Another Round in the House

A subcommittee of the U.S. House of Representatives today heard testimony on two pending bills that aim to prohibit Internet gambling.

The session consisted mainly of the same arguments for and against Internet gambling that have been made at other House hearings, said one Washington insider who was in attendance.

"The problem of Internet gambling is one we ignore at our peril."

-Rep. James Leach

The Judiciary Committee's Subcommittee on Crime heard from Timothy Kelly, executive director of the National Gambling Impact Study Commission and Frank Catania, former director of the New Jersey Division of Gaming Enforcement and president of Catania Consulting Group Inc.

The testimony was part of a legislative session on H.R. 556, the Unlawful Internet Gambling Funding Prohibition Act, which was proposed by Rep. James Leach, R-Iowa, and H.R. 3215, the Combating Illegal Gambling Reform and Modernization Act, a product of Rep. Bob Goodlatte, R-Va., that was introduced on Nov. 1. Neither bill was marked up or voted on today.

Rep. Leach, whose bill would stem Net betting by making it illegal for Americans to use bank instruments, including credit cards, debit cards and checks, to pay for online gambling, opened the session by rehashing his case against the I-gaming.

"The problem of Internet gambling is one we ignore at our peril," he said.

Among I-gaming's drawbacks, he said, is that it puts problem gamers at risk of social and economic ruin and that it sends untold amounts of American cash offshore and into the hands of criminals, including the Russian mafia. Additionally, he said, the form of entertainment reduces jobs in competing economic sectors while creating few itself.

A main argument against Internet gambling, which caused Leach's bill to be initially included in anti-money laundering legislation that was a reaction to the Sept. 11 attacks, is that it is a money laundering venue for terrorists. This notion was on the minds of many at today's session.

"Internet gambling is a particularly attractive alternative to money launderers because of the heightened anonymity," Leach said.

Rep. Goodlatte, whose proposed legislation calls for the 1961 Interstate Wire Act to be updated to include technology such as the Internet, therefore outlawing online gambling, noted that his bill contains changes from the time an earlier version of it was introduced during the Clinton administration. The differences include amending the entire Wire Act rather than adding a new section specifically on the Internet.

"Money laundering, inherently, depends on stealth and online gaming can potentially, if effectively regulated, be one of the most watched and monitored forms of commerce."

-Frank Catania

"The effect of that is to make this legislation technology neutral," he said.

A second change gives power to the states to decide how they want to police their residents' gambling activities. He said this provision has garnered the bill the support of the North American Association of State & Provincial Lotteries.

"We very clearly draw the line at the state line and allow the states, as they traditionally have done, to regulate gambling within their state borders," Goodlatte said.

Kelly, the session's first guest speaker, outlined the results of the National Gambling Impact Study Commission's 1999 report, which included recommendations for a moratorium on the expansion of gambling and a prohibition of Internet gambling.

Appearing on behalf of the Interactive Gaming Council, Catania said he is in favor of regulating the industry.

"It is my contention that the solution lies in a strictly regulated alternative aimed at ensuring the presence of harm minimization measures, not the least of which relate to the protection of children and compulsive gamblers," he said.

Catania also said that, despite the recent connections drawn by legislators between Internet gambling and terrorists' money laundering activities, no one at any level of law enforcement has said terrorist groups use online casinos to launder money. Instead, he said, the electronic trail of online gambling transactions could be used to identify money launderers.

"Money laundering, inherently, depends on stealth and online gaming can potentially, if effectively regulated, be one of the most watched and monitored forms of commerce," he said.

During the session's question and answer section, Rep. Robert C. "Bobby" Scott, D-Va., asked what impact a U.S. law prohibiting the bill would have on an Internet casino run out of Afghanistan. Catania replied it would have no effect.

There was also significant back and forth between Catania and Goodlatte, who for part of the session filled in as chairman of the subcommittee when Rep. Lamar Smith, R-Texas, stepped out of the meeting. Goodlatte questioned the consultant about both the threat of terrorist-backed Internet casinos and the achievability of regulation. Catania said state-regulated Internet gambling is a realistic option.

"The Internet has a matter of trust," he said. "If Virginia has regulated Internet gambling, people would use the site that is licensed by their jurisdiction."