We must take seriously the concerns that are raised about 
the expansion of Internet gaming, including worries that it may 
facilitate money laundering, prey on those who engage in 
problem gambling, and allow the participation of minors who 
would not be able to gamble in a casino. And I would add that 
all of us, no matter what side of the issue you are on, raise 
that as a concern.
    In fact, the Adolescent Psychiatry Journal's review of 
studies concerning Internet gambling and children concluded 
that the potential for future problems among youth is high, 
especially among a generation of young people who have grown up 
with video games, computers, and the Internet.
    We also must consider the arguments of those who assert 
that online gaming taking place under state regulation would 
better prevent those harms than unregulated offshore gaming. 
For instance, in 2011, former FBI Director Louis Freeh stated 
that these offshore gaming sites are run by shady operators, 
often outside the effective reach of U.S. law enforcement, an 
environment rife with opportunity to defraud players and 
launder money for much more dangerous operations.
    There certainly are different perspectives on these 
questions, and the Committee will examine all of them as we 
evaluate H.R. 707, a bill which would provide that the Wire Act 
prohibits non-sports betting as well as betting on sporting 
events.
    I look forward to the hearing, the insights and opinions of 
our witnesses concerning each of these issues, and I believe 
that we have gathered individuals with expertise and balance 
and a contribution that will help us move forward on a question 
that the underlying premise should be how do we serve the 
American public.
    With that, Mr. Chairman, I yield back.
    Mr. Chaffetz. I thank the gentle woman.
    I will now recognize the Chairman of the full Committee, 
the gentleman from Virginia, Mr. Goodlatte, for 5 minutes.
    Mr. Goodlatte. Thank you, Mr. Chairman.
    Internet gambling has been an issue of particular interest 
to me during my service in Congress. I am personally opposed to 
Internet gambling because it is used as a mechanism to launder 
money, because it causes bankruptcy and breaks up families, and 
because it can even lead to suicide, as it did for a 
constituent from my district. I have introduced multiple bills 
dealing with Internet gambling in the past, and I am looking 
forward to a frank and detailed discussion with our 
distinguished witnesses, and the Members of this Subcommittee, 
on the topic.
    As the Chairman noted, the OLC opinion reinterpreting the 
Wire Act caused a dramatic shift in the way the Department of 
Justice views the laws proscribing Internet gambling. In the 
three-plus years since the opinion was issued, it has led to an 
increased push toward the availability of online gambling in 
this Nation. Many participants in the gambling industry, from 
Indian tribes to state lottery commissions to casino operators, 
have been exploring ways to increase their involvement in 
remote gaming.
    In this environment, we must explore ways to protect the 
rights of states to prevent unwanted Internet gambling from 
creeping across their borders and into their states. Updating 
the Wire Act can be a tool to protect states' rights to 
prohibit gambling activity. However, there is also another 
states' rights dynamic that we must acknowledge, and that is 
what to do about states that want to regulate and permit 
Internet gambling within their own borders. Some states have 
already legalized online gambling. Thus, any update to the Wire 
Act will need to address how to handle both the states that 
have already enacted laws allowing online gambling and any 
states that would want to do so in the future.
    These are tough decisions, and we are having this hearing 
today to seek answers to these tough decisions.
    While I am sympathetic to the argument that states are 
laboratories of democracy, I am also concerned about whether it 
is possible to keep this sort of gambling activity from 
crossing state lines and thus violating the rights of other 
states.
    There is a role for Congress to play in upholding states' 
rights in this area. Wholly intrastate criminal conduct may 
nevertheless have an interstate nexus, or be facilitated 
utilizing an instrumentality of interstate commerce such as a 
highway, telephone network, or, yes, the Internet. It is 
therefore within Congress's purview to legislate this conduct. 
The question for the Members of this Committee, then, is 
whether Congress should act in this area, and if the approach 
taken by H.R. 707 is the appropriate way to do so.
    I will be interested in our panel's take on that and many 
other questions. How would a state-by-state regulatory approach 
to Internet gambling affect the citizens of states who do not 
want legalized gambling within their borders? In other words, 
how would you ensure that online gambling, if legal in one 
state, wouldn't bleed over into a neighboring state where it is 
not legal, particularly since the Internet doesn't stop at 
state borders? Is geolocation technology sufficient to 
determine whether an individual who places a bet is physically 
present in a state where it is legal? Should all Internet 
gambling be prohibited? What should be done with states that 
have already passed laws to permit Internet gambling?
    I look forward to discussing all these issues in detail 
with our witnesses. This is a complex issue and evokes strong 
opinions on all sides. Should we decide to move forward with 
legislation to address this issue, we need to do so 
deliberately and thoughtfully.
    I thank the witnesses for their testimony and yield back 
the balance of my time.
    Mr. Chaffetz. I thank the Chairman.
    I will now recognize the Ranking Member of the Judiciary 
Committee, the former Chairman of the Judiciary Committee, Mr. 
Conyers, for 5 minutes.
    Mr. Conyers. Thank you, Mr. Chairman.
    First, I too join in in greeting five witnesses today.
    In recent years, I have reviewed the discussion concerning 
the intended meaning of the Wire Act and have tried to 
determine the best course for public safety. As a result of 
legal analysis, I have the following observations which lead me 
to oppose legislation to amend the Wire Act to prohibit non-
state gaming.
    Three points. I agree with the position of the Department 
of Justice based on a 2011 analysis that the Wire Act's 
prohibitions are limited to sports betting and not to other 
forms of betting facilitated by wire communications, now 
including the Internet.
    Secondly, while unlawful gaming has long been associated 
with harms relating to criminal enterprises, banning online 
gaming is not the answer. That is why the Fraternal Order of 
Police wrote to myself and Chairman Goodlatte in May of last 
year in which they said we cannot ban our way out of this 
problem as this would simply drive online gaming further 
underground and put more people at risk. Not only does the 
black market for Internet gaming include no consumer 
protections, it also operates entirely offshore with unlicensed 
operators, drastically increasing the threat of identity theft, 
fraud, and other criminal acts.
    And finally, considering the greater risk of harm from 
offshore gambling, the better option is to allow states, if 
they choose, to permit online gaming as they see fit, subject 
to regulation and monitoring, of course.
    So that is why the Department of Justice's interpretation 
of the Wire Act and three states--New Jersey, Nevada, and 
Delaware--have already permitted online poker or some forms of 
online casino-style gaming in compliance with the law. Other 
states, including my own, Michigan, now allow online sales of 
lottery tickets. States should be allowed to decide this 
question for themselves, and we should not take any action that 
would overturn such state laws. But I anxiously await our 
discussions back and forth today.
    I thank the Chairman and yield back the balance of my time.
    Mr. Chaffetz. I thank the gentleman.
    I will now recognize myself for 5 minutes.
    I obviously am in favor of this bill, having introduced it. 
I believe it is a states' rights bill, and I think it is 
important that states have the ability, such as Utah and 
Hawaii, where we have no gaming, to protect ourselves from 
something that we would not like to see within our borders.
    I personally am opposed to gambling but recognize the right 
of others and other states, if they so choose, our neighbors, 
good friends in Nevada if they so choose to have at it. But 
nevertheless, I do believe that, going back to December 23, 
2011, the Wire Act had an interpretation for more than 50 
years, and if there is going to be an alteration of such 
significance to the law, then that should be done through the 
regular congressional process, not simply a 13-page memo issued 
by the Office of Legal Counsel within the bowels of the 
Department of Justice.
    Now, there are a number of people on both sides of this 
issue. It is something that people, as Chairman Goodlatte 
talked about, are passionate about. I would like to ask 
unanimous consent to enter into the record 42 different letters 
that we have received by and large in support of restoring 
America's Wire Act or are very concerned about the implications 
of the OLC's opinion.
    These include letters from the African American Mayors 
Association, the Southern Baptist Convention; Senator Mark 
Warner; the Eagle Forum; the American Family Association; two 
letters from the Family Research Council; a letter from the 
Concerned Women for America; a letter from Senator Lindsey 
Graham, Senator Dianne Feinstein, and Senator Kelly Ayotte; 
Attorneys General from 16 states that wrote to us that this is 
a problem; the National Association of Attorneys General. We 
have letters from Governor Rick Perry, Governor Nikki Haley, 
Governor Herbert of Utah, Governor Scott, Senator Reid, Senator 
Kyl, Governor Mike Pence; an op-ed by Governor Rick Perry; 
another op-ed from Governor Bobby Jindal; another letter from 
Senator Dianne Feinstein; a USA Today editorial from November 
20, 2013; a New York Times editorial from November 25, 2013; a 
cover story on Newsweek of August 22, 2014; former 
Representative Spencer Bachus, a Member that was on this 
Committee; the Department of Justice; and the Federal Bureau of 
Investigation's Criminal Investigations. There are a host of 
letters and people who have opined that this is fraught with 
problems and challenges.*
---------------------------------------------------------------------------
    *Note: The submitted material is not included in this printed 
record but is on file with the Subcommittee and can be accessed at:

      http://docs.house.gov/Committee/Calendar/
      ByEvent.aspx?EventID=103090
    But truly, we are here not to hear from the Members of 
Congress but to hear from our distinguished panel, so let me 
introduce them briefly. We will swear you in, and then we will 
start with the testimony from our panel. We do appreciate it. I 
know some of you have traveled from out of state.
