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It’s RAWA or the collapse of Wall Street, claims expert

26th March 2015 11:18 am GMT

While no one will shed any tears for gambling operators, Wednesday’s Congressional hearing on the Restoration of America’s Wire Act made for depressing viewing for supporters of rational debate.

The sessions saw a host of “expert” witnesses provide testimony on how the proliferation of online gaming will bring about the collapse of Wall Street, decimate families and encourage suicide.

Painting the US gambling industry, and even some State governments, as anti-American predators, Prof. John Warren Kindt of the University of Illinois provided testimony – mostly based on his own decades old papers – that internet gambling destabilises Wall Street and the financial stability of the United States.

He highlighted the 2006 “crash” of internet gambling stocks on the London Stock Exchange when billions of dollars were lost “as investors recognized these stocks were predicated on illusory gambling activities”. However, he failed to mention the role of the Unlawful Internet Gambling Enforcement Act (UIGEA) in bringing about the crash.

But Kindt is concerned about more than just the economy. He claims that internet gambling also destabilizes US national security in the fight against terrorism and destabilizes military readiness.

He even accuses the US gambling industry of “callously capitalizing on the 9-11 tragedy” to secure billions of dollars in federal tax breaks. And as for fantasy sports players, he suggests that they are also crooks who have exploited an “arguable UIGEA loophole” to “invest in a sort of hedge fund that trades fantasy sports”.

Les Bernal, national director of Stop Predatory Gambling, was also on hand to demonstrate how government-sponsored gambling is “dishonest” and contributes to “the rising unfairness and inequality in our country”.

According to Bernal, the issue at hand is not whether internet gambling is a states rights issue. He equates states rights on gambling with the ability of state governments to “force casino gambling and lottery games in to every bedroom, dorm room and smart phone in their communities, with the sole purpose of extracting more money, even though a strong majority of individuals in states don’t want it”.

He goes on to state that “at this moment in history, state governments across the United States are blatantly cheating and exploiting their own citizens, infringing on the rights of millions of Americans through the extreme forms of gambling they sponsor and market”.

Bernal asks: “If not the federal government, who will step in to protect the rights of individuals against these practices by an active, predatory state?”

Presenting the “let’s put the genie back in the bottle” argument, former Assistant US Attorney for the Eastern District of Missouri, Michael K. Fagan, testified that “Internet commerce has often been characterized as destroying or, at least, significantly and adversely changing previously well-established trades,” such as newspapers and bookstores.

He states that internet gambling may initially help drive 8-10 per cent of internet gamblers to visit a land-based casino, but in the long term, he predicts that land-based employees will lose their jobs.

According to Bernal, “ten or so years ago people thought access to information on the Internet would drive people to increased reliance on newspapers, too – and look how that’s turned out”.

Andrew Moylan of R Street Institute limited his testimony to the impact that RAWA would have on the scope of federal law. While acknowledging that a broad range of views exist on gambling as an activity, he said that there was a broad consensus that the federal government is too large and too powerful.

“This is in no small part due to a decades-long trend of ever-expanding assertions of federal power by Congress and a compliant judiciary that has validated those assertions. It is this troubling trend, rather than the activity of gambling itself, which motivates my comments to you,” he said.

Moylan explained that his primary concern is protecting limited government in the internet age. He states that as currently written, RAWA appears to regulate wholly interstate activity.

“To treat all use of the Internet, no matter its nature, no matter the individuals or entities it might connect, as ‘per se interstate’ and thus subject to Commerce Clause regulation, would constitute an enormous shove down the slippery slope toward federal power without meaningful limits,” he says.

He adds that RAWA’s potential overreach in failing to exempt intrastate activity is unwise from the perspective of federalism, but could also prove largely unnecessary.

“If a state wishes to prohibit gambling within its borders, it has sufficient power to do so and sufficient legal remedies at its disposal. States are free to ban some or all gambling activity within their borders, both on an institutional and individual level.”

The only expert to testify about the dangers of an unregulated online gaming market was WiredSafety executive director Parry Aftab, who explained that “while all gambling is, by its nature, risky, unregulated gambling is the most risky”.

“It is ironic that a cybersafety charity would oppose the criminalization and recommend the legalization and strict regulation of online gambling. It is counter-intuitive at first glance,” she says. “But as much as I understand and am sympathetic to the concerns of the sponsors of H.R. 707 and others who would try to prohibit Internet gambling in the United States, I respectfully believe that while well-intended, these efforts are not well-founded.”

Aftab argues that a far better approach to addressing the risks associated with gambling is to licence and strictly regulate the activity.

“I have heard claims about our kids being more exposed to online gambling if sites are licensed and regulated in the US. I have heard claims about parents being up-at-arms. I have heard vacant arguments and seen expensive sites, campaigns and promotions targeting online gambling in the US. But, this is too important for claims. It’s too important for glossy campaigns attempting to spread misinformation and hype. We shouldn’t have to make unfounded claims, when we have proof that it works,” she said.

“We have evidence that the well-constructed regulation of online gambling, in fact, works around the world and is working effectively in the US.”

Citing the experience of almost two years of online gaming regulation in Nevada and New Jersey, Aftab points out that with the exception of a handful of incidents which were quickly addressed, all stakeholders are safer and minors are being locked out of online gambling sites.

“It is much easier for them to get fake IDs and wander into a brick and mortar casino than get past the levels of age-gating used by online casinos. If you can’t prove that you are an adult, the site is closed to you. Period.”

“After more than two decades analyzing the risks posed by unregulated Internet gambling, I have reached the firm conclusion that the best way to protect families and consumers in connection with online gambling is regulating it, not prohibiting it,” Aftab concluded. “Laws attempting to prohibit Internet gambling haven’t worked, will not work, and cannot work in today’s digital commerce environment.”

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