[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]



 
                 INTERNET GAMING: IS THERE A SAFE BET?

=======================================================================



                                HEARING

                               BEFORE THE

           SUBCOMMITTEE ON COMMERCE, MANUFACTURING, AND TRADE

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE

                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                            OCTOBER 25, 2011

                               __________

                           Serial No. 112-100


      Printed for the use of the Committee on Energy and Commerce

                        energycommerce.house.gov




                  U.S. GOVERNMENT PRINTING OFFICE
74-869                    WASHINGTON : 2013
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing 
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC 
area (202) 512-1800 Fax: (202) 512-2104  Mail: Stop IDCC, Washington, DC 
20402-0001



                    COMMITTEE ON ENERGY AND COMMERCE

                          FRED UPTON, Michigan
                                 Chairman

JOE BARTON, Texas                    HENRY A. WAXMAN, California
  Chairman Emeritus                    Ranking Member
CLIFF STEARNS, Florida               JOHN D. DINGELL, Michigan
ED WHITFIELD, Kentucky                 Chairman Emeritus
JOHN SHIMKUS, Illinois               EDWARD J. MARKEY, Massachusetts
JOSEPH R. PITTS, Pennsylvania        EDOLPHUS TOWNS, New York
MARY BONO MACK, California           FRANK PALLONE, Jr., New Jersey
GREG WALDEN, Oregon                  BOBBY L. RUSH, Illinois
LEE TERRY, Nebraska                  ANNA G. ESHOO, California
MIKE ROGERS, Michigan                ELIOT L. ENGEL, New York
SUE WILKINS MYRICK, North Carolina   GENE GREEN, Texas
  Vice Chairman                      DIANA DeGETTE, Colorado
JOHN SULLIVAN, Oklahoma              LOIS CAPPS, California
TIM MURPHY, Pennsylvania             MICHAEL F. DOYLE, Pennsylvania
MICHAEL C. BURGESS, Texas            JANICE D. SCHAKOWSKY, Illinois
MARSHA BLACKBURN, Tennessee          CHARLES A. GONZALEZ, Texas
BRIAN P. BILBRAY, California         JAY INSLEE, Washington
CHARLES F. BASS, New Hampshire       TAMMY BALDWIN, Wisconsin
PHIL GINGREY, Georgia                MIKE ROSS, Arkansas
STEVE SCALISE, Louisiana             JIM MATHESON, Utah
ROBERT E. LATTA, Ohio                G.K. BUTTERFIELD, North Carolina
CATHY McMORRIS RODGERS, Washington   JOHN BARROW, Georgia
GREGG HARPER, Mississippi            DORIS O. MATSUI, California
LEONARD LANCE, New Jersey            DONNA M. CHRISTENSEN, Virgin 
BILL CASSIDY, Louisiana              Islands
BRETT GUTHRIE, Kentucky              KATHY CASTOR, Florida
PETE OLSON, Texas
DAVID B. McKINLEY, West Virginia
CORY GARDNER, Colorado
MIKE POMPEO, Kansas
ADAM KINZINGER, Illinois
H. MORGAN GRIFFITH, Virginia

                                 _____


           Subcommittee on Commerce, Manufacturing, and Trade

                       MARY BONO MACK, California
                                 Chairman
MARSHA BLACKBURN, Tennessee          G.K. BUTTERFIELD, North Carolina
  Vice Chairman                        Ranking Member
CLIFF STEARNS, Florida               CHARLES A. GONZALEZ, Texas
CHARLES F. BASS, New Hampshire       JIM MATHESON, Utah
GREGG HARPER, Mississippi            JOHN D. DINGELL, Michigan
LEONARD LANCE, New Jersey            EDOLPHUS TOWNS, New York
BILL CASSIDY, Louisiana              BOBBY L. RUSH, Illinois
BRETT GUTHRIE, Kentucky              JANICE D. SCHAKOWSKY, Illinois
PETE OLSON, Texas                    MIKE ROSS, Arkansas
DAVID B. McKINLEY, West Virginia     HENRY A. WAXMAN, California (ex 
MIKE POMPEO, Kansas                      officio)
ADAM KINZINGER, Illinois
JOE BARTON, Texas
FRED UPTON, Michigan (ex officio)

                                  (ii)


                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Mary Bono Mack, a Representative in Congress from the State 
  of California, opening statement...............................     1
    Prepared statement...........................................     4
Hon. G.K. Butterfield, a Representative in Congress from the 
  State of North Carolina, opening statement.....................     7
Hon. Joe Barton, a Representative in Congress from the State of 
  Texas, opening statement.......................................     8
Hon. Brett Guthrie, a Representative in Congress from the 
  Commonwealth of Kentucky, prepared statement...................     9

                               Witnesses

Alfonse D'Amato, Chairman, Poker Players Alliance................    11
    Prepared statement...........................................    13
Parry Aftab, Advisory Board Member, Fair Play USA................    22
    Prepared statement...........................................    24
Ernest Stevens, Jr., Chairman, National Indian Gaming Association    35
    Prepared statement...........................................    37
Keith S. Whyte, Executive Director, National Council on Problem 
  Gambling.......................................................    60
    Prepared statement...........................................    63
Kurt Eggert, Professor of Law, Chapman University of School of 
  Law............................................................    67
    Prepared statement...........................................    69
Daniel Romer, Director, Adolescent Communication Institute, 
  Annenberg Public Policy Center, University of Pennsylvania.....   100
    Prepared statement...........................................   102

                           Submitted Material

Letter, dated October 24, 2011, from Frank J. Fahrenkopf, Jr., 
  President and CEO, American Gaming Association, to Mrs. Bono 
  Mack, submitted by Mr. Barton..................................   115
Statement, dated October 25, 2011, of Frank J. Fahrenkopf, Jr., 
  President and CEO, American Gaming Association, submitted by 
  Mr. Barton.....................................................   117
Statement, dated October 25, 2011, of Louis Freeh, Advisory Board 
  Member, Fair Play USA..........................................   128


                 INTERNET GAMING: IS THERE A SAFE BET?

                              ----------                              


                       TUESDAY, OCTOBER 25, 2011

                  House of Representatives,
Subcommittee on Commerce, Manufacturing, and Trade,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10:38 a.m., in 
room 2123 of the Rayburn House Office Building, Hon. Mary Bono 
Mack (chairman of the subcommittee) presiding.
    Members present: Representatives Bono Mack, Blackburn, 
Stearns, Bass, Harper, Lance, Cassidy, Guthrie, Olson, 
Kinzinger, Barton, Butterfield, Gonzalez, Towns, Schakowsky, 
and Inslee.
    Staff present: Kirby Howard, Legislative Clerk; Brian 
McCullough, Senior Professional Staff Member, Commerce, 
Manufacturing, and Trade; Jeff Mortier, Professional Staff 
Member; Gib Mullan, Chief Counsel, Commerce, Manufacturing, and 
Trade; Andrew Powaleny, Press Assistant; Krista Rosenthall, 
Counsel to Chairman Emeritus; Lyn Walker, Coordinator, Admin/
Human Resources; Shannon Weinberg, Counsel, Commerce, 
Manufacturing, and Trade; Michelle Ash, Democratic Chief 
Counsel; Felipe Mendoza, Democratic Counsel; and Will Wallace, 
Democratic Policy Analyst.
    Mrs. Bono Mack. Come to order. Good morning. Today we turn 
our attention to a growing controversy in America--should 
Internet gambling be legalized, and if so, what role should the 
Federal Government play? We have divergent opinions represented 
on our panel this morning, and if I were a betting person, I 
would wager that we are going to have a very interesting 
hearing.
    And the chair now recognizes herself for an opening 
statement.

 OPENING STATEMENT OF HON. MARY BONO MACK, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    In many ways, the debate over legalizing Internet gambling 
is a lot like Texas Hold'em poker. Three cards are dealt face-
up. Is the further expansion of gambling in the United States a 
good bet? Can online gambling be regulated effectively? And 
what role should the Federal Government play to protect 
American consumers from ``sharks?'' This is the ``flop'' we 
have been dealt for today's hearing.
    Then there is the ``turn'' card. With billions of dollars 
sitting on the table, can Congress afford not to get involved?
    And finally, the ``river'' card--what impact would 
legalized Internet gambling have on American consumers and the 
U.S. economy? Clearly, the stakes are high, and a ``showdown'' 
is likely on Capitol Hill in the months ahead. As chairman of 
the House Subcommittee on Commerce, Manufacturing and Trade, 
this is an issue which I will be following very closely to make 
certain Americans are dealt a fair hand, regardless of the 
outcome.
    The purpose of our hearing is to simply take a close look 
at the ``face-up'' cards--the things we know with some 
certainty after 80 years of legalized, regulated gambling in 
the United States. Today, we will hear from both sides of this 
important yet very contentious issue.
    One thing we do know is this: the vast majority of 
Americans have gambled at some point in their lives. According 
to the UCLA Gambling Studies Program, approximately 85 percent 
of U.S. adults have gambled at least once--60 percent in the 
past year. What is more, some form of gambling is legalized in 
48 States plus the District of Columbia. The only 2 States 
without legalized gambling are Hawaii and Utah.
    Gaming policy and regulation is generally handled by the 
States, although the Federal Government has been involved in 
shaping the boundaries of what is not permissible. But the 
legal status of online gaming is a lot more complicated. In 
1961, Congress passed the Interstate Wire Act, more than 20 
years before anyone had ever heard of a thing called the 
Internet. Yet according to the Justice Department, online 
gambling is illegal under the Interstate Wire Act because it 
prohibits the use of wire communications for the interstate 
facilitation or transfer of wagers.
    In 1988, gambling in 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.
    And speaking from my own experience--with seven casinos 
located in my Congressional District--tribal gaming has been a 
huge plus. It has created thousands of jobs during difficult 
economic times, and the tribes have been great neighbors, too, 
contributing regularly to charities and civic events.
    Unfortunately, illegal gambling has been growing in 
popularity as well. So in 2006, to combat the proliferation of 
illegal Internet gambling, Congress adopted the Unlawful 
Internet Gambling Enforcement Act. 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 Web sites 
were shut down and 11 people were indicted for bank fraud and 
money laundering, raising new questions about the law. 
Proponents argue that the statute has not reduced Internet 
gambling; it has simply driven it underground and offshore, 
where sharks can operate with impunity. Legalizing Internet 
gambling, they argue, would actually allow the government to 
provide greater protection for consumers.
    Proponents also argue that if Internet gambling is 
legalized, the U.S. would realize significant tax revenues from 
online bets that are currently directed to non-U.S.-based 
gaming companies. It is estimated that Americans wagered $16 
billion last year on Internet poker sites alone. 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.
    So, as policy makers, the issue of legalizing Internet 
gambling certainly raises a lot of questions for us to 
consider: How effective is current enforcement of online 
intrastate gaming? What, if any, forms of interstate gaming 
online gaming should Congress consider allowing? What consumer 
protections exist for online gaming today and do they need to 
be strengthened? And how would any easing of legal restrictions 
on Internet gaming affect American consumers and other 
stakeholders? Hopefully, after today's hearing, we will have a 
better idea of whether we need to hold 'em or to fold 'em.
    [The prepared statement of Mrs. Bono Mack follows:]
    [GRAPHIC] [TIFF OMITTED] 74869.001
    
    [GRAPHIC] [TIFF OMITTED] 74869.002
    
    [GRAPHIC] [TIFF OMITTED] 74869.003
    
    Mrs. Bono Mack. And so with that, I am happy to recognize 
the gentleman from North Carolina, Mr. Butterfield, the ranking 
member of the subcommittee, for 5 minutes for his opening 
statement.

OPENING STATEMENT OF HON. G.K. BUTTERFIELD, A REPRESENTATIVE IN 
           CONGRESS FROM THE STATE OF NORTH CAROLINA

    Mr. Butterfield. Let me thank the chairman for convening 
this important hearing today. This is a topic that I have heard 
so much discussion about since I have been in Congress, and I 
am just looking forward to the six witnesses that we have in 
front of us. And hopefully, you can bring us a perspective that 
we have not heard before or perhaps you may be able to 
reinforce some of the views that we have heard.
    And so as your ranking member, Madam Chairman, I look 
forward to working with you on this issue.
    Congress is no stranger to this issue, and we have grappled 
with how to best address it for some time now. My good friend, 
Congresswoman Shelley Berkley, talks about this very often both 
to us privately and in our caucus meetings, and so we want to 
keep her involved and try to bring some closure to this issue.
    Part of the reason why I think is because Members of 
Congress, just like all of our constituents across the country, 
have very personal feelings about gambling. Certainly in my 
community there are divergent views and all across the country 
it is the same. Some are strongly opposed to all forms of 
gambling while others see it merely as entertainment. The 
debate shouldn't be over whether gambling is moral or not 
moral. Instead, we should acknowledge that Internet gaming is 
happening now all over the world, including here in our country 
where online gambling has been treated as illegal by the 
Justice Department.
    As a result, the 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, and 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 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. We need a robust debate on 
whether Internet gaming should be legalized in the U.S., and if 
so, we will need an oversight structure put in place to ensure 
consumers the strongest possible safeguards. Games like poker 
and bingo are as ubiquitous in the U.S. as baseball and 
football and are played by young and old alike. But technology 
has indeed 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 U.S. 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.
    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 the 
game. A mouse click and a credit card number are all that he or 
she needs to play but with no human interaction with the house. 
There is no one and no way to cut someone off if they have 
played too much. Before long, that same gambler has maxed out 
his or her credit cards and faces the dreaded bankruptcy or 
worse, he turns to criminal activity to finance his habit.
    While my example may be extreme it is very possible and it 
happens daily at conventional gaming houses. People ultimately 
must have personal responsibility to know when enough is 
enough, but when the line blurs, safeguards must be in place. 
That is why any legislation that permits Internet gaming in the 
U.S. must, must have protections in place to mitigate 
compulsive gambling. Consumer protections must also be in place 
to ensure that the games are honest and fair and truly 
randomized.
    Economic boom that could result from legalized Internet 
gaming is perhaps the most compelling reason to give it serious 
consideration. Hundreds of millions of dollars in new revenues 
could be realized by struggling States. Tens of thousands of 
jobs could be created all across the country to directly 
support the new industry. Considering the fragile and 
struggling state of our economy, I strongly believe that all 
potential remedies should be considered to return us to greater 
prosperity.
    Thank you, Chairman. I yield back.
    Mrs. Bono Mack. I thank the gentleman.
    And in accordance with committee rules, Chairman Upton has 
yielded his 5 minutes to me, and I would now recognize the 
gentleman from Texas, Mr. Barton, chairman emeritus of the full 
committee, for 3 minutes.

   OPENING STATEMENT OF HON. JOE BARTON, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF TEXAS

    Mr. Barton. Thank you, Madam Chairwoman. It is good to have 
Senator D'Amato on the panel, and I see former Congressman John 
Porter out in the audience. It is good to have you here.
    Poker is the all-American game. President Richard Nixon 
financed his first congressional campaign partially with poker 
winnings from World War II. Our current president, President 
Obama, is reputed to be a very good poker player. I learned to 
play poker, believe it or not, in the Boy Scouts. So if you 
learn something in the Boy Scouts, it has got to be a good 
thing, right? Unfortunately, because there is some chance to 
it, while it is a game of skill, there are those that think we 
should not allow poker to be played for money on the Internet.
    Consequently, we passed the bill or law several years ago 
that is unenforceable, UIGEA. It is a bad law regardless of 
which side of the debate that you are on. I have introduced a 
bill as the chief sponsor to remedy this, and two of my 
cosponsors are Barney Frank and Ron Paul. I will postulate that 
if you have got a bill that Barney Frank, Joe Barton, and Ron 
Paul are all for, who can be against it? I mean we have covered 
the spectrum.
    You can't see this in the audience but this is a photocopy 
of a registration from yesterday. A person who is in the 
audience today signed up on bodog.com to play poker for money. 
He deposited $50, he got a $5 bonus for making the deposit, and 
he got a solicitation that if he could be more people to sign 
up, too, he could get an additional, I believe, $200 in poker 
chips. People are playing poker on the Internet in the United 
States for money today. We think as many as 8 million players 
per month play poker for money online in the United States per 
month.
    Having said that, it is not regulated, and so these sites 
are offshore, overseas, and consequently outside the ability 
for us to tax the winnings, to regulate, to make sure that it 
is a fair game and everybody has an equal chance to win based 
on their skill. The legislation that I have introduced, H.R. 
2366, is not perfect but it would remedy most of the major 
problems that we face today.
    I want to thank Chairwoman Bono Mack for having this 
hearing. I want to thank the ranking member, Mr. Butterfield, 
for what he said in his opening statement. I think we should 
have a robust debate. Perhaps there should even be an 
additional hearing. But at some point in time in this Congress 
I hope we can move 2366 or something similar to it, Madam 
Chairwoman, to let everybody in America who wishes to play 
poker in States that allow it to do so. And the bill that I 
have introduced, it is a State option. If the governor of a 
State says there shall be no Internet poker played by residents 
of that State, it does not happen. So we are not preempting the 
States, but in the States that thinks it is OK, we set up a 
regulatory scheme and a taxation scheme so that we have a fair 
game and everybody has an equal chance. And future President 
Nixons and Obamas can play on the Internet for money and use 
those earnings to join us.
    With that, Madam Chairwoman Mack, I yield back the balance 
of my time.
    Mrs. Bono Mack. I thank you, Mr. Barton.
    And the chair now recognizes Mr. Guthrie of Kentucky for 2 
minutes.

