[Congressional Record (Bound Edition), Volume 152 (2006), Part 17]
[Senate]
[Pages 22190-22192]
[From the U.S. Government Publishing Office, www.gpo.gov]




                           INTERNET GAMBLING

  Mr. KYL. Mr. President, I would like to address the recent enactment 
of the Unlawful Internet Gambling and Enforcement Act of 2006. Due to 
procedural considerations at the end of the regular session, this law 
was enacted as title VIII of H.R. 4954, a bill focused on port 
security. But I want the record to show that I have been working to 
pass this law for more than 10 years, with the support of many 
colleagues. Indeed, the Senators serving as conferees for the port 
security bill accepted including the Internet gambling title, as did 
the leadership on both sides of the aisle. And this July, the House of 
Representatives voted 317-93 in favor of a bill containing not only 
identical enforcement measures to those that were recently enacted, but 
also including the more controversial Wire Act amendments.
  Over the last five Congresses, a stand-alone Internet gambling bill 
has been passed by at least one Chamber of Congress, every time by 
overwhelming bipartisan votes. The last time an Internet gambling bill 
came before the whole Senate, it was passed by unanimous consent. 
Unfortunately, the Jack Abramoff scandal corrupted the process for that 
bill in the House of Representatives. Since then, the full Senate has 
not had the opportunity to vote on more recent legislation repeatedly 
passed by more than three-quarters of the House. So I greatly 
appreciate the assistance of the majority leader and the conferees in 
finally getting this long-overdue law to the President's desk.
  The National Association of Attorneys General--NAAG--first approached 
me in 1995 about the problem of Internet gambling. The State attorneys 
general were concerned about the evasion and erosion of State laws by 
gambling websites operating beyond the reach of State law enforcement. 
I heeded NAAG's request and introduced the first Internet gambling bill 
late that year to increase Federal enforcement of gambling laws.
  Over the next 10 years, Senate and House Committees repeatedly held 
hearings and markups. We listened to the experts about what types of 
enforcement would be effective or impractical, and revised the 
legislation in response. In 1999, the congressionally commissioned 
National Gambling Impact Study Commission Report recommended that law 
enforcement target the payment systems to combat illegal offshore 
gambling, so that is the approach we adopted.
  I have worked closely with Representative Jim Leach, former chair of 
the House Financial Services Committee, a very capable and thoughtful 
colleague who will be greatly missed in future Congresses. 
Representative Mike Oxley, who succeeded Mr. Leach as Financial 
Services chairman a few years ago, Representative Jim Sensenbrenner, 
chairman of the House Committee on the Judiciary, and Representative 
Bob Goodlatte, who sponsored the bill scuttled by Jack

[[Page 22191]]

