Senator Kyl and members of the subcommittee. My name is Sue Schneider and I appreciate the opportunity to submit testimony to the subcommittee on the issue of Senate Bill 474, the proposed legislation to prohibit internet gambling.

By way of background, I am Editor of Rolling Good Times OnLine (www.rgtonline.com), an electronic magazine on the internet which is read by 120,000 visitors monthly who enjoy gambling as a form of entertainment. We monitor the interactive gambling industry very closely because it's of great interest to our readers.

I also serve as the chairman of the Interactive Gaming Council which is a newly-formed organization under the umbrella of the Interactive Services Association. The Council currently has 35 members, all responsible companies which have invested in bringing gaming products into new mediums such as the internet.

`We have been tracking this legislation closely and would like to offer some comments about how this legislation can best be adapted to the realities of the internet.

May I take a moment to bring you up to date on the status of the industry as it stands today? Currently, there are some 30 internet sites around the world which offer live wagering online. This number is double what it was in January and that number may double again by the end of the year if numerous companies' development schedules remain intact. The majority of these sites are licensed to operate gaming services by various jurisdictions around the world. While these tend to be concentrated in Caribbean and Central American countries, we're beginning to see larger jurisdictions such as several Australia states license internet gaming operations.

Internet gambling is inevitable. It's fueled by the growing popularity of both the internet and gambling as a form of entertainment. Internet gambling is happening today throughout the world and a growing number of jurisdictions are exploring licensing these operations as a source of revenue including at least one state in the U.S. To be factual, although some Attorneys General have taken it on themselves to attack this form of gambling, not one state legislative body has yet spoken and developed policy to deem it either legal or illegal.

Internet gambling is here today. But this is a case where the technology is two years ahead of policy, at least in the U.S. And because of the nature of the internet, it defies a simple answer to see international regulatory processes put into place.

It is my belief, that in the future, existing U.S. gaming operators (whether they be lotteries, land-based casinos, tracks or off-track-betting corporations,) will look to this new medium as an adjunct to their existing gaming products. The convenience demanded by consumers will drive this move to at-home mediums such an the internet offers. So to prohibit this form of home entertainment is simply not realistic. It will create a class of criminals, casual bettors across the country placing a wager on a sporting event for example. Is this something you want to spend precious law enforcement resources on?

I'd like to begin the testimony from the Interactive Gaming Council by concentrating on where we agree with Senator Kyl.

Of primary concern is consumer protection. The possibility of unscrupulous operators who may rig online casino games or not pay off consumers is present today although, quite frankly, the instances of such deception is surprisingly small to date.

The complexities of this new borderless medium presents challenges to international gaming regulators. The Interactive Gaming Council supports stringent regulation of the industry and welcomes the opportunity to meet standards similar to those to which land-based gaming operators must adhere.

However, we disagree on the method which best fosters consumer protection. It is our premise that staunch regulation, not unenforceable prohibition, is the most effective means of protecting players. Toward that end, the Council has begun a process of self-regulation beginning with a Code of Conduct for members.

Our next step is to develop an independent international Internet Gaming Review Board which will develop a set of standards and a review process for certification or accreditation of both operators and suppliers to this fledgling industry. These standards may include but not be limited to such concerns as: background checks; prize payment bonding; random testing of casino games; cash reporting practices which prohibit money laundering; licensing requirements; procedures which prohibit underage gambling and identify problem gamblers and tax reporting practices as required by law.

This certification mechanism may function as, at least, an interim measure until the international community of gaming regulators can catch up with the technology and develop adequate multi-jurisdictional systems.

In the case of this particular legislation, as you know, the genesis of the Interstate Wire Act dates back to the 1930s and the organized crime problems of the 1960s. Ironically, particularly as it relates to sports betting, the extent of illegal sports betting in the US remains huge today. And there is little question that organized crime continues to play a role in that system. Are US consumer not better served by betting with a legally licensed sportsbook, even if that license is from another country?

Let's get down to the real issue….money. Ask the man on the street and they say the US government is against internet gambling because they can't get the tax revenues on this. These are exactly the types of discussions which are taking place in Australia right now. What is the role of the state governments which traditionally regulate and tax gaming proceeds, both that of the operators as well as that of the gamblers whose winnings exceed a certain level? And what is the role of the federal government which traditionally oversees telecommunication policy and also realizes some gaming revenues from both operators and players?

The Interactive Gaming Council asks that, as you consider this bill, you realize the complexities of this international issue and work with the industry to reformulate this unrealistic prohibition bill into an effective regulatory act which adequately address the concerns of consumer protection, underage and problem gambling as well as the possible revenue implications for both state and the federal government.

We appreciate the chance to offer this industry viewpoint and look forward to working with you to design a workable bill. Thank you very much.