    Mr. John Kindt. Did I pronounce that properly?
    Mr. Kindt. Yes, sir.
    Mr. Chaffetz. Thank you.
    Professor Kindt is the Professor Emeritus of Business 
Administration at the University of Illinois. He is a well-
published academic author on issues in relationship to 
gambling. His academic research and publications contributed to 
the enactment of the 1996 U.S. National Gambling Impact Study 
Commission and the United States Unlawful Internet Gambling 
Enforcement Act of 2006, among other Federal and state 
statutes. Professor Kindt received his B.A. degree from William 
and Mary, earned his J.D. and MBA from the University of 
Georgia, and his LLM at SJD from the University of Virginia.
    Mr. Les Bernal is the National Director to Stop Predatory 
Gambling Foundation. He has spoken and written extensively 
regarding the dangers of casinos and lotteries to the American 
public. He has testified before Congress and appeared on 
numerous television and radio outlets. Previously, Mr. Bernal 
served as the Chief of Staff in the Massachusetts State Senate. 
He earned his undergraduate degree from Ithaca College and his 
MPA from Suffolk University.
    Mr. Michael Fagan is an attorney and adjunct professor at 
Washington University School of Law. He is also a special 
advisor to the Missouri Office of Homeland Security, as well as 
an advisory board member at Speartip LLC, where he is a 
consultant on cyber counter-intelligence issues. Previously, 
Mr. Fagan served as Assistant U.S. Attorney for the Eastern 
District of Missouri for 25 years, where he prosecuted several 
high-profile Federal cases involving illegal gambling activity. 
He received his Bachelor's degree from Southern Illinois 
University and his J.D. from Washington University School of 
Law.
    We are also pleased to have Mr. Andrew Moylan. He serves as 
the Executive Director and Senior Fellow for the R Street 
Institute, where he is the organization's lead voice on tax 
issues. Prior to joining R Street, he was Vice President of 
Government Affairs for the National Taxpayers Union. He 
previously served with the Center for Educational Freedom at 
the Cato Institute and has written numerous articles for 
national publications. He is a graduate of the University of 
Michigan and somebody we have seen frequently up here in the 
halls of Congress.
    And Ms. Parry Aftab--did I pronounce that properly?--is the 
Founder and Executive Director for Wired Safety, an 
organization that provides information and education to 
cyberspace users on a myriad of Internet and interactive 
technology safety, privacy, and security issues. In 1999, she 
was appointed the head of Online Child Protection Project for 
the United States by the United Nations' Educational, 
Scientific, and Cultural Organization, a specialized agency 
within the United Nations. She received her B.A. degree as 
valedictorian at Hunter College and her J.D. degree from the 
New York School of Law.
    We have a diverse group of people who have come to testify. 
Again, we thank you for your time and effort to be here.
    It is the tradition of the Committee to have people sworn 
in. So if you will please rise and raise your right hand?
    Do you solemnly swear that the testimony you are about to 
give this Committee shall be the truth, the whole truth, and 
nothing but the truth, so help you God?
    Thank you. You may be seated.
    Let the record reflect that all witnesses answered in the 
affirmative.
    It is a busy, crowded schedule. I will assure you that your 
full testimony will be inserted into the record, but we would 
appreciate it if you would keep your verbal comments to 5 
minutes or less.
    Professor Kindt, we will start with you.

TESTIMONY OF JOHN WARREN KINDT, PROFESSOR EMERITUS OF BUSINESS 
             ADMINISTRATION, UNIVERSITY OF ILLINOIS

    Mr. Kindt. Mr. Chairman, Ranking Member, Members of the 
Committee, participants and guests from the U.S. House of 
Representatives and the U.S. Senate, thank you for your kind 
invitation to testify.
    As a University of Illinois professor since 1978, I believe 
that a large majority of not only Illinois academic experts but 
also other U.S. academics would and should urge President 
Barack Obama and Obama Administration colleagues to support the 
restoration of the Wire Act.
    Internet gambling is an issue of strategic financial 
stability and Wall Street regulation. It is not an issue of 
electronic poker, daily fantasy sports gambling, and other fun 
and games methodologies, which are actually deceptive proposals 
to leverage gateways for legalizing various gambling activities 
throughout international cyberspace.
    Alarmed by gambling, U.S. Senator Paul Simon and House 
Judiciary Chair Henry Hyde sponsored the bipartisan U.S. 
National Gambling Impact Study Commission. Reporting to 
Congress in 1999, the Commission concluded that Internet 
gambling was impossible to regulate and that Internet gambling 
must continue to be prohibited, including by the Wire Act 
initiated by U.S. Attorney General Robert F. Kennedy to combat 
organized crime, and via even stronger prosecutorial 
enforcement mechanisms.
    Accordingly, upon the urging of 49 state Attorney Generals, 
the 2006 UIGEA was enacted into law. At the time, there was 
concern about a UIGEA fantasy sports loophole, which has since 
been dangerously exploited by disreputable organizations and 
needs to be closed.
    Internet gambling's destabilization of Wall Street and 
international financial systems becomes apparent in the 
investigative news video, ``The Bet That Blew Up Wall Street,'' 
which Warren Buffett titled ``financial WMDs'' and which 
members are respectfully but strongly urged to watch at the 60 
Minutes website or on YouTube under ``Credit Default Swaps.'' 
Wall Street is dangerously flirting again with trillions in 
unregulated derivatives; that is, financial side bets. In this 
context, vacuous Internet gambling financials predicated on 
gambling activities are in development, and Internet gambling 
stocks would cannibalize a series of speculative bubbles, which 
can only lead to another Great Recession, or worse.
    Killing personal, business, and institutional finances, 
Internet gambling is widely known as the ``killer application'' 
of the Internet. Internet gambling places real-time gambling on 
every cell phone, at every school desk, at every work desk, and 
in every living room. With ease, people can ``click your phone, 
lose your home'' or ``click your mouse, lose your house.''
    Internet gambling destabilizes U.S. national security and 
the strategic economic base.
    Titles of some of the United States International Gambling 
Report series produced at the University of Illinois speak 
directly to these dangers. Volume I, The Gambling Threat to 
Economies and Financial Systems: Internet Gambling. Volume II, 
The Gambling Threat to National and Homeland Security: Internet 
Gambling. Volume III, The Gambling Threat to World Public Order 
and Stability: Internet Gambling. The over 3,700 pages in these 
three volumes alone include reprints of 97 original 
congressional documents detailing the dangers of Internet 
gambling.
    Citing the threat to national security, in 2006/2007 
Vladimir Putin recriminalized 2,230 electronic gambling 
casinos. What do the Russian economists know that still eludes 
the Federal Reserve Board and Washington decision-makers?
    Internet gambling is big government interstate gambling 
promoted and abused by big government.
    Like Illinois, the U.S. needs the ``New Untouchables.''
    Gambling lobbyists now dominate the economic policies of 28 
states, giving away at least $35 to $100 billion to gambling's 
insiders since 1990. Illinois is now the most bankrupt state in 
the country, with over $110 billion in unfunded liabilities, 
including being branded by the SEC in 2013 for pension and 
securities fraud, and placing teachers, public employees, 
pensions and social programs in extreme jeopardy.
    For example, in 1990, 10 casino licenses worth $5 to $10 
billion were given away to political insiders in Illinois for 
only $25,000 each, including one insider convicted in the 
Governor Rodney Blagojevich scandals. The 2011 reinterpretation 
of the Wire Act was initiated by Illinois officials.
    Similarly, lobbyists callously use the 9/11 tragedy to slip 
into Federal law billions of dollars in tax breaks for slot 
machine electronic gambling. These breaks should be ferreted 
out and eliminated.
    Big government gambling cheats consumers. Are the 
electronic games and slots fair?
    Conclusion: The U.S. should reinstate the ban on Internet 
gambling and encourage other countries to emulate the U.S. ban.
    Thank you, Mr. Chairman and Members of the Committee. Thank 
you.
    [The prepared statement of Mr. Kindt follows:]**
---------------------------------------------------------------------------
    **Note: Supplemental material submitted with this prepared 
statement is not included in this printed record but is on file with 
the Subcommittee and can be accessed at:

      http://docs.house.gov/meetings/JU/JU08/20150325/103090/
      HHRG-114-JU08-Wstate-KindtJ-20150325-SD001.pdf
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                               __________
    Mr. Chaffetz. Thank you.
