Statement by U.S. Senator Jon Kyl (R-Arizona)

26 March 1999
FOR IMMEDIATE RELEASE:
Tuesday, March 23, 1999

Statement by U.S. Senator Jon Kyl (R-Arizona)

Chairman, Senate Judiciary Subcommittee on Technology,
Terrorism and Government Information

"The Internet Gambling Prohibition Act"

From the beginning of time, societies have sought to prohibit most forms of gambling. There are reasons for this -- and they are especially applicable to gambling on the Internet today. Consider the following.

Youth. A recent New York Times article warned that "Internet sports betting entices youthful gamblers into potentially costly losses." In the same article, Kevin O'Neill, deputy director of the Council on Compulsive Gambling of New Jersey, said that "Internet sports gambling appeals to college-age people who don't have immediate access to a neighborhood bookie.... It's on the Net and kids think it's credible, which is scary."

Listen to the testimony of Jeff Pash, the Executive Vice President of the National Football League, before the Senate Judiciary Committee: "Studies ... indicate that sports betting is a growing problem for high school and college students.... As the Internet reaches more and more school children, Internet gambling is certain to promote even more gambling among young people."

Families. Gambling often has terrible consequences for families and communities. According to the Council on Compulsive Gambling, five percent of all gamblers become addicted. Many of those turn to crime and commit suicide. We all pay for those tragedies.

Harm to Businesses and the Economy. Internet gambling is likely to have a deleterious effect on businesses and the economy. As Ted Koppel noted in a "Nightline" feature on Internet gambling, "[l]ast year, 1,333,000 American consumers filed for bankruptcy, thereby eliminating about $40 billion in personal debt. That's of some relevance to all of us because the $40 billion debt doesn't just disappear. It's redistributed among the rest of us in the form of increased prices on consumer goods......" He continued: "If anything promises to increase the level of personal debt in this country, expanding access to gambling should do it."

Professor John Kindt testified before the House Small Business Committee that a business with 1,000 workers can anticipate increased personnel costs of $500,000 a year due to job absenteeism and declining productivity simply by having various forms of legalized gambling accessible.

Addiction. Internet gambling enhances the addictive nature of gambling because it is so easy to do: you don't have to travel; you can just log on to your computer. Professor Kindt has described electronic gambling, like the type being offered in the "virtual casinos" on the Internet, as the "hard-core cocaine of gambling."

As Bernie Horn, the Executive Director of the National Coalition Against Legalized Gaming, testified before the House Judiciary Subcommittee on Crime: "The Internet not only makes highly addictive forms of gambling easily accessible to everyone, it magnifies the potential destructiveness of the addiction. Because of the privacy of an individual and his/her computer terminal, addicts can destroy themselves without anyone ever having the chance to stop them."

Unfair payouts. As Wisconsin Attorney General James Doyle testified before the Senate Judiciary Committee, "[b]ecause [Internet gambling] is unregulated, consumers don't know who is on the other end of the connection. The odds can be easily manipulated and there is no guarantee that fair payouts will occur." "Anyone who gambles over the Internet is making a sucker bet," says William A. Bible, the chair of an Internet gambling subcommittee on the National Gambling Impact Study Commission.

Crime. Further, gambling on the Internet is apt to lead to criminal behavior. Indeed, "Up to 90 percent of pathological gamblers commit crimes to pay off their wagering debts." A University of Illinois study found that for every dollar that states gain from gambling, they pay out three dollars in social and criminal costs.

Cost. According to an article in the March 1999 ABA Journal, "Online wagering is generating a $600-million-a-year kitty that some analysts say could reach as high as $100 billion a year by 2006." 1 want to repeat that: $ 100 billion a year. The article continues: "The number of Web sites offering Internet gambling is growing at a similar rate. In just one year, that number more than quadrupled, going from about 60 in late 1997 to now more than 260 according to some estimates." And a recent HBO in-depth report by Jim Lampley noted that virtual sports books will collect more money from the Super Bowl than all the sports books in Las Vegas combined.

This affects all of us.

