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Emily D. Swoboda

US Rep. Wexler Blasts DOJ at Enforcement Hearing

14 November 2007

The House Committee on the Judiciary heard testimony today on the effectiveness of the enforcement of the Unlawful Internet Gambling Enforcement Act, but the Department of Justice's prosecution methods and the U.S. trade dispute with Antigua stood out as highlights of the hearing.

Catherine Hanaway, U.S. Attorney for the Eastern District of Missouri, was there to testify on behalf of the DOJ, but spent more time defending its perhaps questionable position on Internet gambling. She said the DOJ considers all forms of Internet gambling illegal and will continue prosecutions.

"Internet gambling poses unacceptable risk due to the potential for gambling by minors and compulsive gambling," she testified.

Hanaway said Internet gambling carries with it the potential for fraud, money laundering and the involvement of organized crime.

She conceded, however, that no case of online gambling-related money laundering has been proven.

She said the government has ample authority to make cases against law-breakers without the UIGEA, but wouldn't recommend doing away with it.

Rep. Robert Wexler, D-Fl., questioned why the DOJ has taken to practicing selective prosecution when it comes to Internet gambling.

"As I understand it, we don't prohibit horse wagering on the Internet, yet you testify that it's the Department of Justice's position that all forms of Internet gambling are prohibited," Wexler asked Hanaway. "If that's the case, why aren't we prosecuting every lottery director in America? Why aren't we prosecuting everybody who shows up at every off track horse betting establishment in America? Why aren't we prosecuting every fantasy sports outlet in America? Where am I getting this wrong?"

Hanaway said that the DOJ does take the position that online horse wagering is illegal and has prosecuted cases under the Wire Act.

"Has the Department of Justice shut down a single e-lottery system in the United States, and if you haven't, why not?" Wexler asked Hanaway.

Hanaway did not know the answer to Wexler's question, but offered to find out and submit it in writing.

"The beauty of the Department of Justice's position as you enunciate it, which is 'all forms of Internet gambling are prohibited,' means there's no grey area: shut it all down," Wexler said. "So, when we see selective enforcement that's what suggests a very untoward result in some of our minds."

The committee heard arguments on states' rights. Many states have legalized online gambling activities such as lotteries and horse racing. The legalization of these activities, but the prohibition of others led to the nearly five-year World Trade Organization dispute between the United States and the twin-island nation of Antigua and Barbuda over the United States' selective attitude toward online gambling.

Professor Joseph Weiler of the New York University School of Law is an expert on international law. He said that while the WTO does not oblige the United States to have legal remote gambling, it does not allow it to pick and choose which activities to legalize.

He added that there is no question that the U.S. ban on Internet gambling is a violation of its WTO commitments.

The ongoing dispute has resulted in three rulings against the United States at the WTO. Each ruling has ordered the United States to bring its laws into compliance with international trade laws under the WTO and the General Agreement on Trade in Services, which was signed in 1995. But, rather than comply with the rulings, the U.S. government has chosen to withdraw gambling services from its GATS commitments.

"Our country is the trendsetter and leader in so many international arenas," Weiler said. "Whether we like it or not, we lead by example. This is not a good example."

An industry insider with knowledge of the situation felt that Weiler's testimony had the most impact on the hearing as it demonstrated the implications of the WTO situation on not only the United States but the Internet gambling industry.

"Joseph Weiler's commentary was dramatic and far-reaching and it has implications for the industry across the globe," the insider said. "He really dominated the hearing with what he had to say. Everyone else had more of the same, but he put a new spin on the whole conundrum of legalizing online gambling and allowing free access to the online gambling market in the United States."

Jeffrey Sandman, spokesman for the Safe and Secure Internet Gambling Initiative, which promotes the Internet Gambling Regulation and Enforcement Act (H.R. 2046), said the hearing clearly demonstrated Congress' need to reverse its current policies on Internet gambling.

"Instead of prohibiting Internet gambling, which is futile and denies Americans the freedom to decide whether to gamble online, the government should regulate and tax Internet gambling," Sandman said. "Regulated Internet gambling would ensure proven and effective security controls are available to protect consumers and capture billions in revenue that is needed for critical government programs."

Other witnesses included Valerie Abend, deputy assistant secretary for the U.S. Treasury, who testified on the long-overdue draft regulations for the UIGEA, which were just published on Oct. 1.

A public comment period on the proposed rule is scheduled to close Dec. 12, and Abend said the U.S. Treasury is expecting a large number of responses and would have to provide analysis and reasons for any decisions based on the comments received.

She did concede that the regulations would have no way of policing transactions through offshore bank accounts.

Abend could not say when the regulations would be complete and enforceable, but it has been said that it would be an additional six months after completion of the public comment period.

The committee also heard from Rep. Shelley Berkley, D-Nev., who has introduced the Internet Gaming Study Act; Rep. Bob Goodlatte, R-Va., a long-time opponent of Internet gambling; Tom McClusky, VP of the Family Research Council; professional poker player Annie Duke; and Michael Colopy from Aristotle.

Click here to read the full testimony of Professor Joseph Weiler.

Click here to read the full testimony of Rep. Bob Goodlatte.

Click here to read the full testimony of Rep. Shelley Berkley.

Click here to read the full testimony of Catherine Hanaway.

Click here to read the full testimony of the Safe and Secure Internet Gambling Initiative.

Click here to read the full testimony of Michael Colopy.

Click here to read the full testimony of Annie Duke.

Click here to read the full testimony of Valerie Abend.

US Rep. Wexler Blasts DOJ at Enforcement Hearing is republished from
Emily D. Swoboda
Emily D. Swoboda