On Wednesday, the United States Senate Subcommittee on Consumer Protection, Product Safety, and Insurance held a hearing to discuss consumer protections in the internet gambling industry. With recent introductions of an internet gambling bill from Peter King(R-NY) and an online poker bill from Joe Barton (R-TX), the hearing was quite well timed.

The proceedings began around 10:25am ET with what looked like about five lawmakers seated and others filing in and out during the 80-minute hearing. Senator Claire McCaskill(D-MO, pictured) began by saying, “I fully expect more states to move ahead with legalized internet gambling… I expect to see states authorize interstate compacts.”

She then questioned how broadened internet gambling will affect consumer protections, pointing out the anonymity of the internet: “The internet provides anonymity to players, a luxury not afforded to criminals and fraudsters in the real world… Is the current state-based regulatory regime prepared to handle all of these potential problems?”

Dean Heller (R-NV) explained, “The floodgates are now open to states legalizing all forms of gambling… No discussion has been had as to what consumer protections will be afforded, if any, under the patchwork regulations.” Heller specifically mentioned challenges including terrorism, cheating, identity theft, age verification, and geo-location. He added, “Poker, a game of skill, not a game of chance, is different from other house-banked games.”

Roy Blunt (R-MO) told those in attendance that he was in the House of Representatives in 2006 when the UIGEA was passed: “I supported it. It leaned heavily on the Wire Act… The new interpretation [of the Wire Act]has opened the door to many unintended consequences.” You’ll recall that in late 2011, the DOJ decreed that the Wire Act only applies to online wagering on sports.

The first of four witnesses to provide testimony was Chuck Canterbury, National President of the Fraternal Order of Police, who remarked, “It’s clear that the Wire Act is an old law ill-suited to address our problems.”

He singled out the nation of Costa Rica as a money laundering center and explained, “We know that organized crime is using offshore organizations to launder their profits… There are indications that terrorists in Afghanistan have been using illegal gambling sites to launder their money… U.S. law enforcement can rise to the challenge and successfully attack online money laundering, fraud, and illegal gambling… It is vital that we address this issue before we fall even further behind.”

Matt Smith, President of the Catholic Advocate, urged Congressional action to prevent online gambling expansion.

D.C. attorney Jack Blum opened his testimony by saying, “I think gambling is dumb and I don’t do it.” After a laugh, he gave a rather exhaustive history about connections between organized crime and gambling, saying, “The problem of going on the internet has made the issue of licensing even more important. Who is it that has this internet casino? Is it someone legitimate?”

Blum mentioned Bitcoins as a way the gaming industry has evolved over time and stressed, “In truth, a casino is a bank.” He advocated a Federal scheme penalizing offshore sites.

Wrapping up the witness panel was Thomas Grissen, CEO of Daon, a firm specializing in biometric identity assurance products for large enterprises. Grissen pulled out an Apple device to initiate a transfer of money between a savings account and a checking account. The app asked him to take a picture of himself and speak a sentence in order to verify his identity. He urged any Congressional members to try posing as him, saying, “You will be denied.”

McCaskill then spoke and noted that she had been inundated with online poker-related Tweets in recent days. She was a bit skeptical of Grissen’s technology’s applicability, saying, “A lot of the people play online poker because they don’t want to do it in public. They don’t want to go to a brick and mortar place. I’m respectful of the technology, but it creates a real friction with those people who want privacy.”

Heller (pictured) contended that the Obama Administration did a favor to Illinois and New York in allowing online lottery ticket sales in late 2011 with the Wire Act clarification, using the phrase “friends helping friends.” He assessed, “It’s because of the actions of this White House that we are where we are today.”

A question and answer session followed, with Canterbury at one point contending that the issue needs a Congressional fix: “Law enforcement can’t attack these problems with 50 laws.” Blum echoed, “The current situation is absolute open season… You wouldn’t have service providers offering complete software packages if someone didn’t want to use a casino for nefarious purposes.”

We’ll give the last word on the hearing to Kelly Ayotte (R-NH), who called for action: “What we have here is a free for all… Shame on us if we don’t get something done about this.”

No follow-up hearing in the Senate Committee on Commerce, Science, and Transportation was announced. We’ll keep you posted on the latest poker legislation news right here on PocketFives.

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