Internet Gambling Support
The Progress Report
ProFreedom
In the near future there will be a vote on H.R. 2143, the Unlawful Internet Gambling Funding Prohibition Act. I urge you to vote against H.R. 2143 and any other legislation that attempts to ban offshore Internet gambling. Instead of attempting to eliminate this four billion-dollar a year industry, I propose allowing governmentally licensed and regulated Internet gambling web sites. By taking this approach many problems associated with Internet gambling may be remedied while providing billions of dollars of revenue for state and federal governments annually.
The remainder of this letter expands upon why the Unlawful Internet Gambling Funding Prohibition Act should not pass followed by an brief example of how the revenue from Internet gambling could be harnessed for the benefit of U.S. citizens.
The reason the Unlawful Internet Gambling Funding Prohibition Act should not pass is that it will not work to reduce Internet gambling for very long if at all. There are at least four ways to circumvent this act:
1. Internet sites can easily change their names, forward traffic from one site to another and keep their customers and banks from knowing there was ever change. Considering the revenue generated from Internet gambling and that new Internet domain names can be purchased for $8.95 per year from businesses such as GoDaddy.com, which includes domain forwarding and masking for free, gambling web sites could easily and affordable change their names without losing contact with their customers. Visit http://rightnow.godaddy.com/cgi-bin/rightnow.cfg/php/enduser/std_adp.php?Prg&p_lva=&p_faqid=1544 for information on forwarding and masking domain names.
2. Internet sites may mask their merchant type. Quoted from Mr. Michael Farmer, Senior Vice President, Risk Management Operations, Wachovia Bank Card Services, “For example, internet casinos may seek to conceal the true nature of their transactions by altering the data message to make themselves appear to be merchant types other than gambling institutions. In cases such as this, internet gambling charges may be unknowingly approved.”
3. Internet users may use alternate funding options. Again quoted from Mr. Farmer, “Now there are a number of other reasons why using financial institutions to control internet gambling would be of limited effect. In particular, it is important to recognize that alternative payment types such as automated clearing house payments and checks are not designed to allow for monitoring of payees.”
4. Internet users may establish accounts with a third party company. These accounts could then be used to fund Internet gambling sites. There are at least eleven such companies currently in business. According to Mr. Farmer, “In addition, alternate payment types can be used to complete internet gambling transactions. For example, a gambler may use a payment card or a checking account or other source of funds to establish an electronic cash account with a third party, which could then be used for internet gambling. Wachovia’s systems would not capture these transactions as internet gambling. Deposit into these accounts would bypass the banks detection methods.”
Here is an example of how easily Internet gambling sites could thwart the efforts of the Unlawful Internet Gambling Funding Prohibition Act. Internet gambling site www.casinoa.com opens for business. When customers fund their accounts at www.casinoa.com the bank unknowingly approves the transactions because all of the customers were actually redirected to a masked web site named www.notacasino.com. Now all the transactions are billed to www.notacasino.com, which has selected anything except for gambling as its merchant type and despite its web site name is actually a casino. Eventually the banks realize their mistake and no longer approve transactions for www.notacasino.com. Now the site’s owners replace www.notacasino.com with www.anything.com, an exact copy of www.notacasino.com but with a different name. Now the traffic from www.casinoa.com is redirected to www.anything.com, which also selects a non-gambling merchant type. The casino’s owners could keep changing where www.casinoa.com is redirected forever thwarting banks efforts to not fund Internet gambling sites all the while keeping the www.casinoa.com email addresses and maintaining contact with their customers.
Therefore, instead of playing a cat and mouse game with the offshore Internet gambling industry why not allow governmentally licensed and regulated Internet gambling web sites in the United States and allow these web sites to compete world wide in this four billion dollar a year industry?
Allowing licensed and regulated Internet gambling web sites would generate billions in revenue for U.S. businesses and governments while taking money from organized crime. The current estimate is that Internet gambling is a four billion dollar a year industry and that Americans spend seventy percent of this money. That is 4.2 billion dollars leaving this country. Given the opportunity to gamble at a licensed and regulated casino based in the U.S. or an unlicensed, unregulated casino based in a second or third world country, where do you think the someone would gamble? As Rep. Bobby Scott (D-VA) stated, "If people in the U.S. have a choice between betting at Offhshore.com or Caesar'sPalace.com, they are going to go to Caesar's every time. The marketing potential of U.S. branding, combined with the confidence that players would feel with a U.S. licensed entity would allow U.S.-licensed operators a substantial advantage.” Thus the licensed and regulated casinos would capture most of the U.S. Internet gambling market and keep most of the 4.2 billion dollars in the U.S. In fact, if U.S. licensed and regulated casinos could compete internationally most of the 1.8 billion international Internet gambling dollar could be captured too. If most of the Internet gambling revenue is going to U.S. licensed and regulated Internet gambling sites this would greatly reduce the flow of funds to organized crime from Internet gambling. Also, with fewer funds going to Internet gambling web sites operated by organized crime it may be easier to track money being laundered through these sites. As Senator Jon Kyl points out in this statement “Organized crime groups are heavily involved in internet gambling according to the Racketeering Records Analysis Unit of the FBI” the suspected involvement of organized crime with Internet gambling is very real.
