Unfortunately, there is no data available that provide the prevalence rate for internet gamblers. However, a recent survey of NCAA Division 1 schools reported that 0.9 percent of their students gamble online. This is a group that largely should not be gambling. And the favored gambling venue for those under 21 years of age is sports betting, which is illegal in 49 states.
The recent California case involving a compulsive gambler is indicative of the types of problems states will have to address. In this particular case, a woman incurred $70,000 in debt on her credit card by gambling online that she refused to pay, claiming that internet gambling is illegal. These are the typical actions of a compulsive gambler, and it is likely that we will see far more of these types of scenarios as internet gambling continues to expand.
Gambling is actively promoted in our society. Newspapers list point spreads in sports sections. States, through lotteries, and churches, synagogues and the private sector promote gambling. The largest gambling arena of all is the New York Stock Exchange, where the handle is $10-20 billion per day.
Almost all types of gambling are available on the internet, but the most prominent will prove to be sports betting. The outcome of sports bets are easy to verify. The problem will be with whether or not wagers are paid by the company, though the majority of sites do meet their obligations. Day trading of stocks is another growing area of the internet. People are losing thousands of dollars and this segment of the industry is highly regulated. And if someone wants to find more information on compulsive gambling using the internet, the majority of search engines place banner ads on the screen that will link the person
to a gambling site within a matter of seconds. This is an advertising issue. Underage gambling will continue to increase, as children have access to both credit cards and computers. Elderly gambling will also increase as the elderly become more comfortable with technology.
According to a couple of surveys conducted by MSNBC, 66 percent of those surveyed felt that internet gaming should be legalized and regulated; 59 percent said that internet gaming would not adversely affect society. It is very likely that internet gambling will lead to an increase in the number of compulsive gambling. But the way to combat this problem is to work with the industry and develop a system of regulation and enforcement.
John Shelk is a Vice President with the American Gaming Association, a national trade association of commercial casino companies, gaming equipment manufacturers, and other vendors and suppliers to the gaming industry. The association acts as a national clearinghouse for information about commercial casinos and as an advocate on federal and national issues for those it represents.
With the rapid expansion of the internet and all forms of internet transactions, there are those that argue that internet gambling is no different than any other form of electronic commerce. However, questions concerning internet gambling must be addressed in light of the nature of gaming and how public policy decisions concerning legal wagering have been handled in years past. While most forms of commerce are legal in all states, such as buying a book or selling stocks, gambling is not. States have many different laws concerning the types of gambling they will permit within their own borders.
As a result, the AGA's primary concern with the internet gaming industry is that it allows offshore or out-of-state operators of web sites to accept bets in violation of important state policies. And internet gambling is largely unregulated it is not licensed, taxed, or held accountable to strict federal or state regulatory controls. Whereas casinos must comply with rigid regulations, tax burdens, and, if publicly held, SEC restrictions, internet casinos exist unsupervised.
While the AGA is in favor of updating existing laws to address internet problems, it does not support prohibition of internet gaming. Internet gaming could offer a new venue of gaming for the major casinos to pursue. And in states where other forms of gaming is legal, the internet variation, should also be legal and regulated (i.e., as casino gambling is available in Las Vegas, online casino gambling within the state should also be legal). There are also legitimate uses for the internet in the gambling industry. One example is "pooling," where a casino or other off-track betting facility and a parimutuel facility pool their
wagers-, another is "wide area Progressives' slot machines, games linked to remote locations that permit a portion of the wagers to be pooled for a larger jackpot prize. The internet can also be used to advertise casino resort locations or take hotel or show reservations.
There is a difference between those using technology to circumvent federal and state restrictions, as is done by offshore sites, and the use of technology by licensed operators to expand and deliver services to their customers, Legislation should be drafted to allow for legitimate operations. Also, diplomatic relations with the countries that house the offshore betting sites should be enhanced, as is the case with the United States-Australia ecommerce agreement.
The meeting adjourned at 12:20 p.m. The meeting reconvened at 1:30 p.m. Senator Geller reminded the members that at approximately 3:00 p.m. the minutes from the previous meeting and the NGISC report would be discussed. Public testimony resumed. What follows is a summary of the testimony provided.
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.
