Judiciary Committee hears net gambling testimony

Annie Duke
Annie Duke talks poker with the Judiciary Committee.

The House Judiciary Committee heard testimony from various witnesses today, including Annie Duke, to discuss establishing consistent enforcement policies in the context of online wagers.

The first panel of speakers included Rep. Shelley Berkley (D-Nev.), who has introduced legislation to conduct a study of Internet gambling, and Rep. Bob Goodlatte (R-Va.), who helped push through the Unlawful Internet Gambling Enforcement Act.

Berkley began her statement pointing out that as Las Vegas' representative in Congress, she has an important and unique perspective on the issue on online gambling. That perspective has been formed by growing up in Las Vegas where a person is practically surrounded by gambling wherever they go.

One of the points she made is that despite being immersed in a gambling environment while growing up, she isn't a gambling addict and doesn't gamble very often.

Along with that she said that the current laws have done nothing but create a confusing environment for U.S. citizens who want to wager online. The UIGEA made it worse by targeting the financial sector rather than the gamblers committing the illegal act.

"Although some Internet gaming executives have been arrested and some of the more reputable operators have stopped doing business in the U.S., an estimated 10 million Americans are still wagering online on poker alone, and they are doing so without the benefit of the protections afforded by effective regulatory oversight," Berkley said.

She also discussed the World Trade Organization decision that the United States' online gambling laws violate international trade agreements. Berkley pointed out that choosing to withdraw from our trade agreements rather than comply with them is the wrong route to take.

Congresswoman Shelley Berkley
Rep. Shelley Berkley

"This is the trade equivalent of taking our ball and going home, and sets a dangerous precedent for other nations," she said in her prepared statement. "You can be sure that if China one day decides that it shouldn't have to comply with its WTO obligations, we will be the first to object."

Later testimony from the second panel of witnesses supported Berkley's views. Joseph H.H. Weiler, a professor of law at the New York University School of Law who has served as a WTO panel member, talked about the WTO issue and how the U.S. reaction to it could affect the rest of the world.

Weiler pointed out that the United States voluntarily entered into the original WTO agreement that included allowing online gambling. The nation had the opportunity to exclude that industry initially, but it did not.

"A country is not obliged to give such commitments but once it does it is obliged to respect them - since other countries adjust their economies in view of such commitments and individual corporations and investors will gear their economic activities based on such commitments and [on] promise of access," Weiler said in his statement.

The United States has brought cases against other nations through the WTO, and when the organization ruled in its favor, the other nations came into compliance. Now that the WTO has ruled against it, the U.S. is deciding to change its agreement.

"This might be regarded and is regarded by many as a cynical manipulation of the system - you lose the game, so you try and change the rules," Weiler said. "It also charts a way and creates a political precedent which might harm U.S. interests when other countries emulate such behavior."

He also found it astonishing that the executive branch of the government continues to prosecute online gambling violators despite the United States' admission that its laws are in violation of WTO trade rules.

According to the professor, those businesses are protected and covered by the nation's legal obligations under the WTO until the United States is able to withdraw from that part of its agreement.

The arguments the United States has used to justify its online gambling ban have been examined and taken into consideration by the WTO. Weiler pointed out that the concerns raised by the United States are legitimate, but the policy the nation has embraced won't solve the issues.

"The alternative is to adopt a regulatory regime which would address the hazards of remote betting and would apply with no discrimination both to domestic and foreign service providers from our WTO Partners," Weiler said in his prepared testimony. "In this way, the U.S. would both address its legitimate social concerns and respect its international legal obligations."

When asked by Rep. Goodlatte if he would have the same response if the issue were about cocaine from Columbia rather than an online gambling service based in another country, Weiler reiterated his point that the WTO does provide exceptions for national security issues and other such crucial areas of policy.

However, when the WTO examined the United States' concerns about online gambling, a paradox emerged. Even though the nation was arguing that online gambling is immoral and injurious to social welfare, it was still allowing other forms of online gaming as long as the companies offering it were U.S.-based.

Deputy Assistant Secretary Valerie Abend, U.S. Treasury Department, and U.S. Attorney Catherine Hanaway both spoke about the gambling laws that are contested by the WTO. Their testimony included an update on the UIGEA and where it's at on the journey to being implemented.

At one point in her statement, Hanaway said, "As we have noted on several occasions, the (Justice Department) believes that Internet gambling should remain illegal. Internet gambling poses an unacceptable risk due to the potential for gambling by minors and compulsive gambling."

