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[Senate Hearing 112-627]
[From the U.S. Government Publishing Office]

                                                        S. Hrg. 112-627

 
U.S. DEPARTMENT OF JUSTICE OPINION ON INTERNET GAMING: WHAT'S AT STAKE 
                              FOR TRIBES?

=======================================================================

                                HEARING

                               before the

                      COMMITTEE ON INDIAN AFFAIRS
                          UNITED STATES SENATE

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

                            FEBRUARY 9, 2012

                               __________

         Printed for the use of the Committee on Indian Affairs

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                      COMMITTEE ON INDIAN AFFAIRS

                   DANIEL K. AKAKA, Hawaii, Chairman
                 JOHN BARRASSO, Wyoming, Vice Chairman
DANIEL K. INOUYE, Hawaii             JOHN McCAIN, Arizona
KENT CONRAD, North Dakota            LISA MURKOWSKI, Alaska
TIM JOHNSON, South Dakota            JOHN HOEVEN, North Dakota
MARIA CANTWELL, Washington           MIKE CRAPO, Idaho
JON TESTER, Montana                  MIKE JOHANNS, Nebraska
TOM UDALL, New Mexico
AL FRANKEN, Minnesota
      Loretta A. Tuell, Majority Staff Director and Chief Counsel
     David A. Mullon Jr., Minority Staff Director and Chief Counsel

                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on February 9, 2012.................................     1
Statement of Senator Akaka.......................................     1
Statement of Senator Barrasso....................................     2
Statement of Senator Udall.......................................     2

                               Witnesses

Feldman, Glenn M., Mariscal, Weeks, McIntyre & Friedlander, P.A..    46
    Prepared statement...........................................    47
Fleming, Patrick W., Litigation Support Director, Poker Players 
  Alliance.......................................................    39
    Prepared statement...........................................    40
Porter, Hon. Robert Odawi, President, Seneca Nation of Indians...     3
    Prepared statement...........................................     5
Rose, I. Nelson, Distinguished Senior Professor, Whittier Law 
  School.........................................................    21
    Prepared statement...........................................    23
Skibine, Alex T., Professor, S.J. Quinney College of Law, 
  University of Utah.............................................    28
    Prepared statement...........................................    29
Washburn, Kevin K., Dean, University of New Mexico School of Law.    12
    Prepared statement...........................................    14

U.S. DEPARTMENT OF JUSTICE OPINION ON INTERNET GAMING: WHAT'S AT STAKE 
                              FOR TRIBES?

                              ----------                              

                       THURSDAY, FEBRUARY 9, 2012

                                       U.S. Senate,
                               Committee on Indian Affairs,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 2:15 p.m. in room 
628, Dirksen Senate Office Building, Hon. Daniel K. Akaka, 
Chairman of the Committee, presiding.

          OPENING STATEMENT OF HON. DANIEL K. AKAKA, 
                    U.S. SENATOR FROM HAWAII

    The Chairman. The Committee will come to order.
    Aloha. Today, the Committee will hold an oversight hearing 
on the Department of Justice opinion on Internet gaming and 
examine what impact this decision may have on Tribes.
    This issue is of great importance to Tribes. Indian gaming 
is currently the only form of federally-authorized and 
regulated gaming in the United States. In total, Tribal gaming 
revenue makes up 40 percent of the total casino gaming market 
in the United States.
    Gaming has been the single most effective form of economic 
development for Indian Country. That is why, when court 
administrative or legislative decisions are made, Tribal 
concerns and priorities must be considered as part of the 
dialogue.
    Tribal gaming revenue provides for the education, housing, 
infrastructure and health needs of our Tribal members. In 
addition, Tribal gaming provides economic opportunities and 
jobs in the surrounding communities.
    I would like to call your attention to the charts in the 
room which illustrate that Tribal gaming occupies a unique 
status in the framework of Federal law. As you can see, Tribal 
gaming represents an overwhelming percentage of total U.S. 
casino revenues.
    The Committee held a hearing on Internet gaming in 
November. Since that time, the Department of Justice issued an 
opinion on the scope of the Wire Act. That decision raises many 
questions for Federal, State and Tribal governments. Today we 
will hear from our witnesses on the potential impact that 
decision could have on the current framework of Tribal gaming.
    In this session, Congress may consider proposals that would 
expand Federal authorization and regulation of gaming 
activities in this Country. The Committee will provide a 
legislative forum where everyone, especially Tribal 
governments, are able to provide their perspective on an issue 
that is so vital to Tribal self-sufficiency. We also want to 
continue to hear from other affected stakeholders.
    The record for this hearing will remain open for two weeks 
from today. So I encourage all interested parties to submit 
written testimony.
    I would like to now ask our Vice Chairman for his opening 
statement.

