CONTRARY OPINIONS ON INTERNET GAMBLING VOICED TO HOUSE COMMITTEE

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Online gambling wins big mainstream media coverage

If one of Congressman Barney Frank's objectives in holding Internet gambling hearings was to draw attention to the controversial political topic then he has so far been remarkably successful - within hours of the first hearing in Washington this week the opinions of those present received extensive media coverage.

Frank, a seasoned Democrat political veteran, has introduced bill HR2046, the "Internet Gambling Regulation and Enforcement Act" (IGREA) which seeks to strictly regulate, license and tax online gambling in the USA.  As far as US-licensed Internet gambling sites are concerned, this would effectively emasculate the Unlawful Internet Gambling Enforcement Act passed last October, which forbids financial transactions with online gambling sites.

It will also afford more protection to US online gamblers, which post-UIGEA are exposed to a wider range of dangers due to money transfer hassles. Many observers feel that a regulated online gambling regime in the States would resolve the country’s issues with the World Trade Organisation (WTO) too.

Friday's House Financial Services Committee hearing attracted a wide range of opinion from both the 70 politicians on the committee, from various pressure groups and the public at large.

The pressure group in favour of regulated online gambling, Safe and Secure Internet Gambling Initiative, was very fast off the mark with a press release on the proceedings that was widely distributed within hours, which reported that top experts had testified.

It went on to reveal that oral and written evidence had been submitted to the committee offering proof to members of Congress that a regulatory framework for Internet gambling would protect consumers and ensure the integrity of Internet gambling financial transactions.

Leaders in the fields of internet payment processing, identity identification and online safety described how existing systems and technology have proven successful in combating underage and compulsive gambling and protecting against money laundering, fraud and identity theft.

"It was made clear at today's hearing that online gambling can be effectively regulated," said Jeffrey Sandman, spokesman for the Safe and Secure Internet Gambling Initiative. "Instead of prohibiting Internet gambling, which is futile, the government should regulate and tax Internet gambling to ensure proven and effective security controls are implemented to protect consumers and capture billions in revenue that is needed for critical government programs."

The hearing provided additional momentum by clearly demonstrating how regulated Internet gambling could protect against underage and compulsive gambling and ensure the integrity of financial transactions, the SSIGI press release explained.

Andrew Poole, Head of Online Services for GamCare, a charitable organisation committed to addressing the social impact of gambling, provided testimony that a robust regulatory policy can combat underage gambling and manage the potential for harm through gambling online.

"We are satisfied that if the move towards more responsible operation continues to gather pace, as is increasingly observed across Europe and the rest of the world, that the continued legitimate development of the industry need not be off-set against significant increases in problematic gambling," said Poole. "Robust, formal regulatory frameworks undoubtedly represent the best opportunity for achieving this."

Keith Whyte, Executive Director of the National Council on Problem Gambling, the U.S. advocate for programs and services to assist problem gamblers and their families, discussed in his testimony the opportunity to use the technology and controls available on the Internet to combat compulsive gambling.

"Problem gambling is a serious and even life-threatening mental health disorder," said Whyte. "However, the graphical and interactive structure of the Internet provides a revolutionary opportunity to create informed consumers with access to a variety of information designed to encourage safe choices and discourage unsafe behavior. The technology also exists, unlike for other forms of gambling, to allow players and operators to set limits on limits on time, wagers, deposits, etc ... as well as to exclude themselves. Clearly gambling on the internet raises some difficult issues, but it provides theoretical opportunities for operators to deliver responsible gaming programs that meet or exceed current standards in the 'bricks & mortar' gaming industry."

Gerald Kitchen, Chief Executive of SecureTrading, a payment service provider specializing in the secure processing and settlement of Internet payments, offered in his testimony that concerns raised about Internet gambling are already being addressed by other countries through the implementation of specific systems and technology.

"The issue of compulsive gambling remains a significant challenge and the approach required to effectively combat this requires transparency and involvement from various stakeholders," said Kitchen. "Payment card holders can be offered the possibility to restrict their ability to gamble on the Internet by way of applying to be excluded via a self-exclusion program. When self-exclusion from Internet gambling is put into effect via the payments system, it becomes impossible for the person concerned to participate in any gambling on the Internet that uses traditional card payments through the payment processor."

Jon Prideaux, Chief Executive of Asterion Payments and a former senior executive at Visa tasked with establishing rules, compliance programs and enforcement rules for the operation of Visa online payment systems, provided testimony that it is feasible to protect consumers in a regulated environment.

