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November 23, 2011 Print

Dig Deeper: Two Hearings on Internet Gambling, November 2011

by Chad Hills

Two hearings in November of 2011, examined the decriminalization of Internet gambling in the United States:

Efforts to decriminalize Internet gambling in the U.S. have been ongoing for more than a decade. In 2006, however, the Unlawful Internet Gambling Enforcement Act or UIGEA (see Title VIII in SAFE Port Act) was signed into law, which supplemented the Federal Wire Act of 1961 and gave the U.S. Department of Justice the tools and clarity needed to prosecute illegal, online gambling operations.

Formerly, Rep. Barney Frank led the push, with Poker Players Alliance, to give foreign casinos access to U.S. gamblers. His efforts failed. Now, Reps. John Campbell (R-CA), and Joe Barton (R-TX), have introduced 2011 legislation to repeal or overturn UIGEA, decriminalize online gambling, and bring virtual casinos into homes and remote devices in the U.S. See their bills below:

  • H.R. 2366 – Sponsor: Rep. Joe Barton, R-TX  (Introduced 6-24-2011)
  • H.R. 1174 – Sponsor: Rep. John Campbell, R-CA  (Introduced 3-17-2011)

In the above-mentioned November hearings, all gambling interests have a stake in the fight, but none satisfies all gambling interests.

Native American Indian tribes involved with gambling are not happy with current online-gambling bills because of the competitive disadvantages and tax requirements.

Foreign, online casino operators are unhappy being exempted from U.S. gambling, particularly with language that gives existing Vegas casinos a monopoly on U.S. Internet gambling.

Commercial casinos want control over all online gambling in the U.S.

Lotteries are not happy with the ensuing competition and loss of money.

And the majority of U.S. senators and representatives are not in full support of creating a national casino, and neither are most citizens. The social and economic costs of such invasive and massive gambling expansion are prohibitive.

The persistent online gambling lobbyists, however, continue to pressure U.S. Members of Congress to cave in and decriminalize this vice.


Tribal Online Gambling Lobby

The Senate Indian Affairs Committee met with experts Thursday (11-17-11) to discuss what decriminalization of online gambling in the U.S. would mean for Indian tribes.

According to the 2011 Indian Gaming Industry Report, Indian gambling revenues are slipping, as are most commercial and lottery gambling revenues. One speaker said tribal governments’ budgets depend on gambling revenues for up to 40 percent of tribal government expenses.

Ernie Stevens, chairman of the National Indian Gaming Association, was quoted in Vegas Inc news saying, “The bill would violate the Indian Gaming Regulatory Act, which recognizes that tribes use revenues for [their own, tribal] government purposes — doesn’t tax them.”

In the war for online gambling turf, citizens often become mere commodities to be deceived and exploited for a profit by state lotteries, foreign online casinos, commercial gambling and tribal casinos, while problem gambling addictions are minimized and rarely addressed. This view can be seen in a report, “Online Gaming & Indian Country: An Analysis & Business Forecast,” (Geiger Johns Associates, LLC, 10-18-2010).


Commercial Online Gambling Lobby

Following Thursday’s Senate Indian Affairs hearing, Rep. Mary Bono Mack, R-Calif., held court Friday (11-18-11) in her House subcommittee on Commerce, Manufacturing, and Trade. The bill being debated, H.R. 2366, would decriminalize Internet gambling, but the chief author and co-sponsor of the online gambling bill being debated did not testify.

Lawmakers and researchers continue to disagree on whether Congress should lift the 2006 federal ban on Internet gambling.

According to the National Journal Rep. Mack:

[G]ave few hints on where she stands during her second hearing on this topic…. Rep Mack isn’t convinced just yet one way or the other … “No markup is imminent,” said Ken Johnson, an aide to Bono Mack.

Congressman Frank Wolf testified clearly and strongly against legalizing Internet gambling:

“The legalization of Internet poker will enable the spread of gambling to every computer, iPad, iPhone, Blackberry, Android and Windows phone in the country … It will send a signal to Americans that gambling is permissible and encouraged. And it will be a windfall to the most powerful gambling interests in this country at the expense of American families and taxpayers.

“Although some have disingenuously championed this legislation as a potential budget windfall, I assure you that what tax revenue it generates will overwhelmingly come out of the pockets of the most vulnerable populations,” said Wolf, author of the 1997 legislation creating the National Gambling Commission.

Wolf urged the committee to not weaken the 2006 law banning Internet gambling and said to his Republican colleagues: “For a party that champions families and traditional values, I assure you that Internet gambling is contrary to family values,”

Dr. Rachel A. Volberg, nationally acclaimed gambling addictions researcher, gave an excellent research-based testimony regarding her concerns, as well:

 There are also compelling arguments for prohibition, some in direct counterpoint to the arguments for legalization. The main arguments in defense of prohibition are:

  • the purpose of laws is to codify societal values in an effort to shape, rather than conform to, people’s behavior;
  • legalization will likely increase rates of problem gambling; and
  • player protection tools are likely to have only modest efficacy in preventing problem gambling.

