uring a House Subcommittee on Commerce, Manufacturing, and Trade hearing today, Congressman G. K. Butterfield (D-N.C.) released a letter to Chairman Mary Bono Mack (R-CA) criticizing convening a second hearing on Internet gaming that failed to include testimony from representatives of federal agencies that would potentially implement and govern online gambling. Butterfield said that while he appreciates the Chairman's consideration of this issue, "If the Subcommittee is to proceed with the federal legalization and regulation of online gambling, it must do it right by hearing testimony from those entities that would be integral to its implementation and oversight. Thus far, the Subcommittee has heard testimony from representatives of National Indian Gaming Association, National Council on Problem Gambling, and the American Gaming Association, to name a few. However, to fully understand the legalization of Internet gaming, we must learn the concerns such agencies as the Departments of Justice, Treasury, and Commerce might have since they would be tasked with producing a national Internet gaming framework."
Last month, the Subcommittee held its first hearing on Internet gaming, which evaluated the current prohibition and possible economic benefit of online gambling.
The full text of Butterfield's letter follows.
The Honorable Mary Bono Mack
Subcommittee on Commerce,
Manufacturing, and Trade
U.S. House of Representatives
2125 Rayburn House Office Building
Washington, DC 20515
Dear Chairman Bono Mack:
Today, the Subcommittee on Commerce, Manufacturing, and Trade convened its second hearing this session on Internet gambling. As Ranking Member, I want to thank you for scheduling time for us to consider this complex topic and evaluate proposed legislation. However, I am concerned that the Subcommittee has not yet received testimony from federal entities that would oversee and implement key regulations governing a potential new system of legalized online gambling. These entities include, among others, the Departments of Justice, the Treasury, and Commerce, and the Federal Trade Commission.
At the Subcommittee hearing on October 25, 2011, you indicated that an essential goal of the hearing was to determine the proper role for federal regulators. You asked, "Can online gambling be regulated effectively? And what role should the federal government play to protect American consumers from "sharks?'" I strongly agree that both questions are central to our oversight of this topic. But we cannot obtain informed answers about the effectiveness of gambling regulation or consumer protection if we fail to invite key federal government agencies to testify as witnesses.
Legalizing Internet gambling nationwide would involve several federal entities, each with different roles to play. Currently, the Department of Justice enforces the Wire Act, and has used that statute to treat online gambling as illegal. The Department of Justice also enforces the Unlawful Internet Gambling Enforcement Act (UIGEA), which bans gambling enterprises from accepting checks, credit card charges, electronic transfers, and other payments connected to unlawful online bets or wagers. For its part, the Department of the Treasury was required under UIGEA to prescribe regulations requiring financial transaction providers to establish policies and procedures to "identify and block or otherwise prevent or prohibit restricted transactions."
Under H.R. 1174, introduced by Representatives John Campbell and Barney Frank, Treasury would implement a licensing program for Internet gambling sites. Under H.R. 2366, introduced by Chairman Emeritus Joe Barton, the Department of Commerce would oversee the state or tribal licensure of online poker vendors. Finally, although it has been left out of current proposals, the Federal Trade Commission enforces fair business and marketing practices and possesses the appropriate e-commerce expertise to protect online gamblers' personal data and privacy.
It should be no mystery why strong oversight of online gambling would be required. In addition to monitoring industry practices, preventing fraud, and providing protections for individuals with gambling problems, regulators must ensure that children and teens are completely excluded from gambling activities.
The involvement of minors in gambling is particular problematic -- and already happens all too often. An October 2010 study by the Annenberg Public Policy Center found that 6.2% of boys age 14 to 17 (roughly 530,000 teenage boys) had used an Internet gambling site in the previous month -- and while participation rates by girls were lower, they were increasing. Moreover, in the past month, the Pittsburgh Tribune-Review and USA Today both reported that offshore betting sites are profiting from wagers on televised high school football games. The founder of one such site was quoted as saying, "[t]he customers who bet the games don't have a problem with morality. If the customers are happy, I am happy." Commenting on the scope of the problem in countries where gambling is legal, he said, "Walk to any street corner in the
United Kingdom. You can bet on under 16-year-old soccer events, boys or girls. Any match, just about any amount." This practice represents the type of enforcement challenges federal regulators will face if online gambling is made legal.
If the Subcommittee is to proceed with the federal legalization and regulation of Internet gambling, it must do it right. I respectfully request that our Subcommittee seek formal comments from federal entities that would be involved with any legalized gambling regime.
Subcommittee on Commerce,
Manufacturing, and Trade