Senate Committee Holds Hearing on Internet Gambling

(March 24, 1999) The Senate Subcommittee on Technology, Terrorism, and Government Information held a hearing on Internet gambling on Tuesday morning, March 23. Sen. Jon Kyl stated that he will re-introduce a bill to ban most forms of Internet gambling.

Sen. Jon Kyl (R-AZ), the Chairman of the Subcommittee, introduced a bill in the 105th Congress to ban Internet gambling. S 474 passed the Senate by a vote of 90 to 10. The House never voted on the bill. Sen. Kyl stated that he would soon introduce a modified version of that bill, and that he expects the full Senate Judiciary Committee to mark up the bill in April.

The hearing featured six witnesses from law enforcement, sports, and legalized gambling, all of whom testified in favor of the proposal. The subcommittee also viewed a video about a fraudulent Internet gambling web site which did not pay out to wining gamblers.

Sen. Jon Kyl (R-AZ)

Sen. Kyl stated that "societies throughout history have sought to prohibit most forms of gambling. There are many reasons for this, but they are, I think, especially applicable to Internet gambling today." He cited the  problem of youth gambling, pathological gambling, corrupt casinos, and organized crime involvement.

"This is a case where a national problem is a federal problem," said Sen. Kyl. "which is why the states' Attorneys General are before us again today. The Internet, of course, is interstate in nature. And states cannot protect their citizens, enforcing their own laws, prevent gambling, if anyone can transmit into their states."

Sen. Kyl described his bill in his written statement: "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."

Sen. Kyl continued:

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.

Sen. Dianne Feinstein (D-CA) expressed qualified support for Sen. Kyl. "I know there is a rush, in a sense, to regulate," said Sen. Feinstein. She continued that one question is, "Are current laws adequate to address the conduct already?" She concluded that that since the Wire Act only affects gambling over telephone lines, and "the Internet could be accessed through microwave systems," the "Internet creates a loophole in existing law."

However, she cautioned that "we must be careful how we go about remedying the situation." She added that "we must also be careful not to slow down the Internet, or place unreasonable burdens on legitimate Internet related businesses."

Sen. Mike DeWine (R-OH) stated that he supports the bill.

The subcommittee heard from six witnesses, all of whom support the bill.

Betty Montgomery, the Attorney General of the State of Ohio, stated: "We urge you to support Senator Kyl’s efforts and to make a strong statement to our constituents that this activity is not legal; that the games are not necessarily fair; that they are not necessarily offered by trustworthy parties; and that there may be no recourse for consumers or children who may be cheated."

Wisconsin Attorney General James Doyle testified that "the technology of the Internet simply cannot meet the needs of effective gambling regulation. Gambling laws must address a wide variety of specific issues in order to meet these policy concerns. Some of the most crucial issues include game integrity, dispute resolution, underage gambling, problem gambling, and effective means to verify the physical location of players and proprietors. Internet technology is currently unable to adequately address all of these policy considerations."

Bill Saum, representing the National Collegiate Athletic Association, testified that the "NCAA opposes all forms of sports gambling because of its potential to undermine the integrity of sports contests while jeopardizing the welfare of the student-athlete and the intercollegiate athletics community. Despite federal and state laws that prohibit sports gambling in 47 states, this activity remains a growing problem on college campuses." He concluded that the "NCAA strongly endorses The Internet Gambling Prohibition Act of 1999 and urges members of this Subcommittee to move quickly in adopting this legislation."

Marianne McGettigan, an attorney representing the Major League Baseball Players Association, testified that her client has recently reversed its position, and now supports the bill. Sen. Kyl won the baseball players support by redrafting the bill to exclude fantasy sports games, from which the players receive license fees.

She explained the baseball players position:

"unlike the case with previous proposals, the Major League Baseball Players Association has no objection to Senator Kyl’s most recent draft bill dealing with Internet gambling. This change in position is based on our understanding that: (1) this new language applies the sanctions of the bill only to those involved in the “business of gambling,” not to individual participants; (2) fantasy sports games and contests that are currently legal in a state will continue to be legal both as a matter of state law and federal law; and (3) stated another way, because this will be a federal law, this proposal nonetheless is not intended to make unlawful under federal law, activities that are currently lawful under the law of certain states."

She concluded that "we have no opposition to the enactment of legislation to facilitate the enforcement of state law for activities, including gambling, that are having an effect within a state’s borders and which are unlawful within that state. The Major League Baseball Players Association does not condone gambling."

James Hurley, Chairman of New Jersey Casino Control Commission, also testified in favor of the bill. He does not oppose gambling. Rather, he argued that Internet gambling cannot be closely regulated the way Atlantic City casinos are. He described at length a system of "people watching people watching people. "From what we know about Internet gambling right now, I do not believe the same kind of protections are in place or if they ever could be put in place. The lengthy procedure of background checks on employees, inspections of machines, oversight of operations simply cannot be ensured through internet gambling. Without them, I cannot see how anyone could have any level of confidence in the fairness of the games or the likelihood of receiving their winnings."

The subcommittee heard from no opponents of the bill. However, Sen. Kyl joked about the lobbying against the bill. "I think all of us could live quite comfortably on all the money that was spent just last year, and is likely to be spent this year, lobbying against this legislation."

Sen. Kyl also suggested that the reason that the bill did not pass the House last year was that it was passed last in the summer by the Senate, and soon after, the House committee with jurisdiction (Judiciary) was fully occupied with impeachment matters.