Madam Speaker, I submit the following letter. Dear Chairman Levin and Ranking Member Camp: I write to express my serious concerns about H.R. 4976, the ``Internet Gambling Regulation and Tax…
Madam Speaker, I submit the following letter.
Dear Chairman Levin and Ranking Member Camp: I write to
express my serious concerns about H.R. 4976, the ``Internet
Gambling Regulation and Tax Enforcement Act of 2010,'' and
the legislation it implements, H.R. 2267, the ``Internet
Gambling Regulation, Consumer Protection, and Enforcement
Act.'' The ``optimum'' revenue effects of these bills can be
achieved only by massive and unprecedented expansion of
gambling and by preempting the powers of the States to
regulate gambling within their borders.
Gambling regulation has traditionally been conducted by the
States and Indian tribes. H.R. 2267, the substantive proposal
that underlies the revenue provisions of H.R. 4976, creates
an Internet gambling licensing system that vests regulatory
authority in the United States Treasury Department. While
H.R. 2267 allows the Treasury to partner with States to carry
out regulatory and enforcement activities, the bill also
provides all Federal licensees with a ``complete defense
against any prosecution or enforcement action under any
Federal or State law.'' This ``safe harbor'' provision
effectively nullifies existing State laws by placing all
Federal license-holders outside the scope of the States' own
gambling enforcement powers.
H.R. 2267 also preempts current Federal laws that are vital
to State gambling and regulatory frameworks. State laws are
reinforced by Federal statutes that either rely on
substantive State provisions or prevent interstate incursions
on State-level public policies. The Federal Wire Act of 1961,
for instance, supplements State gambling controls by barring
interstate wagers. The Unlawful Internet Gambling Enforcement
Act of 2006 is structured, in part, around State gambling
laws. By exempting licensees from laws such as the Wire Act
or UIGEA, H.R. 2267 severely impairs this long-standing,
complimentary relationship between Federal and State
regulatory systems.
Importantly, the revenue-generating power of H.R. 4967
depends almost entirely on the Federal preemption made
possible by H.R. 2267. H.R. 2267 does provide a restrictive
opt-out mechanism through which the States may decline to
participate in the Federal licensing system. However, the
Joint Committee on Taxation's most expansive of four
different estimates--$42 billion--is based on discarding even
these State opt-out rights in favor of complete Federal
preemption. In that estimate, the Joint Committee explicitly
assumed that ``no State or tribal government will be
permitted to limit federally licensed Internet gambling
operators from providing online gambling services in their
jurisdictions.'' In other words, H.R. 4976 will generate $42
billion only if H.R. 2267's opt-out procedure--its principal
State-protective provison--is eviscerated.
The Joint Committee on Taxation estimate that is most
clearly based on the texts of H.R. 2267 and H.R. 4976
indicates that the bills will generate approximately $10
billion in Federal revenue. This much more modest estimate
appears to assume that many States will choose to opt-out in
order to prevent the expansion of gambling on the Internet.
While we realize that H.R. 4976 provides license fee revenue
and grants to the States, these incentives do not assuage my
concerns.
Thank you for considering my view.
Sincerely,
Gregory F. Zoeller,
Indiana Attorney General.