"On the basis of my experience I can unequivocally state that Internet gambling can be regulated, and that abuses can be effectively regulated and controlled," said Prideaux. "Regulation ensures that players get a fair deal and are not cheated. ... We owe it to people who have experienced problems with Internet gambling in the past to introduce a regulated environment where the proper protection can be provided to the vulnerable."

Clive Hawkswood, Chief Executive of the Remote Gambling Association, a trade association which represents the largest remote gambling operators and encourages social responsibility within the gambling industry, provided testimony that internet gambling can be regulated to protect the payment system.

"As with all other industries and sectors it (Internet gambling) is capable of control in order to prevent it being used as a source of crime," said Hawkswood. "Within the United States vast amounts of credit card transactions take place on a daily basis. The system is well established and well policed in order to counteract fraudulent and criminal transactions. The only circumstance in which crime can flourish is if the activity is unregulated."

Expert testimony was also provided to the Committee by Radley Balko, Senior Editor of Reason Magazine, who argued that if online gambling goes unregulated, it goes underground, causing the potential for more gambling misconduct. Michael Colopy, Senior Vice President, Communications, Aristotle, Inc. also gave evidence.

Transcripts can be found at http://www.house.gov/apps/list/h ... dem/ht060807.shtml.

Legislation recently introduced to regulate and tax Internet gambling has helped build support in Congress to allow Americans to gamble online. Congressman Barney Frank (D-MA) introduced H.R. 2046 to establish a licensing and enforcement framework for regulated Internet gambling and Congressman Jim McDermott (D-WA) introduced legislation that would tax online gambling companies and could generate between $6 billion and $25 billion in revenues in the first five years of enactment. These revenues could be used to fund important government programs.

Other media reports named Craig Pouncey, partner at UK-based law firm Herbert Smith and head of the firm’s international trade law practice, who provided testimony to the committee that suggested a regulated internet gambling environment could bring the US back into compliance with the WTO General Agreement of Trade in Services (GATS).

“Appropriate regulation of internet gambling would put the US on a road to resolving the WTO problem,” he said. “The US would avoid having to offer possibly substantial compensation in the form of opening new markets to foreign competition and, as a result, affecting possibly numerous other economic players in the US who have absolutely nothing to do with gambling, or the WTO gambling dispute.”

Pouncey added: “The same US that requested, obtained and applied these economic sanctions vis-à-vis the EU is now claiming that it can withdraw commitments without compensation because it did not intend to make these commitments. In my view this is wrong as a matter of law. I am convinced, therefore, that a number of WTO member countries will take the same view and seek compensation from the US. I also believe that the US will be asked, as a result, to open up other markets. This will be the price that the US has to pay to avoid regulation of internet gambling.”

The respected online gambling information portal Casino City was among the front-runners in reportage on the hearings, reporting that the prevention of underage gambling dominated the discussion at the hearing, with sometimes conflicting views on the effectiveness of identity verification measures.

Jeff Schmidt, CEO of the identity-verification firm Authis, testified that current technology is inaccurate, failing 20 to 25 percent of the time. However, Michael Colopy, Senior Vice President of Communications for another identity-verification firm named Aristotle, disagreed with Schmidt. He said that the technology is maturing, employing a multi-layered approach that is nearly 100-percent reliable.

Buffalo State Business Law Professor Joseph Kelly said that more hard data is necessary for regulation to gain traction. "The only way you can resolve this is with an objective commission [of enquiry]," Kelly said. "Once the study is in place, you can have data accepted by everyone, instead of conflicting data reports from interested parties."

The American Gaming Association is also in favor of more studies and more hearings. "The AGA is on the record in support of further study of this issue," it said in a statement. "We believe hearings on Chairman Frank's legislation will provide a valuable opportunity for gathering the facts about the many issues surrounding Internet gambling, including the ability to prevent underage gambling and other regulatory safeguards. We look forward to monitoring the hearings."

A measure that is calling for a one-year independent study of the effects of online gambling in the U.S. was introduced by Rep. Shelley Berkley in April. This has been supported by the influential American Gaming Association (AGA) Berkley is calling for a study by the National Research Councils of the National Academy of Sciences, an independent research group with no ties to online gambling.  

Congressman Frank called the UIGEA "one of the stupidest laws ever passed," and [said he] has been arguing since the law's inception that the U.S. government should not pass measures that compromise personal freedoms because of moral stances.

"I have no energy left to protect people from themselves," Frank said. "Adults have to do that themselves."

Frank said other so-called morality regulations, such as those which restrict the purchase of alcohol, cigarettes and pornography, provide a regulatory environment that supports personal freedom, yet still protects minors.

