Washington, D.C., Dec. 3, 2009 — Experts in the fields of online security and consumer safety testified today before the House Committee on Financial Services to address legislation introduced by Chairman Barney Frank (D-MA) that would regulate Internet gambling in the United States. Witness testimonies provided further evidence to Committee members that a regulatory framework for Internet gambling would protect consumers and ensure the integrity of Internet gambling financial transactions. Chairman Frank has previously indicated interest in having the House Financial Services Committee vote on his legislation, the Internet Gambling Regulation, Consumer Protection and Enforcement Act of 2009 (H.R. 2267) as the next step in getting the bill enacted into law during this Congress.

The hearing highlighted the success of existing systems and technologies in blocking minors from gambling online, combating compulsive gambling and protecting consumers against money laundering, fraud and identity theft.

Protecting Consumers Online

Parry Aftab, executive director of WiredSafety, the largest Internet safety and help group in the world, concluded in her testimony that regulation provides the best opportunity to protect consumers.

“The status quo offers no meaningful assurances that consumers will be protected,” stated Aftab. “[T]here are a number of technologies routinely used in other industries that were easily adaptable to online gambling sites. They are real, proven and in use today. They are also improving by the minute.”

A comprehensive study conducted by Harvard University’s John F. Kennedy School of Government and presented by Professor Malcolm K. Sparrow further reinforced the consumer benefits of regulation.

In the Harvard study, “Can Internet Gambling Be Effectively Regulated? Managing the Risks,” which was released at today’s hearing, Professor Sparrow states, “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. Combining a thoughtful regulatory scheme with education, technology tools, and support appears to be the most effective means of handling the realities and risks of online gambling in the United States…In the end, consumers in the United States would be better protected than they are now.”

Implementing Existing Technology

Michael Brodsky, executive chairman of Youbet.com, a provider of pari-mutuel horse racing content for consumers through Internet and telephone platforms, testified that existing technology can be utilized to successfully regulate Internet gambling.

“Today at Youbet we use technology that would ensure effective regulation of Internet gambling. The already-existing, totally legal, online pari-mutuel horserace wagering industry is a U.S.-based model of how to provide a responsible online wagering experience for adults – one that is clean, regulated and scrupulous about both collecting and paying taxes,” stated Brodsky.

While existing federal laws generally prohibit online wagering, Congress has allowed domestic companies like Youbet.com to accept online wagers for horse racing, despite a Justice Department position that such wagers remain illegal.

Combating Compulsive Gambling

In his testimony, Keith Whyte, executive director of the National Council on Problem Gambling, the U.S. advocate for programs and services to assist problem gamblers and their families, discussed how online technology and controls can be utilized to better help combat compulsive gambling than can be done in the existing land-based industry.

“The graphical and interactive structure of the internet provides an opportunity to create informed consumers with access to a variety of information designed to encourage safe choices and discourage unsafe behavior,” stated Whyte. “The amount of online information and possible interventions are essentially unlimited.”

Legislative Movement on Internet Gambling

The hearing follows the recent announcement by the Federal Reserve and Department of the Treasury to extend the date for compliance with the final Unlawful Internet Gambling Enforcement Act (UIGEA) regulations by six months to June 1, 2010. The delay, Chairman Frank previously stated “…will give us a chance to act in an unhurried manner on my legislation to undo this regulatory excess by the Bush administration and to undo this ill-advised law.” Chairman Frank’s statement implies he will seek to have his regulatory bill enacted prior to June 1, 2010.

“Today’s hearing and the testimony presented showcased the opportunity to effectively regulate Internet gambling, further laying the groundwork for a vote on Chairman Frank’s regulatory bill,” said Michael Waxman, a spokesperson for the Safe and Secure Internet Gambling Initiative. “For too long, Congress has allowed Internet gambling to thrive an underground marketplace, since UIGEA and attempts to prohibit the activity have failed. We hope Congress doesn’t allow much more time to pass before acting to protect consumers and collect billions in much-needed new revenue through adoption of Chairman Frank’s bill.”

The Internet Gambling Regulation, Consumer Protection and Enforcement Act of 2009 (H.R. 2267), introduced by Chairman Frank in May 2009, cosponsored by 63 members of Congress, would establish a framework to permit licensed gambling operators to accept wagers from individuals in the U.S. In addition to consumer protections, the legislation reinforces the rights of each state and tribe to determine whether to allow Internet gambling activity for people accessing the Internet within the state or territory and to apply other restrictions on the activity as determined necessary.

The Joint Committee on Taxation projects up to $42 billion over 10 years would be generated for the U.S. Treasury in a regulated environment with the passage of Chairman Frank’s bill along with a companion bill introduced by Rep. Jim McDermott (D-WA), the Internet Gambling Regulation and Tax Enforcement Act (H.R. 2268). The primary source of this revenue would come from ensuring that applicable individual and corporate taxes and license fees on regulated Internet gambling activities are collected.

For additional information on the hearing and complete witness testimonies, please visit the House Committee on Financial Services Web site.