Lawmakers Debate US I-gaming Regulation

The House Financial Services Committee on Friday heard compelling testimony from witnesses that were both for and against the regulation of Internet gambling in the United States. Discussion within the panel was likewise compelling, with legislators squaring off on all sides of the issue.

Rep. Barney Frank, D-Mass., introduced in April the Internet Gambling Regulation and Enforcement Act (IGREA), which proposes a licensing and regulation regime in the United States, opening the market to both foreign and domestic online gaming companies.

"I guess the bottom line is: Why are we debating this? People gamble because they want to gamble . . . Wouldn't it be wonderful if we could legislate responsibility?" -Rep. Julia Carson, D-In.

Frank introduced the bill as an answer to the prohibitive legislation enacted in October 2006, the Unlawful Internet Gambling Enforcement Act (UIGEA), which prohibits the acceptance of any payment instrument for purposes of Internet gambling.

"This is the most substantive interference with the freedom of the Internet that has ever been enacted into law," Frank said.

Opponents of regulation argue that Internet gambling leads to great social harm as a result of gambling addiction and that technology for regulating Internet gambling--namely geo-location and age verification systems--is inadequate.

"Now, I know the argument is: 'Well, there are abuses here,'" Frank said. "I believe we can deal with the abuses, and let me deal with one: young people. There is a great danger in this society that we will substantially circumscribe the freedom that adults ought to have because we are afraid some young people will abuse it. It is incumbent upon us to try to differentiate in our laws what adults can do and young people can do. And as far as the Internet is concerned, from a lot of my conservative colleagues I often hear: 'Never regulate the Internet,' and I guess what they mean is: 'Never regulate the Internet unless we find something offensive, and then we'll regulate it.'"

Democratic Congressman Robert Wexler (Fla.), who, the day before the hearing, introduced a bill to exempt poker from the ban on I-gaming in the United States, spoke out against the Unlawful Internet Gambling Enforcement Act (UIGEA).

"I simply want to point out certain misunderstandings in terms of the current law," Wexler said. "If you were to listen only to those last year who advocated in support of the Unlawful Internet Gambling Enforcement Act, and listened to the ranking member this morning, you might have the impression that there is no legal gambling on the Internet today allowed in the United States. That's not true. The law--the way it was crafted last year--the current state of the law, if you want to bet on horseracing on the Internet today you can do it with perfect legality. The uneven state of the law simply says, 'If you're a horseracing fan you can bet on the Internet, but if you're a poker player you can't bet on the Internet.'"

Republican Ron Paul from Texas, a tried and true libertarian, has always said it is not the government's role to make its citizens into better people. Over the years, he said, he has opposed the efforts of certain members of Congress to ban Internet gambling.

"I do want to make a few comments about [Congressman Frank's bill, H.R. 2046]," Paul said. "It's already been mentioned, but I strongly believe there are two major reasons why this is a good bill. Freedom of choice is important in a free society. The responsibility for improving one's behavior should be the individual, the family and the church and the community, not the federal government. It hasn't worked before, and it probably won't ever work in the future."

Paul made an unsuccessful bid for president in 2004, but is now campaigning for the 2008 election.

"Also, I believe strongly in supporting this type of legislation because I want to do my utmost to protect the Internet," Paul said. "This is a source for the spread of information and even the regulation of the Internet can backfire on us and be used for other reasons."

As expected, noted I-gaming opponent Rep. Spencer Bachus, R-Ala., challenged the logistics of licensing and regulating I-gaming in the United States.

"Some claim that illegal Internet gambling is a victimless crime," Bachus said. "In fact, the very-real victims of illegal Internet gambling are the underage gamblers who, by the tens of thousands, are becoming compulsive and addicted gamblers. They can't go in a casino and bet legally so they do it on the Internet. It's prohibited and illegal, but they do it in their bedrooms and dorm rooms. It is a mushrooming epidemic leaving in its wake suicide, crimes, and financial and family tragedy. There are several instances of college students who committed suicide as a result of illegal Internet gambling and the debts they drove up. This is not a debate on whether it's illegal or not. Every state in the union has a prohibition against it."

In an effort to emphasize that the prohibition of Internet gambling has been in the interest of Americans long before the UIGEA, Bachus asked those present if they were aware that Congress in 1992, prior to the advent of the Internet, passed the Professional and Amateur Sports Protection Act, which he said prohibits Internet gambling on sporting events.

Furthermore, Bachus attempted to use a World Trade Organization (WTO) decision, which in March found the United States in violation of the General Agreement on Trade in Services (GATS), as an argument against Frank's bill:

"The WTO has indicated today that they are going to challenge your bill, because it still restricts access to the U.S. market," Bachus said. "They've indicated that it's going to be easier to challenge the WTO challenge if this legislation passes."

"Oh, I don't believe that's the case," Frank said. "We've already been found in violation--how can it be easier?"

"You have arbitrary opt-outs which they prohibit," Bachus countered.

"You mean for the sports leagues?" Frank quipped. "Yes, we did give those arbiters of absolute moral superiority--the professional athletic leagues--in a concession of reality the right to opt-out."

When the panel moved on to question the witnesses Bachus took the lead, grilling Jon Prideaux of Asterion Payments on the legality of his company. Bachus asked Prideaux if he was aware that his company was processing transactions for online gambling companies that are taking bets from the United States.

Prideaux said Asterion does not do business with any companies that accept bets from the United States.

Rounding out his plea, Bachus entered into testimony a letter from the National Coalition Against Gambling Expansion (NCAGE), which made reference to disgraced lobbyist Jack Abramoff's opposition to anti-Internet gambling legislation. Bachus' attempt to draw favor from the panel evoked strong disapproval from Frank as well as Bachus's fellow Republican, Steven LaTourette (Ohio).

Rep. Julia Carson, D-In., put the brakes on the argument, asking simply: "Why are we debating this?"

Carson asked the witnesses to explain the difference between off-track betting, which is legal and in the United States, and Internet gambling.

One of the witnesses said: "I'm not sure there is a difference."

Carson also argued against the position that Internet gambling will send families into financial ruin.

"I have heard objection to this for family reasons," Carson said. "They feel they will gamble all of their money before they bring the paycheck home to their spouses. They do that now. It doesn't require Internet gambling to make some irresponsible person not accommodate his responsibilities first for the family. But I'm still confused on how you can bet at a racetrack by computer, and with this legislation you can do it either by credit card or whatever kind of card you want to use. I guess the bottom line is: Why are we debating this? People gamble because they want to gamble--as long as it's consensual adults gambling, whether they're being responsible or not. Wouldn't it be wonderful if we could legislate responsibility?"

Carson added that while she voted for the UIGEA, she doesn't feel hypocritical about her vote now.

"If the chairman wants to repeal what we did, I'm going to vote for it because it doesn't make any sense to me," she said.

At the end of the hearing, Frank introduced the following written testimony, both for and against the legislation, submitted by various people and organizations.