The fate of online gambling in the United States was taken up by the House of Representatives last Thursday as the Crime Subcommittee held a hearing on HR 3125, the Internet Gambling Prohibition Act. Strangely, it came after the Subcommittee's approval the legislation. One of the witnesses summed it up: "I wish that members of this Subcommittee had been my law school professors. . . . How nice that would have been to have a professor go ahead and give me a grade before he even studied the paper."
Another peculiarity was the absence of Subcommittee Chairman Rep. Bill McCollum. McCollum is not a sponsor of HR 3125 (he was in the last Congress), but his staff has been the main force pushing the legislation through the Committee. Some speculate that he's concerned about being publicly associated with the legislation in the midst of his campaign for a seat in the Senate.
Does McCollum's realization that the legislation is radioactive come too late? When the Subcommittee marked up the legislation last November, McCollum went on the record as being supportive; he voted for the bill. In short, he supports in-home gambling for horse, dog, and jai alai industries, as well as state lotteries.
The hearing itself was a whopping four hours long, with nine witnesses. Of those nine, three addressed potential problems with the legislation: Deputy Assistant Attorney General Kevin DiGregory, Institute for Policy Innovation director Bartlett Cleland, and Keith Whyte, executive director of the National Council on Problem Gambling.
Additionally, Senator Kyl, Representative Goodlatte, the chairman of the Oregon Racing Commission, a representative of the NCAA, and Wisconsin AG Jim Doyle all testified. These witnesses sang in unison that Internet gambling must be stopped, and that the only way to do so is to enact the Kyl-Goodlatte-McCollum legislation.
The Department of Justice testimony must have hit the target, as the headline in the Las Vegas Review Journal was "Net Gaming Ban Hits a Snag."
There was also one surprise witness: "John Doe" a self-confessed problem gambler who has lost $5000 to his Internet gaming addiction. Doe said that he began gambling at age 14 at the local horse tracks in San Diego. He then progressed to the Indian gaming facilities, before discovering Microgaming (he mentioned them by name) on the Internet. He used his father's credit card to play online blackjack, and ended up losing the five thousand.
In theory, this guy should have been a good witness. However, members of the Subcommittee essentially recognized "Doe" for what he was--a problem gambler that would have bet the farm at a casino had he not gotten online.
Rep. Steve Chabot began by asking whether Doe would have been discouraged from gambling online had he known that it was illegal. Predictably, Doe said that he wouldn't have bet if he knew it was illegal.
Rep. Bobby Scott (D-VA) then weighed in, noting that it was illegal when Doe began gambling at the horse track at age 14. Scott thus asked Doe why would he let the law get in his way when it came to online wagering. Doe had no answer.
Scott then began to attack the carve-outs in the bill. He asked Doe what his gambling preference was. Doe responded by saying that he liked blackjack. Scott asked whether he would bet on horse racing or jai alai if he couldn't play casino games online. Doe said that he would make pari-mutuel wagers. This brought snickers from the crowd, as everyone recognized that Scott was pointing out the dangers posed by the exceptions in HR 3125.
Rep. Gekas then asked whether Doe was still gambling. After explaining that he was not a compulsive gambler, Doe explained that he lost $100 last week playing online blackjack. At that point, Doe was merely seen as someone who needed professional help. The session closed after Rep. Howard Coble asked
whether Doe still had his father's credit card. The answer was a curt "no."
It was clear from the members' actions and expressions that the witness lost all credibility.
Rep. Gekas (R-PA) said that he would be hard pressed to support any bill that limits states' rights. Rep. Coble (R-NC) said he shared Gekas' worries about states' rights as well as concerns about the penalty provisions of the proposed legislation.
On the Democratic side, Rep. Scott (D-VA) continuously challenged the bill's enforceability, or lack thereof. His attack on the bill was two-pronged. First, he argued that the bill would have no impact on off-shore operators. He used the example of Iraq: If people in Iraq opened up an online casino, how could U.S. law enforcement officials stop them. The question was posed to many of the witnesses, with each ultimately saying that nothing could be done.
Scott's second line of questioning focused on the demand side. He kept coming back to the "casual bettor provision." He said that if nothing is done to curb demand, then addressing supply would be a lost cause. In response, both Goodlatte and Kyl said they would be willing to work with Scott to re-insert criminal liability for casual bettors.
Scott commented to a couple of witnesses that if the measure goes through as is, only law-abiding operators would be forced out of business, leaving unscrupulous operators to serve the entire market.
Additionally Rep. Anthony Weiner (D-NY) and Rep. Sheila Jackson Lee (D-TX) voiced strong concern about the exemptions for in-home horse, dog, lottery, and jai alai wagering. Specifically Jackson Lee went after YouBet! and the exemptions for "closed loop subscriber based services."
Some of the most interesting testimony came from the Department of Justice. Assistant AG Kevin DiGregory stuck to his line that the bill is poorly drafted, and contains inappropriate expansions of gambling in the form of the carve-outs. The dynamic was particularly interesting as DiGregory was seated
next to Kyl. Kyl said that nothing in his bill allowed for in-home Internet based gambling. Subtly, DiGregory disagreed, and cited the carve-outs in detail. In short, he called Kyl either mistaken about his own bill, or disingenuous. The discomfort of that dynamic was palpable.
Keith Whyte of the National Council on Problem Gambling was relatively tame. He did reinforce, however, that the bill contains carve-outs that pose a danger to problem gamblers such as John Doe.
The best testimony, however, came from Bartlett Cleland, who flew in from Texas to testify. Cleland attacked Goodlatte directly, saying that the bill is unworkable, and represents a direct attempt to regulate the Internet.
This hit Goodlatte between the eyes, as he sees himself as the high-tech member. He used all of his time to try to get Bartlett off track. Goodlatte asked, "If we should regulate Net gambling because we can't stop it, shouldn't we regulate child pornography?"
Cleland noted that kiddy porn is universally abhorred, and thus a ban is enforceable globally. In contrast, Net gambling is licensed and regulated in nearly 50 countries.
Goodlatte then said, "Mr. Cleland, you say that this legislation is a regulation of the Internet. Did you know that companies like AOL and GTE, and the Computer Internet Exchange have all written Senator Kyl to thank him for his efforts?"
Bartlett politely noted that as Senator Ashcroft's former counsel, he was very much aware of that letter. And that in fact, it was to thank Kyl for removing the criminal liability facing ISPs. It was not an endorsement of the legislation. At that, Goodlatte was cut off.
Since this was merely a hearing, no votes were taken. However, it is becoming clearer by the day that the legislation's carve-outs make a mockery of real prohibition.