    Mr. Bernal, you are recognized for 5 minutes.

          TESTIMONY OF LES BERNAL, NATIONAL DIRECTOR, 
                 STOP PREDATORY GAMBLING (SPG)

    Mr. Bernal. Hello. My name is Les Bernal, and I am the 
National Director of Stop Predatory Gambling. Our focus is 
government-sponsored gambling, whether it is casinos, state 
lotteries, tribal casinos, or the topic of today's hearing, 
which is Internet gambling.
    Government-sponsored gambling is playing a major role in 
the rising unfairness and inequality in American life, and it 
is directly impacting the lives of your constituents in your 
district.
    Up until about 10 years ago, for me, government-sponsored 
gambling was like the paint on the wall. It was just there. I 
never questioned it. But when you finally stop to look at it, 
you can't avoid the obvious evidence that this public policy is 
contributing to the unfairness and inequality in our country, 
which has been considered one of the defining issues of our 
time by leaders from across the political spectrum.
    Banning the practice of states sponsoring Internet 
gambling, which the bill before you would do, is part of the 
foundation of any serious effort toward reversing this rising 
inequality in our country.
    One important job of the Federal Government is to ensure 
that every state gives every citizen equal protections under 
the law. Yet, at this moment in history, state governments 
across the United States are blatantly, blatantly cheating and 
exploiting their own citizens, infringing on the rights of 
millions of Americans through the extreme forms of gambling 
they sponsor and market to our communities. Many of these 
state-sponsored games, especially electronic gambling machines, 
are designed mathematically so users are certain to lose their 
money the longer they play. At the same time, these games are 
literally designed so citizens can't stop using them. They are 
exploiting aspects of human psychology and inducing irrational 
behavior.
    Citizens, your constituents, aren't demanding these extreme 
forms of gambling. No one is pounding the table for this in 
your district. In partnership with commercial gambling 
operators, states are forcing these gambling games onto the 
public. The most recent poll of New Jersey voters found that 57 
percent, 57 percent opposed online gambling, and only 32 
percent approved. This is after, after their state government 
began sponsoring online gambling in 2013.
    So if not for the Federal Government, who will step in to 
protect the rights of individuals, your constituents, against 
these blatantly dishonest practices that are contributing to 
inequality and being done by an active predatory state?
    People are and should remain free to wager money and to 
play games of chance for money. But while citizens have every 
right to engage in a financially damaging activity, the 
government has no business encouraging them to do it.
    In most of your congressional districts, 5 percent of your 
district, 5 percent of your district, about 35,000 of your 
constituents have been turned upside-down by gambling, most of 
which was sponsored by state government. This figure does not 
account for the reality that each of these citizens has at 
least one or two people close to them whose lives are also 
upended because of this public policy.
    There is no debate that the financial losses of these 
individuals, these people being harmed by this public policy, 
they make up the majority of the revenue taken by state-
sponsored casinos and lotteries. Millions of men and women and 
their families have sacrificed and hurt so much to provide 
these needed revenues to American government. But no one has 
ever thanked them for their service. There are no parades with 
fluttering American flags in the breeze, no yellow ribbons. Our 
country simply renders these people as failures.
    Banning state-sponsored Internet gambling also creates more 
fairness for the two-thirds of your constituents who almost 
never use government-sponsored gambling. Because of this public 
policy, they are paying higher taxes for less services. State-
sponsored casinos and lotteries have proven to be a failed 
source of government revenue, and they haven't delivered on 
their famous promises to fund education, lower taxes, or to pay 
for needed public services.
    The evidence is clear that state-run gambling operations 
add to rather than ease long-term budget problems for states. 
Internet gambling sponsored by government will only make it 
worse. That is why state-sponsored gambling is the symbol of 
anti-reform politicians across the United States, regardless of 
party.
    ``No taxation without representation'' was one of America's 
founding principles. After 40 years of state governments using 
lotteries and casinos to prey on their own citizens, to extract 
as much money as possible, the time has come to add the 
principle of ``no taxation by exploitation'' beneath it.
    Thank you.
    [The prepared statement of Mr. Bernal follows:]
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                               __________
    Mr. Chaffetz. I thank the gentleman.
    Mr. Fagan, you are now recognized for 5 minutes.

  TESTIMONY OF MICHAEL K. FAGAN, ADJUNCT PROFESSOR OF LAW AND 
    COUNSEL-CONSULTANT, WASHINGTON UNIVERSITY SCHOOL OF LAW

    Mr. Fagan. We need to update and restore the Wire Act, and 
particularly to undo the misinterpretation recently given to it 
by the Department of Justice's Office of Legal Counsel. The 
need for a legislative fix I prefer to set out in the written 
testimony submitted to the Subcommittee. It is not greatly 
different from the language in H.R. 707 and returns the Act to 
its proper scope, with a few less exceptions and a bit more 
First Amendment protection.
    Also in my written submission is an analysis of how and why 
the Office of Legal Counsel's December 2011 strained 
interpretation of the Wire Act to preclude its application to 
non-sports gambling communications is wrong substantively and 
was achieved via a closed legislation-by-fiat process neither 
democratic nor sensible given the change it portends for daily 
life in the United States.
    Indeed, the 50-year understanding that the Wire Act applies 
to both sports and non-sports wagering interstate communication 
was the understanding that even the gambling industry had 
during that largely pre-Internet period, as industry behavior 
shows. So when the Office of Legal Counsel's 2011 
reinterpretation of the Act became public, many wondered 
whether the opinion was either careless or corrupt.
    No matter. For present purposes, as a result, it was wrong 
both as a matter of law and as a matter of policy. A restored, 
repaired Wire Act will help states enforce their gambling laws 
whether the state prohibits or authorizes intrastate gambling 
activities. This kind of help is just as needed today as in 
1961.
    Organized crime, both traditional and non-traditional, and 
now increasingly transnational, has long exploited and 
continues to exploit the evasive opportunities presented by 
conducting cross-border gambling operations. By unwisely 
cutting in half the utility of the Wire Act as a tool in the 
prosecutor's toolbox, the Office of Legal Counsel opened a 
window for organized crime and others intent on impoverishing 
Americans through illicit, commercially operated gambling 
enterprises, whether via the numbers racket, lotteries, bolita 
virtual card games, slots, or any of the myriad creative ways 
con men and sharp operators use non-sports gambling to generate 
revenue from gangs designed to exploit and even addict.
    The money laundering utility of gambling enterprises, long 
known but hard to investigate in brick-and-mortar settings, 
becomes all the more difficult to defeat when Internet-based 
gambling moves funds and obfuscates records at the speed of 
light. Of even more serious concern, law enforcement and 
intelligence analysts have seen online gambling sites, sites 
which by their nature are interstate and international in 
scope, being used as terrorist financing vehicles, places to 
clandestinely store and transmit funds.
    Terrorism-related convictions in the United Kingdom of 
Tariq ad Daour and two associates who used Internet gambling to 
facilitate terrorism conduct and planning a few years ago only 
hint at the dozens of classified and non-classified 
investigations that U.S., U.K., and Canadian authorities have 
made under the exploitation of gambling websites to finance 
terrorism.
    More recently, terrorists in Afghanistan have been using 
illegal gambling sites to move their money as well, reports 
Janes Advisory Services. It is no wonder that the Federal 
Criminal Investigators Association supports legislation to 
return the Wire Act to its original scope and opposes any 
carve-out that would weaken its protections and further enable 
criminal and terrorist activity. Without a restored Wire Act, 
there is not adequate legal framework for law enforcement to 
shut down substantial illegal interstate gambling activities.
    Relatedly, the present inability to use the Wire Act in 
cases of non-sports gambling further denies millions of 
Americans the efficient recourse of sentencing-based 
restitution when they become victims of fraud or other 
gambling-based criminal conduct conducted by illegal cross-
border enterprises.
    Those who dream that it's possible to regulate and tax this 
supposedly well-monitored interstate system of online gambling 
are just that, dreamers. I can tell you with the certainty of a 
person who has been there, done that, that there is no way the 
Federal Government or any individual or combination of state 
governments can expand to the degree necessary to effectively 
police and regulate the scale of Internet gambling, multiple 
millions of transactions involving billions of lines of code in 
malleable, disguisable formats with anonymizing and proxy tools 
readily available with easily disguised traditional and 
evolving collusive behaviors. For example, Meerkat-type video 
streaming over Twitter service will always give collusion teams 
a leg up.