"I agree with Rep. Frank that prohibitions don't work," Rep. Ron Paul (D-Texas) said at the hearing. "I'm not in favor of gambling, but responsibility is the job of the individual, the family and the church."

The anticipated evidence of a father whose son suffered jail time as a result of robbing a bank to pay poker debts to fellow students was heard.  Pastor Greg Hogan, a father of four, told the panel the tale of his son Greg, a good college student who "fell prey to the evils of gambling." His son stole money from the family and borrowed from college friends to gamble on the Internet, he said.

"The World Series of Poker is glamorous, but the life of an addicted gambler is not," Hogan said. "Instead of proudly watching my son graduate from college, I will proudly watch my son be released from prison." Frank empathised with Hogan, but countered by saying that his son was of legal age to gamble when the incidents took place.

Rep. Spencer Bachus (R-Ala.) was the UIGEA's strongest proponent at the hearing, Casino City reports, arguing that the earlier a young person begins gambling, the more likely it will lead to addiction and criminal activity.  Frank traded barbs with Bachus, saying that regulation is necessary to help identify underage gambler and potential gambling addictions.

Congressman Frank and other IGREA proponents, like Rep. Robert Wexler (D-Fla.) argue that the UIGEA is hypocritical by nature, allowing online wagers for horse racing, state lotteries and fantasy sports but disenfranchising other types of gamblers under the guise of societal protection.

The hearing ground to virtual halt on this issue, when Rep. Julia Carson (D-IN) asked the witnesses if people in Indiana could bet on the Kentucky Derby over the Internet, why couldn't they make other sorts of wagers?

Casino City reports that the witnesses – and the committee – sat in stunned silence waiting for someone to answer the question – "...but all that came was a feeble mumble from someone on the panel that it should be legal."

Minutes later, Carson repeated the question and once again received no answer. She then declared her support for the IGREA and said she was wrong to vote for the UIGEA.

Rep. Jim McDermott, who had earlier submitted a companion taxation bill to Frank's HR2046 said: "If we decide as a nation to enable gambling online, the billions of dollars flowing out of the country should remain here to help us fund schools and bridges, and a host of social programs that need more than luck to succeed."  Estimates of taxation levels that could flow from US regulation and licensing go up to $25 billion over the next five years based on US stats for growth and revenues in the industry.

The Antiguan Online Gaming Association (AOGA) submitted written testimony to the hearing, appealing for the committee to recognise the existing treaty commitments of the United States under the General Agreement on Trade in Services (GATS) to allow Antiguan remote gaming operators access to the United States gambling market.

"The World Trade Organisation (WTO) has ruled that the United States remains out of compliance with its GATS commitments to permit Antiguan remote gaming operators access to the United States market," the submission noted. "While the IGREA, as proposed, does not bring the United States into compliance with its GATS commitments, it does present an opportunity for Congress to realign United States gambling policy with the realities of the 21st century, and at the same time, prove to its international trading partners that the United States supports and adheres to the dispute resolution process of the WTO."

Describing Rep. Barney Frank as "....a voice of logic and reason on the issue of online gambling in the United States," the submission paid tribute to his commitment as an advocate for the rights of consenting adults to engage in recreational gambling in a responsible setting.

"One of several positive aspects of the IGREA is that it presents Congress with a true opportunity to deliberate and enact a thoughtful, realistic and non-discriminatory system for online gambling in the United States, the submission continued. However, the Antiguans are concerned that the Frank legislation may discriminate against Antiguan remote gaming operators, to the advantage of domestic gambling companies and therefore offer their assistance in making more equitable revisions.

"The AOGA is confident that Rep. Frank does not intend for the IGREA to discriminate against foreign operators, or create a domestic-only industry," the document notes, continuing at some length on political and trade implications of US legislation.

Further hearings have been mooted by a number of observers and organisations, but this week's proceedings have covered a great deal of ground and firmly placed the contentious online gambling issue squarely in the US political spotlight.

CNBC News's "The Heat" column provided a list of links to the pros and cons of online gambling to encourage more debate on the subject, voicing the following editorial opinion:

"Congress is only sticking its head in the sand if it thinks it can stop Internet gambling by choking off its money supply.   The public's desire to throw away money is simply too strong and the Internet too vast and free-wheeling to prevent the inevitable.  Instead of strengthening illegal gambling, we should bring online casinos into the light with appropriate safeguards to keep children and addicts out.  Ultimately, responsible adults should have the freedom to be stupid, as long as they don't hurt anyone else."