Not every problem that is national is also necessarily federal. Internet gambling is a national problem AND a federal problem. The Internet is, of course, interstate in nature. States cannot protect their citizens from Internet gambling if anyone can transmit it into their states. That is why the State Attorneys General asked for federal legislation to prohibit Internet gambling. In a letter to the Judiciary Committee members, the Chairs of the Association's Internet Working Group stressed the need for federal involvement: "[M]ore than any other area of the law, gambling has traditionally been regulated on a state-by-state basis, with little uniformity and minimal federal oversight. The availability of gambling on the Internet, however, threatens to disrupt each state's careful balancing of its own public welfare and fiscal concerns, by making gambling available across state and national boundaries, with little or no regulatory control."

Further, in reaffirming his support for the bill, the former President of NAAG, Wisconsin Attorney General Jim Doyle, wrote: "Internet gambling poses a major challenge for state and local law enforcement officials. I strongly support Senator Kyl's Internet Gambling Prohibition Act. Prohibiting this form of unregulated gambling will protect consumers from fraud and preserve state policies on gambling that have been established by our citizens and our legislators."

Current Law - The Wire Act

In 1961, Congress passed the Wire Act to prohibit using telephone facilities to receive bets or send gambling information. [18 U.S.C. ยง 1084.] In addition to penalties imposed upon gambling businesses that violate the law, the Wire Act gives local and state law enforcement authorities the power to direct telecommunication providers to discontinue service to proprietors of gambling services who use the wires to conduct illegal gambling activity. But, as pointed out in the March 1999 ABA Journal, "The problem with current federal law is that the communications technology it specifies is dated and limited." The advent of the Internet, a communications medium not envisioned by the Wire Act, requires enactment of a new law to address activities in cyberspace not contemplated by the drafters of the older law.

What this Bill Does

The Internet Gambling Prohibition Act ensures that the law keeps pace with technology. The bill bans gambling on the Internet, just as the Wire Act prohibited gambling over the wires. And it does not limit the subject of gambling to sports. The bill is similar to the one that the Senate, by an overwhelming 90-10 vote, attached to the Commerce-Justice-State Appropriations bill last year. Let me take a moment to explain the bill.

The bill covers sports gambling and casino games. Businesses that offer gambling over the Internet can be fined in an amount equal to the amount that the business received in bets via the Internet or $20,000, whichever is greater, and/or imprisoned for not more than four years. To address concerns raised by the Department of Justice, the bill (like the Wire Act) does not contain penalties for individual bettors. Such betting will, of course, still be the subject of state law.

The bill contains a strong enforcement mechanism. At the request of the United States or a State, a district court may enter a temporary restraining order or an injunction against any person to prevent a violation of the bill, following due notice and based on a finding of substantial probability that there has been a violation of the law. In effect, the illegal website will have its service cut off. I have worked with the Internet service providers to address concerns they raised about how they would cut off service, and, as a result, the provisions dealing with the civil remedies have been revised along the lines of the WIPO legislation.

In sum, the Internet Gambling Prohibition Act brings federal law up to date. With the advent of new, sophisticated technology, the Wire Act is becoming outdated. The Internet Gambling Prohibition Act corrects that problem.

Consideration of the Bill in the 105th Congress

I would like to take a moment to review the consideration of the bill during the last Congress. In July 1997, the Judiciary Subcommittee on Technology held a hearing on S. 474. A wide variety of people testified in support of the legislation: Senator Richard Bryan; Wisconsin Attorney General Jim Doyle, the then-President of the National Association of Attorneys General; Jeff Pash, Counsel to the National Football League; Ann Geer, Chair of the National Coalition Against Gambling Expansion; and Anthony Cabot, professor at the International Gaming Institute.

Ann Geer stated that "Internet gambling would multiply addiction exponentially, increasing access and magnifying the potential destructiveness of the addiction. Addicts would literally click their mouse and bet the house."

As I noted earlier, Wisconsin Attorney General James Doyle testified that "gambling on the Internet is a very dumb bet. Because it is unregulated ... odds can be easily manipulated and there is no guarantee that fair payouts will occur .... Internet gambling threatens to disrupt the system. It crosses state and national borders with little or no regulatory control. Federal authorities must take the lead in this area."