 OPENING STATEMENT OF HON. BRETT GUTHRIE, A REPRESENTATIVE IN 
           CONGRESS FROM THE COMMONWEALTH OF KENTUCKY

    Mr. Guthrie. Thank you, Madam Chairwoman, for yielding.
    And I went to college in New York State in the 1980s so I 
appreciate your service Senator D'Amato. I remember reading at 
the New York Media when I was in college and all the great work 
you did for that State. I appreciate it.
    But I am from Kentucky, and as all you know, in Kentucky we 
are famous for our horses. We have two of the greatest 
racetracks in the world--at Churchill Downs in Louisville and 
at Keeneland in Lexington, and we breed the world's best horses 
that run on them. And no matter how you cut it, Internet gaming 
will affect the horse-racing business. Expanded online gaming 
will result in less gaming dollars being spent at tracks. Fewer 
dollars in the racing business doesn't just affect the tracks, 
breeders, jockeys, and trainers; it also affects thousands of 
other jobs in these communities that depend on the horse 
industry.
    Because of this concern, the effect on the horse racing 
must be considered in the expansion of online gaming. And I 
look forward to hearing from the witnesses and my colleagues on 
the underlying issue of online gaming legislation. However, as 
the chairman of the Congressional Horse Caucus, I must remind 
my colleagues that we cannot overlook the impact that gaming 
legislation would have on a $50 billion equine industry.
    While I am biased towards Kentucky's thoroughbreds and our 
signature race, which is truly the greatest 2 minutes in 
sports, this is not a one-State issue. The horse-racing 
industry supports over a million jobs nationwide. We cannot 
ignore this important industry as we consider changes to online 
gaming.
    Thank you, Madam Chairwoman, and I yield back.
    Mrs. Bono Mack. I thank the gentleman.
    And now we turn our attention to our panel. We have one 
panel of witnesses joining us today. Each of our witnesses has 
prepared an opening statement that will be placed into the 
record. Each of you will have 5 minutes to summarize that 
statement in your remarks.
    For introduction, one witness is very well known to many of 
us, former United States Senator from New York, the Honorable 
Alfonse D'Amato, who now serves as chairman of the Poker 
Players Alliance. We all welcome you. And then we have Parry 
Aftab, Advisory Board Member of Fair Play USA. Also testifying 
we have Keith Whyte, Executive Director of the National Council 
on Problem Gambling. We have Kurt Eggert, Professor of Law, 
from Chapman University School of Law. We have Ernest Stevens, 
Chairman of the National Indian Gaming Association. And our 
final witness is Dan Romer, Director of the Adolescent 
Communication Institute at the Annenberg Public Policy Center.
    Good morning. Thank you all very much for coming. Again, 
you will be recognized for 5 minutes. To keep track of the 
time, there are lights and timers in front of you. When the 
timer turns yellow, you will have 1 minute left. And please 
remember to turn your microphone on and bring it close to your 
mouth. Although we might hear you, the TV audience might not at 
home, so it is very important you remember to do that.
    So Senator D'Amato, we are very pleased to welcome you and 
recognize you for 5 minutes.

    STATEMENTS OF ALFONSE D'AMATO, CHAIRMAN, POKER PLAYERS 
 ALLIANCE; PARRY AFTAB, ADVISORY BOARD MEMBER, FAIR PLAY USA; 
     ERNEST STEVENS, JR., CHAIRMAN, NATIONAL INDIAN GAMING 
   ASSOCIATION; KEITH S. WHYTE, EXECUTIVE DIRECTOR, NATIONAL 
  COUNCIL ON PROBLEM GAMBLING; KURT EGGERT, PROFESSOR OF LAW, 
 CHAPMAN UNIVERSITY SCHOOL OF LAW; AND DANIEL ROMER, DIRECTOR, 
  ADOLESCENT COMMUNICATION INSTITUTE, ANNENBERG PUBLIC POLICY 
               CENTER, UNIVERSITY OF PENNSYLVANIA

                  STATEMENT OF ALFONSE D'AMATO

    Mr. D'Amato. Well, Madam Chairman, thank you so very much. 
And let me wish you a belated happy birthday. I understand 
yesterday you celebrated your birthday. And I would like to 
thank you again for giving us an opportunity to testify on an 
issue which I care very much about. Indeed, in my capacity as 
chairman of the Poker Players Alliance, I have been privileged 
to represent 1,200,000 Americans who have joined our 
organization and who love this great American pastime. They 
love playing poker in their homes, casinos, card rooms, 
charitable games, and yes, on the Internet. I want to 
congratulate the committee for holding this hearing, an 
opportunity to get a better understanding of what the status 
quo is as it relates to poker and the Internet.
    And let me say status quo is badly broken, and it benefits 
no one. Although it may have been well intended, the 
legislation that passed 4 years ago, the fact of the matter is 
that it has created many more problems than it has solved. It 
has endangered young people. It has endangered problem 
gamblers. It has endangered those who want to participate in an 
honest, legitimate game. And it is my fervent hope that this 
committee will respond by taking up legislation similar to the 
bills introduced by Congressman Barton and Congressman 
Campbell. And at this point, let me take a moment to 
congratulate the chairman emeritus for his leadership on this 
issue. Congressman Barton, you have stolen my speech. You have 
said it all and you said it much more eloquently and much more 
succinctly than any former United States Senator could do 
because we never had time limitations. And so this 5 minutes is 
rather difficult for me to deal with. But let me just touch on 
one or two points.
    Internet poker, as the Congressman has just said, has not 
gone away. And it is hard to envision a scenario where it will. 
What is taking place now is it takes place under the radar with 
no regulations, with no taxation, with unscrupulous groups who 
can and do operate. They operate in the public and the 
government can do little if anything and certainly doesn't 
safeguard the general public. As the Congressman indicated, 
just yesterday a young man by the name of John Pappas with his 
Federal credit union debit card--very interesting, I guess it 
is the right Pappas debit card--went and opening an account at 
bodog.com. Now, he could have been anybody. He could have 
opening up an account, been underage, been under the age of 21 
because they give these cards to just about anybody. Once I got 
one for my dog believe it or not. And so 16-, 17-, 18-year-old 
can certainly do that. So where is the protection for young 
people?
    And let me tell you, we have people on this panel today who 
speak up for young people. Parry has done a fantastic job, 
Parry Aftab. One of the things that the Congressman's 
legislation provides for is verification and the type of 
verification that will keep youngsters who are under 21 from 
playing. That is the kind of thing that you need to do. One of 
the things that the Congressman's legislation will see to it 
that you don't have unscrupulous operators who inveigle the 
poker player's money and use it for themselves. And we have 
seen that situation with Full Tilt, horrible situation where 
people took poker players' money that should have been placed 
in a trust account and distribute it as dividends to the people 
who ran that corporation, terrible betrayal of people.
    Let me say there are those Internet sites that operate 
where they do have a trust account. Poker Stars, for example, 
legislation required that they have a trust account for those 
dollars, and that is what Congressman Barton's legislation does 
so that you can't have this inveigling, so you have proper 
supervision. And again, if you want to protect young people--
and I understand the genesis of this came from a genuine 
concern that so many young people were flocking to the poker 
rooms, the poker sites. The TV was carrying it. I think the 
third most watched game on television, sports, was poker, 
online poker on television. And so you had kids getting 
involved. Well, how do you keep them from doing it? By passing 
legislation that will require verifiable identification. That 
is how you do it.
    How do you keep the deadbeat dad from becoming a problem 
gambling? Well, I will tell you how. You pass legislation 
similar to that that Congressman Barton has put forth and you 
stop it because States can then post the deadbeat dads that 
will not permit them to go on the Internet and gamble.
    And so for those reasons and lots of others that time will 
not permit--I don't want to test your patience--let me say that 
I really hope that we have an opportunity to do something to 
permit a great game, a game which requires skill to be played 
in people's homes. It shouldn't be that they can just go to 
casinos and play. Lots of people don't have the ability to do 
that. It shouldn't be that they have to go to someone else's 
home or have people being invited to their home. They may not 
be able to get together that game. Great pastime. This 
legislation that has created and clouded the UIGEA legislation, 
the situation may have been well intended; it has missed its 
mark.
    I thank the chair and the committee for giving me this 
opportunity and I look forward to any questions that you might 
have. Thank you.
    [The prepared statement of Mr. D'Amato follows:]
    [GRAPHIC] [TIFF OMITTED] 74869.004
    
    [GRAPHIC] [TIFF OMITTED] 74869.005
    
    [GRAPHIC] [TIFF OMITTED] 74869.006
    
    [GRAPHIC] [TIFF OMITTED] 74869.007
    
    [GRAPHIC] [TIFF OMITTED] 74869.008
    
    [GRAPHIC] [TIFF OMITTED] 74869.009
    
    [GRAPHIC] [TIFF OMITTED] 74869.010
    
    [GRAPHIC] [TIFF OMITTED] 74869.011
    
    [GRAPHIC] [TIFF OMITTED] 74869.012
    
    Mrs. Bono Mack. Thank you, Senator.
    And now I recognize Ms. Aftab for 5 minutes.

                    STATEMENT OF PARRY AFTAB

    Ms. Aftab. Good morning. Thank you very much, Chairman Bono 
Mack and Ranking Member Butterfield and other members of the 
subcommittee, for enabling me to speak today.
    I am representing Fair Play USA as a member of their 
Advisory Board. I am joined in that Advisory Board by Louis 
Freeh, who was director of the FBI; and the first secretary of 
Homeland Security, Governor Ridge, who are unable to testify 
today.
    As we look at these issues, we need to recognize that they 
have a lot in common with the issues that this subcommittee has 
been working on--privacy, security, authentication, protecting 
our consumers. It is very much a matter of protecting our kids 
and protecting our families as well. So to the extent any of 
you know my work, I have been probably best known for 
protecting kids and families online as the unpaid executive 
director of Wired Safety. We are the oldest and largest 
Internet safety group in the world. And we handle all issues. 
And in that capacity I receive phone calls and emails from 
people who have gambled online, won, and not retrieved their 
winnings; people who are confused about whether or not it is 
legal for them to play poker online.
    I am a lawyer and I have to parse the law to really 
understand it. If you walk up and down the street, a lot of 
people don't. They don't understand the difference between 
online poker fun games that are just part of computer games and 
those where there is wagering that takes place. A lot of the 
other countries around the world have looked at this and found 
the solution for the problems that we have identified with 
online gambling: identity theft, money laundering, underage 
gambling, problem gambling, fraud, identity theft, privacy/
security breaches. All of these issues can be dealt with the 
ironic position of legalizing certain aspects of online 
gambling but regulating it and being able to enforce it.
    The benefits of this allow us to help people who are 
defrauded, put in the safeguards that have been put in brick-
and-mortar gambling situations. As we look at this, it is not a 
matter of whether gambling is moral or not. I think that issue 
was dealt with many years ago when State lotteries were put in 
place, when we looked at tribal gambling and we saw how many 
schools could be funded with this. But we can put safeguards in 
effect that are not in effect now. What is happening now isn't 
working. There are millions of people gambling billions of 
dollars online without any protection at all. And because of 
the laws that we have, it is really a hear-no-evil, see-no-
evil, speak-no-evil situation. And these people find themselves 
with no place to go but calling my cell phone at three o'clock 
in the morning.
    So I have a group of teens, teen angels and some of the 
representatives on this subcommittee have teen angels in their 
districts and they are familiar with them, and they knew that I 
was testifying here today. And they are teen Internet safety 
experts. So they said, well, it is really easy for us to find 
these online poker sites in particular, and they went to 
several of them. And one they went to I have here; it is 
pokersites.com. It took them about 2-1/2 seconds to find that 
one. And it has top lists of places that are the best legal 
U.S. poker site 2011--betonline, bodog again. I knew they did 
this because they called and asked for my credit card number to 
be able to put it in place or for permission to use one of 
theirs, and one of the girls was 16 years old and had her own 
credit card that her parents had given her to be able to shop 
at the mall. It is easy. It is too easy and there is nothing we 
can do right now to keep underage gamblers out and protect 
problem gamblers with the kind of things that we can do.
    There are many things that we do to address online gambling 
as it relates to horse racing, although I don't know anybody 
who would rather go to the Internet than the beautiful State of 
Kentucky. But I think that there are so many things that can be 
done here if we treat this as another Internet safety, privacy, 
and security issue instead of something that is unique because 
it has a lot more in common with all of the other things we are 
looking at than there are differences. So I am happy to discuss 
any of those issues with anyone on the committee if you have 
questions and help in any way I can. Thank you.
    [The prepared statement of Ms. Aftab follows:]
    [GRAPHIC] [TIFF OMITTED] 74869.013
    
    [GRAPHIC] [TIFF OMITTED] 74869.014
    
    [GRAPHIC] [TIFF OMITTED] 74869.015
    
    [GRAPHIC] [TIFF OMITTED] 74869.016
    
    [GRAPHIC] [TIFF OMITTED] 74869.017
    
    [GRAPHIC] [TIFF OMITTED] 74869.018
    
    [GRAPHIC] [TIFF OMITTED] 74869.019
    
    [GRAPHIC] [TIFF OMITTED] 74869.020
    
    [GRAPHIC] [TIFF OMITTED] 74869.021
    
    [GRAPHIC] [TIFF OMITTED] 74869.022
    
    [GRAPHIC] [TIFF OMITTED] 74869.023
    
    Mrs. Bono Mack. Thank you very much.
    Mr. Stevens, you are recognized for 5 minutes.

                STATEMENT OF ERNEST STEVENS, JR.