    Remote access and control of computers in a jurisdiction 
where intrastate gambling is allowed will defeat geolocation 
and geo-fencing, and it is fairly trivial to leverage the Tor 
network to obfuscate the original IP address of a client, 
whether it is a laptop, a phone, a tablet, et cetera.
    All this means no police force or regulatory body will be 
big enough, trained enough, or funded enough to keep criminals 
and terrorists from using institutionalized online interstate 
gambling to their advantage.
    I see my time has run out.
    [The prepared statement of Mr. Fagan follows:]
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                               __________
    Mr. Chaffetz. Thank you.
    Mr. Moylan, you are now recognized for 5 minutes.

        TESTIMONY OF ANDREW MOYLAN, EXECUTIVE DIRECTOR 
             AND SENIOR FELLOW, R STREET INSTITUTE

    Mr. Moylan. Thank you, Mr. Chairman and Madam Ranking 
Member, Members of the Subcommittee, for the invitation to 
testify today.
    My name is Andrew Moylan. I am Executive Director and 
Senior Fellow of the R Street Institute. We are a pragmatic, 
non-profit, non-partisan think tank that strives for free 
markets and limited, effective government, and it is in pursuit 
of those goals that I testify before you today regarding 
concerns that we have about H.R. 707, the ``Restoring America's 
Wire Act,'' and what questions it raises about the appropriate 
scope of Federal law.
    My testimony today is focused not on the propriety of 
gambling per se, as is some of the other witnesses, but instead 
on articulating a conception of limited government and 
Federalism as it relates to gambling legislation. In such a 
Federalist system, states carry most of the responsibility to 
exercise powers that are rightfully theirs under the 
Constitution, and Federal power is appropriately constrained to 
genuinely national or interstate matters.
    So while my conservative and Libertarian brethren hold a 
wide range of views on the social implications of gambling, we 
share a broad consensus that the Federal Government is too 
large and too powerful, in no small part due to a decades-long 
trend of ever-expanding assertions of power by Congress and a 
compliant Judiciary that has validated most of those 
assertions, and it is this troubling trend rather than the 
activity of gambling itself which motivates my comments today.
    Much of my professional work has been devoted to protecting 
limited government in the Internet age, including matters on 
which I have previously testified to the Judiciary Committee, 
like Internet sales tax law.
    The Internet is indeed unlimited in its scope, but 
government power, even in this modern age, ought to be limited 
and respectful of borders, both the tangible geographic borders 
that delineate one sovereign state from the next, and the 
conceptual borders that delineate truly national interstate 
issues from state and local ones, and it is in that vein that I 
note potential concerns with the bill before you today.
    While ostensibly expanding the 1961 Wire Act such that it 
covers all forms of gambling, as opposed to just sports 
betting, and specifying the inclusion of Internet transmission 
as prohibited, it appears also to go a step further than that; 
and also in the plain language of the Wire Act itself and the 
closely related Unlawful Internet Gambling Enforcement Act, or 
UIGEA. Specifically, its prohibition on all wire or Internet 
gambling transmissions, including those conducted over the 
Internet, in states that may have chosen to license and 
regulate gambling, is at odds with the basic principles of 
Federalism and the more narrowly targeted language of the 
original Wire Act and UIGEA.
    While there are valid policy-based criticisms of each, both 
the Wire Act and UIGEA were written to help states in their own 
law enforcement pursuits and more carefully circumscribed to 
cover only genuinely international or interstate activity, and 
they did this by effectively exempting intrastate gambling and 
transmissions between entities and states where that behavior 
was legal.
    By appearing to extend to wholly intrastate conduct, the 
Restoring America's Wire Act may well empower the Federal 
Government in a way that we think is unwise, and it is 
problematic for two reasons. First is that it impedes upon an 
area of law that is traditionally reserved for the states, the 
general police power to regulate conduct within their own 
borders. And second, it potentially establishes a dangerous 
precedent in suggesting that mere use of a communication 
platform like the Internet subjects all users and all activity 
to the reach of the Federal Government no matter its location 
or its nature.
    So given decades, even centuries of eroding limits on 
Commerce Clause power, it is incumbent upon Congress to 
exercise restraint in its application, and I think this could 
be readily achieved by modifying the language of Restoring 
America's Wire Act to more closely resemble that in UIGEA, 
which carefully exempted intrastate payments and those between 
states with legal gambling. It even went so far as to exempt 
so-called intermediate routing from qualifying as intrastate, 
since the path of an electronic signal is incidental to the 
conduct in question.
    There are indeed areas where Congress is properly within 
its rights to legislate under the Commerce Clause. In my 
written testimony I refer to several examples of Federal bills 
that would prevent states from exercising cross-border 
authority in such a way as to cannibalize interstate commerce, 
the very problem that led to the downfall of the Articles of 
Confederation and the drafting of the Constitution.
    But there are innumerable instances where the Commerce 
Clause is cited as granting Federal authority to regulate 
conduct which is entirely intrastate and even non-commercial in 
nature. And as written, the Restoring America's Wire Act we 
think is a problematic use of Commerce Clause power that 
threatens to substitute the judgment of the Federal Government 
for that of states, which are the rightful holders of power to 
regulate intrastate activity.
    And so if limited government is to have any meaning in the 
21st century and beyond, we believe that Congress must exercise 
restraint in those claims of power and that in its current form 
the bill is problematic in that regard.
    Thank you.
    [The prepared statement of Mr. Moylan follows:]
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                               __________
    Mr. Chaffetz. Thank you.
    Ms. Aftab, please, you are now recognized for 5 minutes.

            TESTIMONY OF PARRY AFTAB, ESQ., FOUNDER 
           AND EXECUTIVE DIRECTOR, WIREDSAFETY, INC.

    Ms. Aftab. Thank you very much, Mr. Chairman and Ranking 
Members of both the Judiciary Committee and the Subcommittee 
here.
    I don't have a stake in gambling. I have a stake in 
protecting people online. The last time I testified before this 
Subcommittee was several years ago on radicalization of the 
Internet, and that is when I informed you that terrorists were 
recruiting our teens online from suburban areas where they were 
bored. I have testified before Congress on cyber-bullying, 
child sexual exploitation, child pornography, and child 
privacy. So my stake in this is to make sure that whatever 
happens, our kids and consumers are safer.
    So, I agree there are lots of problems. There are 
terrorists who are using online gambling, and there is money 
laundering going on, and there is malicious code that can be 
downloaded, but that is not happening in New Jersey, Delaware, 
or Nevada. It is happening currently with all of the offshore 
gambling sites, or many of the offshore gambling sites that are 
not covered by our laws, that we have been frustrated in trying 
to police over the years.
    In this case and the reason it is a little different is 
once you legalize online gambling with an interstate model, you 
now have partners in trying to shut down the illegal sites. So 
the providers who are licensed within a state have a stake in 
making sure that those who are offshore, those who are not 
subject to regulation, will follow what they need to do.
    I have looked long and hard at these issues, and I have 
surveyed the regulators in Delaware, New Jersey, and Nevada. We 
had done a white paper when I testified at the last hearing on 
online gambling, and we looked at best practices around the 
world. I picked up the phone and I called the top regulators in 
each of those states and I said are you keeping kids off? Are 
you having problems? What is your experience? Is the 
geolocation working properly? And I got very good responses 
from them. I was, frankly, a little surprised.
    It is not perfect. There were three kids who had gotten on 
to online gambling in Nevada, two during the test period. They 
had used their parents' account. One had used his older 
brother's account. It is a little like when we used to send 
somebody into a liquor store to buy beer when we were underage, 
and they would come out and nobody broke the law. I think that 
we are starting to see some of that here.
    We have had a lot of fraud over the years. I have had a lot 
of senior citizens who called me who had gotten into gambling 
offshore, and everyone was happy to take their money, but they 
weren't so happy to give it back.
    When we talk about terrorists and money laundering, you 
need to recognize that in the three states that are handling 
traditional gaming games--and Nevada is just doing poker and 
the other two are doing other games in connection with online 
gambling--they are very careful to make sure that you don't get 
paid your winnings until the right reports are made to the IRS 
about those winnings.
    Now, I don't know a great deal about financing terrorists 
and money laundering, but I don't think a lot of them want to 
sign up with the kind of identity controls that are put into 
these states and then have to file something with the IRS 
before the money goes back to an account that has already been 
authenticated.
    So I deal with a lot of issues of online crimes and risks 
against everyone, and it always comes down to verification and 
authentication. And the different hoops that people have to 
jump through to prove that they are in the state, that they 
have a valid bank account that has been approved under all of 
the Federal laws that have to, under the Know Your Customer 
rules on making sure that not just the IP address, which is the 
old-fashioned way of doing things that has been spoofed over 
the years, but that you can't even log on with a remote 
technology that lets you get into your computer when you are 
home because the technology that is used by the providers in 
these three states will block anything that is using remote 
access. It will block anything that is a little off, and it is 
actually incredibly accurate and is becoming more accurate 
because everyone has a stake in knowing where you are.
