Thank you, Mr. Chairman and Members of the Subcommittee, for providing me this opportunity to provide the Subcommittee with the Department of Justice’s views on Internet gambling and H.R. 3125, the "Internet Gambling Prohibition Act of 1999."
The growing availability of emerging technologies has had a prolific effect on gambling. The Internet and other new technologies have made possible types of gambling that were not feasible a few years ago. For example, a U.S. citizen can now log on from his living room and participate in an interactive Internet poker game operated from a computer located in Antigua. Not only have the Internet and other new technologies brought gambling into the home, they have made it anonymous and readily available to virtually anyone at any time and at any place where there is an Internet hookup. As a result, the number of Internet gambling sites operating illegal betting and wagering businesses online has increased at an alarmingly rapid rate. The Department is deeply troubled by this proliferation of gambling on the Internet for three reasons.
First, since the Internet allows virtually instantaneous and anonymous communication that is difficult to trace to a particular individual or organization, the potential for operators of Internet gambling sites to successfully defraud their customers is significantly greater than with traditional casino-style gambling. Fraudulent activities can range from credit card fraud to the manipulation of gambling odds. Of course -- and as the Deputy Attorney General noted before this Subcommittee on February 29th -- we recognize that there are legitimate reasons to allow anonymity in communications networks. A whistleblower or a member of a battered woman’s support group, for example, may understandably wish to use the Internet and other new technologies to communicate with others without revealing his or her identify. Nonetheless, such admittedly legitimate uses for anonymity on the Internet involve legal activities and are inapplicable in connection with gambling on the Internet, which is illegal.
Second, because the Internet provides people with virtually unfettered access to the opportunity to gamble at any time and from any place, Internet gaming presents a greater danger for compulsive gamblers and can cause severe financial consequences for an unsuccessful player.
Last, because the Internet is both anonymous and widely available, it is much more difficult to prevent minors from gambling. Currently, Internet gambling businesses have no reliable way of confirming that gamblers are not minors who have gained access to a credit card and are gambling on their web sites.
Despite the proliferation of Internet gambling, the Department is optimistic about its ability to combat this form of illegal gambling. Just last week, a jury in federal district court in New York found Jay Cohen, the owner of an Internet gambling site in Antigua, guilty of violating 18 U.S.C. § 1084, a statute that makes it illegal for a betting or wagering business to use a wire communication facility to transmit bets or wagers in interstate or foreign commerce. Several of the counts for which Mr. Cohen was found guilty solely involved his Internet operations. That is not to say that section 1084, as written, will apply in every case. As I will explain later in my testimony, the Department believes that the statute may need to be amended to assist us in our efforts against gambling and organized crime.
Before I discuss that, however, let me say that the Department has reviewed H.R. 3125 in great detail and is very concerned about how it proposes to deal with Internet gambling. The Department is most concerned about the following three issues.
First, the Department is concerned that the bill does not really prohibit Internet gambling, but rather facilitates certain types of gambling from the home and, therefore, arguably expands gambling opportunities. Specifically, the Department recognizes that H.R. 3125 exempts parimutuel wagering from the prohibition against Internet gambling. The result is that people will be able to bet on horse racing, dog racing, and jai alai from their living rooms. While the bill provides that such gambling must be done on a "closed loop subscriber based service," the definition of that term is extremely broad. I could receive a free disk in the mail, load it on my computer, connect through my regular Internet service provider, and start betting on horse racing from my living room. Additionally, if my children have access to that same computer, they may also be able to get online and bet and wager on parimutuel activities.
Simply stated, the Department does not understand why the parimutuel wagering industry should be allowed to accept bets from people in their homes, when other forms of gambling have rightly been prohibited from doing so. The same concerns that we have expressed about children and compulsive gamblers having unfettered access to gambling via the Internet is true whether the betting is on horse races or on casino games.
Related to this point is the Department’s second concern that the passing of H.R. 3125 will allow gambling online that currently is not allowed in the physical world. For example, people cannot not currently legally call gambling businesses in others states from their homes and place bets on horse races. Yet, H.R. 3125 would allow them to place the same such bets over the Internet. It is hard for the Department to understand why conduct previously deemed unacceptable in the physical world and over the telephone should now be legal when carried out in cyberspace.
