Thank you, Mr. Chairman and Members of the Subcommittee, for providing me this opportunity to provide the Subcommittee with the Department of Justice's
views on Internet gambling and H.R. 3125, the "Internet Gambling Prohibition Act of 1999."
The growing availability of emerging technologies has had a prolific effect
on gambling. The Internet and other new technologies have made possible types of
gambling that were not feasible a few years ago. For example, a U.S. citizen can
now log on from his living room and participate in an interactive Internet poker
game operated from a computer located in Antigua. Not only have the Internet and
other new technologies brought gambling into the home, they have made it
anonymous and readily available to virtually anyone at any time and at any place
where there is an Internet hookup. As a result, the number of Internet gambling
sites operating illegal betting and wagering businesses online has increased at
an alarmingly rapid rate. The Department is deeply troubled by this
proliferation of gambling on the Internet for three reasons.
First, since the Internet allows virtually instantaneous and anonymous
communication that is difficult to trace to a particular individual or
organization, the potential for operators of Internet gambling sites to
successfully defraud their customers is significantly greater than with
traditional casino-style gambling. Fraudulent activities can range from credit
card fraud to the manipulation of gambling odds. Of course -- and as the Deputy
Attorney General noted before this Subcommittee on February 29th --
we recognize that there are legitimate reasons to allow anonymity in
communications networks. A whistleblower or a member of a battered woman's
support group, for example, may understandably wish to use the Internet and
other new technologies to communicate with others without revealing his or her
identify. Nonetheless, such admittedly legitimate uses for anonymity on the
Internet involve legal activities and are inapplicable in connection with
gambling on the Internet, which is illegal.
Second, because the Internet provides people with virtually unfettered access
to the opportunity to gamble at any time and from any place, Internet gaming
presents a greater danger for compulsive gamblers and can cause severe financial
consequences for an unsuccessful player.
Last, because the Internet is both anonymous and widely available, it is much
more difficult to prevent minors from gambling. Currently, Internet gambling
businesses have no reliable way of confirming that gamblers are not minors who
have gained access to a credit card and are gambling on their web sites.
Despite the proliferation of Internet gambling, the Department is optimistic
about its ability to combat this form of illegal gambling. Just last week, a
jury in federal district court in New York found Jay Cohen, the owner of an
Internet gambling site in Antigua, guilty of violating 18 U.S.C. § 1084, a
statute that makes it illegal for a betting or wagering business to use a wire
communication facility to transmit bets or wagers in interstate or foreign
commerce. Several of the counts for which Mr. Cohen was found guilty solely
involved his Internet operations. That is not to say that section 1084, as
written, will apply in every case. As I will explain later in my testimony, the
Department believes that the statute may need to be amended to assist us in our
efforts against gambling and organized crime.
Before I discuss that, however, let me say that the Department has reviewed
H.R. 3125 in great detail and is very concerned about how it proposes to deal
with Internet gambling. The Department is most concerned about the following
three issues.
First, the Department is concerned that the bill does not really prohibit
Internet gambling, but rather facilitates certain types of gambling from the
home and, therefore, arguably expands gambling opportunities. Specifically, the
Department recognizes that H.R. 3125 exempts parimutuel wagering from the
prohibition against Internet gambling. The result is that people will be able to
bet on horse racing, dog racing, and jai alai from their living rooms. While the
bill provides that such gambling must be done on a "closed loop subscriber
based service," the definition of that term is extremely broad. I could
receive a free disk in the mail, load it on my computer, connect through my
regular Internet service provider, and start betting on horse racing from my
living room. Additionally, if my children have access to that same computer,
they may also be able to get online and bet and wager on parimutuel activities.
Simply stated, the Department does not understand why the parimutuel wagering
industry should be allowed to accept bets from people in their homes, when other
forms of gambling have rightly been prohibited from doing so. The same concerns
that we have expressed about children and compulsive gamblers having unfettered
access to gambling via the Internet is true whether the betting is on horse
races or on casino games.
Related to this point is the Department's second concern that the passing
of H.R. 3125 will allow gambling online that currently is not allowed in the
physical world. For example, people cannot not currently legally call gambling
businesses in others states from their homes and place bets on horse races. Yet,
H.R. 3125 would allow them to place the same such bets over the Internet. It is
hard for the Department to understand why conduct previously deemed unacceptable
in the physical world and over the telephone should now be legal when carried
out in cyberspace.