    Mr. Stevens. Thank you. Good morning, Madam Chairman Bono 
Mack, Ranking Member Butterfield, and the members of the 
subcommittee. Thank you for this opportunity to provide the 
views of the National Indian Gaming Association on the 
important issue of Internet gaming.
    To place our views in context, let us start with the 
Constitution. Indian tribes are recognized in the United States 
Constitution as governments. Through treaties with the United 
States, tribal governments ceded hundreds of millions of acres 
of their homelands to help build this great Nation. In return, 
the U.S. promised to preserve remaining tribal lands and tribal 
sovereignty and provide for the health, education, and general 
welfare of Indian people.
    Unfortunately, Madam Chairman, the United States has broken 
many of these treaty promises. After suffering generations of 
failed Federal policies, tribes took matters into their own 
hands in the 1960s and '70s when they began to use gaming as a 
means to generate revenue to meet tribal needs. That is when 
President Johnson and Nixon adopted the policy supporting 
Indian self-determination. Indian gaming is Indian self-
determination.
    In 1988, after more than a decade of legal challenges by 
States and commercial gaming interests, Congress stepped in and 
established a Federal law through the Indian Gaming Regulatory 
Act, or IGRA. IGRA acknowledges Indian tribes as governments 
with the right to regulate and operate gaming. IGRA provides 
that tribal gaming revenues be used for tribal government 
purposes. It also provides that tribal revenues are not subject 
to taxation. And finally, the Act established a comprehensive 
regulatory system that involves 3 levels of government 
regulation: tribal, Federal, and State.
    Twenty-three years later, more than 200 Indian tribes have 
made IGRA work to begin to rebuild their once-forgotten 
communities. Gaming revenues are working to improve tribal 
education, health, elder care, and rebuilding tribal 
infrastructure, and so much more. For many tribes, Indian 
gaming is about jobs. In 2010, Madam Chair, Indian gaming 
created more than 600,000 American jobs. Without question, 
Indian gaming is putting people to work.
    These tribes realize that the games would not be possible 
without strong regulation. The tribal regulatory system employs 
more than 3,400 regulators, along with state-of-the-art 
technology to protect tribal revenues. In 2010, tribes spent 
375 million in regulation. The system is costly, it is 
comprehensive, and our record of experience shows that it is 
working. Because of Indian gaming, tribal governments are 
stronger, our people are healthier, and an entire generation of 
Indian youth have hope for a better future.
    As a result of these gains, all tribes are weary when 
Congress considers changing the playing field with regard to 
gambling. Legalized Internet gaming raises significant 
concerns. In 2010, tribal leaders conducted more than a dozen 
meetings to discuss the issues of Internet gaming. From these 
meetings, tribal leaders nationwide have unified behind a set 
of general principles regarding Federal Internet gaming 
legislation. These principles are listed in my written 
testimony, and I will try to summarize these for you, Madam 
Chairman.
    First, our principles require that Federal legislation 
provides similar authorizations and protections for tribal 
Internet gaming that IGRA provides for Indian gaming. To 
accomplish this goal, Internet gaming legislation must 
acknowledge that tribes are eligible to operate and regulate 
Internet gaming. If a Federal regulatory system is required, 
tribes ask that the NIGC be vested with the authority to 
regulate tribal Internet gaming. The National Indian Gaming 
Commission is the only Federal agency with experience in 
regulating any form of gaming in the United States.
    Indian Country's fourth principle states that the Federal 
legislation must acknowledge that customers may access tribal 
Internet sites as long as such gaming is not prohibited where 
the customer is located. And five, legislation must acknowledge 
that tribal Internet gaming revenues are not subject to 
taxation. Tribal gaming revenues are 100 percent taxed. These 
funds go to serve the public purpose of tribal and nearby 
communities. There is no room for Federal and State taxation.
    Our final principle is based on the fact that tribes have 
invested significant resources on the current law. Thus, 
legislation must fully protect tribal rights under the Indian 
Gaming Regulatory Act and existing tribal State gaming 
compacts.
    Internet gaming bills that have been introduced in the 
112th Congress violate many of these principles and we oppose 
their passage as currently written. In addition, there are many 
stakeholders that have yet to be heard from. For example, 
neither of the Departments of Justice, Interior, Commerce, 
Treasure, or the National Indian Gaming Commission have been 
heard on this issue.
    I know my time is short so I will briefly conclude, Madam 
Chairman. Indian gaming has proven to be the most effective 
tool to help Indian tribes address more than a century of 
Federal policy failures. Tribes are concerned that legalized 
Internet gaming will threaten these games. NIGA has dialogued 
with Congress on Internet gaming for close to 15 years, and on 
the most recent discussions, tribes have met and unified behind 
these set of core principles.
    We look forward to working with Congress and this 
subcommittee and to ensure that any legislation moving to 
legalize Internet gaming adheres to these principles that are 
developed and established by the tribes across the United 
States. And I thank you again for this opportunity to testify 
and I am here to answer any questions you may have, Madam 
Chairman.
    [The prepared statement of Mr. Stevens follows:]
    [GRAPHIC] [TIFF OMITTED] 74869.024
    
    [GRAPHIC] [TIFF OMITTED] 74869.025
    
    [GRAPHIC] [TIFF OMITTED] 74869.026
    
    [GRAPHIC] [TIFF OMITTED] 74869.027
    
    [GRAPHIC] [TIFF OMITTED] 74869.028
    
    [GRAPHIC] [TIFF OMITTED] 74869.029
    
    [GRAPHIC] [TIFF OMITTED] 74869.030
    
    [GRAPHIC] [TIFF OMITTED] 74869.031
    
    [GRAPHIC] [TIFF OMITTED] 74869.032
    
    [GRAPHIC] [TIFF OMITTED] 74869.033
    
    [GRAPHIC] [TIFF OMITTED] 74869.034
    
    [GRAPHIC] [TIFF OMITTED] 74869.035
    
    [GRAPHIC] [TIFF OMITTED] 74869.036
    
    [GRAPHIC] [TIFF OMITTED] 74869.037
    
    [GRAPHIC] [TIFF OMITTED] 74869.038
    
    [GRAPHIC] [TIFF OMITTED] 74869.039
    
    [GRAPHIC] [TIFF OMITTED] 74869.040
    
    [GRAPHIC] [TIFF OMITTED] 74869.041
    
    [GRAPHIC] [TIFF OMITTED] 74869.042
    
    [GRAPHIC] [TIFF OMITTED] 74869.043
    
    [GRAPHIC] [TIFF OMITTED] 74869.044
    
    [GRAPHIC] [TIFF OMITTED] 74869.045
    
    [GRAPHIC] [TIFF OMITTED] 74869.046
    
    Mrs. Bono Mack. Thank you, Mr. Stevens.
    And now I am happy to recognize Mr. Whyte for 5 minutes.

                  STATEMENT OF KEITH S. WHYTE

    Mr. Whyte. Thank you, Madam Chairman, Ranking Member 
Butterfield, and the committee members.
    My name is Keith Whyte. I am the executive director of the 
National Council on Problem Gambling. This is actual my 12-year 
anniversary with the National Council; I started 12 years ago 
this week. The NCPG is the national advocate for programs and 
services to assist problem gamblers and their families. We have 
a 39-year record of independence and objectivity in dealing 
with the often controversial issue of gaming. We are neutral on 
legalized gambling taking no position for or against it. Our 
main concern is advocacy for problem gamblers and their 
families.
    We believe strongly the most ethical and cost-effective 
response to problem gambling issues raised by the Internet is a 
comprehensive public health approach. Problem gambling, like 
other diseases of addiction, will likely never be eliminated, 
but we can and must make better efforts to protect consumers, 
prevent addiction, and mitigate the damage. It is inconceivable 
that Internet gambling be legalized without dedicating a 
portion of the new revenue to address the known social costs of 
gambling addiction.
    Madam Chairman said this in her opening statement: at least 
85 percent of adults have gambled once in the past year, 15 
percent at least once in the past week. You are looking at $95 
billion generated by casinos, tracks, and lotteries in legal 
gaming revenue alone, which obviously does not include most 
sports gambling and much of the Internet gambling today. $6 
billion per year comes from the special Federal withholding tax 
on legalized gambling winnings. Yet unlike the Federal excise 
taxes on tobacco and alcohol, not a single penny of this 
Federal tax revenue from legalized gambling is returned back to 
prevent and treat the social cost of gambling addiction.
    Between 68 million adults and 500,000 adolescents meet 
criteria for a gambling addiction in a given year. High-risk 
groups include members of racial and ethnical minority groups, 
young males, and veterans. The estimated social cost to 
families, business, and communities top $7 billion per year 
from addiction, bankruptcy, and crime. Problem gambling is 
therefore an important national public health concern. Gambling 
problems are significantly correlated with other substance use 
and abuse problems that we know are extremely costly to our 
State governments and to our families and individuals. Gambling 
problems are significantly correlated with higher rates of 
unemployment, bankruptcy, arrest, incarceration, and poor 
physical health. In addition, millions of spouses, children, 
families, and parents, employers are also negatively impacted 
by gambling addiction.
    It is not clear with the impact of the legalization of 
Internet gambling is going to be on problem gambling. The 
available research does consistently show that Internet 
gambling has the lowest participation rates of any form of 
gambling regardless of legality of gambling in that 
jurisdiction. The rates of participation do not seem to vary 
significantly whether it is legal or illegal. And as we have 
heard this morning already, there are massive numbers of 
Americans that are gambling online currently. Yet studies 
throughout the world also find relatively high rates of 
gambling problems among those who do gamble online. Of course, 
those who gamble online are also very likely to gamble in 
traditional forms to the extent that Internet gambling almost 
seems to be an adjunct to people who are already gambling in 
traditional forms.
    It is also possible that people who gamble online may be 
exacerbating their problems due to the unlimited access, the 
high speed of play, use of credit and non-cash instruments and 
perceived social anonymity, all of which are known risk factors 
for gambling addiction in the bricks-and-mortar world. Since 
online gamblers are known to have high rates of problems, it is 
important to require extensive responsible gaming policies.
    These programs provide an opportunity to create informed 
consumers, to provide informed consumers with a variety of 
information designed to encourage safe choices and discourage 
unsafe behavior. The technology exists to allow players to set 
limits on the amount of money gambled, the time they gamble, 
and the deposits they make. And I am pleased that Dr. Romer is 
going to speak a little bit on some of these consumer 
protection policies.
    Strong regulation is important but it cannot be effective 
alone. It must be accompanied by equally robust prevention, 
education, treatment, and research services. A portion of 
gambling revenue from legalized gambling, which we estimate 
would be not less than $50 million annually, must be set aside 
for such programs. This need is magnified by the disparity of 
services among the States as more than 1/3 of the States, 
including a number of States represented by members of this 
committee, provide absolutely no public funds whatsoever to 
prevent or treat gambling problems. This is neither cost 
effective nor an ethical means of responding to a known public 
health concern.
    An important and cost-free first step is to cut social 
costs by designating a lead Federal agency on problem gambling. 
Unbelievably--although we have heard a lot of testimony that 
gambling has been around and is certainly present in most 
States--there is no single Federal agency that coordinates 
efforts on this issue. I call your attention to H.R. 2334, the 
Comprehensive Problem Gambling Act, which has been introduced 
now for the fourth time in the House, which would designate the 
Substance Abuse and Mental Health Services Administration as 
the lead agency on problem gambling to address the public 
health concerns of this issue.
    I thank Representatives Barton, Schakowsky, Pitts, 
Whitfield, Campbell, Frank, and many others who are current or 
former sponsors of this legislation. And as Member Emeritus 
Barton has said, we certainly appreciate the broad sponsorship 
on our bill as well with you and Representative Frank.
    In closing, millions of Americans are experiencing gambling 
problems today like my friend Mike. He gambled away more than 
$250,000 in the past 3 years gambling on the Internet. He lost 
his job, his house, and his family. He sat in his grocery store 
parking lot here in Northern Virginia and contemplated suicide. 
Fortunately, he was able to get treatment, and today, he works 
to ensure that hope and help are available for problem gamblers 
and their families. Simply put, treatment works. It is an 
investment that pays for itself many times over.
    In closing, those who legalize, regulate, promote, and 
profit from gambling have an ethical and an economic imperative 
to minimize the social cost of gambling addiction. Thank you 
for the opportunity to testify.
    [The prepared statement of Mr. Whyte follows:]
    [GRAPHIC] [TIFF OMITTED] 74869.047
    
    [GRAPHIC] [TIFF OMITTED] 74869.048
    
    [GRAPHIC] [TIFF OMITTED] 74869.049
    
    [GRAPHIC] [TIFF OMITTED] 74869.050
    
    Mrs. Bono Mack. Thank you, Mr. Whyte.
    And Professor Eggert, welcome, and you are recognized for 5 
minutes.

                    STATEMENT OF KURT EGGERT

    Mr. Eggert. Good morning, Madam Chairwoman. Thank you, 
Madam Chairwoman and Ranking Member Butterfield and members. I 
appreciate your inviting me to talk about this important issue. 
You should know I come at this from a different angle than 
most. I come from a consumer protection angle where I have 
worked in most of my career. I was an advisor to the Federal 
Reserve Board on consumer financial issues on their Consumer 
Advisory Council, and you can imagine what fun that was during 
our recent years. And so when I think about gambling, the 
question I have is what consumer protection should be in place? 
And I am very happy to hear many of you talk about the 
importance of consumer protection in gambling because it is in 
fact a crucial issue.
    Gamblers used to be looked down on but now they are just 
consumers. It is just another industry. And so we should treat 
them as consumers as we would in other industries and think 
about what consumer protection is important in this industry. 
The purpose of consumer protection is to make consumers good 
shoppers, to give them the tools they need to make smart 
decisions when they purchase--when they go to a casino, when 
they gamble online, whatever they do, we want to make them good 
shoppers and protect them from shark practices. Because the 
engine of the consumer economy is if the consumers drive it and 
as long as they are given the information they need to make 
good decisions, then companies will have to compete based on 
quality of product and price, which is what makes our economy 
run.
    Now, in the gambling industry, they talk often about 
consumer protection is honesty, fairness, and making sure that 
the gambler gets paid. Those are all very important, but 
equally important is that the gambling industry provides 
accurate price disclosure to consumers who are gambling. Now, 
the price of the game in the gambling industry is a very 
interesting thing. If you play $100 slot machine, you put $100 
in, but on average you get money back. Otherwise, why do it? 
And so the real average price of a slot machine is the amount 
that the casino retains from the gambler's bets. So if you bet 
$1,000 and you get $970 back, then the price of that gambling 
was $30.
    For slot machines, casinos know exactly what the average 
hold percentage of the slot machine is. They can order a slot 
machine with a 5 percent hold percentage, a 10 percent hold 
percentage, 15 percent hold percentage, and they know that is 
on average what that machine will cost. The problem is that 
information is not disclosed to gamblers. They may be sitting 
at a 2-percent-hold-machine table or a 15-percent-hold-machine 
table and not know the difference. They could be sitting at one 
much more expensive or much cheaper and not be given that 
information.
    It is crucial that gamblers have this information so that 
they can make smart decisions and so that they can shop based 
on price. Any Internet gambling should include that. And so any 
legislation for Internet gambling should require disclosure of 
the hold percentage of every slot machine on the system.
    Now, for Internet poker, it is a different proposition 
because the price made by the borrower is based more on 
competition of other players than it is by any setting of the 
site. Here, the problem is that professional players have new 
tools to use against recreational gamblers that far exceed 
anything that they could do in a casino poker table. There are 
computer boosts that they have; there are computer bots that 
are getting increasingly effective. And so recreational 
gamblers may find themselves playing against professionals who 
far exceed their ability to play and the recreational gambler 
may have no idea what they are getting into. There is even 
computer tracking software using data mining that helps strong 
gamblers identify who the weak gamblers are so they can follow 
them to tables and play against them.
    This is a real problem for the Internet poker industry 
because the industry doesn't want all of its recreational 
gamblers' money to be drained out by professionals using bots 
or other tools. And so any legislation has to think about how 
to have a level playing field in Internet poker. And I have 
some ideas on that but my time is up so I will appreciate any 
questions later on. Thank you.
    [The prepared statement of Mr. Eggert follows:]
    [GRAPHIC] [TIFF OMITTED] 74869.051
    
    [GRAPHIC] [TIFF OMITTED] 74869.052
    
    [GRAPHIC] [TIFF OMITTED] 74869.053
    
    [GRAPHIC] [TIFF OMITTED] 74869.054
    
    [GRAPHIC] [TIFF OMITTED] 74869.055
    
    [GRAPHIC] [TIFF OMITTED] 74869.056
    
    [GRAPHIC] [TIFF OMITTED] 74869.057
    
    [GRAPHIC] [TIFF OMITTED] 74869.058
    
    [GRAPHIC] [TIFF OMITTED] 74869.059
    
    [GRAPHIC] [TIFF OMITTED] 74869.060
    
    [GRAPHIC] [TIFF OMITTED] 74869.061
    
    [GRAPHIC] [TIFF OMITTED] 74869.062
    
    [GRAPHIC] [TIFF OMITTED] 74869.063
    
    [GRAPHIC] [TIFF OMITTED] 74869.064
    
    [GRAPHIC] [TIFF OMITTED] 74869.065
    
    [GRAPHIC] [TIFF OMITTED] 74869.066
    
    [GRAPHIC] [TIFF OMITTED] 74869.067
    
    [GRAPHIC] [TIFF OMITTED] 74869.068
    
    [GRAPHIC] [TIFF OMITTED] 74869.069
    
    [GRAPHIC] [TIFF OMITTED] 74869.070
    
    [GRAPHIC] [TIFF OMITTED] 74869.071
    
    [GRAPHIC] [TIFF OMITTED] 74869.072
    
    [GRAPHIC] [TIFF OMITTED] 74869.073
    
    [GRAPHIC] [TIFF OMITTED] 74869.074
    
    [GRAPHIC] [TIFF OMITTED] 74869.075
    
    [GRAPHIC] [TIFF OMITTED] 74869.076
    
    [GRAPHIC] [TIFF OMITTED] 74869.077
    
    [GRAPHIC] [TIFF OMITTED] 74869.078
    
    [GRAPHIC] [TIFF OMITTED] 74869.079
    
    [GRAPHIC] [TIFF OMITTED] 74869.080
    
    [GRAPHIC] [TIFF OMITTED] 74869.081
    
    Mrs. Bono Mack. Thank you, Professor.
    And Dr. Romer, welcome. You are recognized for 5 minutes.

