House Subcommittee Hears Testimony on Online Gambling Regulation

On October 25, 2001, the U.S. House Energy and Commerce Committee’s Subcommittee on Commerce, Manufacturing, and Trade held a hearing on the state of online gambling and the potential impact of regulation. A wide range of testimony was given by varied groups, most of it coming down in favor of taxing and regulating. Given the Joint Select Committee on Deficit Reduction, also known as the Supercommittee, and its mandate to issue a formal recommendation on reducing the budget deficit by at least $1.5 trillion over the next decade, the time seems right to get such legislation passed.

Online gambling has a rocky history in the U.S. In the early 2000’s the Bush administration attempted to use the Wire Act, mostly unsuccessfully, to prosecute online gambling; federal courts have typically held that the Wire Act only applies to online sports betting, not online gambling in general. The Bush administration responded by sneaking the Unlawful Internet Gambling Act of 2006 (UIGEA) into the SAFE Port Act as a last-minute amendment that received almost no review. The UIGEA prohibits payment processors from accepting payments in connection with unlawful online gambling, but neglects to specify what types are unlawful. The UIGEA did cause a number of large online gambling sites to pull out of the U.S. market, but the market quickly recovered and continued to grow, with online poker being a particularly popular form. On April 15, 2011, the Department of Justice seized the domain names and froze the domestic assets of three of the largest online poker sites; Poker Stars, Full Tilt Poker, and Absolute Poker. These sites no longer operate within the U.S. although many smaller sites still operate domestically.

The October 25th hearing may have marked a turning point in online gambling in the U.S. Over the past few years, numerous pieces of legislation were drafted, and at least one was formally introduced. Yet most have stalled in either the drafting or committee review stage. The recent hearing, however, shows that the momentum may have finally shifted. There was key discussion about how regulation could help with consumer protection, and subcommittee members spoke in favor of regulating online poker in particular. Perhaps surprisingly, the National District Attorney’s Association issued a statement supporting online poker. Likewise, the National Council on Problem Gambling, while recognizing that online gambling may increase the danger of gambling addiction, explained how technology could be used to help combat compulsive gambling more effectively in an online setting than in traditional casinos. Finally, former FBI Director Louis Freeh submitted testimony in favor of regulating online poker. Given the potentially large source of revenue that taxing and regulating online gambling could bring to federal and state governments, along with its widespread popular support, it is time for Congress to stop forcing online gambling underground, and instead license and regulate it to provide a safe environment for the players and much needed revenue for the government.