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House Financial Services Committee Holds First Hearing

House Financial Services Committee Holds First Hearing 0001

The U.S. Congress took its first step toward potentially legalizing and regulating the online poker industry on Thursday with a hearing in the House Financial Services Committee. As baby steps usually go, little was actually accomplished, but the results were encouraging.

"I think what this hearing did was lay a foundation of record for the issue," said John Pappas, executive director of the Poker Players Alliance. "The proponents of Internet gambling did a good job. I really think we got the much stronger and compelling arguments. If that's the best (the opposition) can bring to the table, I feel pretty good about it."

While the hearing was set to discuss the proposed legislation HR 2266, the Reasonable Prudence in Regulation Act, and HR 2267, the Internet Gambling Regulation, Consumer Protection, and Enforcement Act, no dissecting of the texts of those bills took place. Instead, the hearing turned into a series of general arguments for and against officially legalizing and regulating the online poker industry.

At the center of the arguments was the debate between committee chairman Barney Frank (D-Mass.) and ranking minority member Spencer Bachus (R-Ala.).

"The notion that this Congress should tell millions of adult Americans that we know better than they what they should do with their own money on their own time on their own computers seems to me to be a grave error," Frank said in his opening statement.

Bachus focused on how he believes Internet gambling is a threat to the country's minors. "No amount of regulation can begin to protect against this particularly predatory and abusive intrusion into American homes and the harm it is causing our youth," he said.

Seven witnesses were allowed to read statements including the following people:

  • Robert Martin, tribal chairman of the Morongo Band of Mission Indians;
  • Parry Aftab, executive director of WiredSafety, a non-profit organization focused on protecting children from Internet dangers;
  • Malcolm K. Sparrow, a Harvard University professor commissioned by WiredStudy to do a study on risks associated with Internet Gambling;
  • Keith S. Whyte, executive director of the National Council on Problem Gambling;
  • Jim Dowling, head of the Dowling Advisory Group who previously worked for the IRS Criminal Investigation Division and as an anti money-laundering advisor to the White House;
  • Samuel A. Vallandingham, chief financial officer and vice president of The First State Bank speaking on behalf of the Independent Community Bankers of America; and
  • Michael Brodsky, executive chairman of the horse racing site

Full statements and transcripts of the hearing, as well as the actual webcast, can be viewed at the official House Financial Services Committee site.

Aftab, Sparrow, Vallandingham and Brodsky spoke in favor of regulating the industry. These four and Whyte, who appeared neutral but made some good points in favor of regulation, were called by Frank.

Dowling, who was mostly neutral, and Martin, were witnesses called by Bachus. Only Martin spoke against the legislation, claiming that it protected offshore companies at the expense of Americans.

Frank quickly refuted Martin's argument, pointing out that the Morongo are not against Internet poker in general and in fact are trying to get involved in the industry by passing legislation in California.

"You want to be able to do it and have no one else do it, is that the issue?" Frank said to Martin, who had no response.

Perhaps the most compelling witness was Aftab, whose testimony directly negated Bachus' argument that the industry should not be licensed and regulated because Internet gambling is harmful to youths.

"It's particularly interesting, I call it ironic, that I am sitting here today saying that the only way to protect consumers from online gambling risks is to legalize it," Aftab said. "And I never thought I'd be saying such a thing. But if we don't legalize it, we can't regulate it."

If there were any negatives for poker at the hearing, it's that the session was quick, lasting a little over an hour and a half, and that few of the 70 members of the Financial Services Committee attended.

Pappas, who was present at the proceedings, said he counted 22 congressmen in the room for part of the hearing, with no more than 10 to 12 present at any one time.

"I unfortunately don't think a whole lot of new ground was broken during the course of the hearing, and I think that's indicative of where we still are in the process," said Joe Brennan Jr., chairman of the Interactive Media Entertainment and Gaming Association. "We have this delay (of the Unlawful Internet Gambling Enforcement Act), but all it does is reset the clock. It hasn't advanced the legislation at all. Having said that, it's good to see this thing at least being debated now. One of the concerns has been there's so much going on in Washington and the House Financial Services Committee that this bill would just get lost in the mix. But here we are in the middle of the health care debate and concerns with the economy and you have the chairman himself calling this hearing. It's a big positive and a good way to get the ball rolling on this."

Frank ended the hearing by saying the committee would return to the subject next year, which created some optimism that this truly was the first step in building toward regulation rather than simply being a one-time deal.

"I think he probably intends on holding a hearing and a markup next year," Pappas said of Frank. "I think it will happen soon, not too far down the road."

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