                   STATEMENT OF DANIEL ROMER

    Mr. Romer. Good morning, Madam Chair and Ranking Member 
Butterfield and other members of the committee. Thanks for 
inviting me this morning. It is a pleasure to be here and to 
hear all the different points of view about what I think is a 
very difficult issue for you to deal with.
    So I have been doing research on adolescent gambling since 
2002 at the Annenberg Public Policy Center and trying to 
understand both the prevalence and the harms that might occur 
to young people as a result of all kinds of gambling, not just 
on the Internet. And we have found with a lot of the research 
that we have been doing is that young people at a very early 
age are starting to gamble and this puts them at risk 
potentially for gambling dependence as they get older. So it is 
very important for the committee and for the Congress to think 
about what the impact will be on young people and their 
families as a result of any actions that are taken with regard 
to online gambling.
    One of the things we have done since 2002 is conduct a 
National Annenberg Survey of Youth, which studies young people 
ages 14 to 22, and what we have found from this survey is that 
most of the attempts to restrict online gambling haven't been 
particularly effective, as we have already heard. We found in 
our last survey in 2010 that more than 400,000 youth in the 
college-age range gamble once a week and 1.7 million or more 
once a month. So a lot of people are online as you have heard. 
The same is true of high school kids, very high rates, but not 
so much on a regular basis. So we think that age restrictions 
and laws that would encourage age-restricted responsible 
gambling--which is what we have seen in some of the other 
countries that have allowed online gambling--may be an approach 
that would work, but we are still very much in the early phases 
of understanding how online gambling will work, and I think we 
need research to understand it better.
    But if we have legislation that can provide some safeguards 
that could potentially restrict underage gamblers and also to 
the extent they do go online, make it harder for them to lose 
control while they are online would be excellent safeguards to 
include in any legislation.
    And I think the principle that I see when I look at what is 
going on in Europe is this idea of responsible gambling, and so 
one idea that I think is particularly helpful is that gambling 
operators should not receive disproportionate income from users 
who are unable to control their habit. And I think the bill 
that has been put forth by Mr. Barton and others might have a 
mechanism in it for the public to observe, monitor how funds 
are being made on Internet gambling so that you could see if 
certain gamblers are disproportionately contributing to 
profits.
    Now, some of the other ideas that we have heard about age 
restrictions and so forth I think are very important. The 
method of payment is really important. We still don't really 
know how well they work. We need research, and this country is 
actually way behind the U.K. and countries in Europe on 
understanding what happens when young people go online and 
gamble. We really need to find that out. We need monies 
dedicated to that question.
    I think we also need to consider and the law should 
consider money and time limits. I think Keith mentioned that he 
thinks this is a good idea. There should be a running clock 
online, there should be a win/loss total online so that the 
young person knows how much they are wagering. And this is true 
whether they are 18, 21, or 51. This is something I think is 
straightforward but we really don't know how many of these 
kinds of restrictions would work.
    We also need prevention messages online. It is much easier 
to put these online than it is, for example, at a casino. And 
we need to regulate or monitor the advertising that is done to 
attract people. We don't want the advertising to target young 
people disproportionately or addicted gamblers 
disproportionately.
    And so I think the challenge will be if you do legalize 
this will be to put in place both things that Keith talked 
about in terms of treatment but also a program of research to 
figure out are restrictions that you put in place working? What 
mix of restrictions work best? And what can we do in the future 
to maximize the chance that this kind of activity will not 
produce harms for young people and their families. And I have 
included a bunch of other ideas in my testimony.
    And I thank you for this opportunity to say these things. 
Thanks.
    [The prepared statement of Mr. Romer follows:]
    [GRAPHIC] [TIFF OMITTED] 74869.082
    
    [GRAPHIC] [TIFF OMITTED] 74869.083
    
    [GRAPHIC] [TIFF OMITTED] 74869.084
    
    [GRAPHIC] [TIFF OMITTED] 74869.085
    
    [GRAPHIC] [TIFF OMITTED] 74869.086
    
    [GRAPHIC] [TIFF OMITTED] 74869.087
    
    Mrs. Bono Mack. Thank you, Dr. Romer.
    And I am going to begin the questioning. And I thank all of 
the panel for your testimony and recognize myself for 5 minutes 
for questions.
    Mr. Whyte, I would like to begin with you. And Dr. Romer 
just spoke about this, too, but you state problem gamblers 
could exacerbate their problems by gambling online because of 
the use of credit and 24-hour availability. Would restrictions 
on those factors reduce the problem, for example, limited times 
and limits on credit? Do other countries offering Internet 
gambling currently have restrictions to limit the use of credit 
and availability, and if so, can you talk about their results?
    Mr. Whyte. Yes, I can. There is some evidence from Canada 
and Europe that there are supposed to be restrictions that have 
been put into place which generally include, as you say, limits 
on the use of certain types of payment processing, limits on 
the time and money spent gambling seem to be able to not 
necessarily intervene with pathological gamblers who will keep 
gambling despite any and all barriers put in their way. They 
seem rather to be better targeted at those people that are at 
risk for gambling problems or they are moderate problem 
gamblers. These restrictions, properly tailored, can be and 
have shown to be effective in some studies at stopping people 
from stepping over the edge and developing severe gambling 
problems.
    As Dan said, we are not entirely sure exactly what works 
best, but we believe that there is enough evidence to show that 
some of these interventions can be effective, and in fact some 
of them can be much more successfully implemented on the 
Internet with account-based wagering than in a traditional 
gambling forum.
    Mrs. Bono Mack. Thank you.
    Mr. Stevens, you suggest that any legislation authorizing 
online gambling should allow tribal governments' early entry 
with a period of exclusivity. Can you explain the rationale for 
your position?
    Mr. Stevens. Yes, I can. You know, I think it is important 
to understand and appreciate what tribes have been through and 
the history with the United States Government. You know, if I 
could speak just quickly about my grandmother. She is 101 years 
old and she lives in her own apartment independently in an 
apartment that is assisted but not a nursing home. And she 
lives in that apartment at 101 independently. She started out 
her life going to boarding schools and working and wearing a 
uniform and disciplined for being left-handed like my friend 
next to me and speaking her language, you know, and, you know, 
leaving her family. The family would go by the boarding school 
and not even be able to wave or visit or look at your children. 
And again as we approach a little bit emotional to bring it up 
because even though my grandma is doing fine and if you called 
her apartment on the reservation in Oneida, Wisconsin, you 
would probably find that she is not home. So she is involved in 
activities which she is a retired schoolteacher. She spent her 
whole life teaching the language and the culture that was 
attempted to be taken from her.
    And again, that is a success story, but really if you look 
at the way her life was, her grandfather who raised her was a 
Civil War veteran and he used to ride by the boarding school 
and throw candy but he would never look because the government 
said you couldn't even look at your kids. And again, that is a 
mild story about what our people have been through. Millions 
and millions of Indian folks when our first European contact, 
in spite of all those struggles and challenges that we have 
been through, we have been able to persevere and survive and 
fight back. And if anybody deserves to be at the front line in 
this industry, it is Native American people.
    Mrs. Bono Mack. OK.
    Mr. Stevens. And at the very least equal footing, Madam 
Chair.
    Mrs. Bono Mack. Well, why is it important that legislation 
permit tribes to operate Internet gaming without renegotiating 
their tribal state compacts? What is the concern?
    Mr. Stevens. Well, I believe that that is a new industry 
and I believe that they shouldn't undo or attempt to amend the 
current law in order to accomplish that.
    Mrs. Bono Mack. Can you please clarify your principle 
regarding the preservation of tribal regulatory authority? 
Should we actually legalize online gaming? Can you speak to 
that and how do you see that authority affected by Federal 
legislation to legalize online gaming?
    Mr. Stevens. OK, I am sorry, Madam Chair. I misunderstood 
you.
    Mrs. Bono Mack. I actually think I missed a comma in there. 
So could you please clarify your principle regarding the 
preservation of tribal regulatory authority should Federal 
legislation legalize online gaming?
    Mr. Stevens. I think that I spoke briefly to that in my 
testimony and quite extensively on it in my written testimony. 
The regulators in Indian Country have analyzed this and they 
are the ones responsible. The National Indian Gaming Commission 
is the only Federal authority that has experience in gaming, so 
we feel like that in order to oversee this element of it, we 
should utilize experienced folks.
    Now, just by coincidence I have my--it is the nicest one I 
got but it is the National Tribal Gaming Commission and 
Regulators. It is a national association independent of NIGA 
and independent of the tribes that have worked to analyze the 
expertise and the important aspects of tribal regulation to 
make a stronger and able to adhere to the responsibilities to 
our constituents.
    Mrs. Bono Mack. I am sorry. I hate to cut you off but my 
time is up if you can wrap up in 5 seconds.
    Mr. Stevens. My bottom line is that we have asked these 
regulators nationwide if they are prepared to regulate this 
industry and they assured us that they are in strong 
preparation to do so.
    Mrs. Bono Mack. Thank you.
    All right. Again, my time has expired and I am pleased to 
recognize Mr. Butterfield for 5 minutes.
    Mr. Butterfield. I thank the chairman.
    Madam Chairman, I am among those who is beginning to 
understand I would say online gambling. I am beginning to 
understand that it could provide a great boost to our national 
economy and it could provide a boost for Federal and State 
coffers. And so I am beginning to connect the dots and 
understand what this is about. Today should be the beginning of 
a robust discussion and this conversation certainly should be 
expanded as we go forward.
    As the chair pointed out, online gambling is a very 
complicated issue. I am beginning to see that. Other issues 
still warrant discussion. For example, the great State of 
California with 53 Representatives and the District of Columbia 
with a nonvoting Representative are already moving forward with 
intrastate online gaming even though its legal status is 
unclear given that the U.S. Justice Department believes the 
Wire Act prohibits all online gambling. I have to wonder, 
therefore, under the current state of play, is Justice going to 
shut these operations down once they are up and running? And 
there are other critical questions that need to be answered.
    We need to hear from California and D.C.; we need to hear 
from the Justice Department; we need to hear from other State 
and Federal regulators who would be tasked with implementing 
and enforcing inter-regulatory framework regarding online 
gaming. This is an issue that warrants further review before 
this subcommittee. We have jurisdiction and we need to 
certainly inquire into that.
    In his testimony, Mr. Whyte notes that among the groups at 
high risk for gambling addiction are racial and ethnic 
minorities. I want to talk about that for a minute. He 
specifically identifies African Americans, among others, as 
being at high risk. Earlier this month, this subcommittee held 
a hearing on revisions to the Children's Online Privacy 
Protection Act Rule. The testimony of one of the witnesses for 
that hearing contained references to a study by the Sesame 
Workshop that included some interesting insights into the 
online habits of minority children. According to that study, 
African Americans and Hispanic children have less home Internet 
access, but those that have access use the Internet more than 
white children. African American children between the ages of 5 
and 9 spend 41 minutes online per session. White children in 
contrast spend 27 minutes online per session. Hispanic children 
between ages 8 and 14 spend almost 2 hours online each day, 40 
minutes more than white children. The study also pointed out 
that children from low income and ethnic minority homes were 
less likely to have adult guidance when accessing the Internet. 
As a result, they were spending more time on lower-quality Web 
sites or on activities that wouldn't help them develop school-
based skills.
    Now, Dr. Romer, let me try you, sir. I know your own work 
has focused on the prevalence of gambling among high school and 
college youth. However, I don't think it would be too much of a 
leap to assume that this tendency by younger minority children 
to use the Internet more and to spend more time on lower-
quality Web sites persists into high school and college. Given 
all of this, I am wondering whether you can speak to whether 
you have seen differences along racial and ethnic lines?
    Mr. Romer. There are racial and ethnic differences in 
gambling. We haven't seen it in terms of Internet use partly 
because it has still been kind of small in our survey so I 
can't really talk to it. But from what you have said if there 
are these disparities that occur for kids who are online, I 
would fully expect that those kids to then make the same----
    Mr. Butterfield. The data seems to suggest that.
    Mr. Romer. Yes.
    Mr. Butterfield. Yes. Do you have any thoughts about 
whether there might be particular implications for young 
minorities from online gambling that should be taken into 
account in the discussion about whether and how to go about 
recognizing some forms of online gambling as legal?
    Mr. Romer. Well, I mean are you saying----
    Mr. Butterfield. Is there anything in particular we could 
write into the law that would try to safeguard against this?
    Mr. Romer. Well, I don't know that you could write a law 
that would, you know, safeguard against particular people other 
than people who are prone to, you know, lack of control. So I 
think the thing you want to prevent is people from using online 
gambling sites who can't control their gambling. And anything 
you can do to warn them, to remind them, to keep them aware of 
the fact that they may be spending more than they have I think 
would be valuable. And you need to explain I think, as Kurt 
Eggert has said, people need to know what they are going to win 
on a site. I think that is a valuable thing to tell people at 
any age. But we don't want kids on there at all. I mean that is 
the goal. We don't want kids.
    Mr. Whyte. Another important aspect is to make sure that 
there are health services available if kids do get into 
trouble. And I think that is where, again, the impact on the 
minority community is disproportionate. There is less access to 
health services. We also understand that there is less access 
to, for example, services in Spanish and in other culturally 
specific services for Native Americans, Asian Americans, and 
others. So on the health side, regulation alone cannot 
adequately protect people from an addiction as we have known 
from drugs and alcohol and tobacco. You must have health 
services and we must have within those health services 
dedicated, culturally specific services available for both 
youth and adults to prevent, educate, treat, and research. That 
is the way that we are going to make the progress that gets to 
public health disorders.
    Mr. Butterfield. Thank you.
    Mrs. Bono Mack. I thank the gentleman.
    And chair would remind people that we have a 5-minute rule 
on questioning and answering as well if we can try to stick 
close to it. We will have a second round of questioning that 
way.
    The chair is happy to recognize Mr. Bass for 5 minutes.
    Mr. Bass. I thank the chairman. And I also want to thank my 
friend from Texas, Mr. Barton, for his courtesy. I have to 
preside at noon and the House is not in session now, and when 
you don't show up at noon, people get uptight very quickly.
    I am also quite perplexed by some of this discussion about 
this money that could be lost in Internet poker. I know quite a 
few people who have played poker and I haven't met one yet that 
admits to ever losing anything. I will also point out that New 
Hampshire is, as we all know, first in the Nation presidential 
primary and it will remain so. It also happens to the first 
State to adopt a statewide lottery in 1964. It has raised over 
$4 billion and provided about $1.3 billion for public education 
in the State.
    My question and only question is for my former colleague 
from New York, Senator D'Amato. Senator, representing the poker 
players, in your organization's opinion, what impact would the 
passage of legislation permitting Internet gambling have on 
State lotteries? And secondly, would your organization have any 
objection to allowing or giving the State lotteries the 
opportunity to also compete if you will in the Internet poker 
business?
    Mr. D'Amato. Congressman, let me answer the second question 
first because that is an easier one to answer. We would have no 
objection whatsoever. As it relates to whether or not there has 
been an impact, we believe that the people who buy lottery 
tickets are generally not the same people and we don't believe 
they really compete. We believe that many will continue. If you 
look at the lottery tickets and their purchases, you will find 
that while the Internet does play a role, most of it is at your 
commercial establishments. And so we don't see a conflict and 
we certainly have no objection to lottery tickets and the 
scrape-off tickets that the States put out there having that 
ability.
    I would also note that in New York, you presently have a 
situation where the revenues from the lotteries--I am very 
conscious of this--play a very substantial part in our State's 
economy and budget, and we want to protect that. I am certainly 
not advocating that we cut into that.
    But I make one other point. And the ranking member brought 
up the fact that there is a disparate impact and it would seem 
that the young minority children are addicted to a greater 
extent to the Internet and to programs which are not those kind 
that you would generally want to encourage them is going to 
help them in school. And I hope I am paraphrasing your 
sentiments correctly. More reason to see to it that there is 
good, tight regulation as it relates to using the Internet and 
poker in particular. There is no regulation now. There is 
nothing to stop these kids from getting on. If we want to 
eliminate those who unfortunately become involved at a young 
age, there is no verification required by these offsite groups. 
There is no way to stop or prevent them.
    And so I think it makes abundant sense if we want to do 
something to curtail this, the misuse by youngsters to have 
strong, tough regulations protecting the consumers, protecting 
the young people, seeing to it--I would like to hear some of 
Mr. Eggert's suggestions because we are certainly not opposed--
to how do we give the kind of information so that players have 
a better playing field. So I think for all of those reasons 
that it is important that we move forward with this kind of 
legislation.
    Mr. Bass. Thank you very much, Senator. I appreciate your 
addressing my question as well as Mr. Butterfield's and Mr. 
Eggert's.
    Mr. D'Amato. Thank you, Congressman.
    Mr. Bass. And I yield back to the chairlady.
    Mrs. Bono Mack. Thank you, Mr. Bass.
    The chair recognizes Mr. Towns for 5 minutes.
    Mr. Towns. Thank you very much, Madam Chair and of course 
the ranking member, Mr. Butterfield, for having this hearing. I 
think this is a very, very important hearing.
    The question before this committee is what if any forms of 
online gaming should Congress consider? Over the course of the 
next several weeks, Congress will decide on how our Nation will 
begin to put its fiscal house in order. And this seems to be a 
way to get revenue. One of the many proposals that Congress 
will consider is easing the current restriction of online 
gamine. Currently under the Wire Act, online gaming is illegal. 
However, that has not stopped offshore gaming, Web sites from 
profiting off of the United States. Gaming industry experts 
have estimated that United States spent over $16 billion in 
2010 online poker alone. Some experts also suggest that 
revenues generated by online gaming would bring in significant 
tax revenues to the Federal Government that currently are 
directed to non-U.S. gaming companies. This additional revenue 
could be used to help balance our growing Federal deficit 
without causing drastic cuts to entitlement programs that so 
many Americans rely on.
    While I am sympathetic to the view that more revenue is 
needed to help balance the Federal budget, I am concerned with 
the unintended consequences of this proposal. So first I want 
to begin by asking you, Mr. Stevens, you know, I am not sure in 
terms of your real reasons for opposing any kind of change, 
what are your real reasons? Could you be very specific?
    Mr. Stevens. I don't think I understood your question, sir.
    Mr. Towns. I understand that you oppose this, right, and 
you mentioned the fact that there were certain agencies that 
were not involved in it, you know. What are the reasons as to 
why you might oppose it?
    Mr. Stevens. And again, Representative Towns, we had 
several, as much as 12-plus meetings on this issue, and the 
Indian tribes are opposed to this discussion based on 6 points. 
Indian tribes are sovereign governments with a right to 
operate, regulate, tax, and license Internet gaming and those 
rights must not be subordinated to any non-Federal authority. 
Internet gaming as authorized by Indian tribes must be 
available to customers in any locale where Internet gaming is 
not prohibited. Consistent with long-held Federal policy, 
tribal revenues must not be subject to tax. Existing tribal 
government rights under the tribal state compacts and Indian 
Gaming Regulatory Act must be respected. The legislation must 
not open up any gaming regulatory act and Federal legislation 
of Internet gaming must provide positive economic benefits for 
Indian Country. Those are the 6 points that were developed in a 
series of meetings with tribal leaders from throughout the 
country.
    Mr. Towns. You know, this committee must ensure that, you 
know, all the stakeholders involved are able to benefit from 
any legislation that may take shape over the coming weeks and 
months. You know, so we are very sensitive to that as well. But 
you know, my concern would be the fact that the oversight and 
the fact that we make certain that, you know, it is being done 
fairly. And of course that would be a real concern because I 
think that we have to look at ways to be able to deal with the 
deficit. And based on what everybody is saying, this is a way 
to attract revenue.
    Now, I am also concerned about youth and all of that but I 
think that based on programs that are in place that we can sort 
of look at that and be able to make certain that they are safe 
and that they are not involved in any way. And any time you 
have anything, you are always going to have some folks that 
take it to the extreme. I think that what we need to do is to 
make certain if they do, that there is something in place, you 
know, for them. I mean so you can name almost anything and I 
can tell you, you know, how someone has gone and taken it to 
the extreme. You name it. I think the main thing, though, is to 
try to put safeguards in place. And I think that is an issue 
that we need to talk about as to safeguards that we can put in 
place, programs that we can put in place that will make it 
possible for people to continue to function without destroying 
families.
    So I want to thank all of you for your testimony and I am 
going to respect the 5 minutes.
    Thank you, Madam Chair.
    Mrs. Bono Mack. Thank you, Mr. Towns. I will remember you 
at Christmas for that.
    And I am pleased to recognize I think the best poker player 
in Congress, Mr. Barton, for 5 minutes.
    Mr. Barton. Well, I don't know about that. I haven't got 
some bills passed through the Senate yet. That is where you 
play real poker up here is when you play with the Senate at the 
end of the year on getting your bills through.
    Mr. Butterfield. Mr. Engle wouldn't like that, either.
    Mr. Barton. That is exactly right.
    Mr. Butterfield. He considers himself world-class.
    Mr. Barton. First of all, Madam Chairwoman, I would ask 
unanimous consent to put into the record a letter to you from 
Frank Fahrenkopf, who is the president of the American Gaming 
Association, and written testimony that he was prepared to give 
had there been room on the panel. I am told this has been 
cleared by your staff and the minority staff and that it is not 
a problem.
    Mrs. Bono Mack. Hearing no objection, so ordered.
    [The information follows:]
    [GRAPHIC] [TIFF OMITTED] 74869.088
    
