June 18
The meeting was called to order at 9:00 a.m. by Steven Geller,Chair, PSGSC.
Steven Geller provided a brief history of the formation of the Public Sector Gaming Study Commission. The PSGSC was formed to address concerns of the National Council of Legislators from Gaming States regarding the research being conducted by the federally appointed National Gambling Impact Study Commission (NGISC). The NGISC had no state representative and therefore lacked an important component to its study. The PSGSC will address, through its research and in its final report, that missing segment.
Senator Geller asked each PSGSC member to introduce him- or herself. Senator Geller then mentioned the members not in attendance. Governor Roy Barnes, State of Georgia, will be sending the Senate Oversight Committee Chair to the third PSGSC public hearing in San Francisco and will be attending the fourth PSGSC public hearing in Boston. Either Governor Barnes or the Lieutenant Governor will be attending the final PSGSC meeting in Orlando. Mayor Willie Brown, City of San Francisco, will be attending the third PSGSC public hearing in San Francisco and the final PSGSC meeting in Orlando. Attorney General Frankie Sue Del Papa was in attendance at the first meeting but was unable to attend the current meeting.
Senator Geller recognized the staff of the PSGSC. To ensure competence and objectivity, the PSGSC is staffed by Florida State University. Senator Geller introduced the PSGSC Executive Director, Dr. Lance deHaven-Smith, Professor of Public Policy and Public Administration, Associate Director of the Florida Institute of Government, and noted author. Dr. deHaven-Smith introduced Shana Goetz, Assistant Director of the PSGSC, and Dena Hurst, who will provide the research for the PSGSC's final report. In addition, the
Florida Institute of Government has approximately 15 additional staff members in Tallahassee to provide support as needed.
In summary, Senator Geller stressed that the PSGSC is neither for nor against gambling. The PSGSC's purpose is to provide as comprehensive an evaluation as possible on gambling from the state government perspective. Its diverse composition, seven state government leaders, representatives from both the Indian gaming and state lottery industries, a local law enforcement officer, and a noted city leader, will better help it achieve its goal.
The remainder of the current meeting was devoted to public testimony. From 9:30 a.m. to 2:00 p.m., the PSGSC heard testimony on internet gaming, from 2:00 p.m. to 5:00 p.m., the PSGSC heard testimony on problem and compulsive gambling. On June 24, the PSGSC heard testimony on the social and economic impacts of gambling in the morning and on casinos in the afternoon. At the third public hearing, July 23 and 24 at the W-Hotel in San Francisco, the PSGSC will hear public testimony on Indian gaming (July 23) and "cruises-to-nowhere" for two hours and parimutuels for five hours (July 24). At the fourth public hearing, August 20 and 21 at the Omni Parker House in Boston, the PSGSC will hear testimony on lotteries during the morning and charitable gaming (including Bingo), and illegal gaming in the afternoon (August 20). Any additional time on August 20 will be available for testimony from anyone unable to attend the previous three meetings. The PSGSC will spend the final day (August 21) voting on the format of the final
report.
Senator Lana Oleen pointed out that any person or group who has requested to testify before the PSGSC has been given the opportunity. Senator Oleen mentioned that the requests of several groups to testify before the national commission (NGISC) were denied. Not only does the PSGSC solicit expert testimony, it provides an open forum for any groups who wish to raise issues of concern. Senator Geller agreed and added that the PSGSC has heard testimony from a wide range of groups.
In addition, all of the meetings have been and will be taped and all of the deliberations and drafts have been and will be held "in the sunshine."
Senator Geller then announced that the current day's meeting agenda would be adjusted to allow time for discussion at 3-00 p m. of the final report of the National Gambling Impact Study Commission, released June 18 (this day).
Public testimony began at 9:45 a.m. What follows is a summary of the testimony presented:
The information provided is the research of the individuals who testified. It has not been substantiated by the PSGSC and is not put forth as facts supported by the PSGSC.
Dale Youngs of the Missouri Attorney General's Office stated that, at least under Missouri law, internet gaming is illegal, and it should remain so. From a consumer standpoint, it can not be regulated, regulation can only flow from the ability to prohibit it.
Under Missouri law, as in most states, gambling is presumed to be illegal unless it falls within certain exceptions. It took a constitutional amendment to allow certain types of gambling on riverboats-I and these forms of gambling are strictly regulated.
It is important that the economic benefits be balanced with any social costs. Missouri has seen a rise in bankruptcies as well as an increase in the number of people seeking help for gambling problems since it legalized gambling in 1996. The internet may harm those people who have gambling problems by giving them an easier and more anonymous way to feed their addictions.
There are very strong social issues that revolve around internet gambling, particularly regarding consumer protection. There is no effective way to regulate it. Consumers have no way of knowing who they are dealing with over the internet: is organized crime involved, is it a money laundering scheme, or is it a fly-by-night operation? Are the games fair? What happens to the credit card numbers that are given out over the internet?
Internet gambling sites do not have loss limits or minimum payouts. The operators of the sites are not licensed and are not subject to extensive background searches. For example, in Missouri, there is a state highway patrol officer on board each riverboat to ensure that things run smoothly. The operators are licensed and are required to provide a great deal of financial information on a regular basis. The machines are removed periodically and tested at an independent laboratory to see that they are operating correctly. The machines are then sealed with evidence tape to ensure that they are not reconfigured between testings.