Third, H.R. 3125 is not technology-neutral, but applies only to Internet
gambling while leaving the existing prohibition on gambling over "wire
communication facilities" in general unchanged. While the Department is
generally concerned about legislation designed for particular technologies such
as the Internet, it is specifically troubled here by the creation of two
inconsistent gambling prohibitions - one expressly for the Internet and a
different one for the use of wire communication facilities (which includes the
Internet).
Indeed, any effort to distinguish Internet transmission from other methods of
communication is likely to create artificial and unworkable distinctions. For
example, we expect digital Internet telephony to grow in popularity over the
next few years. How would we deal with gambling that occurred over this
technology, which would use the Internet or other packet-switched networks for
pure voice communications? Would it be under the proposed section 1085, which is
designed specifically for the Internet, or under section 1084, which deals with
wire communications in general (but also includes the Internet)? This is
especially problematic, as section 1084 and the new section 1085 proposed by
H.R. 3125 would have different standards and punishments.
The Department urges Congress to identify the conduct that it is trying to
prohibit and then to prohibit that conduct in technology-neutral terms. The
fact that gambling, an age-old crime, has gone high-tech and can now be done
through the Internet, is no reason to pass new laws that specifically target the
Internet for regulation. Passing laws that are technology-specific can create
overlapping and conflicting laws prohibiting the same activity, but with
different legal standards and punishments. This will be the result if H.R. 3125
is enacted in its current form. We will have both section 1084, which we've
used to prosecute Internet gambling, and a new section 1085 which would prohibit
some, but not all, types of Internet gambling. This overlap in the statutes can
only complicate law enforcement's efforts on the Internet gambling front.
The Department encourages Congress, especially as it encounters more
traditional crimes online, to ensure that existing laws are sufficient and
technology-neutral in their approach and do not single out the Internet for
regulation. If existing laws are deemed insufficient, please consider
legislation, whether prohibitive or permissive, which focuses on specific
conduct and not on the specific medium employed to perpetrate that conduct.
One last problem with H.R. 3125 that the Department has identified involves
the bill's silence on Indian gaming issues. The Department believes that any
Internet gambling legislation should not repeal or amend the rights or
privileges secured tribes under IGRA. Of course, to the extent that Indian
Tribes seek to offer gaming to citizens of various states, where such gaming
does not take place solely on Indian lands and is not otherwise authorized by
law, there is no compelling reason to exempt Indian Tribes from the otherwise
generally applicable provisions of the legislation for such off-reservation
gambling.
For all of the reasons I've discussed, the Department urges Congress to
amend existing gambling laws, rather than create a new technology-specific
statutory scheme.
As I noted earlier, section 1084 criminalizes those betting and wagering
businesses that transmit bets or wagers on sporting events or contests over the
Internet. The Department recognizes, however, that section 1084, which was
enacted almost forty years ago, may need to be amended to bring it into the 21st
Century. The Department believes that this can be done through the following
actions:
Amending section 1084 so that it clearly applies to all betting or
wagering and includes the transmission of bets or wagers over any
communications facilities. Such an amendment would eliminate any doubt
about whether section 1084 only applies to bets or wagers on sporting
events and contests. It would also ensure that future technologies that
are not wire-based communication facilities are covered by section 1084.
Adding several definitions to 18 U.S.C. § 1081. For example, we
would recommend adding the following definitions for
"transmission," "bets or wagers," and
"information assisting in the placing of bets or wagers."
Amending section 1084 to specifically cover those individuals in the
betting and wagering business who are located outside the territorial
jurisdiction of the United States, when those individuals knowingly
facilitate or aid in unlawful betting and wagering by transmitting a bet
or wager to or from an individual located within the United States.
While the current statute includes those transmissions involving
interstate and foreign commerce, it is unclear whether the statute would
cover someone on a boat in the middle of the Atlantic Ocean who is using
a cellular phone to take bets or wagers from a U.S. citizen located in
Miami.
Requiring any person, not just a common carrier, that provides a
facility to an individual in the business of betting and wagering to
disconnect service when served with proper lawful process by law
enforcement agencies. We would also extend the same protections against
liability contained in the existing statute for common carriers to these
persons.
(5) Clarifying that section 1084 does not repeal or amend the rights
or privileges secured tribes under IGRA.
Clarifying that section 1084 does not prohibit how states are
currently legally using communication facilities in the operation of
multi-state lotteries.
The Department of Justice believes that if 1084 were to be amended in these
ways, many of our concerns, as well as the concerns that led to the introduction
of Internet gambling bills, would be addressed. We would be happy to work with
Congress towards this goal.
I want to thank the Subcommittee again for asking me to present the
Department's views on Internet gambling. I would now be pleased to answer any
questions you may have.