Michael Shagan has spent the past 28 years as a participant in and consultant to the wagering and racing industries and was founder of and general counsel to the New York City Off-Track Betting Corporation. He testified that the appropriate American policy with regard to gambling is that the states should have the primary responsibility for determining what forms of gambling can legally take place within their own borders and that the federal government should prevent interference by one
state with the gambling policies and should protect national interests. This language is from the congressional findings contained in the Interstate Horse Racing Act of 1978 and, as it is very appropriate, should not be changed.
Offshore internet gambling has presented new challenges to policy makers, regulators, and law enforcement officials. Technology is spreading more quickly than government's ability to keep up with it. It appears, though, that concerns about the use of this technology have been lumped into a need to attempt to prohibit internet gambling activities.
But federal prohibition removes the states' rights to control gambling in their own borders, particularly if the proper safeguards may be developed in the near future, and derive revenues from such activities. Such a prohibition would also remove the United States from a rapidly expanding global enterprise and would force American companies to move outside the Country to continue their business. Prohibition could also profoundly impact existing gambling industries, particularly the parimutuel industry, which has made great strides with simulcast wagering and "pooling." In fact, 80 percent of horse race wagering took
place away from the track at which the race occurred.
The internet is here to stay and is not subject to traditional forms of regulation that are based upon intervention at a physical location. The appropriate step is for governments to legalize internet gaming and apply to it carefully prepared and rigorous regulations that will ensure the safety of the consumer. Only those gambling activities that can be regulated should be legalized. For those that can not, educating the public about what is legal and what is illegal will help. Governments and regulators should also seek out experts who can help develop reasonable methods of controlling or eliminating abuses.
Ms. Paul asked about the specifics of the operations of the telephone companies.
Mr. Shagan replied that there is technology available that allows for the identification of the call origination location. Assuming that the telephone companies are current in their technology, gambling establishments can allow bettors to wager from only specific telephone numbers.
Ms. Paul asked how other countries, if they adopted a policy of only accepting Internet wagers from countries that allowed gambling over the Internet, could ensure that the telephone technology they possessed would be equal to or better than that of the country in which the bet was originating.
Mr. Shagan stated that he did not mean to imply that all of the technology that is needed is available, but there are measures that have not been fully explored. It is not fair to ban Internet gambling entirely when there are some regulatory options that are available. The states should decide when, or if, they are ready to allow this type of gambling.
Representative Caron stated that there are many levels of wagering, such as parimutuel or casino-style prohibition may work for some and not others.
Mr. Shagan agreed, saying that the states have the Tight to refuse to allow the types of games of which they do not approve. They have the right to demand of the Internet-based companies any assurances that they wish, With rapidly developing technology, states need to know not only that certain measures are available but that they will be implemented and correctly operated.
Mr. Nott stated that the Internet gambling industry is moving quickly toward legalization, particularly in states such as Nevada that already have many other forms of legalized gambling.
Mr. Shagan agreed that there are many closed-loop systems, account wagering systems, via the Internet. This is slightly different than strict Internet wagering. In Nevada, in addition to operating legalized account wagering on horse racing, it is now legal to place sports bets through an intrastate system. Senator Geller asked whether there were exceptions made for parimutuels in the Kyl Bill.
Mr. Shagan replied that there were two such exceptions, one for the transmission of information that assists in wagering (potentially to allow merged pools).
Betty Greer, Executive Director of the Mississippi Council on Problem and Compulsive Gaming, testified that compulsive gambling is serious problem that needs to be addressed by the gambling industry and governments. In January 1997, a study was conducted in Mississippi to determine the prevalence of gambling related problems among the state's adult population. The results of this study indicate that substantial numbers of Mississippi residents participate in legal gambling and that most residents spend small to moderate amounts on gambling. The estimated prevalence rate of current problem and current
probable pathological gamblers is 4.9 percent of the total adult population.
The costs of problem and pathological gambling are high, not only for the individual but for families and communities as well. Pathological gamblers experience physical and psychological stress and exhibit substantial rates of depression, alcohol and substance abuse, and suicidal ideation. Their families endure abuse as well as harassment from bill collectors and creditors and employers, creditors, social service agencies, and the justice system all feel the impacts.