Additionally, in June, the Judiciary Committee held a hearing on FBI oversight at which I said to FBI Director Louis Freeh: "the testimony from other Department of Justice and FBI witnesses has supported our legislation to conform the crime of gambling on the Internet to existing law. And l would just like a reconfirmation of the FBI's support for that legislation." Director Freeh replied "yes, I think it's a very effective change. We certainly support it."

The Judiciary Subcommittee on Technology passed S. 474 unanimously; the full Judiciary Committee passed S. 474 by voice vote.

In July 1998, by a 90 to 10 vote, the Internet Gambling Prohibition Act was attached to the Commerce-Justice-State Appropriations bill. In the House, the bill passed Representative McCollum's Crime Subcommittee unanimously, but due to the lateness of the session, the bill failed to move farther in the House and was not included in the final CJS bill.

Supporters

The bill has broad bipartisan support in Congress and the strong support of law enforcement. As I just mentioned, FBI Director Freeh has testified that the bill makes a "very effective change" to the law and the National Association of Attorneys General sent a letter supporting S. 474 to all Senators.

Further, the President of NAAG, Wisconsin Attorney General Jim Doyle, wrote a letter expressing his support of the bill: "Internet gambling poses a major challenge for state and local law enforcement officials. I strongly support Senator Kyl's Internet Gambling Prohibition Act. Prohibiting this form of unregulated gambling will protect consumers from fraud and preserve state policies on gambling that have been established by our citizens and our legislators."

Florida Attorney General Bob Butterworth also wrote a letter stressing the support of the states for this bill: "The adoption of a resolution on this issue by NAAG represents overwhelming support from the states for a bill which, in essence, increases the federal presence in an area of primary state concern. However, it is clear that the federal government has an important role in this issue which crosses state as well as international boundaries."

In the 105th Congress, S. 474 was strongly supported by professional and amateur sports. The National Football League, the National Collegiate Athletic Association, the National Hockey League, the National Basketball Association, Major League Soccer, and Major League Baseball sent a joint letter of support to all Senators.

I would like to read a passage from this letter:

Despite existing federal and state laws prohibiting gambling on professional and college sports, sports gambling over the Internet has become a serious -- and growing -- national problem. Many Internet gambling operations originate from offshore locations outside the U.S. The number of offshore Internet gambling websites has grown from two in 1996 to over 70 today. It is estimated that Internet sites will book over $600 million in sports bets in 1998, up from $60 million just two years ago. These websites not only permit offshore gambling operations to solicit and take bets from the United States in defiance of federal and state law but also enable gamblers and would-be gamblers in the U.S. to place illegal sports wagers over the Internet from the privacy of their own home or office.

The letter concludes: "We strongly urge you to vote in favor of S. 474 when it is considered on the Senate floor."

On behalf of the NCAA, Bill Saum testified in February before the National Gambling Impact Study Commission on the dangers of Internet gambling:

"Internet gambling provides college students with the opportunity to place wagers on professional and college sporting events from the privacy of his or her campus residence. Internet gambling offers the student virtual anonymity. With nothing more than a credit card, the possibility exists for any student-athlete to place a wager via the Internet and then attempt to influence the outcome of the contest while participating on the court or the playing field. There is no question the advent of Internet sports gambling poses a direct threat to all sports organizations that, first and foremost, must ensure the integrity of each contest played."

Conclusion

The Internet offers fantastic opportunities. Unfortunately, some would exploit those opportunities to commit crimes and take advantage of others. Indeed, as Professor Kindt stated on "Nightline," "Once you go to Internet gambling, you've maximized the speed, you've maximized the acceptability and the accessibility. It's going to be in-your-face gambling, which is going to have severe detrimental effects to society.... it's the crack cocaine of creating new pathological gamblers."

Internet gambling is a serious problem. Society has always prohibited most forms of gambling because it can have a devastating effect on people and families, and it often leads to crime and other corruption. The Internet Gambling Prohibition Act will curb the spread of online gambling.

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