    [GRAPHIC] [TIFF OMITTED] 74869.089
    
    [GRAPHIC] [TIFF OMITTED] 74869.090
    
    [GRAPHIC] [TIFF OMITTED] 74869.091
    
    [GRAPHIC] [TIFF OMITTED] 74869.092
    
    [GRAPHIC] [TIFF OMITTED] 74869.093
    
    [GRAPHIC] [TIFF OMITTED] 74869.094
    
    [GRAPHIC] [TIFF OMITTED] 74869.095
    
    [GRAPHIC] [TIFF OMITTED] 74869.096
    
    [GRAPHIC] [TIFF OMITTED] 74869.097
    
    Mr. Barton. OK, thank you.
    My first question to the distinguished panel: Is there any 
one of you who believes that millions of Americans are not 
playing poker for money on the Internet right now? Let the 
record show that they all are staring. So is there any of you 
that believe it would be possible to prevent American citizens 
who wish to play poker for money on the Internet from doing so? 
The gentlelady with Fair Play.
    Ms. Aftab. Underage gamblers we would be able to deal with. 
I was part of the Berkman Center, the Harvard Center Age 
Verification Group, the Internet Safety Technology Taskforce, 
and although you can't prove for the purposes of COPPA who is 
under the age of 13, you certainly can prove who is over the 
age of 21. So we would be able with the right things in place--
--
    Mr. Barton. I will stipulate that whatever we can do if the 
bill moves to prevent underage poker players, you tell me how 
to do it, and we will put it in the bill.
    Ms. Aftab. We actually had a study that was done at the 
Kennedy School at Harvard with Dr. Sparrow, and it was 
presented last year at the hearings with Barney Frank. And if 
anyone on the subcommittee would like that, I am happy to enter 
that into additional testimony----
    Mr. Barton. As the chief sponsor of the bill, I can assure 
you that I don't want underage poker players, so we will work 
with you on that.
    I want to ask the gentleman who is representing the Indian 
tribes, under the proposed legislation that I have introduced, 
a State that wishes not to allow its citizens to play poker for 
money on the Internet simply opts out. We give that same option 
to the tribes. Why would that not protect your sovereignty? If 
you don't want your citizens in the Indian Nation to play, all 
you have to do is send a letter to the Secretary of Commerce 
that you don't want them to play.
    Mr. Stevens. I am sorry. Could you restate that question, 
sir?
    Mr. Barton. Well, we respect sovereignty. We respect State 
sovereignty and we respect the Indian Nation's sovereignty, so 
the bill that I have introduced, it gives the governor of a 
State--I would have to check what it does for the Indian 
tribes. I would assume it would give the chief or the tribal 
council the same right that we give a governor. If you don't 
want to let the citizens within your boundaries play poker for 
money on the Internet, you simply opt out so they can't play. 
So we treat the Indian tribes the same as we treat the States. 
That seems pretty fair to me.
    On the other hand, if you think it is OK for them to play, 
then you play by the same rules that everybody else plays by in 
terms of regulating poker players for money on the Internet. I 
mean that seems to me to be a very fair position. We are not 
anti-Indian; we are not pro-Indian. We are fair to all 
concerned.
    Mr. Stevens. I think in the States on behalf of the tribes, 
I think that covers it, but we want to be recognized as tribal 
governments appropriately under the law.
    Mr. Barton. Well, that is beyond the scope of the poker 
bill I think. I played poker at an Indian casino in Oklahoma so 
I am with you and I am 1/32nd Cherokee. So I am 1/32nd with you 
there on that.
    Mr. Stevens. Well, sir, I am a full-blooded Oneida from 
Wisconsin who used to engage in New York State. And under the 
Jay Treaty, you know, we are encouraged to do commerce for not 
just with other Indian tribes but other regions and even across 
into our friends in the First Nations in Canada.
    Mr. Barton. Well, that may be larger than the scope of this 
bill, but we are not trying to treat Indian tribes for poker 
playing any differently than anybody else.
    Senator D'Amato, do you think there are any technical 
issues in terms of addressing problem poker players and 
underage poker players that couldn't be addressed in this 
legislation?
    Mr. D'Amato. We definitely have the technology now, Mr. 
Congressman, to deal certainly with problem gamblers where 
there is nothing now restraining them. There is no impact. 
There is no one out there looking. And we can build into the 
system the kind of program that can identify or they can be 
placed on a list where they will be not allowed in if they go 
over a certain amount of money to participate. Is this going to 
solve all the problems? No. But it certainly will eliminate and 
curtail what is taking place now--no protection for the kids or 
the problem gamblers.
    Mr. Barton. My time is expiring. Let me simply say to Mr. 
Eggert before I yield back, this issue of the bots, these 
mechanical or automatic players, whatever needs to be done to 
prohibit that and outlaw it, if you have got proposed language, 
if you will give it to the committee staff. We absolutely don't 
want to set up a system where somebody in this audience can 
play poker online for money if their governor says it is OK and 
play against a computer. That is not what we are trying to do. 
So if you have got a program that can prevent it or language to 
prohibit, we will certainly look at it positively.
    With that, I yield back, Madam Chairwoman.
    Mrs. Bono Mack. I thank the gentleman. And the chair 
recognizes Mr. Lance for 5 minutes.
    Mr. Lance. Thank you, Madam Chair, and good morning to you 
all. This is a subject that interests me greatly, last term on 
the Financial Services Committee and this term on the Energy 
and Commerce Committee.
    Louis Freeh could not be here today, Madam Chair. He has a 
statement that states in part, ``addressing a growing threat 
that can mutate as rapidly as illegal Internet-based gambling 
operated outside of the country is challenging in and of itself 
for Federal law enforcement.'' And he goes on to say, ``online 
poker stands apart because it is a game that millions of 
Americans play at home with friends and family or even at 
charity fundraisers. Unlike most games played against other 
players rather than against the house and relies on a set of 
practiced skills, unlike most other games, it is also not 
defined as illegal in other statutes. Clarifying which online 
games are illegal also creates an opportunity to establish a 
strict and transparent regulatory regime for online poker that 
allows adult consumers to play safely and securely while 
ensuring accountability to tax and law enforcement 
authorities.''
    Madam Chair, I would request unanimous consent to introduce 
Mr. Freeh's statement into the record.
    Mrs. Bono Mack. Without objection, so ordered.
    [The information follows:]
    [GRAPHIC] [TIFF OMITTED] 74869.098
    