From the LSU Gambling Studies Unit and the Louisiana Association on Compulsive Gambling, a compulsive gambler is a person who spends a disproportionate amount of time gambling, who continues to gamble despite having jeopardized or lost a significant relationship or career, and who continues to gamble despite the inability to pay off debts or meet other obligations. A compulsive gambler affects the lives of 10-15 relatives, friends, and business associates. Eighteen percent of compulsive gamblers have attempted suicide (twice the national average). Compulsive gamblers typically have a high IQ and most enjoy a
traditional family life and have no prior problems with the law. Compulsive gamblers have a high risk of relapse, total abstinence is necessary for a complete recovery.
It is the recommendation of the Mississippi Council on Problem and Compulsive Gaming that more national research be done on prevention programs to determine their effectiveness and to determine the impacts of other forms of gambling, such as in the financial markets, curriculum on problem gambling be introduced into K-12 schools as well as into social work and mental health programs at colleges and universities-, problem and pathological gambling; information be distributed through Employee Assistance Programs: and police, parole, and probation officers, judges, correctional officers, and military personnel
should be educated about the effects of pathological gaming. We must all work together to solve this problem.
Senator Geller stated that when a gambler calls the helpline, they are given immediate crisis advice and then referred to experts who can provide treatment.
Ms. Greer agreed.
Senator Oleen requested clarification on the types of gambling that are available to youth under 15, since, according to Ms. Greer, 96 percent of those with gambling problems began gambling early in life.
Ms. Greer stated that sports betting is the preferred form, followed by card games and lotteries.
Senator Oleen asked who funds the treatment for gambling problems.
Ms. Greer stated that there is no funded treated center in her state; problem gamblers must pay for their own treatment. Many public programs and private insurance companies do not pay for gambling treatment.
Senator Oleen asked whether the problem gambling councils have made attempts to lobby local and state lawmakers on the insurance issue.
Ms. Greer stated that they had not, though this issue is of concern to them.
Senator Oleen asked whether Ms. Greer was aware of treatment programs for any other compulsive problems, such as alcoholism, that also addressed gambling problems.
Ms. Greer said that co-addiction is common among these individuals, as is depression.
Mr Patton asked whether the recent increased posting of the helpline number has led to an increase in calls.
Ms. Greer said that she expects to see such a change, but it is too early to tell.
Senator Geller asked whether all of the problem gambling councils were primarily referral agencies.
Ms. Greer replied that operations vary from state to state.
Sheriff Lopez asked whether pathological gambling was recognized as a disease
Ms. Greer stated that it had been so recognized by the American Psychiatric Association since 1980.
Linda Graves, Deputy Director of the Delaware Council on Gambling Problems, stated that while her agency is neither for or against gambling, it does believe that if states are going to be in the gambling business, they should take responsibility for those who become victims of public policy. The Delaware Council on Gambling Problems offers public information, referral services, training of health professionals, advocacy for all levels of social policy, research, and helpline services. The council was established in 1975 but received no funding until 1984. Since that time, the legislature has annually set aside a percentage
of the revenues generated from video lottery terminals for the council to provide assistance to problem gamblers.
While researchers and practitioners have not reached a consensus on the definitions of problem and compulsive gambling, problem gambling is still a problem. Compulsive or pathological gambling indicates a worse problem. "Pathological" is the term used in the Diagnostic and Statistical Manual of Mental Disorders, Fourth Edition, which was published by the American Psychiatric Association, to describe "persistent and recurrent maladaptive behavior that disrupts personal, family, and vocational pursuits." Ten criteria are included, and, if a patient meets five of those criteria, he or she is considered pathological. However, if a person calls a helpline and says they have a problem, their statement should be taken at face value.
In a recent analysis of all prevalence studies conducted in the past ten years, the Harvard Medical School's Division of Addictions concluded that the prevalence of problem and pathological gamblers was 2.9 percent. This may not sound like much but consider the fact that this figure computes to 5.7 million problem gamblers in the United States.
There is not enough effort or money put into managing this problem. There are currently 14 states that receive gambling revenue but do not allocate any money to address the problems that arose from the state being in the gambling business. The revenues from those states totaled $8.1 billion.
Delaware has set a precedent for other states in funding services for problem and compulsive gamblers and their families. However, in Delaware, not one cent of funding comes from the sale of lottery tickets or from horse racing revenues, The Public Sector Gaming Study Commission should consider recommending that a percentage, not less than one percent, of the state's portion of all gambling proceeds be set aside for funding a state council to address the needs of problem gamblers.