    You will see that there was a recent article about Four 
Square and Twitter wanting to know exactly where you are so 
they can advertise to you. That is the same technology that is 
being used to find out where you are. So whether you are using 
your GPS plus an IP and triangulation, whether it is knowing 
that you have been trying to get in from other places in the 
past, we have seen very good compliance and really the state-
of-the-art issues on authentication and verification of your 
location and knowing that you are who you are.
    Is it bullet-proof? No. But I think that the lotteries will 
be able to learn a great deal from the providers that come from 
more of the commercial gaming, and I think that their best 
practices will improve.
    Thank you.
    [The prepared statement of Ms. Aftab follows:]
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                                   __________
    Mr. Chaffetz. I thank the gentle woman.
    I will now recognize the Chairman of the full Committee, 
the gentleman from Virginia, Mr. Goodlatte, for 5 minutes.
    Mr. Goodlatte. Thank you, Mr. Chairman.
    I am going to go right down the line. I appreciate all your 
testimony, and I have a few brief, straightforward questions.
    The first one is, what is your position on H.R. 707, the 
bill introduced by the gentleman from Utah? Are you in favor of 
it? Are you against it? And either way, is there a key issue or 
a few issues that would make a difference to you?
    So, we will start with you, Professor Kindt.
    Mr. Kindt. I would tend to be in favor of this bill, and I 
think it should be actually stronger and more extensive. We 
need to keep the Internet gambling genie in the bottle. The 
U.S. National Gambling Impact Study Commission said keep this--
--
    Mr. Goodlatte. I am going to keep you short just because I 
have a bunch of questions I want to ask.
    Mr. Kindt. Yes, sir.
    Mr. Goodlatte. Mr. Bernal?
    Mr. Bernal. We support the bill.
    Mr. Goodlatte. Mr. Fagan?
    Mr. Fagan. I again support the bill. I prefer to see it 
worded a little differently, but as a compromise it certainly 
is much better than not having a bill.
    Mr. Goodlatte. Mr. Moylan?
    Mr. Moylan. I would oppose the bill for both Federalism 
concerns and also some practical ones, which we can get into.
    Mr. Goodlatte. You mentioned some. Is it repairable, or is 
it----
    Mr. Moylan. I think it is repairable from a Federalism 
perspective in the sense that there is a consistent application 
of Federal power as it relates to Federalism that relates to 
intrastate conduct, legitimately, genuinely intrastate conduct. 
When I mention practical concern, my own view--I didn't focus 
on gambling in my testimony. It is not my expertise. But my own 
view is that gambling, while a problem, is not something that 
is likely to bump other priorities from a law enforcement 
perspective.
    Mr. Goodlatte. Got it.
    Ms. Aftab?
    Ms. Aftab. I oppose the RAWA. I think that it just puts 
kids back into the crosshairs of the risks that we are facing 
in gambling.
    Mr. Goodlatte. All right. Let me now ask you what your take 
is on the argument that states should be allowed to permit 
Internet gambling within their own borders, and what about non-
Internet gambling, for example in a brick-and-mortar casino? 
Mr. Kindt?
    Mr. Kindt. I think all gambling----
    Mr. Goodlatte. Should states be allowed to permit gambling 
within their own borders on the Internet?
    Mr. Kindt. Mr. Chairman, I think all gambling is 
economically problematic. You are not creating anything. There 
are opportunity costs. There is no product being created, 
artificial risk.
    With regard to can it be kept within borders, I don't think 
technologically that is possible.
    Mr. Goodlatte. Mr. Bernal?
    Mr. Bernal. We strongly think states should not be 
sponsoring Internet gambling at the state level, and anyone who 
has any doubt----
    Mr. Goodlatte. Do you think the Federal Government should 
stop them, or do you think that is the responsibility of each 
state?
    Mr. Bernal. The Federal Government should step in and stop 
state governments from cheating and exploiting their citizens, 
yes.
    Mr. Goodlatte. Mr. Fagan?
    Mr. Fagan. Likewise. As a matter of policy, states should 
not have commercial gambling, whether Internet or otherwise. As 
a matter of Federal policy, the use of the Internet to gamble 
necessarily implicates Federal interests, so states shouldn't 
be allowed to do that. But as a matter of constitutional law, a 
state can choose to have gambling within its borders and set up 
its own intrastate Internet of sorts.
    Mr. Goodlatte. Including on the Internet?
    Mr. Fagan. Well, if it is on the Internet, it would be 
unwise because----
    Mr. Goodlatte. Within their state borders, they can do it 
on the Internet just like they do in brick and mortars.
    Mr. Fagan. They have the right to do that if they can keep 
it within their borders.
    Mr. Goodlatte. Okay. Mr. Moylan?
    Mr. Moylan. I think that states are well within their power 
to regulate gambling into or out of existence such as they see 
fit. I have my own preferences in that regard, but it is pretty 
clear to me that they have the authority to do so, and we have 
seen a wide range in states' approaches to that issue that 
bears that out.
    Mr. Goodlatte. Do you think the Federal Government should 
step in and protect a state that does not want Internet 
gambling from bleeding into its state, if you will, from states 
that do have it on the Internet?
    Mr. Moylan. Sure. I think that there is a genuine role to 
be played for Congress to address intrastate transmissions, as 
we discussed. The original Wire Act was in that vein. It was 
attempting to help states enforce their own laws. Their powers 
essentially end at their borders, and so they lacked the 
ability to enforce these intrastate transmissions, and that is 
why they turned to the Federal Government for help.
    Mr. Goodlatte. Ms. Aftab?
    Ms. Aftab. I think that the Federal role in being able to 
set up standards and enforce those standards so that 
geolocation is actually working so it is not moving across the 
borders is very important.
    Mr. Goodlatte. Okay. Let me ask one more question, because 
I have a few seconds left. Do you see a difference between 
gambling via online poker and sports betting versus playing the 
lottery? Mr. Kindt?
    Mr. Kindt. Yes. Sports gambling and Internet gambling are 
the crack cocaine of creating new addicted gamblers and opening 
up vast new areas of----
    Mr. Goodlatte. You are more troubled by that than by online 
Internet lottery?
    Mr. Kindt. I am troubled by lotteries, but I am more 
troubled by the sports gambling.
    Mr. Goodlatte. Mr. Bernal?
    Mr. Bernal. When governments are in the business of 
sponsoring gambling, we oppose that practice. Of the ones you 
mentioned, online poker, is really a sliver of the whole 
business. Those who lobby for this, just let us play poker, 
poker is a tiny amount of their business model. It makes people 
feel good. People have an association with cards, but that is a 
very minor piece of this.
    Mr. Goodlatte. Got it.
    Mr. Fagan?
    Mr. Fagan. All the different types of gambling you suggest, 
if permitted online by states, are all subject to being 
basically slottified. They will be converted to essentially 
slot machine-type addictive behaviors, generating increased 
speed of play, people staying online as long as possible to 
play, even though they shouldn't do that.
    Again, individual states within their borders have the 
right----
    Mr. Goodlatte. I am out of time, and I want to give Mr. 
Moylan and Ms. Aftab, if the Chairman will permit, a chance to 
answer.
    Mr. Moylan. If I understand your question----
    Mr. Goodlatte. Do you see a difference between gambling via 
online poker and sports betting versus playing the lottery?
    Mr. Moylan. I don't have particularly greater concern as it 
relates to the online conduct that you described as opposed to 
in-person. I think that wraps it up for you.
    Mr. Goodlatte. Ms. Aftab?
    Ms. Aftab. And I see the difference between sports betting 
but not poker and lottery. Sports betting has always been 
handled under the Wire Act. It is addressed. But I think that 
lotteries and poker and online slot machines are all in the 
same class.
    Mr. Goodlatte. Do you think that when we had a telephone as 
the only way of communicating, which is what we had when the 
Wire Act was written, do you think that it was contemplated--we 
knew that people would call up and say I want to put a bet on 
certain sports contests. But do you think somebody would call 
up on the phone back in 1964 and say put $50 on red and spin 
the roulette wheel and tell me whether or not I won?
    Ms. Aftab. I think it is like poker.
    Mr. Goodlatte. Probably not, right?
    Ms. Aftab. I will tell you what all my cards are and I will 
win if you believe me.
    Mr. Goodlatte. So there is a problem there in the fact that 
some are trying to draw a distinction between the two, when 
there really isn't that big a distinction.
    Ms. Aftab. Well, I think that lotteries--I have been in 
states that allow it and----
    Mr. Goodlatte. No, I am saying lotteries on one side, but 
you have sports betting and you have casino gambling on the 
other side.
