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Hearing of the Commerce, Manufacturing, and Trade Subcommittee of the House Energy and Commerce Committee - "Internet Gaming: Regulating in an Online World"


Location: Washington, DC

When it comes to the debate over legalizing Internet gambling, is it time for Congress to let the genie out of the bottle? Or is the genie already online with a pile of chips playing Texas Hold-em?

As Chairman of this subcommittee, this is an important issue which I have been following very closely in hopes of making certain that everyone is dealt a fair hand.

Today, we know this: the vast majority of Americans have gambled at some point in their lives and the number of people who try gambling is going up every year. Currently, the only two states without legalized gambling are Hawaii and Utah.

48 other states allow charitable gaming.
43 states and the District of Columbia have lotteries.
40 states permit pari-mutuel betting.
29 states have Indian casinos, while another 28 states have stand-alone casinos or
racetrack casinos.

Today, as we continue to look at whether Congress should legalize Internet gambling, there
are a number of questions which we will be raising:

How effective is current enforcement of online gaming in jurisdictions that have legalized it? And how are states preparing to deal with the issue?

What, if any, forms of interstate online gaming should Congress consider allowing?

What consumer protections exist for online gaming and what new protections are needed?

How would any easing of legal restrictions on Internet gaming affect American consumers and other stakeholders, especially federally recognized Native American tribes?

Gaming policy and regulation is generally handled by the states, although the federal government has been involved in shaping the boundaries of what's permissible under current law.

In 1988, gambling across the United States began to proliferate after Congress passed the Indian Gaming Regulatory Act, addressing the jurisdiction and authority of tribes to establish gaming on their lands. Since its passage, tribal gaming operations have seen tremendous growth with revenues last year exceeding $26 billion. Of the 565 federally recognized tribes across the United States, nearly half of them operate casinos which provide a critically important source of funding for tribal operations and governance.

In my own Congressional District, tribal gaming has been a huge plus, with seven casinos supporting thousands of jobs during these difficult economic times. The tribes have been great neighbors too, contributing regularly to charities and civic events. So as this debate continues to unfold, it's very important to remember how tribal gaming has improved the lives of thousands of Native Americans and I want to make certain that they are not adversely impacted by online gambling -- legal or otherwise.

Congress has had to step in before. In 2006, to combat the proliferation of illegal Internet gambling, the Unlawful Internet Gambling Enforcement Act was adopted.

This effectively outlawed interstate online gaming in the United States by prohibiting gambling-related businesses from accepting payments in the form of checks, credit card payments, or electronic funds transfers relating to unlawful Internet gambling. The law also establishes fines and penalties for banks and financial companies that process such payments.

In April of this year, three of the top poker websites were shut down and 11 people indicted for bank fraud and money laundering, raising new questions about the law.

Proponents argue that the statute has not reduced Internet gambling -- it's simply driven it underground and offshore where shady operators play by their own rules.

Legalizing Internet gambling, they argue, would actually allow the government to provide greater protection for consumers.

But those who want to keep the ban on Internet gambling in place argue that repealing the current law will expose more Americans to serious problems such as compulsive gambling.

They are also worried about an increase in fraud, money laundering, and organized crime.

Still, others have expressed concern that state budgets could be harmed by the loss of lottery and gaming revenue, and they point to a huge potential impact on existing, legitimate gaming operations.

While most states have taken no action regarding online gaming, seven states -- Illinois, Indiana, Washington, Louisiana, Oregon, Montana, and South Dakota -- have now enacted express prohibitions on Internet gambling.

Other states have interpreted federal law as permitting intrastate online gaming and they are beginning to authorize different forms of remote gaming.

Nevada, for example, is already providing remote intrastate sports wagering through Blackberry-enabled mobile phone devices, and the state is also forging ahead with plans to begin licensing online poker sites.

So, in many respects, the genie is already out of the bottle, and now it's up to Congress to decide whether Internet gambling across state lines is legal or illegal.

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