Attempts to eliminate Internet gambling parallel the attempts to eliminate alcohol consumption in the 1920’s. Both attempts tried to eliminate a widely accepted activity that tens of millions of people enjoy, consider that gambling is legal in some form in every state except Utah and Hawaii. Both attempts tried to eliminate very lucrative industries, the current Internet gambling industry’s estimated worth is four billion dollars annually and increasing significantly. There are people willing to provide the service whether or not it is legal, there are currently over 1200 Internet gambling web sites. It does not seem logical to repeat a mistake so similar to the one that helped organize crime flourish 80 years ago.
Allowing adult United States citizens to legally gamble at any Internet gambling web site around the world would greatly reduce access to gambling over the Internet for minors. Internet gambling web site customers could not claim that an illegal transaction had occurred when the said customer deposits money at an Internet gambling web site unless the customer claims he or she was impersonated by someone or that he or she was a minor at the time of the purchase. Therefore the Internet gambling web sites would want to make sure to use all available means, like those used by eLottery and the MGM Mirage, that the person making the deposit at the casino was who they claimed to be and that the person was not a minor. If a Internet gambling web site failed to collect adequate identification information minors could make a deposit, gamble the money and collect the winnings if he or she was lucky or dispute the deposit claiming that the transaction was illegal if he or she wasn’t so lucky. Information on how it is possible to regulate internet gambling is located in the second to last paragraph.
Some of the Unlawful Internet Gambling Funding Prohibition Act supporters believe Internet gambling will significantly increase the number of people who become addicted to gambling. Gambling is accepted throughout most the United States. Currently at least 38 states and Washington, D.C. have lotteries and at least 25 states have land-based casinos, and as mentioned earlier only Hawaii and Utah completely ban gambling. With gambling so abundantly available, it is very unlikely that eliminating Internet gambling web sites will have much affect on keeping anyone who is addicted to gambling from gambling. In conjunction with this point is that Internet gambling won’t be eliminated even if Internet gambling web sites are. Individuals throughout the U.S. will still be able to day-trade on the stock markets and in some states bet on horse races and purchase lottery tickets over the Internet or telephone.
With this proliferation of gambling throughout the United States some supporters of this act may argue that Americans have enough opportunities to gamble. This argument is flawed in that there are thousands of brick-and-mortar stores throughout United States, but some Americans still like to shop from home over the Internet, so if some Americans enjoy gambling from home why shouldn’t they also be allowed to do so?
The following plan is a simple example of how the federal and state governments could benefit from selling licenses and taxing Internet gambling businesses operating in the United States. Four billion dollars was used as the fixed annual income for the Internet gambling industry for these calculations. Given that Internet gambling is currently a four billion-dollar a year industry and projected to continue to grow significantly these calculation may be undervalued. The license fee was determined by comparing the size of the Internet gambling market with that of the gambling market and proposed license fee for horse racing tracks located in Pennsylvania which may be charged a license fee to add slot machines to their properties if certain legislation passes in the Pennsylvania congress.
Example:
Federal government sells 500 Internet gambling licenses for 10 million dollars per license with a maximum of 5 licenses per company for a total income of five billion dollars.
Annual license renewal fee of four hundred thousand dollars per license for a two hundred million dollars in annual income.
Internet gambling tax of 40 percent for 1.6 billion dollars in annual income.
Combined the annual license renewal fee and Internet gambling taxes would generate an annual income of 1.8 billion dollars. This would leave the Internet gambling industry with a total annual income of approximately 2.4 billion dollars, which would be if divided evenly among the 500 casinos, average 4.8 million dollars per Internet gambling web site.
All the funds from taxes and licenses would be divided among the federal government and those states that choose to allow Internet gambling.
If there is more demand than supply for the licenses the government could sell tickets for a license lottery or auction the licenses, or ask companies to submit bids and give the licenses to the companies most willing to share in the revenue generated from their Internet gambling sites. A list of the licensed casinos could be available on a government web site so customers may check that a casino is licensed and regulated.
It is possible to regulate Internet gambling if the companies involved use software and procedures currently used by companies such as MGM Mirage and eLottery. MGM Mirage operated an online casino from the Isle of Mann that used software that prevented U.S. citizens from participating. eLottery enables several states to sell lottery tickets over the Internet while ensuring that only valid participants purchase the lottery tickets via the Internet. The following quote from eLottery founder Edwin J. Quinn describes how its is possible to do this “(Potential customers) would be required to submit their name, address and age. Right now, eLottery is using Equifax, a very significant and large data information provider, along with Department of Motor Vehicle and voter registration records, regarding this important and necessary control. This information would be checked against comprehensive data sources for correctness. Once it had been determined that the player was, in fact, a resident of the State in question and over the legal age, the player would be issued a PIN number and a password to access the site where the purchase could be made.” It is clearly possible to regulate Internet gambling when companies use the currently available programs and procedures, as U.S. licensed and regulated Internet gambling web sites should be required.
I hope that you will vote against H.R. 2143 and any other legislation that attempts to ban offshore Internet gambling. It is difficult if not impossible to enforce laws banning the use of and the funding of Internet gambling web sites. By allowing U.S. based licensed and regulated Internet gambling web sites the current trend of billions of Internet gambling dollars exiting this country would be reversed and in fact over a billion international Internet gambling dollars could be gained while reducing money going to organized crime. Considering these and the other previously made points, why should Internet gambling be banned or the Unlawful Internet Gambling Funding Prohibition Act enacted?
