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Online Gaming Regulation Equals Protection Say US Experts

4th December 2009 10:26 am GMT

The House Financial Services Committee hearing on Thursday heard expert testimony from a number of witnesses and was presented with a new study by Harvard University, showing that U.S regulation of Internet gambling is the most effective way to protect consumers, particularly children and problem gamblers. At the same time, the staunchly pro-UIGEA Rep. Spencer Bachus used the occasion to cite new information from the FBI on the dangers posed by Internet gambling.

The study entitled 'Can Internet Gambling Be Effectively Regulated? Managing the Risks' was conducted by Harvard Professor Malcolm Sparrow on behalf of WiredSafety. The study evaluated and weighed the different types and levels of consumer risks associated with existing, mostly unregulated Internet gambling, against the risks associated with Internet gambling in a strictly-regulated environment. These risks included, amongst others, gambling by minors, problem gambling, money laundering and fraud.

The study reached three main conclusions; that online gambling could be regulated effectively if it were legalised and that a well-structured regulatory regime should provide much better social and consumer protections than the status quo for all of the identified risks. Finally, that even an imperfect legalisation and regulatory regime for online gambling would give Americans much more protection than they have now, since the current prohibitionist policy is extremely weak and large numbers of U.S residents already gamble online using offshore sites, many of which are poorly regulated or unregulated.

Meanwhile, Rep. Spencer Bachus continued his staunchly pro-UIGEA stance, citing new information from the FBI on the dangers posed by Internet gambling, despite industry leaders claiming that the dangers actually made the case for licensing and regulation.

In response to a letter from Bachus to FBI Director Robert S Mueller concerning questions relating to Internet gambling, FBI Assistant Director Shawn Henry replied last month that there was still no failsafe way to prevent children from falling prey to online gambling, and that technology existed to manipulate online poker games.

In his letter, Henry warned that online poker could be used for money laundering and that geolocation information could be manipulated to hide the physical location of players. He stated however that the FBI had no data on alleged incidents of online cheating and that the FBI's primary focus was on counterterrorism, counterintelligence and cyber threats to critical infrastructure.

"If Congress repeals the law, online casinos will proliferate. In the next five years, Chairman Frank, I feel that if you are successful in creating a federal right to gamble on the Internet, we will create a generation of millions of Americans who from their youth will be addicted to Internet gambling and, therefore, life-long problem gamblers," said Bachus.

Other witness testimonies provided further evidence to Committee members that a regulatory framework for Internet gambling would in fact protect consumers and ensure the integrity of Internet gambling financial transactions.

Keith Whyte, Executive Director of the National Council on Problem Gambling, discussed how online technology and controls can be utilised 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 behaviour. The amount of online information and possible interventions are essentially unlimited," he said.

The hearing also heard testimony from Robert Martin, Tribal Chairman of the Morongo Band of Mission Indians, Ms. Parry Aftab, Executive Director of Internet safety and help group WiredSafety, Youbet.com's Executive Chairman Michael Brodsky, Jim Dowling of Dowling Advisory Group, and Samuel A Vallandingham, CIO and VP of the First State Bank on behalf of the Independent Community Bankers of America.

"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, spokesperson for the Safe and Secure Internet Gambling Initiative.

"For too long, Congress has allowed Internet gambling to thrive in 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."

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