    Ms. Aftab. Yes, and I don't think there is a difference 
between casino games only because Congress has already acted 
under the Wire Act in connection with the wire and the kinds of 
things we are seeing with racketeering. We are talking about 
licensed gambling providers here under certain regulation, and 
I think it is different.
    Mr. Goodlatte. Control within the state borders.
    Ms. Aftab. As long as it is within the state borders, and 
you can keep it within the state borders.
    Mr. Goodlatte. Right. Thank you very much.
    Thank you, Mr. Chairman.
    Ms. Aftab. And keep kids off.
    Mr. Chaffetz. I thank the gentleman.
    I now recognize the Ranking Member of the Subcommittee, Ms. 
Jackson Lee, for 5 minutes.
    Ms. Jackson Lee. Thank you very much, Mr. Chairman.
    Again, this is a very important discussion.
    Let me go first to Mr. Moylan and ask on the question 
dealing with both Federalism and states' rights, the Chairman's 
question or theme in his remarks, Mr. Goodlatte, about bleeding 
into other states. I know that you are framing your discussion 
around the question of states' rights. Some have a system of 
online that they have regulated.
    How would you answer the question of bleeding into other 
states?
    Mr. Moylan. It is a good question, and I think that the 
answer to it is--and first of all, this is a question that we 
face in any number of areas, not just as it relates to 
gambling. But states have remedies at their disposal, and there 
is Federal law at the disposal of prosecutors today to address 
that conduct. If a state chose to ban gambling within its 
borders, it could do so on both an institutional level and an 
individual level. And on the Federal level, the interstate 
transmission of those bets are, by and large, already illegal 
under UIGEA and the Wire Act.
    So I think that the tools are there to be able to prosecute 
that. Whether states choose to do that is, of course, a 
separate question. I am sure they are less eager about doing so 
with individuals than they are institutional purveyors of it. 
But the tools are there, in my estimation.
    Ms. Jackson Lee. And why don't you expand a little bit on 
general police powers that individual states have and how that 
would impact your discussion?
    Mr. Moylan. Well, from a sort of broad perspective, 
discussing Federalism and the Constitution, police powers are 
reserved to the states. There have been many court cases that 
have tested this, and it is the reason that we have to assert 
what is the nexus under which the Federal Government involves 
itself in an issue.
    So in this case, the very clear nexus is to the extent that 
there are interstate transmissions or issues in-between two 
states or international issues. But when we are talking about 
intrastate conduct, and to the extent that it is genuinely 
intrastate, those are by and large reserved to the states, and 
in the absence of reserving those powers to the states, I think 
that we worry, the R Street Institute does very much, about 
what that implies for the role of the Federal Government and 
the size of the Federal Government moving forward.
    Ms. Jackson Lee. One of the things is we have all found 
ourselves on the side of states' rights at one time or another.
    Let me ask a question of Ms. Aftab, and as I do that I will 
ask the Chairman to submit into the record a letter from the 
National Fraternal Order of Police. I ask unanimous consent to 
place this into the record.
    Mr. Chaffetz. Without objection, so ordered.
    Ms. Jackson Lee. Thank you.
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    Ms. Jackson Lee. Ms. Aftab, I have made my point clear, my 
concern for children and the ultimate impact. Why don't you 
respond to two points, one the question of children who are 
making decisions that may not be the best for them and without 
good judgment. They are children, and it is no reflection on 
how good their parents are. We know technology finds its way 
into bedrooms, little bedrooms, and on all of the new devices 
that are coming out all the time. Number one.
    Number two, how do we respond to the question that an 
unregulated process draws a lot of horror stories, particularly 
in the money laundering, offshore gambling that no one has 
control of, and that may draw innocent persons who desire to 
gamble and then find themselves in a worse position, being 
involved in unregulated processes?
    Ms. Aftab. Thank you very much, Ranking Member. I was a 
member of the Internet Safety Technology Task Force. It was 
from the Harvard Berkman Center, and we were charged by the 
Attorneys General to look at age verification and kids online, 
and it was basically to see how we could tell how old somebody 
was for the privacy laws that were put in place and 
inappropriate content.
    What we recognized was you can never identify a kid, but 
you can identify an adult. So these technologies require that 
you have bank accounts. They require that you show government-
issued identification. They look at these. They go through 
databases. A lot of them are using IDology, which is being used 
by a lot of the big companies out there and has been providing 
information to the FTC and advice to the FTC over the years.
    So what you have to do is prove that you are an adult and 
prove that you are who you are, and prove that you live where 
you are, and all of the databases out there that are collecting 
information about us have to agree. If anything doesn't agree, 
you are kicked out. If they find that you are using technology 
on your computer that allows you to get to it remote, you are 
kicked out. If they find that there is any question about what 
is going on, you are kicked out.
    Ms. Jackson Lee. Are you suggesting, if I might, that other 
states would have the ability to use the technology, or are 
using the technology?
    Ms. Aftab. They are already using it, and it is actually 
very good.
    Ms. Jackson Lee. And let me conclude by just simply saying 
you are suggesting that the offshore operators are not 
following----
    Ms. Aftab. They are not doing anything. They don't want to 
keep kids out. Kids have a lot of money.
    Ms. Jackson Lee. Thank you so very much.
    Thank you, Mr. Chairman. I yield back.
    Mr. Chaffetz. I thank you.
    We have some critical votes on the floor. We are dealing 
with the budget, and these are multi-trillion-dollar votes. So 
the Chair finds that we are going to go into recess. If Members 
wish to ask further questions, it is the intention to open this 
back up and come back into session here for this hearing within 
about 10 minutes of the last vote. So it is probably no sooner 
than at least 6:30, but it is Congress, so anything bad can 
happen.
    So, with that, the Committee will stand in recess.
    [Recess.]
    Mr. Chaffetz. The Committee will now come to order. With 
votes closed on the floor and two Members present, we will 
continue, and I am going to recognize myself for 5 minutes.
    I would like to kind of go down the line and ask a few 
questions and keep this confined. I have a few concerns.
    The Attorney General nominee, Loretta Lynch, stated, when 
asked a question in her confirmation hearing, she said, ``I am 
not aware of any statute or regulation that gives OLC opinions 
the force of law,'' OLC being Office of Legal Counsel within 
the Department of Justice.
    Do you agree that the OLC opinion of December 23rd, 2011, 
does not carry the force of law?
    We can start with Professor Kindt and go on down the line. 
I would appreciate it.
    Mr. Kindt. I would concur with that, that it doesn't carry 
the force of law. It is simply an interpretation. It could be 
read differently by another attorney general.
    Mr. Chaffetz. Thank you.
    Mr. Bernal. Absolutely, I agree that it doesn't have the 
force of law, and I think the best example is they released it 
the day before Christmas Eve. That tells you all you need to 
know.
    Mr. Chaffetz. Mr. Fagan?
    Mr. Fagan. It does not have the force of law----
    Mr. Chaffetz. Microphone, if you could, please, sir?
    Mr. Fagan. Clearly, it does not have the force of law. It 
is simply a lawyer's opinion and justifies a decision of non-
prosecution on DOJ's part.
    Mr. Chaffetz. Mr. Moylan?
    Mr. Moylan. We are going to go four for four. It does not 
carry the force of law and it is merely their own 
interpretation of it.
    Mr. Chaffetz. Do you believe, Mr. Moylan, that the states 
and others are taking risks by believing that it does carry the 
force of law?
    Mr. Moylan. I think states are certainly taking a risk if 
they are acting in contravention to stated policy of the 
Justice Department. That in and of itself doesn't tell you what 
the law is or what courts would say about it, but it certainly 
puts them at risk of their own institutions, of their own 
individuals facing prosecution under Federal law.
    Mr. Chaffetz. Ms. Aftab?
    Ms. Aftab. It doesn't carry force of law, but the Federal 
courts have ruled in the same way that sporting events and 
contests should be read together. So, although it doesn't, some 
Federal courts have taken the position that it does.
    Mr. Chaffetz. The FBI has issued a couple of letters of 
deep concern about the ability to police this. We have this 
from attorneys general, we have it from the FBI, we have it 
from a number of different law enforcement organizations.
    Mr. Moylan, how do you answer their concerns about the 
regulation and the policing of these types of online schemes?
    Mr. Moylan. Sure. I think it is perfectly fair to have 
concerns about whether or not the laws that are on the books 
are sufficient to be able to enforce what states' prerogatives 
are. I think what my contention is is that the laws that are 
necessary to do that are generally on the books; that we have, 
by and large, bans certainly as it relates to UIGEA interstate 
payment processing. The Wire Act itself obviously deals with a 
class that this bill would attempt to change of intrastate 
transactions, and states have their own prerogative inside 
their borders to establish a law as they see fit. So the 
question is really in these cross-border issues.
