Mr. Chairman, members of the Committee, thank you for allowing me the opportunity to present testimony on H.R. 3125, the Internet Gambling Prohibition Act. My name is Lisa Dean. I am the Vice President for Technology Policy at the Free Congress Foundation, a Washington, DC based think-tank focusing on the culture of American conservatism and our Constitutional liberties.

The Free Congress Foundation strongly opposes H.R. 3125 because we believe it flies in the face of conservative principles of federalism, individual responsibility, and limited government.

As you may know, we are deeply concerned about the speed with which gambling has spread from Las Vegas across the country and into American living rooms. However, of much greater concern to us is the speed with which the long arm of the federal government has spread from Washington, DC, into American living rooms.

When balancing the possible benefits of this legislation with its certain costs, the ledger ends up in the red. H.R. 3125 represents a major step backward in the fight against the creeping assault on individual liberty.

There are some who would stop the spread of gambling at any cost. We are not among them. In this case, in fact, we believe the costs are much too high.

H.R. 3125 puts several critical components of American democracy at risk.

First, this legislation makes a mockery of States' rights and the Tenth Amendment to the United States Constitution. Throughout the history of this country, gambling has wisely been dealt with as a state issue. Community standards differ from state to state, and from region to region. Imposing a one-size-fits-all policy from on high in Washington, DC, is at best, misguided, and at worst, dangerous. We strongly believe that gambling in cyberspace, like gambling in the real world, should be dealt with at the state level, not at the federal level.

In addition, this legislation represents a blatant disregard for the principles of federalism on which this country was founded. Nowhere is that disregard more evident than in the way the bill deals with gambling on State lotteries. Taking the power away from states to regulate their own lotteries is an arrogant usurpation by the federal government of one of the most fundamental rights of states--the right to self-governance.

Second, this legislation represents the worst kind of government-enforced industrial policy. The bill essentially says that all Internet gambling should be prohibited--except gambling on horse racing, dog racing, and similar activity. While some might suggest that the broad carve-outs contained in this legislation exist to preserve states' rights, why is there no carve out for state lotteries? Or for state-run blackjack games? Or for state-run video poker?

We believe that allowing some gambling over the Internet while outlawing others is nothing more than the federal government picking winners and losers in the marketplace, and question where the federal government gets the moral or legal authority to say that a bet on the Kentucky Derby is acceptable, but a bet on the Superbowl should be outlawed.

Third, and perhaps most important, is the issue of government regulation of the Internet. How does the federal government propose to enforce this nearly unenforceable legislation? Will it begin to monitor everyone's email? Will it create a list of federal-government-banned sites that Internet Service Providers must block? Will it stage dead-of night raids to seize the hard drives of unsuspecting individuals? Frankly, we hope not. However, it is difficult to see how, short of tactics like these, that the government could be at all effective in shutting down an industry that is legal in countries all over the world.

We believe that the issue of Internet gambling is very much like the issue of smoking. While many of us abhor smoking, would never do it, and teach our children to stay away from cigarettes at all costs, we do not want the government to step in and tell us whether or not we are allowed to smoke. Because if the federal government can tell us whether we can smoke, or whether we can gamble, eventually it is going to try to tell us what we can read and where we can worship.

We also believe that this legislation represents the first major threat by the federal government to impose a wide-ranging regulatory scheme on the Internet. This regulatory scheme is a true slippery slope. By suggesting who can and cannot place bets online, it divides the Internet up by geography--which is exactly what those who would tax the Internet need. As such, we believe it is not inconceivable that passage of this legislation could be the first nail in the coffin of a tax-free Internet.

But taxation is only one potential problem. When we use the term "gambling", we are referring to casinos, horse racing, lotteries and other games of chance. The definition is a rather narrow one but for those who are seeking the opportunity to regulate the Internet, they would likely use this legislation to expand the definition of gambling to include online auctions or even day trading. From there, it is not much of a stretch to include other industries as well which Washington doesn't like.

I realize that this is not the intent of the sponsors of H.R. 3125 but rather the intent of those who seek to control an industry that is young and inexperienced in the world of Washington politics, nevertheless, it is a stark reality and this legislation would give the green light to those who wish to regulate this new medium and marketplace.

This bill is also one of those pieces of legislation that separates those who are willing to have the federal government step in no matter what from those who truly believe in a limited federal government, and are leery of Washington stepping in to try to achieve goals that are best accomplished by the states or the private sector.

For these reasons, we strongly urge the Committee to reject the approach taken by H.R. 3125.

Thank you for allowing me to testify. I would be happy to answer any questions you may have.