Dr. Volberg’s testimony continued:

 … While there are strong economic incentives for governments to legalize and regulate Internet gambling, there is, as yet, no satisfactory model proposed to regulate these activities.

… Despite the law, many U.S. players circumvent UIGEA by using non-U.S. financial transaction intermediaries to place bets. While overall participation in Internet gambling in the United States is quite low (estimates range from 0.3% to 3.0%) (Rasmussen Reports, 2006; Welte, Barnes, Wieczorek, Tidwell, & Parker, 2002), a recent survey of international online gamblers found that 25% of the respondents were from the United States (Wood & Williams, 2009).

… Poker is the most popular form of online gambling and accounts for approximately 60% of online gambling activity but for only 23% of the worldwide online gambling market … (Global Betting and Gaming Consultants, 2008, cited in Wood & Williams, 2009). Extrapolating from these figures, it appears that online poker generates approximately $4 billion in annual revenues worldwide.

… As far as I have been able to determine, there are no published estimates of the revenues that would likely be generated by the legalization of online poker in the United States.  …

… Furthermore, regardless of whether Internet gambling is legalized in the United States, there will always be many non-domestic sites available to online gamblers (Williams et al., 2012 in press). … If these figures are extrapolated to a legalized U.S. market, tax revenues from Internet gambling are more likely to be in the range of $3 billion to $12 billion over ten years.

… Finally, it is possible that legalizing online gambling and providing domestic access may actually increase monetary outflow rather than retaining it. This is a lesson learned in the late 1980s and 1990s from the introduction of domestic-market casinos in North American states and provinces, intended to capture gambling dollars that were being spent in Nevada and Atlantic City.


The Forecast for Online Gambling in the U.S.

Online gambling stands a slim chance – if any – of passing through both chambers of Congress anytime soon, particularly in the wake of the FBI-DOJ seizure of illegal online gambling sites conducting fraudulent business practices.

Senate Majority Leader Harry Reid (D-NV), will not allow a vote on any legislation opposed by Nevada casino bosses. Senate Republican Whip Jon Kyl (R-AZ), who is an outspoken opponent of Internet gambling, as well. The Internet gambling lobby tried, last summer, to make a Reid-Kyl online-gambling letter to the U.S. Attorney General Eric Holder  look like Kyl was endorsing online gambling, but the letter does not indicate any change in Sen. Kyl’s opposition. Furthermore, the Republican-dominated House will likely not fold to the online gambling lobby, even though more liberal or libertarian-leaning Republicans like John Campbell (R-CA) and Rep. Joe Barton (R-TX) have seemingly been co-opted by the online gambling lobby.

This is a good time to remind Republican leadership that the 2008 GOP Platform contains a plank of opposition aimed at Internet gambling (Page 47  – PDF):

Internet Gambling: Millions of Americans suffer from problem or pathological gambling that can destroy families. We support the law prohibiting gambling over the Internet.

Another reason Internet gambling legislation won’t move anytime soon is the inherent competition and greed for the same gambling money between the following four gambling entities:

  • Tribal Casinos – violation of sovereignty, violation of Indian Gaming Regulatory Act, state/federal taxes, unequal opportunity
  • Vegas Commercial Casinos – want complete control – initiated, funded online lobbying group, Fair Play USA
  • Foreign Online Gambling Lobby – Initiated Poker Players Alliance, worked through Rep. Barney Frank – want foreign access to American gambling money
  • State Lotteries – Won’t be able to compete with online casinos – oppose loss of more lottery money to online casinos, competition for same dollars

Though the likelihood of any online-gambling legislation moving forward soon is slim, we remain vigilant in our watch. The moment we leave our post or do not provide sufficient opposition, the shrewd, persistent gambling lobbyists, and a handful of misguided, elected officials, will find a way to attach online-gambling legislation to another bill.

Dig Deeper …

  • To learn more about the online gambling lobbying groups, read the blog-analysis: Invasion of the Money Snatchers .
  • See estimates, using previous research and known statistics, of what Internet gambling could cost our nation if it were to be decriminalized: Internet gambling costs what?
  • Beyond the seizure of the ‘big three’ illegal, online gambling sites, the FBI and DOJ have taken more action: Online Sting Seizes More Illegal Gambling Sites .
  • The DOJ maintains that online gambling is illegal. This blog was written to address those who circumvented U.S. law to continue gambling online, even though the DOJ created payment blocks to prevent illegal, online gambling from occurring in the U.S. – online gambling is a huge risk. Blog – Don’t Cry When Your Illegal Activity Is Shut Down .