Abramoff, have all helped shape Internet gambling legislation over the 
last several years.
  Why has Congress been so supportive of Internet gambling legislation 
for so long? Because offshore operators have been flouting American 
laws for personal gain. They have been giving Americans the false 
impression that these activities are legal. They have been profiteering 
from this. The Federal Government has long given States the right to 
prohibit or limit gambling activities for the protection of the public, 
but offshore Web sites have been ignoring and circumventing the State 
laws. State law enforcement officials and Congress refused to stand 
idly by as our laws were evaded and eroded.
  How could an illegal activity become so pervasive? Knowing that their 
businesses are illegal in the United States and many other countries, 
Internet-gambling businesses have set up shop in countries with very 
few gambling regulations, such as Antigua and Costa Rica. These small 
countries benefit from the billions of dollars of profit generated by 
their local gambling operators. So when the United States tries to 
prosecute a criminal violation of its gambling laws, these countries 
are not interested in extraditing their wealthiest residents. The 
United States is thwarted in its efforts to enforce its criminal laws 
against offshore gambling businesses.
  Some say that, instead of trying to enforce the law, we should 
legalize and regulate online gambling. Why does this approach have so 
little support in Congress? Because Internet gambling is a scourge to 
society, leading to addiction and bankruptcy, and enticing young people 
into a gambling lifestyle.
  Internet gambling is highly addictive. Online gambling is available 
24/7 from almost any location. Fast and continuous play, often financed 
by credit, allows online gamblers to rapidly lose tens of thousands of 
dollars, leading to bankruptcy, family devastation, and criminal 
activity. It is easy to conceal the addiction because an online gambler 
does not need to leave home or the office to gamble, and shows no 
physical signs of addictive behavior like an alcohol or drug addict 
does.
  Various recent studies show that Internet gamblers are two to three 
times more likely to become addicted than brick-and-mortar gamblers. 
One study of students at the University of Connecticut found that 74 
percent of Internet gamblers were problem or pathological gamblers. The 
Annenberg Public Policy Center's 2005 National Annenberg Risk Survey of 
Youth--NARSY--surveyed 900 young people between 14 and 22 and found 
that 54 percent of youth who gamble online at least once a week are 
problem gamblers, and that card players exhibit the most symptoms of 
gambling addiction.
  Internet gambling entices young people into a gambling lifestyle. 
Young people who are accustomed to playing video games for hours on end 
are particularly likely to be enticed by the games and to lack a 
realistic perception of the consequences of gambling for money. 
Conversely, traditional casinos appeal to mature adults: according to a 
recent survey by the American Gaming Association, 75 percent of casino 
customers are over 40 years old. Internet gambling appeals to the 
opposite demographic: at least 70 percent of Internet gamblers are 
under 40 according to the AGA, and they did not even count the millions 
of online gamblers who are under 21. Also, Internet gambling appears to 
be a gateway drug. According to that same survey, Internet gamblers are 
twice as likely to engage in traditional gambling than the general 
population. So the rise of online gambling is fertilizing the soil for 
an explosion of gambling addictions in this country.
  The United Kingdom is in the midst of an effort to legalize and 
regulate online gambling, including efforts to prevent youth and 
problem gambling. This effort is not going well. A report commissioned 
by the British Government was issued a few weeks ago. The report admits 
that most gambling operators choose jurisdictions where there is very 
little regulation on their activities. This creates a race to the 
bottom, where gambling operators in a few countries can offer services 
that flout the laws of almost every other jurisdiction.
  The new law confronts the problem of online gambling in three ways. 
First, it transforms violations of State gambling laws into a Federal 
crime as soon as the gambling operator receives money for the 
transaction. Second, it authorizes Federal and State attorneys general 
to enjoin persons who enable violations of the law, such as a person 
running advertisements for illegal Web sites. Third, it requires 
payment systems to block payments for illegal online gambling.
  The new Federal criminal law is already having a positive effect. The 
publicly traded online gambling companies, who have to answer to 
financial institutions and other investors, have quickly withdrawn from 
the U.S. market.
  Some Web sites continue to deceive the American public about the 
legality of online gambling, State and Federal law enforcement are now 
empowered to enjoin advertising for these illegal websites, and any 
other support services within their reach. Payment blocking is 
necessary to reduce Internet gambling and make it clear to the American 
public that this activity is illegal.
  The payment blocking requirements will not become effective until the 
Treasury Department and the Federal Reserve issue regulations. The 
statutory deadline for these regulations is August 10, 2007. I urge the 
Treasury Department and the Federal Reserve to issue these regulations 
on time, and to make them strong.
  Most online gambling websites use third-party offshore payment 
systems to receive money from U.S. customers, because many U.S. 
financial institutions have already been blocking payments to these Web 
sites for years. When a U.S. credit card or bank sends money to one of 
these services, the U.S. financial institution does not know how the 
money will be used. On the other hand, the third-party payers know the 
money in their accounts is being used for online gambling by U.S. 
customers. Therefore, these third-party payers are knowingly aiding and 
abetting a criminal act when they send funds from U.S. customer 
accounts to online gambling companies.
  Firepay has appropriately chosen to stop making these illegal 
payments for American customers, even though it operates out of 
Ireland. The regulations need to make sure that law-abiding companies 
such as Firepay are protected, while third-party payers who knowingly 
aid and abet criminal activity are effectively sanctioned.
  I would also note that this law empowers payment systems to make 
strong efforts to stop the use of their systems for online gambling. To 
that end, section 5364(d) of the new law protects entities from civil 
liability for blocking restricted transactions, or if they mistakenly 
block, prevent, or prohibit legal transactions when attempting, in good 
faith, to comply with the law. At the same time, section 5364(b)(4) 
clarifies that the government will attempt to draft the regulations to 
catch as few legal transactions as possible.
  The key is implementing the most effective and efficient enforcement 
measures that are reasonably possible. We have not sat idly by while 
unscrupulous operators profiteer from evading our laws and perpetrating 
fraud on the public. We have worked long and hard to defend the letter 
and the purpose of State and Federal gambling laws, and now we ask the 
executive branch to help us finish the job. Strong regulations for 
payment systems will cut off most fund transfers to offshore online 
gambling operators and destroy U.S. markets. By drastically reducing 
the availability of Internet gambling in the U.S., we will reduce new 
addictions and violations of the law.
  This is why, this year, 49 State attorneys general, as well as the 
National District Attorneys Association, Federal Criminal 
Investigators, and Fraternal Order of Police wrote in support of this 
law. These law enforcement groups were not alone. They were joined by 
extraordinarily diverse

[[Page 22192]]

groups that are concerned about the effect that online gambling has on 
society and the rule of law.
  First, sports organizations are concerned about preserving the 
integrity of athletic competitions, and want to protect them from 
perceptions of corruption or a culture of gambling. This is why the 
National Football League, National Collegiate Athletic Association, 
Major League Baseball, National Basketball Association, and National 
Hockey League all actively supported the law.
  Second, financial institutions are concerned about Internet 
gambling's association with money laundering, uncollectible consumer 
debt, and use of their systems for criminal activity. This is why the 
American Bankers Association, America's Community Bankers, and 
Securities Industry of America, joined by individual companies such as 
American Express, Citigroup, and PayPal, wrote in support of the law.
  Third, religious groups and family welfare groups are concerned about 
the devastating effects that gambling addiction can have on families. 
This is why this law was supported by a broad range of civic 
organizations, from mainline churches such as the United Methodist 
Church and the National Council of Churches, to coalitions such as the 
National Coalition Against Gambling Expansion, to conservative family 
groups such as the Family Research Council and Concerned Women for 
America.
  This is why I am proud that this legislation was finally enacted. As 
all these diverse groups recognized, online gambling is a threat to 
civic society for many reasons. Failing to enforce laws that are meant 
to diminish this threat undermines the rule of law itself. But today we 
stand ready to reclaim the power to enforce the law, and I ask for the 
help of the Treasury Department and other executive agencies to secure 
this victory.

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