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Senators See Red Over Online Gambling

The Senate Commerce Subcommittee
on Consumer Protection held a hearing on Internet gambling, but as with
anything Internet related in Washington these days, the discussion ranged from
cybersecurity and advertising to online privacy and protecting kids.

The hearing, "The Expansion of
Internet Gambling: Assessing Consumer Protection Concerns," made it clear
that the issue went far beyond who was putting their money on red or black from
the comfort of their laptops or smartphones.

Full Committee chairman Jay
Rockefeller (D-W. Va.) made that clear in his opening statement, in which he
pointed to the using gaming sites to launder money for terrorist groups. In
addition, he said, "We've also got to take a hard look at consumer
protections, and how we're going to fix any existing gaps that allow underage
gambling or otherwise leave consumers vulnerable to fraud and abuse."

Subcommittee Ranking Member Dean
Heller (R-Nev.), from a state that knows a little about gambling on and
offline, relayed the story of a friend whose child had gambled away their college
tuition on an online site. He said that his phone had rung off the hook from
both sides of the issue of online gaming. He said it was an important issue,
and preventing problems -- like access by minors and potential for money
laundering to fund terrorism -- "should be a priority of this

At the hearing, Sen. Mark Pryor
(D-Ark.), chair of the Communications Subcommittee, briefly pointed out that
his subcommittee had struggled with the tech issues of whether parents should
have a blocking mechanism to control access to the Web and that he was
interested in the gaming issue as well and wanted to work with his colleagues
on the subcommittee.

Sen. Richard Blumenthal (D-Conn.)
focused on the data protection issues of gambling sites having info on site
users and his concern over the opportunity to steal that online info. Attorney
Jack Blum, a witness at the hearing, shared that concern. He said it was a huge
problem and suggested that if he were a Russian "crook" he would open
a casino, collect credit card info, then close down a week later.

Blumenthal said that Congress had
"a clear moral and economic imperative to prevent abuses and wrongdoing
that are inherent, almost inescapable, in this form or gambling."

Chuck Canterbury, president of the
Fraternal Order of Police, said he was not anti-gambling, particularly state or
local governments getting into the online lottery business since that could
help pay his members paychecks. But he did say the feds needed to come up with
standards for enforcing protections for children and others, saying local law
enforcement did not have the resources to monitor offshore sites.

He conceded that local law
enforcement is going to prioritize armed robberies and burglaries over offshore
gambling sites.

Blum agreed that localities did
not have the resource to police Internet gambling. He called for creating
federal oversight through a new entity -- a sort of FGC, or Federal Gaming
Commission -- rather than through any existing agency. He pointed out that the
IRS is "deep in its own trouble," with not enough resources. He said
his model would be some type of federal entity, financed by the people who seek
licenses and with industry expertise.

Blum said the money laundering potential in
gaming sites was obvious, citing a Bermuda service provider that also provides
turnkey gaming sites, with such sites also linked to porn sites as another way
to move and shield money and owned by companies nobody can identify. That is
"guaranteed trouble," he said.