    Mr. Chaffetz. We are getting to the heart of what one of my 
deep concerns is. I believe that this bill is a states' rights 
issue, that the State of Utah does not want gambling within its 
borders. That is our long-held position. We don't have 
lotteries. We don't have Indian gaming. We don't have any sort 
of gaming whatsoever, and it is na?ve at best to think that you 
can suddenly just create these fictitious borders because of 
technology and prohibit them coming into the State of Utah.
    I mean, you give me a good 16-year-old and in about 5 
minutes he can figure out how to spoof this or put some virtual 
private network out there. You can sign up for this for a few 
bucks, and I don't care if you are 13 years old and live in 
Provo, Utah. It is fiction for anybody to believe that they can 
just virtually create these borders. We have videos of people 
going and doing this for gaming, for lotteries. It is a 
serious, serious problem.
    Does anybody really believe on this panel, does anybody 
really believe that technology can prohibit a 16-year-old from 
getting on a VPN or creating some sort of technological way and 
really prohibit gaming within the State of Utah? Does anybody 
believe that?
    Ms. Aftab. I do.
    Mr. Chaffetz. Why?
    Ms. Aftab. I do. The providers in the three states that we 
are looking at prohibit any VPN. If there is a sign that one is 
being used on your computer----
    Mr. Chaffetz. Really? And who is the VPN police?
    Ms. Aftab. The VPN police are the providers who are doing 
the geolocation.
    Mr. Chaffetz. Really?
    Ms. Aftab. Now, I can't talk for the lotteries, and I 
looked for the others, and there is always an exception to 
things, but this technology is getting a lot better. So that 
16-year-old won't be able to spoof them, and they won't be able 
to do the rest as long as everyone is doing the best that they 
are doing now, which I have seen.
    There may be an exception. There is always an exception. I 
told you we used to send people in to buy beer for us. But I 
think that what we will have is better than what exists now, 
which is nothing that will stop them from gambling off the 
Caribbean sites and the rest in Utah and in every place else.
    Mr. Chaffetz. There are payment plans and other things, but 
I think it is foolish at best to assume that this technology is 
suddenly going to create this virtual border.
    My time has expired. I will now recognize the gentleman 
from Texas, Mr. Poe, for 5 minutes.
    Mr. Poe. I want to thank the Chairman for allowing 
everybody to come back.
    I appreciate all of y'all, including the spectators, for 
being back here after 7 o'clock tonight. It just shows that 
this is important to a lot of people for a lot of reasons.
    I will try not to take very long. First, without objection, 
I am going to introduce the testimony of Michelle Minton, a 
Consumer Policy Fellow at the Competitive Enterprise Institute, 
for the record.
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                                   __________
    Mr. Poe. I have some questions for all of y'all. That is 
plural for ``y'all'' if you are from Texas. [Laughter.]
    Let me just try to explain what I am thinking. I think it 
is a concern of many Members as well.
    The Ranking Member said it best. We are all for states' 
rights sometimes, and I try to be for states' rights all the 
time. Federalism is an issue that is important to me. In Texas 
we have horse racing, we have dog racing, we have state-
sponsored lottery which doesn't raise money for the education 
system even though it is supposed to. The reservations have 
casinos, and if people want to, they drive as fast as they can 
on the weekends to Louisiana where they have a lot of casinos.
    By adding Internet gaming in the state, the word 
``Internet,'' and I think the debate is over the issue since it 
is the Internet, then the government, the Federal Government, 
has the authority to regulate it.
    So do you agree or disagree, Mr. Moylan?
    I have several questions. I will ask all of you the same 
question, but I will ask them to him first, and then if we are 
out of time, then I will just submit them to you in writing and 
you can answer them in writing so we are not here all night.
    Do you think that if something is on the Internet, 
therefore the Federal Government, under the guise of the 
Commerce Clause, can regulate that activity?
    Mr. Moylan. Yes. I think that it is a very problematic 
construction to say that any activity, any conduct on the 
Internet whatsoever is, per se, interstate. It effectively 
eviscerates the Commerce Clause as any kind of real limitation 
moving forward. We see now what the Internet looks like today. 
Think of what it might look like 20 years from now in the way 
that it might expand and help people connect in other ways.
    So to think that the mere use of the Internet, in and of 
itself, justifies Federal intervention, whether or not the 
conduct has any other transmission across state lines of a non-
incidental nature, I think is hugely problematic.
    Mr. Poe. But isn't that what we are saying with this 
legislation, that because it is on the Internet and the 
activity may cross state lines, therefore the Federal 
Government has the authority to regulate it?
    Mr. Moylan. Right, that is essentially what underlies it. I 
mention in my written testimony that there are three words in 
RAWA itself that make that very clear. When it is adding 
basically Internet transmissions into the definition of the 
Wire Act, what it does is it says incidentally or otherwise, 
and that also makes clear that, for example, what led to that 
OLC memo in 2011, the states that were attempting to allow 
online sales for their lotteries that have this intermediate 
routing of a payment processor that happens to be in another 
state, but you have a purchaser and a seller that are in the 
same state, that that would constitute interstate for the 
purposes of Federal regulations.
    So I think that that is a huge problem; and, yes, that is 
something that underpins at the heart of this bill.
    Mr. Poe. The types of gaming activity that I mentioned 
other than Internet gaming, that is a state issue?
    Mr. Moylan. By and large, gambling activity is a state 
issue, sure.
    Mr. Poe. Horse racing and dog racing, casinos, and the 
state lottery--I think that covers all of them--aren't those 
just state issues?
    Mr. Moylan. And there are exemptions that exist in RAWA for 
several of those things, which I think puts the lie to the fact 
that all gambling is, in and of itself, pernicious, the fact 
that we have legislation on the Federal level and at the state 
level that exempts these kinds of activities that you 
mentioned.
    Mr. Poe. I don't think the issue is whether or not the 
government should regulate gaming because it is bad. I think we 
tried that with prohibition, or demon rum, as my grandmother 
used to call it, and we see where that got us. That is what she 
called it. So that is a concern to me. It is a concern that the 
regulations themselves may cause more crime offshore than what 
we have now.
    So it is your answer that this is something that if the 
State of Texas wants to have intrastate Internet gaming, that 
they should be allowed to and the Federal Government shouldn't 
prohibit it because other states don't like it in their states?
    Mr. Moylan. Yes, I think that is precisely my position, 
that states have within their power today to determine their 
own fate as it relates to gambling, and they should continue to 
have that power. It is a power that is justly reserved to them 
under our system as we have it today, and this bill is 
problematic in that regard because it would take from them that 
ability because of this, as you mentioned, this sort of 
treatment of any kind of conduct on the Internet as inherently 
interstate.
    Mr. Poe [presiding]. I will have the same questions for all 
of you, but I will put them in writing so you can submit it in 
writing.
    I will recognize the Ranking Member, Ms. Jackson Lee, who I 
just quoted.
    Ms. Jackson Lee. Mr. Richmond, I am willing to yield to you 
for a moment--we were almost closing--so that you can raise 
your questions, if I might, and then follow him, Mr. Chairman? 
He has not asked any questions.
    Mr. Poe. I recognize the gentleman from Louisiana, Mr. 
Richmond----
    Ms. Jackson Lee. Thank you.
    Mr. Poe [continuing]. If he wishes to ask questions.
    Mr. Richmond. Thank you, Mr. Chairman, and I will make it 
short.
    I have been a bunch of places on this issue, but as of late 
I have a quick concern, and it has probably been answered. But 
my question now would be how does this affect my Louisiana 
lottery, Mega Ball and all of those, which we as a legislature, 
when I was in the legislature, decided to dedicate those funds 
to education, to teacher pay? And for a state that is now 
facing a $1.6 billion budget deficit, to lose any other revenue 
that is helping pay for a free tuition program for college or 
for a teacher's education becomes a major concern. So can 
someone tell me how it affects the Louisiana lottery?
    Mr. Kindt. Let me address that, if I may, Representative. 
Going back to Illinois, which was one of the first states to 
legalize the lottery, allegedly to help education, we were one 
of the first states to get riverboat gambling, then land-based 
casinos. We are now putting video lottery terminals everywhere 
throughout the state, at convenience stops, at very low tax 
rates. They are not being taxed the way other states are being 
taxed. And the reason is because, as I indicated in my 
testimony, gambling lobbyists are virtually dictating economic 
policy in the State of Illinois, and this has had a terrible 
effect. I put this in Law Review articles 20 years ago, when we 
were discussing this at the Illinois legislature and looking at 
what this was going to cause.
    I would also indicate that I happen to chair the Faculty 
and Staff Benefits Committee at the University of Illinois. We 
are seeing widespread reduction on tax on our pensions, on 
education, on social services, and a very large component of 
that is the gambling issue, not just the lotteries but beyond 
the lotteries, of the money that is being misdirected to 
gambling interests.
