Wired Safety letter to House Financial Services Committee | Gambling | Internet

July 23,2010 The Honorable Barney Frank Chainnan Committee on Financial Services U.S.

House of Representatives 2129 Rayburn HOB Washington, DC 20515 Dear Chairman Frank and Ranking Member Bachus: As the Committee prepares for the July 27 markup hearing on H.R. 2267, the Intemet Gambling Regulation, Consumer Protection, and Enforcement Act, I respectfully request that you give serious consideration to the benefits of astrong regulatory regime for Internet gambling in which consumer protection is acentral focus. I previously addressed the existing risks associated with unregulated Intemet gambling as well as the benefits of legalization and smct regulation in testimony I provided to the Committee at its December 3,2009 hearing on H.R. 2267. Today I want to highlight for you some of the main conclusions of that testimony, which is included in its entirety as an attachment to this letter. First though let me provide some perspective on my involvement in issues associated with unregulated Intemet gambling. Internet gambling is not a new issue for my organization WiredSafety, the largest online safety and educational program in cyberspace. We identified online gambling by minors as a problem in 1995. Kids were already gambling online - illegally, but gambling nonetheless­ - using babysitting, paper-delivery and birthday money. They contacted us when the websites failed to payout, or they suspected fraud. Parents contacted us when they discovered their teens gambling, or wanted help keeping them away from gambling sites. We helped when we could, but minors' gambling remains a problem, as does fraud by unregulated gambling websites. Rigged games and collusion using old-fashioned and digital methods are common. There may be no safeguards against criminals from using these sites to launder money. And protections against problem gambling are virtually nonexistent. After more than adecade analyzing the risks posed by unregulated internet gambling, and after commissioning researchers at Harvard's Kennedy School of Government to inventory and evaluate those risks and mitigating technologies, I have reached the conclusion that the best way to protect families and consumers is via legalization, not prohibition. We pretend that online gambling is outlawed and therefore unavailable to US residents, but the statistics reflect otherwise: Americans, The Honorable Spencer Bachus Ranking Member Committee on Financial Services U.S. House of Representatives B371 a Rayburn HOB Washington, DC 20515

including more than 700,000 between ages 14 and 22 who play at least monthly, spend approximately $6 billion per year on Internet gambling and that figure is on the rise. The unintended but inevitable result of the current U.S. legal approach to internet gambling is to force millions of American consumers to offshore sites out of the reach of U.S. courts and regulators and exposing U.S. citizens to significant risks without legal recourse. Prohibition isn't working here any better than it did during the days of AI Capone. People will find ways to place a bet online. As a result, the U.S. finds itself in the unfortunate position of incurring all the social costs of online gambling while having abdicated control over the gaming sites accessed by its consumers. With unregulated internet gambling there is no one to tum to for help when the player suspects fraud, or winnings are not paid. Who will make sure these sites are following established rules or using state-of-the-art security practices and technologies? How do we keep them from attempting to lure teens to set up accounts? Or what do we tell a senior citizen who has been defrauded into gambling away all their savings? While all gambling is, by its nature, risky, unregulated gambling is the most risky. Frankly, we need governmental help. The status quo offers no meaningful assurances that consumers will be protected. In fact, they are on their own. However, strict and smart regulation, coupled with technology, would offer significant improvements to all the risks associated with Internet gambling. Even if the risks are not fully eradicated, they will be seriously mitigated. In contrast to unregulated sites, well regulated overseas gambling jurisdictions require identity, location, and age verification and use existing technologies to confirm an individual's information. These technologies when coupled with a strong regulatory environment, like those that exist in places like the United Kingdom, effectively exclude minors. If we are serious about protecting consumers, we must recognize that online gambling is real and growing. We owe it to Americans to address it intelligently. The best way to address its risks is by developing a strong regulatory regime where consumers are protected - not by wishing Internet gambling would go away on its own, but by comprehensive regulations and sanctions to ensure that vulnerable populations are not exploited. Additional detail on my perspective is provided in the attached testimony. Thank you again for your time and consideration.



"reg a s, . --. ....

Parry Aftab, Esq,
Executive Director
Wired Safety

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