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    Default Senate Committee on Commerce, Science and Transportation hearing on Internet gambling

    This Senate committee is holding a hearing titled "The Expansion of Internet Gambling: Assessing Comsumer Protection Concerns" this morning. Getting off to a bit of a late start, but I plan on live-posting the hearing.

    Here's the witness list:

    Mr. Chuck Canterbury
    National President
    Fraternal Order of Police

    Mr. Matt Smith
    President
    Catholic Advocate

    Mr. Thomas Grissen
    Chief Executive Officer
    Daon

    Mr. Jack Blum
    Attorney at Law

    Live feed just started, looks like it's about to get underway.

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    So much for the first 15 minutes ... computer had to be restarted, didn't like the stream. Back up and running.

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    Caterbury is currently citing arguments that offshore online gambling sites provide safe haven for criminals and terrorists.

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    With changes in how the Wire Act is uses, the U.S. does not have the means to shut down offenders.

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    Matt Smith of the Catholic Advocate now up, worried about vulnerable populations like teens and seniors.

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    Wants reinstating previous interpretation of the Wire Act. "We recognize Congress did not create this problem, but here is an opportunity" to fix it. Believes federal restriction of online gambling is urgent.

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    Blum, an attorney, now up talking about the history of gambling and organized crime.

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    The question of who owns a casino is pivotal, and that's why casinos need to be licensed, and that's why states like Nevada and New Jersey that have casinos have a rigorous licensing process.

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    I really can't fathom how any state can control (and online casino). Off shore casinos have been able to evade U.S. law, and now with the online currency Bitcoin, it removes it from banking even further, making it more difficult to track and prosecute.

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    A casino is a bank. Any business organization that has an ecrypted switch and can open accounts, take money and send money is operating as a bank. The question is how to regulate online casinos in any meaningful way. We are now having a huge problem with regular banks getting them to comply with money laundering laws. "If the treasury department is having a problem with HSBC, how is it going to handle the Internet gambling industry, which is sprawling and global?"

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    The only way we can get on top of this is to have a regulatory agency at the federal level that licenses casinos, bans off shore casinos, and any US player that uses a foreign online casino is subject to penalty.

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    Looks like there's about four senators in attendance. Grissen is now up. Focus is on technology and establishing trust in the online environment.

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    How do we know that the person we're interacting with is who they say they are?

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    Now doing a demonstration with his iPad, showing how he's going to transfer $15,000 from a checking to savings account, he's required to submit a PIN and take a picture and speak a phrase for voice recognition.

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    Says banks are adopting these technologies, and other industries will soon follow.

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    Senator McCaskill wants to know if Grissen thinks online gaming should require these steps. Should gamblers be required to have an iPad? Should operators be required to use it?

    Grissen: Being rolled out by banks. Biometrics are a very powerful tool, his recommendation is that it should be required.

    McCaskill: Certainly adds a new wrinkle to the bajillion people who have Tweeted at me the last few days. I don't know how they're going to feel if they have to take their picture every time they want to play online ... I'm respectful of the technology, but it creates a real friction for those people who want privacy. Fascinating that we would create a whole new treasure trove of data. Would technology address concerns others had?

    Blum: KYC is very important. But this doesn't begin to address question of whether account activity is normal. Will verify identity, but won't identify whether behavior is appropriate.

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    Senator Dean Heller (R-Nev.) now up for questions. I think there are literally three senators at this hearing.

    Relates a story about a friend whose son lost his tuition money playing online poker at an offshore site.

    Says UIGEA made sense, to halt transactions from the bank end of things.

    Reason we're here today is because on Dec. 23, 2011, the administration changed all this, and the reason they changed it is so their friends in New York and Illinois could put their lotteries on the Internet.

    Some parent is going to see their 14-year old child on an online casino and they're going to be gambling.

    Blaming the White House for the ability for people to get online and gamble. Because there was no online gambling pre-2011.

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    Canterbury - anything that generates revenue for state and local government, I'm for it, because that's where my members get their budgets. But criminals and terrorists have been using online sales of all kinds to fund their activities.

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    Heller: Are states looking at this technology?

    Grissen: There is a hesitation to be first.

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    Senator Roy Blunt (R-Mo.) now up - wants to know how things should be handled - federal vs. state

    Canterbury - needs to be a federal standard, 50 states and 50 regulatory schemes is a nightmare
    Smith - Also wants a federal standard

    Asking Blum about money laundering

    Blum - have to know that money coming into casino are for gambling and that profits are not disguised and really from another source, the money is taxed. Says uniform federal standard is needed. Current situation is absolute open season. No state government has the resources or the interest to pursue individuals that violate state law by offering gambling on the internet.

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