House Financial Services Committee Holds Hearing on Internet Gambling

June 8, 2007. The House Financial Services Committee (HFSC) held a hearing titled "Can Internet Gambling Be Effectively Regulated to Protect Consumers and the Payments System?" Witnesses disputed whether or not the age and location of internet gamblers can be verified.

Rep. Frank's Bill. Rep. Barney Frank (D-MA), the Chairman of the HFSC, is the sponsor of HR 2046 [LOC | WW], the "Internet Gambling Regulation and Enforcement Act of 2007".

HR 2046 would not repeal the Unlawful Internet Gambling Enforcement Act (UIGEA), the recently enacted law that targets the financial transactions associated with internet gambling. Rather, the bill would exempt from the provisions of the UIGEA financial transactions with licensed operators of internet gambling facilities.

Also, the bill does not expressly repeal or amend the federal Wire Act, or preempt any state laws banning any types of gambling or internet gambling. However, the bill provides that "It shall be a defense against any prosecution or enforcement action under any Federal or State law against any person possessing a valid license under this subchapter that the activity is authorized under and has been carried out lawfully under the terms of this subchapter".

See, story titled "Rep. Frank Introduces Bill to Facilitate Licensed Internet Gambling" in TLJ Daily E-Mail Alert No. 1,574, May 3, 2007.

Witness Testimony. Jon Prideaux (Asterion Payments) previously worked for Visa in Europe, and is now a consultant. He wrote in his prepared testimony [10 pages in PDF] that "Gambling is a legal, regulated business in the UK and in a number of other European countries."

In addition, he wrote that "The UK Government has an explicit strategy to try to make the UK a jurisdiction of choice for Internet gambling companies", and that "Gaming operators are some of the largest companies in the country."

He continued that internet gambling is "regulated and taxed by the UK Government".

He argued that "at all stages of the process, precisely because the Internet gambling environment takes place in the electronic environment, the degree of control that can be applied far exceeds that which can be applied in the face to face environment where cash is the normal currency. Internet gamblers cannot be anonymous and all the activity that they undertake can be regulated and controlled through a variety of different processes."

Gerald Kitchen, CEO of SecureTrading Ltd., a UK company that operates a financial payments business that specializes in the processing and settlement of internet payments, wrote in his prepared testimony [12 pages in PDF] that his company supports HR 2046.

He wrote that "From the text of the Internet Gambling Regulation and Enforcement Act of 2007 certain financial transactions are likely to be permitted. To the extent that this is the case, I respectfully offer to the Committee that there is, today, the technological and process capability in place to permit those legal transactions to occur -- with protections in place to prohibit underage or compulsive gambling, organized crime, money laundering and fraud."

Jeff Schmidt, CEO Authis, a provider of identity and security-related products and services to the financial industry, wrote in his prepared testimony [3 pages in PDF] that verifying the age and geographic location of internet gamblers is difficult.

He wrote that "When considering the proposed legislation, it is critical to consider that Internet age verification can not be done reliably and as such one must conclude that motivated minors will in fact easily and regularly circumvent the system."

He also wrote that "reliable determination of the geographic location of individuals/devices on The Internet is simply not possible."

Greg Hogan Sr., a Baptist pastor, wrote in his prepared testimony [PDF] that his son is "in prison for a robbery he committed to feed his online gambling addiction".

Radley Balko (Reason Magazine) wrote in his prepared testimony [PDF] that "What Americans do in their own homes with their own money on their own time is none of the federal government's business."

See also, prepared testimony [4 pages in PDF] of Michael Colopy (Aristotle, Inc.).