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Hearing of the Subcommittee on Commerce, Manufacturing, and Trade - "Internet Gaming: Is There a Safe Bet?"

Statement

By:
Date:
Location: Washington, DC

During a House Subcommittee on Commerce, Manufacturing and Trade hearing on Internet gaming today, where representatives from the National Indian Gaming Association, National Council on Problem Gambling, Poker Players Alliance and FairPlayUSA testified, Congressman G. K. Butterfield (D-NC) said the hearing was not a debate on whether gambling is moral, but instead, to examine the status of Internet gaming in the United States and to consider how consumers would be affected if current legal restrictions were eased.

"We must acknowledge that internet gaming is happening now all over the world, including here in the United States -- where online gambling has been treated as illegal by the Justice Department," said Butterfield, Ranking Member of the subcommittee. "Because of this, American Internet gamblers have turned to unregulated foreign, offshore entities for access to games. Considering the fragile and struggling state of our national economy, I strongly believe that we must give serious consideration to the economic boon that could result from legalizing internet gaming. Hundreds of millions of dollars in tax revenues could be realized by struggling states, and tens of thousands of jobs could be created all across the country to directly support the newly installed industry."

Understanding the enormity of internet gaming and the varied viewpoints of stakeholders, Butterfield urged careful and deliberate consideration as well as recommended additional hearings to further explore the issue. "Madam Chair, I hope that you will agree that this is an issue that warrants further review before this subcommittee -- the subcommittee with jurisdiction -- signs off on any online gaming plan." Butterfield further pointed out, "California and the District of Columbia are already moving forward with INTRA-state online gaming even though its legal status is unclear given that the Justice Department considers it illegal. We need to hear from California and the District, we need to hear from the Justice Department, and we need to hear from other state and federal regulators who would be tasked with implementing and enforcing any regulatory framework regarding online gaming."

In 2006, the Unlawful Internet Gambling Enforcement Act was passed to stop the flow of revenue to unlawful Internet gambling businesses. The Act prohibits gambling-related businesses from accepting checks, credit card charges, electronic transfers, and similar payments in connection with unlawful Internet gambling. The law also requires the Department of the Treasury and the Federal Reserve to prescribe regulations requiring financial transaction providers to establish policies and procedures to identify and block or otherwise prevent or prohibit restricted transactions.

To date, no agency has enforced those regulations.

Butterfield's full opening statement follows.

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Opening Statement of Congressman G. K. Butterfield

Ranking Member, Subcommittee on Commerce, Manufacturing, and Trade

"Internet Gaming: Is There a Safe Bet?"

Chairman Bono Mack, thank you for holding today's hearing on the issue of Internet gaming. Congress is no stranger to this issue and has grappled with how to best address it for some time now. Part of the reason why, I think, is because Members of Congress, just like all our constituents across the country have very personal feelings about gambling. Some are vehemently opposed to all forms of gambling, while others see it merely as entertainment.

However, the debate shouldn't be over whether gambling is moral or not. Instead, we should acknowledge that Internet gaming is happening now all over the world, including here in the United States -- where online gambling has been treated as illegal by the Justice Department. As a result, American Internet gamblers have turned to unregulated foreign, offshore entities for access to games.

The offshore entities may not provide consumer protections for those who gamble. There is no U.S. oversight to ensure U.S. citizens are not harmed. There is often no legal recourse for consumers who have been wronged by bad offshore actors.

There is also the small issue of money. Last year alone, Americans wagered 16 billion dollars just on Internet poker. While some of that money went back to players in the form of winnings, the overwhelming majority remained offshore, unregulated, and untaxed. With our significant national debt, a commonsense solution seems clear: Internet gaming should be legalized in the United States and an oversight structure put in place to ensure consumers the strongest safeguards possible.

Games like poker and bingo are as ubiquitous in the United States as baseball and football and are played by young and old alike. But technology has evolved, permitting individuals to participate in games of chance and skill in real time and remotely. Instead of embracing a new twist on an old game, our inaction has led Americans to spend their money offshore and at their own peril.

Permitting Internet gaming entities to operate within the United States could yield tremendous financial benefits to struggling Federal and state coffers through unrealized direct and indirect tax revenues. It would also allow for oversight of and accountability for the industry's business practices. Most importantly, we would have the opportunity to create and implement strong consumer safeguards that each entity would have to follow. The Wild West status quo is not working for anyone.

However, having anytime access to gamble real money raises significant concerns. The compulsive gambler would no longer have to expend any effort -- like driving to a casino -- to play. A mouse click and credit card number are all he needs to play. But with no human interaction with the House, there is no one and no way to cut someone off if they've played too much. Before long, that same gambler has maxed out his credit cards and faces bankruptcy. Or worse, he turns to criminal activity to finance his habit. While my example is extreme, it is very possible; and it happens daily at conventional brick and mortar gaming houses. People ultimately must have personal responsibility to know when enough is enough. But when that line blurs, safeguards must be in place to protect them.

That is why any legislation that permits Internet gaming in the United States must have protections in place to mitigate compulsive gambling. Consumer protections must also be in place to ensure that the games are honest, fair, and truly randomized.

The economic boon that could result from legalizing internet gaming is perhaps the most compelling reason to give it serious consideration. Hundreds of millions of dollars in tax revenues could be realized by struggling states. Tens of thousands of jobs could be created all across the country to directly support the newly installed industry. Considering the fragile and struggling state of our national economy, I strongly believe that all potential remedies should be considered to return us to greater prosperity.

Thank you. I yield back the balance of my time.


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