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April 16, 2014

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Another argument for federally regulated online gambling: Thwarting terrorists

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Julie Jacobson / AP

Casino industry representatives and exhibitors watch an online poker game during industry’s G2E conference, Tuesday, Oct. 4, 2011, in Las Vegas.

Dean Heller

Dean Heller

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Surrounded by Nevada legislators, Gov. Brian Sandoval signs an online poker bill into law, Thursday, Feb. 21, 2013. The law will allow Nevada to move ahead with online poker in the absence of federal action.

The case for federal online poker legislation was once about adults’ freedom to spend their money as they like and states’ need for an extra source of revenue.

When that fell flat, online poker advocates regrouped and began calling for federal legislation as a way to combat gambling addiction and abuses, especially among children and senior citizens.

But Wednesday morning, a panel of experts Sen. Dean Heller gathered before the Senate Commerce Committee’s Subcommittee on Consumer Protection argued that the chief reasons to pass federal internet gambling legislation were a need to stop money laundering and stymie terrorists.

“There are indications that terrorists in Afghanistan have been using online gaming to launder their funds,” said Chuck Canterbury, national director of the Fraternal Order of Police. “There is no legal or regulatory framework for law enforcement to shut down this activity.”

The hearing on the expansion of online gambling — the first official action on the subject in the Senate this year — was called to hear from experts about the best ways to rein in the current “free for all,” as Heller put it, of online gambling access and regulation across the country.

The assembled senators and panel of experts had high praise for the Unlawful Internet Gambling Enforcement Act, the 2006 law that rendered interstate banking transactions to process gaming payments and wagers illegal. They also had significant criticism for the December 2011 reading of the 1961 Wire Act that allowed states to legalize online gaming transactions within their own states.

“The reason the administration changed this was so their friends in Illinois and New York could put their lottery tickets online,” Heller said. “With one decision, the DOJ effectively rendered all laws that have been on our books, put together by members of Congress over 50 years...useless to regulate and stop Internet gambling.”

Subcommittee Chairwoman Claire McCaskill, meanwhile, worried that interstate compacts between states that have legalized the same type of gaming laws “will make it incredibly easy for consumers to gamble across interstate lines.”

“Online gambling is inherently an interstate matter,” she said. “The borderless Internet does not recognize the boundaries and jurisdictions of individual states.”

But universal reproach for the reinterpretation of the 1961 Wire Act and a shared sentiment that the federal government needs to do something to combating illegal gambling did not bring the room any closer to agreeing on just what steps ought to be taken.

Most senators, including Heller, had clearly come into the meeting hoping to discuss the dangers of children and other vulnerable populations abusing the anonymity of the Internet to get into real trouble.

“We need to be making sure we can stop children and perhaps problem gamblers from getting caught up in this web,” Heller said.

The subcommittee had Thomas Grissen, CEO of Daon, a technology security company, do a demonstration of how facial and voice-recognition software could prevent identity theft, as well as identify children who ought not to be gambling online.

Grissen said that to his knowledge, there are no states that have mandated online gaming operators they are licensing under new interpretation of the Wire Act to adopt such technologies.

“I’ve not seen any overtures to try and look aggressively at this technology,” Grissen said.

But panelists questioned whether those technologies could actually mitigate the worst risks or gambling online.

McCaskill worried that the idea of people trusting casino companies with all their biometric information — which would be saved online — would turn off many potential customers.

“It creates a real friction between those people who want privacy in this age of big data,” McCaskill said. “I don’t know how they’re all going to feel about being able to play online poker if they’re not willing to take their picture every time they walk in.”

Sen. Richard Blumenthal of Connecticut worried that the information held online simply wouldn’t be safe.

Mass theft of passwords and credit card information is a fairly commonplace occurrence on the Internet these days, and if bad actors had access to biometric information, identity theft would be even more difficult to combat.

“If I were a Russian crook, I think I’d open up a casino online and steal credit card information,” said Jack Blom, a lawyer who focuses on money laundering and tax evasion.

But most critically, the experts dismissed the technology as providing a barrier to the worst crimes.

“The technology we’ve seen here today, I’m not sure it would prevent the money laundering, though it does help in the aspect of underage gaming or troubled gaming,” Canterbury said. “We know that the terrorist groups have been using any kind of Internet sales, not just gambling, to try to launder money.”

“This is a tool that’s being used by people who want to launder money...and my special concern is that some of this casino operation could be used to move funds from the United States to a foreign location,” Blum said.

Blum, reminding the panel of how the history of casinos was inextricably linked to organized crime and money laundering, pointed out that online, tracing funding streams would become more difficult to track.

“In truth, a casino is a bank,” Blum said. “Now on top of everything else, we have an artificial currency called Bitcoin, which would even take it out of the realm of policing it through the banking system.”

The panelists hardly spoke of online poker. In fact, only Heller mentioned the reasoning for singling out the game, once. “Poker, a game of skill, not a game of chance, is different,” he said.

Instead, they simply pleaded with the assembled senators to do something.

“Law enforcement won’t be able to attack terrorist activity...with 50 laws,” Canterbury said.

“We don’t know that the profits of the casino aren’t disguised profits of crime,” Blum said. “The only way you can do that on the Internet is to have a uniform federal standard. The current situation is open season.”

“We recognize that Congress did not create this problem,” said Matt Smith, the fourth member of the panel and president of Catholic Advocate, a Catholic lobbying organization to Congress. “But here is an opportunity for Congress to address this before it becomes a crisis.”

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