Questions, Uncertainty Remain After House Internet Gambling Hearing
Lawmakers will continue to consider Internet gambling legalization despite significant concerns voiced at a hearing Tuesday held by the House Commerce, Manufacturing and Trade Subcommittee. A collection of professors, researchers and Native American gaming groups objected to the idea of legalizing Internet poker without implementing safeguards to address what they saw as myriad problems legalization would create. After the hearing a subcommittee spokesman said there is a “good possibility the subcommittee will likely have another hearing” to consider Internet gambling legislation.
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Subcommittee Chair Mary Bono Mack, R-Calif., acknowledged the “significant tax revenues” that the U.S. could capture from online bets that are going overseas, but questioned the logistics of regulating online gambling. “Our problem is to try to advance technical problems at the same time as legislative hurdles,” said Bono Mack. For instance, “what do you do if your Internet service goes out in the middle of a big hand? Do I win if I flip off my modem?”
Ranking Member G.K. Butterfield, D-N.C., also recognized the “hundreds of millions of dollars” in tax revenue that could go to states struggling to close their budget deficits. “Considering the fragile state of our economy I strongly believe that every form of potential revenue should be considered,” Butterfield said. Nevertheless, he voiced “significant concerns” with the idea of legalizing “anytime access” to Internet gambling and said strong consumer safeguards were necessary.
Rep. Joe Barton, R-Texas, said his legislation, HR-2366, “is not perfect but it would remedy many of the problems we have today.” Barton’s bill would legalize online poker playing by requiring Web gambling sites to obtain licenses and maintain a database of all their online poker players (WID Sept 6 p1). The bill would also establish an office of Internet poker oversight in the Department of Commerce, amend the Unlawful Internet Gambling Enforcement Act (UIGEA), and prohibit players from using credit cards for Internet gambling. At the hearing Barton labeled UIGEA a “bad law” and “unenforceable."
The abuses and lack of consumer protections in the current online poker marketplace show the dire need for Internet gambling regulation, witnesses said. This year federal authorities blocked U.S. players from accessing three of the top poker websites, Full Tilt Poker, Absolute Poker and PokerStars, and prosecutors in Manhattan charged 11 people with bank fraud, money laundering, and illegal gambling offenses (WID April 18 p6). Prosecutors alleged that the poker companies tricked small banks into accepting payment in connection with unlawful Internet gambling in order to circumvent UIGEA. Subsequently, U.S. Attorney for Manhattan Preet Bharara called Full Tilt Poker a “global Ponzi scheme,” because the international gambling site did not maintain funds sufficient to repay all players (WID Sept 21 p1).
Former Sen. Alfonse D'Amato, R-N.Y., compared the effectiveness of a ban on illegal gambling with failure of the Volstead Act to curb problem drinking. “When we passed the Volstead Act the government lost revenues and it didn’t cut down on problems,” said D'Amato, who now chairs the Poker Players Alliance. Today, Internet poker “has not gone away and it is hard to envision a scenario where it will. It takes place under the radar with no regulations, with no taxation, and with unscrupulous groups,” he said. “I would suggest that 50 years later we are well behind the times.”
Consumer protections must be a key component of any Internet gambling legislation, said Keith Whyte, executive director of the National Council on Problem Gambling. “Gambling problems are correlated with unemployment, bankruptcy, and poor health,” Whyte said, “and it’s not clear what the impact of Internet gambling legislation will be.” Whyte said that if Congress moves to legalize Internet gambling it should dedicate public funds to the treatment and consultation of problem gamblers and appoint a federal agency to coordinate such efforts.
Native American tribal governments object to Internet gambling legislation and have “significant concerns” that legalization could adversely affect the Indian gaming industry, said Ernest Stevens, chairman of the National Indian Gaming Association. Stevens specifically outlined six principles that should be incorporated into any federal Internet gambling legislation: tribal Internet gambling should not be taxed; should be available everywhere; should not be subordinated by non-federal entities; must be consistent with existing tribal government rights; must not amend the existing Indian Gaming Regulatory Act; and must provide positive economic benefits to Indians. “If anybody deserves to be at the front line in this industry it’s the Native American people,” Stevens said. “It’s a new industry and it shouldn’t undo or amend the current law.”
There is potentially a “huge problem” with bots, computer programs that log online card game data and calculate odds to a high degree of accuracy, said Kurt Eggert, a law professor at Chapman University. “If someone uses a bot to guide them there is no way to stop that,” said Eggert. Barton acknowledged such programs may exist but said there are ways to catch cheaters. “I will acknowledge that it’s technically possible to set up an elaborate scheme to set up computer bots against people,” Barton said. But “there should be ways to verify with current technology if someone is routinely beating the system. We can flag that.”