She points out the various potential problems with online gambling such as money laundering, fraud and the involvement of organized crime in the industry. Laws have been put in place to protect people from such problems.

The UIGEA is on its way to being implemented, but it is not the first law to ban online gambling in the United States. Hanaway points to the Wire Act and other laws that already establish that online gambling is illegal.

In light of the existing regulatory framework, the Department of Justice has been prosecuting online gambling companies, and Hanaway gives several examples of cases, including the case against NETeller for providing U.S. residents with a way to transfer funds to online gambling sites.

Rep. Bobby Scott (D-Va.) asked Hanaway during the question period if the current laws make it illegal to gamble online.

Her response was that it isn't illegal for a person to gamble online. What is illegal is to provide online gambling services to American residents. Foreign companies must use cables and wires located within the U.S. to offer their services to Americans, thereby leaving themselves open to prosecution by the federal government.

Abend attended the hearing to talk about the UIGEA and where it is in the enactment process. She updated the panel on the proposed rules that are currently up for comments until Dec. 12.

She said they have much work to do, but they understand the task ahead and what they'll need to do reach the objective of implementing the UIGEA.

Goodlatte spoke in the first panel after Berkley gave her viewpoint on the online gambling issue. As a promoter of the UIGEA, he took the opposite stance from Berkley and provided testimony against online gambling.

Talking about the problems created by gambling, Goodlatte said, "The anonymity of the Internet makes it much easier for minors to gamble online. Furthermore, online gambling can result in addiction, bankruptcy, divorce, crime and moral decline just as with traditional forms of gambling, the costs of which must ultimately be borne by society."

His stance was later echoed by Panel II member Thomas E. McClusky, Family Research Council vice president of government affairs.

He said that the bills introduced by Rep. Barney Frank and Rep. Robert Wexler that will legalize and regulate online gambling and provide an exemption for poker in the current bill will open up a Pandora's box of consequences.

"Adoption of these bills will lead to anonymous corruption, the dissolution of families and the disruption of today's delicate negotiations between the United States and other countries, notably the United Kingdom and Antigua."

McClusky too pointed to the social ills created by gambling and cited statistics from a National Gambling Impact Study Commission report from 1999.

"The report estimated that lifetime costs of gambling (including bankruptcy, arrests, imprisonment, legal fees for divorce, etc.) amounted to $10,550 per pathological gambler and $5,130 per problem gambler."

Those costs in turn affect the gamblers' families, McClusky said, reiterating Goodlatte's point that gambling isn't a victimless crime.

McClusky, like Goodlatte, gave examples of people whose lives were adversely affected by online gambling.

Annie Duke, representing the Poker Players Alliance and speaking as a concerned citizen, provided the opposite side of the equation for the Judiciary Committee hearing.

During her statement she pointed out that online gambling is a matter of personal freedom, and as such shouldn't be banned by the government.

Annie Duke
Annie Duke pursuing her profession.

"Having the right to continue to pursue my profession, wherever I might choose to pursue it, is very important to me from both a financial standpoint, but also from the broader perspective of freedom, personal responsibility and civil liberties," she said.

She also stated that although there are many who believe that gambling is immoral or unproductive, even though she doesn't share those beliefs, she does respect them.

"What is harder to respect is the idea that just because someone disapproves of a particular activity, that they should seek to have the government prevent others from engaging in it," she said.

She compared online gambling and its downfalls to online shopping or day trading or even drinking water, which can all become addictive, harmful behaviors as well. The government will have to ban a lot more activities if they want to continue to protect people from themselves, she argued.

Duke also reiterated the point that regulation will provide more effective protection to keep minors from gambling than a ban does. As well, she addressed the issue of distinguishing between skill games and games of pure luck in the context of the UIGEA.

She was able to demonstrate the skill factor in poker when one of the panel members asked her an odds question, and she told him the percentage of times a person could make an inside straight flush on a hand of poker.

It spoke to Duke's own skill that she knows those odds and can use them in her favor to come out a winning player in the game, unlike in other casino games where outcomes hinge entirely on luck.

The final witness for the panel was Michael Colopy of Aristotle Inc., a company that provides online verification systems for businesses.

He talked about his company's systems and how they are used already by various businesses online to verify the identity of consumers, in order to ensure they're legally entitled to purchase what they want or visit the sites they're trying to access.

Colopy's argument was that there are efficient, effective and reliable systems out there already that will help keep minors from gambling online and provide a way for problem gamblers to exclude themselves from online gambling.

Related Article: House Committee to Talk Net Gambling

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