    [GRAPHIC] [TIFF OMITTED] 74869.099
    
    Mr. Lance. Thank you very much, Madam Chair.
    Ms. Aftab referenced a wonderful study in my judgment from 
Malcolm Sparrow at the Kennedy School of Government up at 
Harvard titled, ``Can Internet Gambling be Effectively 
Regulated: Managing the Risks.'' And while I will not ask that 
the whole study be placed into the record, I would read a 
pertinent part that ``notwithstanding the current 
prohibitionist legal and regulatory approach, millions of U.S. 
residents gamble online through offshore gambling sites. The 
establishment of a well regulated industry under U.S. 
jurisdiction would offer far better protection against online 
gambling's potential social harms than outright prohibition.'' 
That is my considered view and certainly those who are 
interested in reviewing the full study can contact my office or 
I am sure Ms. Aftab.
    To Mr. Stevens, good morning to you. And sir, I certainly 
respect your opinions and I recognize your sovereignty and 
honor your sovereignty. You mentioned that tribes should not be 
subject to tax or third-party regulation based on their 
sovereign status. I respect the status of Indian tribes but 
isn't it true that tribes in gaming and other businesses can 
make a sovereign decision to do business in the 50 States 
outside of their reservation lands and subject themselves to 
State and Federal regulation? For example, Mohican Sun is 
licensed in Pennsylvania with a casino, although Mohican Sun is 
obviously in Connecticut, and the Florida Seminoles purchased 
Hard Rock. If tribal gaming is to be expanded beyond the 
borders of the reservation through the Internet, isn't it 
inevitable that tribes will have to submit to some sort of 
regulation other than that of their own tribal governments?
    Mr. Stevens. You know, I think that our regulation is 
established and prepared for to deal with this type of 
situation. I think that dealing with sovereign governments 
doing business from their sovereign territories are different 
than some of the areas where they have branched out and again 
appropriately games and other economic endeavors to reach 
beyond gaming as far as building our future.
    Mr. Lance. Thank you. Certain Indian tribes have been 
pushing the idea of regulating Internet gaming at the State 
level, I think that this might mean a challenge for tribes in 
small States. In poker, for example, where you need a critical 
mass of players to operate a site, how could a tribe in Rhode 
Island or South Dakota or even Connecticut hope to participate? 
It seems to me that this would only benefit a small number of 
tribes in California and the other larger States.
    Mr. Stevens. Yes, I think that we have tried to analyze 
where tribes are working through coalitions and working within 
their State organizations, and so we have yielded to the State 
tribal authorities to handle those types of situations.
    Mr. Lance. Thank you for your response.
    And finally--and my time is about to expire--let me say it 
is an honor for me, Madam Chair, to be in the same committee 
hearing room with Senator D'Amato. I was rooting for his 
election as a graduate student at Princeton in 1980, and as I 
recall, Senator D'Amato, I wagered $10 you would win your 
primary and another $10 that you would win the general 
election. This was not on the Internet because, of course, it 
hadn't been----
    Mr. D'Amato. You should have gotten some good odds.
    Mr. Lance. I was confident in your public service, sir.
    Thank you, Madam Chair.
    Mrs. Bono Mack. I thank the gentleman and now recognize Mr. 
Harper for 5 minutes.
    Mr. Harper. Thank you, Madam Chair.
    I welcome each of you here today and appreciate you taking 
time out of your schedule, and it has been interesting to hear 
the input from each of you and the concerns well noted of what 
do you do about preventing or reducing the possibility of 
problem gamblers. You know, that is something we would all 
agree that there are certain people that shouldn't gamble. 
There are some that gamble that maybe need to have limits on 
them. And it is one thing with the physical location where you 
can do that, but to have it online with the anonymity, with all 
of the concerns that can go on is that I have not been given 
any real comfort here that since it can't be regulated offshore 
or in illegal sites how we are actually going to be able to do 
that if this takes what appears to be an interest in another 
step.
    So I know we have heard different opinions here, some that 
are trying to decide. The idea of online gambling, legal or 
illegal, gives me great concern. But with that, I do thank you 
for your time here.
    And I guess one question I would have for each of you is do 
any of your organizations receive any money from offshore 
casinos? Does your organization receive any funds or 
contributions from offshore casinos? And I will start with Mrs. 
Aftab.
    Ms. Aftab. Fair Play USA does not accept any money from 
offline casinos. And if I could address just for a moment 
unlike other aspects of the Internet where you are looking for 
anonymity, when you are dealing with online gambling, you need 
to look for authentication and verification of identity.
    Mr. Harper. Sure.
    Ms. Aftab. And that, given your expertise already in the 
subcommittee, you will understand that it will allow you to 
track problem gamblers and allow them to opt into programs to 
protect them. So this is the one area where we are not looking 
for anonymity.
    Mr. Harper. All right.
    Ms. Aftab. But Fair Play USA does not accept money to my 
knowledge from anyone offshore.
    Mr. Harper. Thank you. Mr. Stevens?
    Mr. Stevens. Not to my knowledge, sir.
    Mr. Harper. Mr. Whyte?
    Mr. Whyte. We have received a donation from companies that 
operate offshore. We accept no restrictions on those donations, 
but yes, we have received some money.
    Mr. Harper. And how many different entities?
    Mr. Whyte. I think just one. We have a long tradition of 
encouraging that anybody that operates gambling should 
contribute to responsible gambling, so Mississippi Casinos have 
donated to our organization. We accept again no restrictions on 
any money we receive from any source, especially from the 
gaming industry.
    Mr. Harper. But you have received funds from offshore 
sources?
    Mr. Whyte. Yes.
    Mr. Harper. OK. Senator D'Amato?
    Mr. D'Amato. Yes, we have. And I would note, though, we 
encourage this legislation so that we will permit onshore 
activities and we say it should not be just offshore.
    Mr. Harper. OK.
    Mr. D'Amato. And to your question, Congressman, as it 
relates to being able to ensure the age, right now there is 
nothing that restricts youngsters basically and requires age 
identification. We would say that we have the technology that 
is developed that is used today in banking, online banking, as 
it relates to the kinds of proofs necessary for people to 
conduct banking activities. And it is that same process that we 
would utilize here.
    Mr. Harper. Thank you, Senator.
    Mr. D'Amato. Thank you.
    Mr. Harper. Professor Eggert?
    Mr. Eggert. I work for Chapman University. I have no idea 
who their donors are.
    Mr. Harper. Sure.
    Mr. Egger. I hope there are many, though.
    Mr. Harper. Dr. Romer?
    Mr. Romer. Yes, so the Annenberg Public Policy Center 
doesn't accept money from any commercial----
    Mr. Harper. I think it is important that we just kind of 
know where we are on this, but it doesn't appear to me that 
there are really being any real steps taken that are being used 
to block--perhaps the way to deal with the offshore or the 
illegal casinos is to come up with ways to block payment to 
those sites. That is something that I think we could develop 
more. But, you know, we certainly have some that have argued 
that we should develop legalized online gambling in this 
country much the same way that we have heard others argue that 
we should legalize certain drugs. So I think, you know, this is 
something that I think we need much more to look at. I am not 
confident at all that we have the tools in place to do what we 
need to do.
    And the question in looking back and preparing for this, 
Senator D'Amato, I know in September of this year, the U.S. 
Attorney in New York referred to Full Tilt Poker as a global 
Ponzi scheme and, you know, apparently thousands of online 
poker players out about $300 million, Ultimate Bet, another 
organization that I believe you represent--does Poker Players 
Alliance receive dues or contributions from either Full Tilt 
Poker or Ultimate Bet?
    Mr. D'Amato. No, we don't.
    Mr. Harper. OK.
    Mr. D'Amato. And again, Congressman, I don't mean to beat a 
dead horse to death, it is already killed, but the one way to 
deal with Full Tilt and people like that who have taken 
advantage of the system is to provide a tough, strong, 
enforceable licensing bill. And I mean tough.
    Mr. Harper. Um-hum.
    Mr. D'Amato. There should be a requirement as there has 
been for Poker Stars--I mention them because they are the 
largest offshore--where those dollars are segregated and placed 
in a special account so that these kinds of things can't take 
place. Had we had legislation, we could have prevented players 
from being taken advantage of and that is why it cries out for 
regulation.
    Mr. Harper. And Senator D'Amato, with all due respect, 
perhaps it is better that we not go down this road, we work on 
ways to protect people against offshore sources. And with that 
I yield back.
    Mrs. Bono Mack. The gentleman's time has expired.
    The chair recognizes Ms. Blackburn for 5 minutes.
    Mrs. Blackburn. Thank you all for being here. I will have 
to admit this is a feisty debate and a wonderful conversation 
and I think many of our Members are like me. We have got 
friends that are for it and friends that are against it. And it 
is good to have you all here and to listen to what you have to 
say.
    Mr. Whyte, I want to come to you and, Senator D'Amato, I am 
glad that the two of you are sitting there in the center, kind 
of like these debates. I have got the two people I want to talk 
to right in the middle.
    Now, Mr. Whyte, you said that you didn't think that having 
online poker would expand the use and so that is curious to me. 
I would like for you to talk about if there is something in the 
American culture that is different about our addictive 
behavior? And then I would like to know if it is not going to 
increase participation, then why are entities so anxious to 
offer online gambling? Mr. Whyte first.
    Mr. Whyte. Thank you very much. That is a great question. 
It does seem that right now the participation in poker is 
generally very low. You know, whether or not legalization would 
dramatically increase that is an open question. In the U.K., 
for example, it has not except among young men. Young men do 
seem to show in replication surveys in the United Kingdom more 
propensity to gamble online. So there may be----
    Mrs. Blackburn. OK. Now, let me interrupt you right there. 
And then, Mr. D'Amato, I want you to weigh in on this. You 
mentioned the U.K.
    Mr. D'Amato. Yes.
    Mrs. Blackburn. So what are the successes of the European 
jurisdictions that have licensed and regulated Internet 
gambling and what are their mistakes? So the lessons learned, 
basically.
    Mr. Whyte. Sure. The lessons that we take away from the 
European experience is that you have to have a balanced 
approach with both regulation and public health protections. 
Obviously, in a country like the U.K., there is an extensive 
social welfare, a health system to make sure that if people do 
get into trouble, they have resources to go.
    Mrs. Blackburn. OK. So they have got a safety net.
    Mr. Whyte. Yes, ma'am.
    Mrs. Blackburn. Senator D'Amato?
    Mr. D'Amato. Well, I think that Mr. Whyte has touched on 
it. Number one, we can and should provide revenues and I think 
$50 million that he has mentioned that should be there to treat 
youngsters, to treat addicted people, to deal with their 
problem, easily could be made available with the revenues that 
would be generated from online poker players.
    Robust verification, we can do that today so that we know 
who it is that is playing and we can keep that youngster off. 
We have learned that. Seeing to it that funds are utilized and 
segregated as they have in Europe to keep the kind of thing 
that Full Tilt engaged in where they took monies that belonged 
to the players and distributed them out. So there are those 
things that we have learned that they have done well and we can 
expand upon them. We can build on them and bring those 
protections here.
    Mrs. Blackburn. OK. If I may interrupt you right there and 
I have got 1-1/2 minutes left, and I want to start with Ms. 
Aftab and work down. I would like to have each of you answer. 
Looking at brick-and-mortar gambling and the rules and 
regulations that apply in a brick-and-mortar sense, should 
those same rules and regulations apply in the online sense and 
should those two be paired up? And just one right after 
another.
    Ms. Aftab. Yes, plus more. Because of the nature of the 
technology, we can do a lot more with authentication, controls, 
verification----
    Mrs. Blackburn. OK.
    Ms. Aftab [continuing]. So at least that much.
    Mrs. Blackburn. OK, Mr. Stevens?
    Mr. Stevens. Yes, we believe not, two different forms of 
gaming----
    Mrs. Blackburn. Two completely different forms?
    Mr. Stevens. Yes, and our folks are working on that, our 
national--our regulators----
    Mrs. Blackburn. OK. Mr. Whyte?
    Mr. Whyte. Yes, but more. I agree with Parry.
    Mrs. Blackburn. Yes, but more. Senator?
    Mr. D'Amato. Well, I think you have the opportunity to be 
much more vigilant as it relates to the utilization of 
technology and knowing who the people are, verification, et 
cetera. It is easier to do.
    Mrs. Blackburn. OK. Mr. Eggert?
    Mr. Eggert. I think you need more in the Internet sense, 
especially given the problem of bots, which I think you can't 
just ban. And if that is not dealt with, the Internet poker is 
going to have huge problems.
    Mrs. Blackburn. OK. Doctor?
    Mr. Romer. Yes, I think I mentioned some thoughts about how 
you can put things online that you typically wouldn't have in a 
casino, you know, a clock, wins, losses, that kind of thing----
    Mrs. Blackburn. Thank you.
    Mr. Romer [continuing]. That would remind people that they 
are going over their limit.
    Mrs. Blackburn. Thank you. My time has expired. I yield 
back.
    Thank you, Madam Chair.
    Mrs. Bono Mack. I thank the gentlelady.
    And the chair recognizes Mr. Stearns for 5 minutes.
    Mr. Stearns. Thank you, Madam Chair.
    Mr. Whyte, is Internet gambling allowed for blackjack, 
poker, roulette, and other things in the European Union?
    Mr. Whyte. It depends on the State. The regulation is quite 
broad, but in general what we see is a lot of poker and sports 
gambling. Sports gambling in particular is a big driver of 
gambling on the Internet in Europe.
    Mr. Stearns. But they also have poker?
    Mr. Whyte. Yes. Yes, sir.
    Mr. Stearns. Now, if I go to the 27 countries in the 
European Union, would all of them have poker?
    Mr. Whyte. The law in the European Union is very complex. 
They are trying to harmonize that right now. It is not my 
understanding that poker is universally available across the 
European Union.
    Mr. Stearns. Is blackjack universally available?
    Mr. Whyte. I believe that is far less available.
    Mr. Stearns. And what about roulette or slot machines on 
the Internet?
    Mr. Whyte. They certainly exist both in the legalized, 
regulated framework in the EU and also, of course, on, you 
know, the second tier of unregulated Web sites that always seem 
to flourish regardless of legality.
    Mr. Stearns. Ms. Arab?
    Ms. Aftab. Aftab.
    Mr. Stearns. Aftab. How do you do identification with 
children? You know, with pornography, you can't stop it because 
they just ask are you over 18? They say yes and away they go. I 
mean how would you do this to protect the family and the 
children--or even children that are latchkey that are home and 
their parents aren't there--from gambling?
    Ms. Aftab. Well, we don't age verify children. We age 
verify adults so that if the age is set at 21 and older, there 
are many indicators we have of somebody being the age of 21. 
They may be registered voters, they may have drivers' licenses, 
they may have bank accounts that have already been 
authenticated, they may be holding jobs. There are many other 
ways where they can be authenticated.
    Mr. Stearns. How would you authenticate in this case if we 
made poker legal?
    Ms. Aftab. What I would do is set a goal and the goal is we 
authenticate that they are 21 and older using the best methods 
that are available at the time, as opposed to locking into a 
technology that is improving all the time.
    Mr. Stearns. So you have sort of a voter ID?
    Ms. Aftab. You may use a voter ID, you may use----
    Mr. Stearns. License?
    Ms. Aftab [continuing]. Homeownership, you may be using 
rental records. There are so many----
    Mr. Stearns. And who would keep that and who would verify 
and keep the record up to date?
    Ms. Aftab. There would be a third-party verification system 
that would be built in and required or at least those standards 
that are applied. And the benefit of this is once you get the 
professionals who have a financial stake in this, you are going 
to get the best practices and the best that you can get because 
they don't want kids on there.
    Mr. Stearns. No, I know but just----
    Ms. Aftab. And by putting----
    Mr. Stearns [continuing]. Like we have an e-verify program 
that we, you know, took a long time to get that working and in 
some cases it is not accurate, so you have confidence that we 
could set up a third-party verification for children----
    Ms. Aftab. Yes, but not of children.
    Mr. Stearns. I mean for adults.
    Ms. Aftab. Of adults, absolutely. And there is a large 
Federal----
    Mr. Stearns. So if a 17-year-old is working or a 19-year-
old is working----
    Ms. Aftab. Well, they may but we know that they are 17.
    Mr. Stearns. What?
    Ms. Aftab. So we know that they are 17 years old. So we 
would require--whatever technology at the time would let us 
know that that person has been verified of being 21 and older, 
not just a credit card. This is not COPPA. This is something 
far more that would require several levels of authentication 
that this person is 21 and older. And there are a lot of those 
technologies out there now. And actually, the Federal 
Government is now looking at--in addition to Congress we are 
seeing it out of the White House and a lot of other departments 
that are looking at verification authentication methods to 
identify who people are, how old they are, and where they are 
really from.
    Mr. Stearns. I understand that you can't do Internet 
gambling because we passed the law here in Congress, but in 
Nevada aren't they doing it on Blackberrys right now, so you 
can gamble intrastate? In other words, if I am in Nevada today, 
can't I gamble off my Blackberry today?
    Mr. Whyte. Yes, sir. It is called remote gambling and it is 
almost a wireless form of gambling. It is allowed within----
    Mr. Stearns. And bet money?
    Mr. Whyte. Yes.
    Mr. Stearns. Since the law says you can't use your credit 
card, you can't use deposits, you can't use money transfers, 
how can Nevada----
    Mr. Whyte. Think of it a little bit like off-track betting 
or even more so like having a telephone account for a State 
that allows horse racing where you can call in your bets. This 
is essentially the same sort of system where it is regulated 
within a State or within a property but you are able to use a 
wireless device to access your account and place a wager there 
from within that property.
    Mr. Stearns. Now, how do the authorities in Nevada protect 
children from picking up their parents' Blackberry and gamble?
    Mr. Whyte. Well, it is not Blackberry. It is a specific 
custom device that is available. It is treated almost like a 
gaming device----
    Mr. Stearns. Well, let us say the parents have that 
device----
    Mr. Whyte. Right.
    Mr. Stearns [continuing]. Leave it on the dining room 
table--what she indicated is this identification program. Do 
they have that in place now?
    Mr. Whyte. I am not an expert on this but again I think----
    Mr. Stearns. Do you care to comment?
    Mr. Whyte [continuing]. You have to use both enforcement 