These kinds of things do not happen with internet gambling. There is no way to be sure that the games are fair and there is no way to ensure that the operators do not take advantage of children and people with gambling addictions. In addition, the vast majority of internet gaming companies are located offshore to avoid restrictions by states and the federal government. By attempting to tell consumers that, as states, we can regulate these games, we give them a false sense of security and that is bad public policy. Internet gaming should remain illegal.
Senator Geller asked to what extent the Missouri Attorney General supports the Kyl Bill with amendments to allow for the transfer of information.
Mr. Youngs stated that the Kyl Bill in its current form should be passed. His office is primarily concerned with consumer protection issues, and the Kyl Bill addresses these issues.
Ms. Paul asked for clarification on the issue of enforcement, given the premise that internet gambling is too difficult to regulate.
Mr. Youngs replied that Missouri has been successful in enforcing internet gambling restrictions based on its consumer protection laws. In addition, there are ways using the technology available to filter web sites.
Senator Oleen asked Mr. Young to state the position of the National Association of Attorneys General on this issue,
Mr Youngs stated that the NAAG is in favor of keeping internet gambling illegal.
Joel Schwarz, New York Assistant Attorney General, testified that there are already in existence a number of statutes that prohibit the transmission of gaming information in interstate or foreign commerce, including the Federal Interstate Wire Act and the Interstate and Foreign Travel or Transportation in Aid of Racketeering Enterprises Act (Travel Act). It is also important to note that Congress has acknowledged that states have a central role in regulating gaming-, in fact, the intent behind the passage of these two federal acts just mentioned was to aid states in the prohibition of gambling within their own borders.
After reviewing a number of state constitutions and gambling statutes from states that had and did not have some form of legalized gambling, it was concluded by the New York Attorney General's Office that gambling activities are presumed illegal in a state unless there is explicit legal authorization to the contrary. This means that internet gambling is illegal unless specifically allowed under a state's laws, a position in opposition to the claims of the internet gaming industry that internet gaming is legal unless prohibited by law.
Another question regarding the legality of internet gaming is the question of where the gambling actually takes place, in the state where the gambler is located or at the site where the internet company's servers are located. The courts have decided that the gambling takes place where the gambler is located, the location in which the information originated and from which it was transmitted.
It is imperative that we maintain our battle against internet gaming. By applying and, where necessary, clarifying, our existing laws we can eliminate internet gaming.
Sue Schneider is publisher of the Interactive Gaming News and Chair of the Interactive Gaming Council, a trade association comprised of more than 55 companies from around the world, She testified that it is essential that the PSGSC take the time to become educated about the capabilities of the internet as it relates to offering gaming as an entertainment option. While the attorneys general are right in saying that the internet itself can not be regulated, gaming products online can and should be regulated to protect the interests of consumers.
Prohibition of internet gaming will not work, as prohibition has not worked in the past. Rather than eliminating a commodity for which there was great demand, past prohibition activities created an unregulated underground market that met the needs of citizens. It is rather the responsibility of the internet gaming industry to partner with parents to ensure that minors are not allowed to gamble, on or offline. And while compulsive gambling is a problem, the Interactive Gaming Council has addressed the issue, and much more quickly than land-based casinos, with several initiatives.
As for consumer protection, the internet gaming industry has already taken steps to ensure that consumers get what they expect. The Interactive Gaming Council has developed a Code of Conduct and is developing a Seal of Approval to designate those member operators who are fair and honest. When fraud is committed, existing consumer protection and civil suit laws are just as applicable in the context of internet commerce as they are in land-based transactions.
Cyberspace casinos can be just as easily regulated as those in Las Vegas or Atlantic City. In fact, the number of licensing jurisdictions around the world currently stands at 25 and is growing. Even the Nevada Gaming Commission recently approved online gambling products for use with the state.
The technology available will only make regulation easier. There are already companies whose sole purpose is to verify the age and identity of cyber-surfers. And in the case of compulsive gambling, it is easier to track a person's betting history by computer than in person. The industry itself is developing a risk management database to assist in identifying those who have problems with continual use of their credit cards.
It is better for the states if they develop a strict and consistent regulatory framework to govern the operations of internet gaming activities to ensure that their citizens are protected and to possibly derive some benefit from the dollars generated.
Mr. Patton asked if the Gaming Council had taken into consideration the convenience factor of being able to gamble from one's home.
Ms. Schneider replied that problem and compulsive gambling issues were of great concern to the Gaming Council and proactive steps were being taken. But other forms of gambling are also convenient, so this is an industry-wide problem, not just an internet gaming problem.
Senator Geller asked whether any of the sites used software that limited the amount of time a bettor could spend on-line.
Ms. Schneider replied that many of the sites implement loss limits, but none that she was aware of used time limits.
Kevin O'Neill, Deputy Director of the Council on Compulsive Gambling of New Jersey, Inc., stated that his organization takes no position for or against gambling but that does not mean that they do not have concerns regarding the future of internet gambling. The level of technology available today has given gamblers faster and more convenient access to internet gaming sites.
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