On Wednesday, internet gaming and poker was once again in the spotlight on Capitol Hill. In the Senate Subcommittee on Consumer Protection, Product Safety and Insurance, Missouri Senator Claire McCaskill, the chairman of the subcommittee, called the hearing yesterday morning for discussion of the issue of online gaming. The hearing, entitled “The Expansion of Internet Gambling: Assessing Consumer Protection Concerns,” was one that presented a mixed bag for advocates for a regulated online gaming and poker industry in the United States.
As the meeting started (with four of its thirteen members in attendance), Sen. McCaskill started off the hearing with a few comments. Citing the Department of Justice decision from December 2011 that the Wire Act of 1961 only applied to sports betting, McCaskill stated, “(the decision) has liberated the states for casino-style online gaming. Online poker is up and running in Nevada and, by the end of the year, New Jersey and Delaware will be live with a full slate of casino-style online gaming. Many other states are actively considering legislation also.”
While McCaskill admitted that “cash-strapped states” will be considering online gaming for revenue and join in compacts with other states to increase their player pools, McCaskill asked, “What will be the consequences for consumer protection? Gambling, whether bingo or blackjack, has long been regulated by the states. But does a patchwork of state regulations adequately protect consumers? Can it protect against underage or problem gambling?”
McCaskill brought up several concerns heard from lawmakers in the past, including the usage of online gaming for money laundering especially by “terrorists looking to launder money to fund their activities,” according to McCaskill. Joined by Republican Senators Roy Blunt (who admitted he actively supported the passage of the Unlawful Internet Gaming Enforcement Act (UIGEA) of 2006 and continues to support a ban against online gaming) and Nevada’s Dean Heller and Democrat Brian Schatz of Hawaii, the hearing moved to the witnesses for the meeting.
The National President of the Fraternal Order of Police, Chuck Canterbury, stated in his testimony to the hearing that “it is time for our nation’s legal framework to catch up to the technology it seeks to regulate.” He admits that the FOP supported the UIGEA and points out a 2012 study from the International Narcotics Control Strategy Report that Costa Rica, where much of the activities of internet gaming occur, launders “millions of dollars” in illicit proceeds.
“We know this for certain,” Canterbury stated, “organized crime is using offshore online operations to launder their profits.” While not taking a stance either way on the question of regulation of online gaming, he did advocate for a regulatory framework that will allow law enforcement to “go after” organizations and businesses that violate the law.
The President of Catholic Advocate, Matt Smith, vehemently testified against any expansion of gaming. Accusing “large states” of lobbying the Obama Administration to change the DoJ’s assessment of the Wire Act, Smith said that “the UIGEA is now under assault.” “We recognize that Congress did not create this problem,” Smith finished his testimony. “Congress, though, does have the power to protect our seniors, our children and give law enforcement the tools they need to protect the vulnerable. We urge bi-partisan congressional action to restrict the imminent expansion of online gambling throughout the states, lotteries and off-shore operators. Federal restriction of online gambling is vital, urgent and consistent with recent congressional intent.”
“Personally, I think gambling is dumb and I learned early on that the house always wins,” Attorney Jack Blum began his testimony. Taking things to another level, Blum invoked the names of organized crime figures Al Capone and Meyer Lansky in explaining how their casinos and race tracks laundered their money. He also spoke of an early 1990s Italian organized crime ring that used a casino on the island of St. Maarten to launder money. “I do not think this kind of regulation can be done at the state level,” Blum testified.
Finally, the Chief Executive Officer of Daon (a biometrics and identity assurance software company), Thomas Grissen, testified as to some of the methods that could be used to verify the identity of a potential online enthusiast. Using his smartphone, Grissen demonstrated how he could be the only person to access his online banking account and insinuated it could be done for online gaming and poker. McCaskill expressed some doubt about the methods in stating, “A lot of the people play online poker because they don’t want to do it in public…(the technology) creates a real friction with those who want privacy.”
Oddly absent from the hearing was anyone of a pro-online gaming agenda.
The committee and witnesses bantered some questions around, with both sides agreeing that a federal solution (either for or against online gaming) was necessary. Canterbury followed his testimony by saying, “Law enforcement can’t attack these problems with 50 laws,” and Blum agreed, stating, “The current situation is absolute open season. You wouldn’t have service providers offering complete software packages if someone didn’t want to use a casino for nefarious purposes.”
The hearing closed with no further hearings scheduled on the subject, but it was a bit of a splash of cold water in the face of online gaming and poker supporters. With no legislation in the Senate on the subject at this time (and two bills in the House of Representatives that have yet to be scheduled for debate), it appears the federal regulation of online gaming and poker still has a long road ahead if it is to become a reality.