Anti-Internet MA Gaming Law Defeated
iMEGA Chairman Joe Brennan Jr. testified before the Joint Committee on Economic Development and Emerging Technologies in Massachusetts, to oppose the clause in Gov. Deval Patrick’s casino legislation that would have made gambling on the Internet a crime punishable by up to two years in prison and a $25,000 fine. The legislation was defeated in committee by a 10-8 vote.
Below is a transcript of Mr. Brennan’s testimony:
Dear Chairman Bosley and Chairman Hart:
The Interactive Media Entertainment & Gaming Association (iMEGA) is a trade association representing entities and individuals invested in the continued growth of the Internet and of the interactive media. We are here today to announce our opposition to the provision in House Bill 4626, which bans online gambling and request that that language be stricken from the bill.
We view the Internet as an indispensable engine for economic prosperity and justice. Furthermore, we adhere to the proposition that the inalienable rights that each of us holds under the Constitution to freedom of speech, association, and private conduct should not—and cannot—be diluted in any way simply because an individual chooses to exercise these rights while employing the emerging medium of the Internet. These “Digital Civil Rights” do, in our view, serve as the cornerstone for sustaining freedom and building wealth in a globalized economy. In addition, it stifles privacy rights by denying people the right to participate in lawful acts in the privacy of their own homes.
I. The Provision in H. 4626 is Unconstitutional and Violates Individual Digital Civil Rights
This provision is unconstitutional because it tramples on Americans’ inalienable right of freedom of speech. The protection of digital civil rights and the ability of all American to exercise their freedom of choice in a safe and protected manner are essential to the future of the Internet and is a core value upon which this nation was founded. Protecting the rights of those who engage in this newfound tradition is just as important as it has been to protect the right of every American to engage in the freedom of speech.
Rather than promulgate policies that do little more than reactively police cyberspace, let’s work together to utilize existing technologies that also ensure our individual liberties remain as our forefathers envisioned.
For example, why is gambling in a casino OK and gambling on the Internet is not? Why criminalize an activity online that is legal off-line in 48 of the 50 states. If I have the right to gamble off-line, shouldn’t I maintain that right online?
II. The Provision in H.4626 would stifle Online Commerce and Innovation
The provision contained within this bill would, if implemented exert a harshly chilling effect on innovation surrounding the Internet. What is more, by imposing unprecedented burdens on the intricate system of financial transactions and payment system instrumentalities–which has up until now been universally recognized as being inherently content-neutral–these proposed regulations run the grave risk of sharply stifling the growth of electronic commerce.
Given the harsh potential sanctions facing any market participant falling afoul of this proposed bill, the natural course of action for a financial intermediary–particularly a smaller entity without a corporate legal department or sophisticated outside counsel to guide it–will be to deem every transaction submitted by an Internet gaming concern to be an “unlawful” one. This would impose a deep chill upon technological innovation and the principles of financial transparency.
III. The Bill would Place an Undue Burden on Financial Institutions
The supposed difficulty in identifying legal and illegal transactions is an acknowledgement that rules cannot be fashioned to fit every one of the billions of transactions which occur in Internet Gambling. Therefore, we are profoundly troubled by the refusal to define just what an “unlawful gambling transaction” is.
Simply put, filtering is more effective, judicially recognized by the United States Supreme Court, and even recognized as a most effective means of regulation of the Internet Gambling Industry by experts in the area as early as 1998 in a study of possible enforcement modes for proposed Internet Gambling regulations.
For all of these reasons this provision to the bill should be removed since it places an excessive burden of regulation and reporting on other institutions to define whether each of billions of transactions are legal or not.
IV. The Federal Court is Currently Weighing a Challenge to the Federal Online Ban
Currently iMEGA is embroiled with the Department of Justice in litigation in federal court
over the constitutionality of the Unlawful Internet Gaming and Enforcement Act, a bill that banned most Internet gaming nationally. iMEGA believes that our challenge to UIGEA will fundamentally shape the future of the Internet and whether or not Americans’ right to privacy will be protected or dismissed.
On March 6, 2008, the United States District Court for the District of New Jersey handed down its memorandum opinion in the civil rights lawsuit brought by our association on behalf of this industry – Interactive Media Entertainment & Gaming Association Inc. v. Gonzales, et al., Civil Case No. 07-2625. This ruling by the presiding federal trial court judge, the Honorable Mary L. Cooper, established, with crystal clarity, the standing of iMEGA as the voice of this industry, fully entitled and unquestionably empowered to assert our fundamental digital civil rights in the courts of the United States. The importance of the fact that the federal courts have now recognized iMEGA as the voice of this industry can not be overstated.
However, at the same time, Judge Cooper essentially punted on the groundbreaking questions we presented, namely, that those fundamental rights we all enjoy – of speech, expression, and conduct – should not be lessened in any way simply by being exercised using the Internet. As a result, the Court dismissed our lawsuit—in essence, reserving these issues to be decided by a “higher authority,” the United States Court of Appeals for the Third Circuit.