and prevention that----
    Ms. Aftab. Yes, to my knowledge, States do not have an age 
verification system in place, which is one of the reasons we 
need this. We have a problem that I believe only you can solve 
because there is nothing out there now. There are no systems, 
there are no best practices, there is no baseline to keep kids 
off, to help parents with this, to deal with senior citizens 
and scams, helping law enforcement do what they need to do. 
Right now there is nothing.
    Mr. Stearns. Yes.
    Ms. Aftab. We need to do something and with due respect, 
when we are looking at ways to control what money is being 
spent, that is what UIGEA is all about. And unfortunately, in 
the same way kids can get around all these issues, a lot of the 
people who are trying to gamble can, too. They pretend they buy 
towels, they miscode it and they are able to use the financial 
systems to do this.
    Mr. Stearns. Thank you, Madam Chair.
    Mrs. Bono Mack. I thank the gentleman and now recognize Dr. 
Cassidy for 5 minutes.
    Mr. Cassidy. Thank you. And may I begin by wishing Madam 
Chair a happy 29th birthday.
    Mrs. Bono Mack. I thank the gentleman very much.
    Mr. Cassidy. Mr. Whyte, did I hear you say that you don't 
think that if this law passes that there would be an increase 
in Internet gambling in the United States?
    Mr. Whyte. Well, not necessarily significant increase.
    Mr. Cassidy. Well, now, I got to wonder why Google ads are 
even purchased. I would just say recently I was looking at the 
Minnesota Vikings football team and all of a sudden on my 
sidebar I had all sorts of things about Minnesota. Do I want to 
take a vacation, did I want to do this, did I want to do that? 
Now, why is somebody buying that, number one; and number two, 
my intuition is to think you are wrong. There is a large 
settlement recently in which Google is paying the Federal 
Government for running advertisements for overseas pharmacies.
    Mr. Whyte. Um-hum.
    Mr. Cassidy. So that tells me that somebody thought Google 
was an effective enough advertiser to purchase for overseas 
pharmacies. Why would that not yield a significant increase in 
gambling?
    Mr. Whyte. Well, certainly, we may very well be wrong, and 
I think that is one the reasons why we are calling certainly 
for health-based research because it is very unclear. But the 
experience in other jurisdictions seems to suggest that those 
people that gamble online who are prone to and want to gamble 
online are already doing so regardless of the legality of the 
law. But certainly, yes, we have grave concerns that----
    Mr. Cassidy. Just because I have limited time, it reminds 
me of blue laws. I think I know from my medical training that 
if a county has a blue law, it still has alcoholics but it has 
fewer drinkers and therefore fewer alcoholics. In effect, this 
is a blue law, correct?
    Mr. Whyte. Yes, sir.
    Mr. Cassidy. Ms. Aftab, do we have data on the prevalence 
of underage gambling in countries--I don't know; I am asking. I 
am not advocating or challenging--prevalence of underage 
gambling in jurisdictions in which they do require the sort of 
verification you are describing?
    Ms. Aftab. Yes, and it is in the report that we put 
together with Dr. Sparrow, so to the extent that is entered 
into the record, we have it there.
    There are certain countries, in particular in the U.K., 
that have looked at the capability of locking kids out by 
requiring age verification systems that work and they have been 
very, very effective. So it is out there and it is getting 
better by the minute.
    Mr. Cassidy. Mr. Eggert, I really liked your testimony, 
man. I kept on reading your testimony thinking if we think we 
can restrict any sort of super bot or some smart kid from 
gaming--excuse the pun--system, your testimony suggests to me 
that we cannot. There is going to be some kid who has got his 
buddy right there and the buddy is going to be typing in what 
all the cards are. And so even if the bot is not resident upon 
the computer which is accessing the Internet, it is nonetheless 
telling him what bet to place. Reasonably speaking, is there 
any way to restrict data mining to find weaker players, super 
bots to play, et cetera?
    Mr. Eggert. Well, that is an interesting question. The 
recent American Gambling Association White Paper addresses that 
very question, and in the text of the paper it says, you know, 
sites can ban bots. But there is a footnote that says if 
somebody is using a bot to guide them so the bot isn't playing 
but it is somebody playing with the bot given them advice, 
there is no way to restrict that. I know of no way to prevent 
somebody from having a bot on one computer telling him what to 
play on another computer. And so this is a huge problem for the 
industry to the extent that legal industry or illegal in that 
recreational gamblers don't want to go on their poker site and 
get killed by somebody using a bot. And that is going to happen 
more and more as bots get smarter and smarter. There are 
international competitions now to design the best poker-playing 
bot. And they are doing a darn good job, and they are just 
going to get better and better until they can beat anybody in 
this room or almost anybody----
    Mr. Cassidy. Even Joe Barton?
    Mr. Eggert. Even him.
    Mr. Cassidy. So once we put the imprimatur of government 
that this is an OK activity and therefore Google can run a 
sidebar when I say I am going to go visit Nevada to see Yucca 
Mountain and instead I got a lot of places to go gamble on the 
Internet. How would you address what Mr. Eggert just spoke of, 
how these bots are going to be basically ripping people off 
legally? Yes, ma'am?
    Ms. Aftab. Well, right now on brick-and-mortar casinos, you 
have card counters.
    Mr. Cassidy. Yes, but the house watches for those and 
throws them out.
    Ms. Aftab. The house watches but the online sites, if they 
are well done and operated correctly, can watch for a lot of 
that as well.
    Mr. Cassidy. But if I were designing such a super bot, I 
would get it so it would win only 90 percent of the time. Every 
now and then it would fold on a full house or something such as 
that.
    Ms. Aftab. But once you are dealing with full 
authentication and you know who everyone is, it allows you to 
start tracking patterns. And what will happen is part of what 
we are doing now on the Homeland Security grid, the energy 
grid, we start sharing the information scrubbed of where the 
problem occurred with other companies across it so that you can 
improve your skills in that way.
    Mr. Cassidy. So before we pass this bill, do we need to 
have the permissive legislation to allow that data sharing?
    Ms. Aftab. I don't think you need permissive legislation. I 
think it is a matter of what the privacy policies say and what 
the expectations of the users are. And I think if you say that 
it is scrubbed of certain things and you are looking at people 
who are violating the law or violating the terms, I think that 
that can be done with privacy policies and so forth.
    Mr. Cassidy. I am out of time. And I love Mr. Eggert's 
opinion on the doability of that. But that said, we are out of 
time and I yield back. Thank you.
    Mr. Barton. Would the gentleman yield the time he doesn't 
have?
    Mrs. Bono Mack. With negative time. We will have a second 
round of questions if we can do it through that means.
    And with that, I am happy to recognize myself for 5 minutes 
and just say that as I listen to the testimony, I am reminded a 
lot about what we saw with the content industry--music and film 
and television that they stood in the way of the Internet and 
were bowled over by it not exclusive to that content. And I 
believe if we are going to do this, then the rising tide has to 
lift all boats, including Indian Country.
    Senator D'Amato, do you take any issue with any of the 
principles advanced by Mr. Stevens on behalf of the National 
Indian Gaming Association? Most specifically, do you agree that 
the tribal governments should be allowed early entrance and a 
period of exclusivity? And do you agree that tribal Internet 
operations should be open to customers wherever legal?
    Mr. D'Amato. Madam Chairman, I think we want a competitive 
marketplace for everyone, for casinos, for our Indian brothers. 
The fact of the matter is it doesn't exist today. The fact of 
the matter is what we have is old operators. None of the 
legitimate houses that we have in this country are going to go 
forward and risk the loss of their licenses, et cetera, until 
or unless we change the law. And so we are going to continue to 
have all of the problems that we have heard about. They will be 
exacerbated as it relate to young people, as it relates to 
having a fair game so that people have a fair opportunity 
whether they use the super bots or not. There will be no 
opportunity to control that. And you are not going to be able 
to stop the advertising because they will still advertise on 
Google; they will advertise all over.
    So the problem we have now is one that it seems to me is 
very parallel to what we had in prohibition. We know that 
people who overindulge--it was terrible. We know that the cost 
to society was ruinous. And so with all good intent we passed 
the Volstead Act. And what happened? We had the very people who 
we didn't want to get into the distribution and sale of 
alcohol, some that was killing people, got in. Government lost 
revenue. It didn't cut down on all of the problems, the family 
abuse, the drunkenness, et cetera, and I would suggest that 
here we are 50 years later, we are well behind the times to say 
that you shouldn't use the Internet for commerce. But whether 
you like poker or not, that is nonsense to say, ``Oh, our 
little kiddies.'' Did we ever hear about parental 
responsibility as well?
    Now, let me tell you what moved the gambling--and there did 
come a time when youngsters wanted to play Texas Hold'em. They 
want to say Texas Hold'em, Congressman Barton, the State has 
got the Texas Hold'em. Why? It became famous because of 
television. The third most watched sport--first, NFL, then 
NASCAR and then, yes, poker on the television. Are we going to 
ban that? Are we going to ban showing that at the casinos? What 
do you think created this impetus and a huge surge in that game 
in particular of poker----
    Mrs. Bono Mack. Senator, let me just jump in here if I 
might because as you know better than anybody here our problem 
is to try to advance technological problems at the same time as 
legislative hurdles. And Professor Eggert spoke eloquently I 
think about bots and as Dr. Cassidy and the fear that can we 
actually protect some people. Is this entirely new version the 
wild, wild west? Is this entirely a buyer beware? Professor 
Eggert in his testimony talked about artificial intelligence 
and I feel like I should ask Seary on here if she is capable of 
gambling.
    Mr. D'Amato. But Madam Chairman, if we do nothing, that 
problem will grow with no opportunity to interdict, no 
opportunity of having people who will have the skills and have 
the wherewithal because they want to protect their business. So 
as the professor indicated, one of the things they are going to 
be looking to do is to reduce that. He knows of no system to 
eliminate it but to reduce it. And you can identify----
    Mrs. Bono Mack. Little questions, though, that we do--I 
don't know if you all can answer and I have 30 seconds left--
and I think Professor Eggert's testimony again, how do you 
handle something as innocent as losing Internet service in the 
middle of a hand.
    Mr. D'Amato. I didn't quite get that. How do I handle 
something as innocent as----
    Mrs. Bono Mack. Your Internet service just goes out and you 
are in the middle of a big hand and you lose Internet 
connectivity. What happens?
    Mr. D'Amato. You know, Congresswoman----
    Mrs. Bono Mack. Do I win if I just flip off my modem?
    Mr. D'Amato. I have to tell you this legislation can't 
protect everybody at every time in every instance but it can go 
a long way to protecting people who have no protections at all, 
whether it is the bots, whether it is the problem gambling, 
whether it is the youngsters, no one can promise 100 percent 
certainty. When it comes to identification and verification, 
certainly we should be able to use the most robust technologies 
that have been developed and will continue to be developed. But 
there is nothing perfect about this legislation. It will be 
imperfect but a heck of a lot better than doing nothing.
    Mrs. Bono Mack. All right. I thank you and my time has 
expired. And I am pleased to recognize Mr. Butterfield for 5 
minutes.
    Mr. Butterfield. Thank you.
    Technological advances have allowed manufacturers to create 
ever-more enticing products. But I am not concerned about the 
flashing lights and the funny noises or a game's appearance; I 
am only interested in game attributes or marketing practices 
that have the potential to mislead, deceive, or confuse.
    Mr. Eggert, I think I will try you on this one. You 
discussed slot machines that intentionally give the game player 
a large number of near misses complete with a counter on the 
side of the screen letting them know exactly how many they have 
had. This is a manipulation of consumers that inhibits their 
ability to understand how the game works and makes the game 
seem easier to win than it actually is. You may agree or 
disagree with that, but briefly, what are the most egregious 
examples of misleading or deceptive tactics that we should be 
aware of in the online gambling world, those worse practices 
that should be carefully monitored or restricted?
    Mr. Eggert. Well, in the online world, we have heard some 
of the worst practices are online poker sites not having the 
money that the gamblers have put--have drained the money out so 
if the gamblers try to get their money out, they can't. That is 
a very bad practice. Another bad practice is insiders being 
able to see the whole cards of their opponents so that they can 
win much more easily because they are playing against. That is 
another really bad thing. But another really bad thing is not 
being able to tell what the hold percentage of a slot machine 
you are playing is. I think that is an important thing for any 
slot player is to say, you know, am I going to lose on average 
2 percent, which is a good machine or am I going to lose 15 
percent, which is a much more expensive and much worse machine. 
That is an incredibly bad practice and it exists in Internet 
slots; it exists in land-based slots. That is something that 
should be addressed. It is an important part of consumer 
protection.
    Mr. Butterfield. What kind of expertise and authorities 
should an enforcing agency have in order to keep up with the 
misleading or deceptive tactics of an industry's bad actors?
    Mr. Eggert. Well, that is actually an interesting question. 
I do a lot of work in the financial services community, and 
regulators are doing a better job now of actually experimenting 
to see what consumers understand and what they don't 
understand. And so what we should have is a regulatory agency 
that focuses on consumer protection and really tries to figure 
out what can consumers understand as far as disclosure is? What 
information do they want? How much information can they use? 
And so I would assert that we should have a Federal regulator 
who does that kind of investigation to see what works best for 
gambling consumers.
    Mr. Butterfield. Can you tell me how vendors describe their 
games when they do it in writing to their consumers?
    Mr. Eggert. Well, typically for slot machines they say that 
they are either loose or they are looser or they are the 
loosest, but often they don't give much detail as to what that 
means.
    Mr. Butterfield. Is there room for improvement?
    Mr. Eggert. There is incredible room for improvement.
    Mr. Butterfield. What about misleading tactics or 
deceptions by other players, for example, when a poker game is 
infiltrated by predatory professional players or algorithm-
driven bots that are impossible to beat? In a case like this, 
is an empowered, knowledgeable consumer even enough?
    Mr. Eggert. Well, the problem consumers have is they often 
don't know if they are playing against somebody who is using a 
computer assist or computer bot to help guide the game. And so 
you might have some, you know, 21-year-old who is playing their 
first game of poker online facing, you know, somebody who with 
the computer algorithms is, you know, really a top poker 
player. It would be as if you go to the neighborhood to have a 
pickup game and unbeknownst to you, you are playing against an 
NBA player. I don't think you can prevent people from using 
bots because I think that is just impossible.
    For me, the solution would be to have a rating system 
whereby if you want to play against people and know whether 
they are good or bad, everybody has a rating like in the chess 
world. Better players have higher ratings; worse players have 
lower ratings. I know if I play against somebody with a 1,000-
point higher rating than me, I am going to get beat but it 
might be fun. The same thing should happen in the gambling 
world where if you go online playing poker and you have a 1,400 
rating and you are playing against somebody who has a 2,100 
rating, most likely they are going to beat you but you might 
learn something.
    Mr. Butterfield. Very informative. Thank you.
    Mrs. Bono Mack. Thank you, Mr. Butterfield.
    And the chair recognizes Mr. Barton for 5 minutes.
    Mr. Barton. Thank you, Madam Chairwoman. I was going to 
leave and then we were told we were going to have a second 
round so I decided to stick around. But my stomach is starting 
to growl, so let us don't have 3 rounds even though I asked for 
the hearing.
    I want to refocus. You know, we are kind of letting the 
tail wag the dog here. We are having a hearing as to whether it 
is acceptable, appropriate to allow those citizens of the 
United States that live in States that the States want them to 
play poker for money online to do so, and we are getting into 
some pretty esoteric areas about underage and problem gambling 
and now we are into this issue of computer gamblers. I will 
acknowledge that it is technically possible to set up some 
elaborate scheme using these computer bots against people, but 
we can always guarantee that somebody is a live body at the 
table, right, even if they have a computer. That is doable, and 
if you have that, you know, you are not going to set up an 
elaborate computer scheme to play in a 1-cent, 2-cent limit 
online poker game. There is just enough money. And the higher 
you go in these games--I have never played money online. I have 
played poker online and I have got play money out the kazoo. I 
have got $10, $15 million of play money, but that and 75 cents 
gets you a coke. I mean it just doesn't help you a lot.
    But when I look at the for-money sites, most of them are 
less than $100. Now, you can get 1,000, 2,000, so anybody with 
any sense at all who--to use your term, Professor--a 
recreational poker player, you are going to be an absolute 
idiot to go online and get into a high-dollar poker game. I 
mean just you go into that game knowing that everybody else at 
that table is really good and unless you are an heir to the 
Rockefeller family or the Perot family or Bill Gates or 
somebody like that, you don't in your wildest dreams want to be 
playing poker in that game. You just don't want to do it.
    So if we can verify that they are adults and maybe even 
require people to stipulate that they are not using computer 
ability when they play, even though they can cheat, if they 
cheat you can catch them. Do you agree with that, Professor?
    Mr. Eggert. I don't think you can catch poker players who 
are using a computer to guide them. I think as long as they 
make sure that they don't win too often, that they screw up 
once in a while, that they can fly under the radar and make 
good money. You don't have to be playing $300-a-bet games to 
make a decent living. People can make 60, $100,000 playing 
professional poker with bots----
    Mr. Barton. Well, all of the information in your written 
testimony about data manipulation and data statistical analysis 
I can get. I can get myself right now if I want to take the 
time to do it. It doesn't mean I understand it, it doesn't mean 
I will benefit by it, but I have the ability if I want to 
really find out what is out there, I can do that without too 