    Ms. Aftab. I think the simple answer is, as written, your 
lottery goes offline.
    Mr. Richmond. Does anybody disagree with the fact that the 
lottery will go offline?
    Mr. Bernal. I don't disagree with that, but I guess the 
policy question is not so much what happens to your lottery but 
to the constituents of Louisiana. Is there less inequality and 
unfairness in Louisiana if the lottery isn't taking their money 
through online venues? Because what the Louisiana lottery is, 
or any other lottery that you have in this country, is it is 
taking money from the less well-off and giving it to the haves. 
So the evidence is overwhelming that it is an incredible wealth 
transfer. It is creating inequality in our country, and it is 
creating it in your state.
    Mr. Richmond. So your position would be because it is 
online as opposed to brick and mortar?
    Mr. Bernal. It is building on--the Louisiana lottery, part 
of the reason you have a deficit, a $1.6 billion deficit, is 
things like the lottery was supposed to fill your budget gaps. 
But the truth is it has been a failed public policy.
    Mr. Richmond. No. Actually, my Republican governor did a 
billion dollars in tax breaks with no pay-for.
    Mr. Bernal. I understand. [Laughter.]
    Understood. But the point is that the lotteries, not just 
in your state, sir, but all across this country, have not 
produced the revenues that they were promised. What they have 
done is they have made everyday people poorer. They have 
created an incredible amount of inequality, and they go to the 
heart of the financial inequality in our country today. 
Gambling is the public voice of government in Louisiana and 
every other state.
    Mr. Richmond. Well, let me close with this question. I 
didn't want to take up all the time, and it was so nice of Ms. 
Jackson Lee to yield. But as you go into casinos, brick-and-
mortar casinos, you will see people who obviously are in there 
that can't afford, at least in your opinion, can't afford to 
lose whatever they are gambling and certainly shouldn't be 
sitting at the high-stakes slot.
    So what becomes the difference? That they can get up and 
go?
    Mr. Bernal. From our perspective, lotteries and casinos, 
that is all part of an extension of government. Yes, 
absolutely. The people playing the slot machines, losing their 
paychecks, absolutely, that is contributing to the inequality 
and unfairness in your state as well.
    Mr. Kindt. If I might add, we have done studies throughout 
the years, over the last 20 years, that show that the social 
and economic costs to the state are at least three dollars or 
more for every one dollar in tax revenues coming into the 
lottery and other gambling taxation.
    So it is a slow descent, and as I said, in Illinois we are 
facing $111 billion in unfunded liabilities plus the same type 
of budget deficit that you are talking about in Louisiana, and 
a large part of that is because of this gambling.
    Mr. Richmond. Thank you.
    And thank you, Mr. Chairman. I yield back.
    Mr. Poe. The Chair will recognize the gentle lady from 
Texas for brief questions.
    Ms. Jackson Lee. Thank you very much, Mr. Chairman.
    And again, I want to thank the Chairman of this Committee 
for working with me on the importance of this hearing, and the 
Chairman of the full Committee, and the Ranking Member of the 
full Committee as well.
    Let me thank the witnesses and offer one or two points that 
I think should be the obvious, that we have three very strong 
witnesses for this legislation, it appears. I think woven into 
your support of it is, of course, your assessment of the, if 
you will, ills of gambling and the addiction that occurs in 
some individuals and the drastic societal results of its use. I 
believe that this Committee, which deals with the law, should 
also be concerned about those societal ills.
    I hope that as we proceed in reviewing this legislation, 
marking it up, we might find common ground on addressing how 
our approach should actually be. I think the question that you 
have made, Mr. Moylan, for those of us who take special pains 
to look at the Constitution and assess the infrastructure 
between the Federal Government and state government are 
troubled and want to determine how this concern of the societal 
ills matches with the very age-old debate on Federal and state 
relationships and Federal jurisdiction and states' rights. I 
think the point that you have made is that the state can 
contain itself, can provide those firewalls against other 
states that may not be so inclined. But how do you stop the 
states that are inclined from being able to do so?
    I will just use an example, Mr. Chairman. When we were 
dealing with the question of the bricks and mortar issue with 
online purchases versus the issue of bricks and mortar stores, 
that was somewhat of a state issue as well, online versus 
bricks and mortar, how do you balance the guys who build 
buildings and sell goods versus those online. So I think that 
is a great concern to me.
    And then finally, Ms. Aftab, if I might just get you again 
to state for the record--and then I have some letters to put 
into the record--state for the record again the process that 
you have discerned that protects children and counters or 
blocks the offshore criminal activity that is going on 
unregulated and that draws many of our citizens to ruin, if you 
will, because it is unregulated, it is untested, it is not 
secure. So if you would talk about the children, and I will 
conclude on that.
    Ms. Aftab. There are multiple steps that are brought in to 
make sure that you are dealing with an adult, not that it is a 
child but that it is an adult. So they go through age 
verification, they look at government I.D.s, they look at 
public records, they look at private records, and they make 
sure all along that everything matches and that you are who you 
say you are, and when you say you are living at some place, you 
really are at that place.
    There is nothing at all that is happening with most of the 
rogue operators outside of the United States. They are not 
paying on bets. They don't care who you are. Kids have a lot of 
babysitting money and birthday money and Christmas money, and 
they are using it to gamble, and they are not getting their 
money back. I have gotten phone calls and people who have 
reached out to us over the years, and there is nothing I can 
do.
    If we can have licensed providers, they will help police it 
because they paid a lot of money for the ability to do so 
within the state. They will help identify the outliers and law 
enforcement will be able to do something about it. Not all. It 
is the Internet, after all. But if you give them things that 
are safe, private, and keep the kids off in fair games, and 
they don't have malicious code, people would prefer to be there 
than in the rogue sites offline.
    Ms. Jackson Lee. Again, I thank the witnesses.
    Mr. Chairman, I am going to yield back.
    Thank you so very much for that explanation on the record.
    I would like to submit into the record and ask unanimous 
consent for a letter from the National Governors' Association 
dated May 9, 2014; a report from the State of New Jersey dated 
January 2, 2015, ``New Jersey Internet Gaming One Year 
Anniversary: Achievements to Date and Goals for the Future.'' 
This letter concerns the position of the National Governors' 
Association, the previous letter. I ask unanimous consent 
again. This letter was dated January 2, 2015. And then a letter 
from the Democratic Governors dated March 17, 2015, on the same 
issue, the Restoration of America's Wire Act 2015.
    Mr. Poe. Without objection, they all will made a part of 
the record.
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    Mr. Poe. Yield back?
    Ms. Jackson Lee. Yield back.
    Mr. Poe. Just a couple of other questions. I think I have 
made it clear as to my biggest concern, the Federalism issue, 
the states having the duty, obligation, and right to determine 
gaming as a general rule.
    Turning to another question, it is very brief, the criminal 
element issue. I am a former judge. I don't like crooks, 
outlaws, whatever you want to call them, of any type.
    Will this legislation, Ms. Aftab, will this legislation 
encourage or discourage or have no effect on the criminal 
element, in your opinion?
    Ms. Aftab. My opinion, if you outlaw the legal means of 
doing this, then the only means out there are the criminal 
sites and the criminal operations. So they will go underground, 
they will go offshore. The more you put in to try to regulate 
what they are doing here without giving them an avenue, the 
more likely it is that you are going to be dealing with more 
racketeering and criminal elements. We have seen it, we are 
going to see more of it, and these days criminals don't just 
fall into the type they used to have in Texas when you used to 
wear your six shooters. Now we are seeing a lot that are 
terrorist activities and raising money, and I think that it is 
a great deal of money that can be made and that is being 
gambled by people in the United States, and we have an 
obligation to our consumers and to our children to ensure that 
we are managing what is happening with them and we don't leave 
them to, willy nilly, people who don't care about them at all.
    Mr. Poe. Are you aware of the fact that the National Order 
of Police is opposed to this legislation?
    Ms. Aftab. I am not, and I would love to see what it is. I 
am not surprised that they are opposed to the legislation in 
some areas. It is a very complicated argument. If anyone ever 
said the Internet safety charity that has been protecting 
people for 20 years is now coming out and saying please 
legalize online gambling, my mother would put me out in the 
woodshed somewhere. But it is bringing together a lot of 
strange bedfellows, and we need to recognize in the end 
national security, our kids, money, all of the things that we 
need to do can only be done if we take control. Giving up 
control to the rest of the world is not what Americans do.
    Mr. Poe. I want to thank all the witnesses again for being 
here for such a long period of time, and also for your 
testimony and expertise, and the spectators as well for showing 
your interest.
    This Subcommittee is adjourned.
    [Whereupon, at 7:23 p.m., the Subcommittee was adjourned.]
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