The next step for iMEGA is to prosecute this battle before the Third Circuit Court of Appeals in Philadelphia – an appellate court which, traditionally, has been exceptionally protective of the fundamental rights of speech and expression. A positive result for iMEGA in the Third Circuit to affirm the principles of digital civil rights on the Internet would represent a truly landmark victory, with historic consequences.
This case is far from over. At issue here are fundamental questions that, ultimately, have to be decided by the higher courts and iMEGA has been judicially recognized as the industry’s voice to fight this battle. We are confident then when our argument to safeguard Americans’ digital civil rights is heard in the Third Circuit, we will prevail.
Consequently, as this case makes it way through the legal system, we believe that it would be best for the Massachusetts legislature to remove this provision from the legislation and at the very least wait until the courts have acted on the legality of online gambling.
V. This Provision is in Direct Conflict with Congressman Frank’s Legislation, which would overturn the Online Ban
Massachusetts Congressman Barney Frank has filed legislation to overturn the federal ban. In fact a hearing is scheduled sometime in April. Congressman Frank’s legislation includes a number of co-sponsors and is just one of several pieces of legislation, which would overturn the federal online gambling ban that Congress is currently reviewing.
VI. Technology Already Exists to Protect Children and Problem Gamblers
Today innovations have already emerged–in the form of electronic filtering and financial vectoring–the tools necessary to ameliorate the social ills ostensibly serving to motivate the proponents of this provision. It is, indeed, ironic, then, that the very groups that this provision would purportedly intended to protect—such as children and individuals with addictive disorders—may well end up being made worse off by its implementation.
The advent of the Internet presents a new and unique challenge for regulators. Unlike traditional casinos, Internet gambling sites cannot be shut down by merely chaining the doors.. . . . In fact, unlike gaming of the past, Internet gambling does not even need to be hosted in the state or the country where the player logs in. The fact that Internet gambling knows no boundaries adds an additional layer of complexity that distinguishes it from its predecessors.
Schwartz, Joel Michael, The Internet Gambling Fallacy Craps Out, 14 Berkeley Technology Law Journal 1021, 1032-1037 (footnote deleted) (1999). This basic fact which pervades the use of the Internet for virtually any activity in the year 2007 has not escaped the Industry’s attention. In the context of regulation of Internet transactions, the preferred method of regulation of content based activities is not external regulation – it is self regulation through filtering. The Government Accounting Office prepared a study for Congress during consideration of Internet Gambling regulation under the Leach-LaFalce Internet Gambling Enforcement Act, H.R. 556-2002 in 2002. That report advised Congress that the major credit card companies, payment aggregators and banks already had in place filtering or coding to regulate Internet Gambling related transactions. The GAO also reported on the emergence of new technology and approaches to self-regulation. Further, law enforcement sources reported little concern with issues of money laundering and fraud. The United States Supreme Court sustained issuance of a preliminary injunction against enforcement of the criminal penalties of the Child Online Protection Act, 47 U.S.C. § 231, et seq., because its prohibitions did not constitute the least restrictive means to prevent child pornography in light of the availability of filtering programs which exist and can be used to prevent access.
The Internet Gambling industry took pains to develop its own standards over six (6) years ago. The Internet Industry Association, www.iia.net.aus, an Australian Trade Association, published its Internet Industry-Interactive Gambling Industry Code: A Code for Industry Co-Regulation in the Area of Internet Gambling Content Pursuant to the Requirements of the Interactive Gambling Act of 2001 in December 2001. Even then, the proposed self-regulating code contained Schedule 1-Scheduled Filters § (5), which listed fifteen (15) readily available commercial filters. As a noted authority, William S. Mossberg, noted recently in the Wall Street Journal:
[f]or years, add-on programs have attempted to give parents some control over what children can do on the computer. Some of these have been OK, but many have had weaknesses that were exploited by kids, who are typically technically savvier than adults. Many parents, however, don’t realize that the latest versions of the two main computer-operating systems, Microsoft’s Windows Vista and Apple’s Mac OS X Tiger, have parental controls built right in.
Finally, this provision does not take into account the ability of the end user or any other participant in the activity stream of Internet Gambling to effectively and efficiently use filtering to identify transactions which are prohibited or which are legal.
VI. The Provision Creates a Slippery Slope for Additional Forays into Cyberspace
Like much of the government’s forays into cyberspace, these efforts are well intended but yield the considerable practical problems of unintended consequences. Have individual Americans’ right to privacy and freedom of expression have become victim of overzealous lawmaking?
It is imperative that haphazard government regulation of Internet not create a slippery slope, whereby lawmaking encroaches on all aspects of Internet use, severely hampering on-line potential and individual rights of personal privacy.
In the last 10 years Internet usage has skyrocketed and has rapidly assumed its place as arguably the most valued information medium in the world. The confluence of news, information, social networking, entertainment and a blizzard of other portals and sites has made on-line surfing, the new American pastime.
I look forward to addressing any questions from the Chairman and Members of the Committee.