much trouble. That information is fairly transparent.
    What we want to prevent is somebody using it unfairly, and 
in a real-world situation when you walk into the casino, you 
can't take a pocket computer with you. You know, you can't have 
somebody behind you saying the probability on this hand 33 
percent, that that guy over there has got pocket aces or 
whatever. You have got to know it. On the computer, you can get 
access to it, but there should be ways to verify with the 
current technology is somebody is routinely beating the system, 
we can flag that and then we can outlaw them. We can put 
penalties into the bill that if I use computer analysis at all, 
I can be banned from that site, I can be penalized, and I guess 
if the committee wants to, we can throw them in jail.
    So that is not a reason not to do it. It is something we 
need to work on, it is something we need to be aware of, but 
because some computer whiz kid at MIT develops a problem that 
they think can beat the system, if we are aware that they have 
got that program, eventually we are going to catch them. Do you 
agree or disagree with that?
    Mr. Eggert. I disagree with that. Think of the chess world. 
You know, if----
    Mr. Barton. No, no, chess is perfect knowledge. Everybody 
knows on the chess board where the pieces are. When I sit down 
at a poker table, I know my cards, I know the cards on the 
table, and if I am really, really smart, I might be able to 
infer what Senator D'Amato has and you have based on the way 
you bet, but I don't have perfect knowledge. That is why poker 
is such a great game. It is a game of skill, it is bluffing, it 
is probability, and it is reading people, but it is not poker 
knowledge. This is not chess.
    Mr. Eggert. But if you have a poker program that plays as 
well as some of the best players in the world and I use it, how 
do you tell if I am using a program----
    Mr. Barton. Well, within an hour, everybody at the table is 
going to know that----
    Mr. Eggert. How will you know----
    Mr. Barton [continuing]. And if you use it for a week, the 
people that are monitoring the site, if it is legalized and 
regulated are going to know it and you are going to be banned.
    Mr. Eggert. How would you distinguish between me and a 
really good player who is not using the program?
    Mr. Barton. I would call you up and talk to you about 15 
minutes on the phone if I am the regulator and ask you a few 
basic questions. I would find out pretty quick what kind of a 
poker player you are. I could do that right now actually.
    Mr. Eggert. I think that your----
    Mr. Barton. And I yield back.
    Mrs. Bono Mack. I thank the gentleman and recognize Mr. 
Kinzinger for 5 minutes.
    Mr. Kinzinger. Well, thank you, Madam Chairman, for putting 
this on.
    Just a few questions to start with, Ms. Aftab. Let us talk 
a little bit about the offshore gambling industry, and I 
apologize if you have been asked this already. But can you tell 
me a little bit about it, just how it exists today? 
Specifically, you know, where is most of it located at? What 
kind of gambling, you know, for the most part is occurring on 
these offshore sites? And what kind of protections do these 
offshore sites have for players and particularly for minors? If 
you just want to talk in general about it and then we will go 
from there.
    Ms. Aftab. Thank you very much. I hate to keep referring to 
our report from the Kennedy Center at Harvard, but it does 
address these things.
    Offshore we are dealing with sites that are legal under the 
jurisdiction where they are regulated--Gibraltar, the U.K. A 
lot of the different foreign jurisdictions have regulatory 
schemes that allow online gambling under certain circumstances 
with checks and balances. And then the vast majority of the 
sites we are seeing are unregulated. They are in places that 
have no regulations in place and no checks and balances.
    So when you are looking at a well regulated scheme, they 
keep kids out by requiring adult verification and 
authentication. They have trust systems that money needs to be 
put into trust accounts and kept distinct so that a payment is 
made on winnings. They have checks and balances on money 
laundering to make sure that they know who they are dealing 
with and you are seeing patterns of behavior. They are using 
artificial intelligence, Symantec web that Representative 
Barton was talking about. From his perspective, it is the good 
side of the bots to look at certain patterns of behavior. They 
have audits of who is employed, where the money came from----
    Mr. Kinzinger. And again, we are talking about regulated 
sites right now, correct?
    Ms. Aftab. I am sorry?
    Mr. Kinzinger. We are talking about the regulated----
    Ms. Aftab. The regulated sites as opposed to the other ones 
that may be run by terrorist organizations, they could be run 
by underworld criminal activity, they could be run by somebody 
out of their garage. You don't know and, you know, you never 
know who is a dog on the Internet and it is pretty hard to 
figure out who you are gambling with. So there are ways of 
doing this and I think what we need to do is cherry-pick the 
best that we see out there and then Americanize it and make it 
even better.
    Mr. Kinzinger. So on the unregulated sites, basically it 
really is anything can go. I mean you could have 12-year-olds 
on there betting----
    Ms. Aftab. You could have 12-year-olds on it, you will have 
collusion among gamblers, you are going to have people who 
aren't paying you on bets, they are taking your money, it is 
not even real. Anything that could possibly go wrong does go 
wrong.
    Mr. Kinzinger. Do we have any idea approximately how much 
American money is being bet on those sites?
    Ms. Aftab. The numbers are huge. The 4 to $6 billion a year 
of U.S. gambling is the estimate that we are seeing offshore. 
That is a lot of money that people are spending not in the 
United States, maybe they shouldn't be spending it, and they 
are not spending it fairly. So it is money that could be 
brought back here and help us and be done better.
    Mr. Kinzinger. And ultimately, you know, if it is 
unregulated, it is almost impossible to put them out of 
business. I mean we can't----
    Ms. Aftab. It is really impossible to put them out of 
business, and the problem I have been seeing is consumers here 
don't know where to go because if they think that what they are 
doing is illegal because they are gambling online and they are 
scammed, they are afraid to call the police because they think 
they might be arrested. So we are finding consumers who have no 
place to go, no recourse in law enforcement but doesn't know 
what to do and how to do it effectively.
    Mr. Kinzinger. And just one more question for you, too. 
Operator fraud and theft from players, you touched on that with 
these companies that are--has any of this happened in companies 
regulated in EU-member states? I mean have you been seeing that 
or is that mostly on the unregulated sites I guess?
    Ms. Aftab. Well, every once in a while you are going to see 
somebody in a regulated scheme that is violating the laws and 
they police those very carefully.
    Mr. Kinzinger. Right.
    Ms. Aftab. And that is the difference. People will always 
break the law, but if you have laws in place and law 
enforcement skills and the tools are there, then you can put 
them out of business and----
    Mr. Kinzinger. You can prosecute it and go after it.
    Ms. Aftab [continuing]. Put them behind bars.
    Mr. Kinzinger. OK. Great. Well, that is all I have. Thank 
you for your patience. And I yield back.
    Ms. Aftab. Thank you.
    Mrs. Bono Mack. Thank you. And Mr. Harper, you are 
recognized for 5 minutes.
    Mr. Harper. Thank you, Madam Chair.
    You know, there are so many things going through my mind as 
we listen to the different witnesses and the input on this. You 
know, right now if we have offshore online Internet casinos, 
whatever we want to call them, and they are receiving funds 
illegally from U.S. citizens, would you support legislation 
that would say that those companies that are knowingly right 
now violating our law that would ban them from ever opening up 
and being a part of legal U.S. Internet gambling?
    Ms. Aftab. I will answer for myself but not necessarily for 
Fair Play USA because I don't know what the answer is. And as 
far as I am concerned, if you are violating the law, you 
shouldn't be allowed to engage in a licensed and regulated 
regime----
    Mr. Harper. OK, thank you.
    Ms. Aftab [continuing]. In the same way you couldn't open a 
brick-and-mortar casino if you are a criminal. You shouldn't be 
able to do this, either.
    Mr. Harper. Mr. Stevens?
    Mr. Stevens. Yes, sir, we would be supportive. Absolutely.
    Mr. Harper. OK. Mr. Whyte?
    Mr. Whyte. We don't have a dog in this fight. We are 
neutral on legalized gambling so our organization has no 
opinion on that.
    Mr. Harper. Well, then I will ask you personally.
    Mr. Whyte. Personally, yes.
    Mr. Harper. Do you have an opinion personally as to whether 
or not a company that has been conducting technically illegal 
activity offshore is now going to want to come in and be 
licensed to do this in the United States?
    Mr. Whyte. Yes, if they are breaking the law, it certainly 
seems that they would be unfit to receive licensure under the 
general gaming statutes that we have.
    Mr. Harper. Thank you. Senator D'Amato?
    Mr. D'Amato. If you violated the law, you should not be 
permitted to have a license.
    Mr. Harper. OK. Mr. Eggert?
    Mr. Eggert. I also agree that if a company has been 
intentionally violating the law, I don't see them as a fit 
gambling operator here.
    Mr. Harper. Dr. Romer?
    Mr. Romer. Well, I mean all of them are violating the law 
as far as I can tell. So I think there have been some 
agreements with some of these companies to acquire, you know, 
back taxes and so forth that might work.
    Mr. Harper. Thank you.
    Mr. D'Amato. I might, Congressman----
    Mr. Harper. Yes, sir, Senator?
    Mr. D'Amato. They are not really all violating the law. 
That is a very real question. And indeed I think the 5th 
Circuit indicated that the Wire Act----
    Mr. Harper. Sure.
    Mr. D'Amato [continuing]. Which really creates the 
violation has not been violated as it relates to playing poker 
but rather that Wire Act was intended for sports gambling. So I 
think, you know, there is a legal distinction. Now, some are 
still battling that out. It hasn't gone up to the Supreme 
Court, but that is the highest ruling to date.
    Mr. Harper. And I am certainly aware of that conflict that 
is there.
    Professor Eggert, if I may ask this, and I will just read a 
little something here and then get your thoughts on it. In 
2007, Jeff Schmidt, CEO of Authis, provider of identity- and 
security-related products, testified before our committee. Mr. 
Schmidt certainly is recognized as an expert on these issues on 
online identification and authentication. In his testimony he 
stated, ``age verification and determination of geographical 
location simply cannot be done reliably over the Internet.'' 
And I would ask has technology changed and improved to the 
point where that has drastically changed since '07 and do you 
agree with Mr. Schmidt's assertion regarding age and 
geolocation verification?
    Mr. Eggert. Well, that is actually a good question. I am 
not sure I am the proper person to answer that because I 
haven't really studied age verification and Internet search. I 
wouldn't want to hazard an opinion without doing more reading 
on that.
    Mr. Harper. And I know that, Ms. Aftab, you would agree 
that it has changed or has improved, would you not?
    Ms. Aftab. Yes, it is changing radically and very quickly 
and all of us are now carrying around devices with GPS 
capability on them all the time so that it has changed greatly. 
And I was part of the taskforce that said you can't 
authenticate kids but you can authenticate adults, so that 
question needs to be asked in the right way when we ask about 
age verification of adults.
    Mr. Harper. But if you are doing that, can a person still 
not sell their information or share that with someone else or 
it be stolen?
    Ms. Aftab. They could but if you are using biometrics along 
with it that would require that when you log in you are 
authenticated as you and that has been verified through some 
regimen that has been approved, I think we can really get 
there. And we are getting there across the board on a lot of 
other areas.
    Mr. Harper. If we legalize Internet gambling in the United 
States, there will be obviously costs associated with that. So 
what will prevent someone from saying, well, you know, it cost 
me more to use what is the legal Internet gambling here; I want 
to still go offshore? What is going to prevent them from still 
doing what they are doing now?
    Ms. Aftab. Well, now you are going to have a lot of big 
players in the fence. So right now everybody is outside of the 
fence, but when you get a lot of the players who know what they 
are doing, they understand the technology, they understand the 
patterns of play, they understand all of these things who now 
have a vested stake inside, they can turn around and blow the 
whistle on everybody else and help you get the ones who are the 
outliers because they are competing unfairly. You will have 
some good allies.
    Mr. Harper. My time is up. I yield back.
    Mrs. Bono Mack. Thank you. And Dr. Cassidy for 5 minutes.
    Mr. Cassidy. Mr. Whyte, again, as I think about, OK, we 
have a subset of people; let me just accept what you say 
earlier--again, not to challenge just to learn--that you will 
not significantly increase the risk, there is a possibility 
that those that do gamble will significantly increase their 
gambling.
    Mr. Whyte. Absolutely. We covered that in our written 
statement.
    Mr. Cassidy. So let me----
    Mr. Whyte. Sorry.
    Mr. Cassidy. Now, I have learned when gambling was 
introduced in Louisiana, the problem gambling increased 
dramatically, as well as did theft from businesses as people 
financed their habit if you will. Have you learned in these 
jurisdictions that legalized Internet gambling that problem 
gambling increases and that the incidents of theft associated 
with such increases?
    Mr. Whyte. That is a great question. In the jurisdictions 
we have looked at to date without exception the rate of problem 
gambling has not exploded. It has not exploded in proportion to 
the----
    Mr. Cassidy. Now, exploded is a subjective term.
    Mr. Whyte. Exactly. But still what we do see--and I think 
to the point of your question--is that there are subtle 
increases in perhaps severity of problems especially among 
certain groups like, for example, young men who tend to be very 
heavy gamblers, who tend to be high adopters of Internet 
gambling. So I think Louisiana's example is the same. There are 
at-risk groups that when gambling is made legalized, more 
accessible, more available, more acceptable, they may shift in 
their patterns of gaming. They may either start gambling or 
take their existing----
    Mr. Cassidy. Now, when you say that exploded is objective, 
20 percent is a definite, can you give me a percent, say, 
across all jurisdictions we see a 5 to 20 percent increase in 
problem gambling?
    Mr. Whyte. No, sir, we have not seen that.
    Mr. Cassidy. Do you have a percent I am asking? I am making 
up a number.
    Mr. Whyte. Absolutely. I apologize. Yes, in the United 
States it has gone roughly from .5 percent to around 1 percent 
over the last 30 years----
    Mr. Cassidy. Problem gambling?
    Mr. Whyte [continuing]. Pathological gambling. So that is a 
large percentage increase, certainly----
    Mr. Cassidy. See, my local DA told me that the amount of 
theft associated with it had increased significantly, not a 
definite number, but after gambling was legalized, the amount 
of theft--in fact they stopped investigating it because it was, 
you know, so much of a problem.
    Mr. Whyte. That is absolutely--60 percent of problem 
gamblers will commit a white collar crime to finance their 
gambling.
    Mr. Cassidy. OK.
    Mr. Whyte. And as more and higher-stakes forms of gambling 
are available, they may be driven to more severe crimes because 
they are chasing more and more money to----
    Mr. Cassidy. OK. Let me ask Dr. Romer and Mr. Eggert, first 
you, Mr. Eggert. If I would say that my goal is to limit the 
amount of problem gambling, to limit the amount of the number 
of adolescents who enter into a lifestyle which is destructive, 
but to allow people like Mr. Barton if you will to pursue his 
pastime, Mr. Eggert, do you think that this legislation is a 
positive in terms of pursuing that goal or do you think it is a 
negative?
    Mr. Eggert. Well, first of all, I am not a problem gambling 
expert. I am a consumer protection expert. I think that there 
are good things about Internet gambling where you can put in 
harm minimization strategies. I don't think that there is a 
good study out there that shows whether that has a net benefit 
or a net----
    Mr. Cassidy. So what about consumer protection? Do you feel 
like this legislation is a negative or a positive for consumer 
protection?
    Mr. Eggert. Well, I haven't seen any legislation yet that 
has what I consider strong consumer protection. I think if we 
had legislation with strong consumer protection, that could be 
a net positive.
    Mr. Cassidy. And then the very fact of legalization which 
some folks suggest will allow it to be increased consumer 
protection, you are not convinced of?
    Mr. Eggert. I am sorry, could you----
    Mr. Cassidy. So some folks I am hearing say just legalize 
it and inherent in legalization will come consumer protection.
    Mr. Eggert. I think that you have to build in strong 
consumer protections.
    Mr. Cassidy. Dr. Romer, again, let me ask you. Do you think 
this legislation in particular--I gather from your testimony 
you actually think this legislation or some legalization would 
be beneficial in terms of the problem of adolescent gambling.
    Mr. Romer. I think it would if certain, you know, 
safeguards were put in place, the kinds that have been 
suggested, because the Internet is a place where you can alert 
people to problems while they are gambling, you could cut them 
off, and we could also examine--I think the bill that is 
currently proposed suggests that we could make public the 
records of these gambling companies so that we could see are 
they making disproportionate profits from----
    Mr. Cassidy. To go back to Mr. Eggert's comment, he wants 
to see that sort of thing on the front end, not kind of 
retrofitted on the back end. Do you think that such legislation 
should have that sort of transparency built into it on the 
front end?
    Mr. Romer. Yes, I think consumers ought to know what their 
chances are of winning on a particular site, and if it is very 
difficult, they ought to know that. Yes. They ought to know the 
odds.
    Mr. Cassidy. OK. And I haven't read this legislation so 
critically. You may not be an attorney. I hope you are not.
    Mr. D'Amato. Congressman, we would have no problem 
supporting legislation that clearly called for the kind of 
thing that Kurt Eggert suggested and that is that there be 
identified what percentage does the house keep? If it is 3 
percent on a game, 2 percent, whatever it is, no problem in 
establishing that. That is great consumer protection and 
putting it out there before they pull that slot, if it is not a 
slot, but before they deal those cards.
    Mr. Cassidy. OK. I am out of time. Thank you. I yield back.
    Mrs. Bono Mack. I thank the gentleman. And I would like to 
thank our panel very much for being here today. You have been 
very gracious with your time and helpful and enlightening with 
your answers. I look forward to working with all of you again 
as we continue to explore the issue of Internet gambling.
    As chairman of the subcommittee, let me be clear about two 
things: First, we are going to be very thorough in examining a 
wide range of issues related to Internet gambling before coming 
to any conclusions; and secondly, at the end of the day, we are 
going to do what is best for American consumers.
    I remind members that they have 10 business days to submit 
questions for the record and ask the witnesses to please 
respond promptly to any questions they might receive. The 
hearing is now adjourned.
    [Whereupon, at 1:00 p.m., the subcommittee was adjourned.]