Third, H.R. 3125 is not technology-neutral, but applies only to Internet gambling while leaving the existing prohibition on gambling over "wire communication facilities" in general unchanged. While the Department is generally concerned about legislation designed for particular technologies such as the Internet, it is specifically troubled here by the creation of two inconsistent gambling prohibitions - one expressly for the Internet and a different one for the use of wire communication facilities (which includes the Internet).
Indeed, any effort to distinguish Internet transmission from other methods of communication is likely to create artificial and unworkable distinctions. For example, we expect digital Internet telephony to grow in popularity over the next few years. How would we deal with gambling that occurred over this technology, which would use the Internet or other packet-switched networks for pure voice communications? Would it be under the proposed section 1085, which is designed specifically for the Internet, or under section 1084, which deals with wire communications in general (but also includes the Internet)? This is especially problematic, as section 1084 and the new section 1085 proposed by H.R. 3125 would have different standards and punishments.
The Department urges Congress to identify the conduct that it is trying to prohibit and then to prohibit that conduct in technology-neutral terms. The fact that gambling, an age-old crime, has gone high-tech and can now be done through the Internet, is no reason to pass new laws that specifically target the Internet for regulation. Passing laws that are technology-specific can create overlapping and conflicting laws prohibiting the same activity, but with different legal standards and punishments. This will be the result if H.R. 3125 is enacted in its current form. We will have both section 1084, which we’ve used to prosecute Internet gambling, and a new section 1085 which would prohibit some, but not all, types of Internet gambling. This overlap in the statutes can only complicate law enforcement’s efforts on the Internet gambling front.
The Department encourages Congress, especially as it encounters more traditional crimes online, to ensure that existing laws are sufficient and technology-neutral in their approach and do not single out the Internet for regulation. If existing laws are deemed insufficient, please consider legislation, whether prohibitive or permissive, which focuses on specific conduct and not on the specific medium employed to perpetrate that conduct.
One last problem with H.R. 3125 that the Department has identified involves the bill’s silence on Indian gaming issues. The Department believes that any Internet gambling legislation should not repeal or amend the rights or privileges secured tribes under IGRA. Of course, to the extent that Indian Tribes seek to offer gaming to citizens of various states, where such gaming does not take place solely on Indian lands and is not otherwise authorized by law, there is no compelling reason to exempt Indian Tribes from the otherwise generally applicable provisions of the legislation for such off-reservation gambling.
For all of the reasons I’ve discussed, the Department urges Congress to amend existing gambling laws, rather than create a new technology-specific statutory scheme.
As I noted earlier, section 1084 criminalizes those betting and wagering businesses that transmit bets or wagers on sporting events or contests over the Internet. The Department recognizes, however, that section 1084, which was enacted almost forty years ago, may need to be amended to bring it into the 21st Century. The Department believes that this can be done through the following actions:
(2) Adding several definitions to 18 U.S.C. § 1081. For example, we would recommend adding the following definitions for "transmission," "bets or wagers," and "information assisting in the placing of bets or wagers."
(3) Amending section 1084 to specifically cover those individuals in the betting and wagering business who are located outside the territorial jurisdiction of the United States, when those individuals knowingly facilitate or aid in unlawful betting and wagering by transmitting a bet or wager to or from an individual located within the United States. While the current statute includes those transmissions involving interstate and foreign commerce, it is unclear whether the statute would cover someone on a boat in the middle of the Atlantic Ocean who is using a cellular phone to take bets or wagers from a U.S. citizen located in Miami.
(4) Requiring any person, not just a common carrier, that provides a facility to an individual in the business of betting and wagering to disconnect service when served with proper lawful process by law enforcement agencies. We would also extend the same protections against liability contained in the existing statute for common carriers to these persons.
(5) Clarifying that section 1084 does not repeal or amend the rights or privileges secured tribes under IGRA.
(6) Clarifying that section 1084 does not prohibit how states are currently legally using communication facilities in the operation of multi-state lotteries.
I want to thank the Subcommittee again for asking me to present
the Department’s views on Internet gambling. I would now be pleased
to answer any questions you may have.
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