               STATEMENT OF HON. JOHN BARRASSO, 
                   U.S. SENATOR FROM WYOMING

    Senator Barrasso. Thank you very much, Mr. Chairman. I do 
appreciate your holding this hearing today.
    We all recall that last November the Committee held an 
oversight hearing on Internet gaming in Indian Country. About a 
month later, the Department of Justice issued an opinion 
regarding Internet gaming. So today we are going to hear from 
the witnesses what that opinion means for the Indian Tribes.
    I realize that this is a subject of great importance to 
Tribes across the Country, so I just want to thank you, Mr. 
Chairman, for your leadership in examining this matter. I 
appreciate and thank the witnesses who have traveled great 
distances to be here to testify today.
    So thank you, Mr. Chairman.
    The Chairman. Thank you very much, Senator.
    Senator Udall?

                 STATEMENT OF HON. TOM UDALL, 
                  U.S. SENATOR FROM NEW MEXICO

    Senator Udall. Thank you very much, Chairman Akaka. I 
really appreciate being here with you today, and I want to 
thank you for holding this important hearing on Internet gaming 
and the Department of Justice's recent opinion.
    And thank you for remaining engaged in this issue. It is 
very appropriate that the Indian Affairs Committee take up the 
issue of Internet gaming. This is an issue that may have 
significant impact on Indian Country. So the Committee and 
Tribal leaders need to be an active part of the debate over any 
possible legislation.
    Beyond this hearing, it is my hope that my colleagues in 
the Congress who are proposing related legislation will engage 
Tribes in the development of any gaming proposals. And while I 
am at it, Mr. Chairman, I would also like to welcome Mr. Kevin 
Washburn, who is the Dean of the University of New Mexico Law 
School. Mr. Washburn is a citizen of the Chickasaw Nation of 
Oklahoma. He is the first Native American to serve as a dean, 
as the Dean of the UNM Law School. He has a strong background 
in Indian law, gaming and criminal law. And I am sure we will 
learn a lot from him today.
    Mr. Washburn is also a former Federal prosecutor in New 
Mexico and a trial attorney with the DOJ. He has served as the 
General Counsel of the National Indian Gaming Commission. I 
look forward to Mr. Porter's testimony and Mr. Washburn's and 
the other panelists. I want to thank Mr. Washburn very much for 
participating today and making the trip here. I also want to 
applaud the National Indian Gaming Association and the gaming 
Tribes for getting out on front of this issue. This is the most 
important thing you could do.
    Thank you, Mr. Chairman, and with that, I look forward to 
hearing the witnesses.
    The Chairman. Thank you very much, Senator.
    Now I would like to invite our first panel. Let me welcome 
you, the Honorable Robert Odawi Porter, President of the Seneca 
Nation of Indians. President Porter, will you please proceed 
with your remarks?

STATEMENT OF HON. ROBERT ODAWI PORTER, PRESIDENT, SENECA NATION 
                           OF INDIANS

    Mr. Porter. Nya-weh Ske-no. Mr. Chairman, Mr. Vice 
Chairman, Senator Udall, thank you for having me today. I am 
thankful that you are well.
    I am honored today to testify on this subject before this 
well-credentialed panel of law professors and deans and 
scholars. They do what I used to do for many years before I 
became the president of my nation.
    I have read their testimony and they make very good points. 
But as a Tribal leader I must say that there are two questions 
that must frame our discussion as we move forward. First, will 
the decisions of the Congress in Internet gaming support or 
destroy the Indian gaming jobs held by our Tribal citizens and 
our neighbors? And two, will your decisions support or erode 
the gaming revenue that Tribal nations use to fund essential 
governmental programs and services?
    In my written testimony, I have set out a number of reasons 
why it is in the political interest of every member of 
Congress, including Senators Schumer and Gillibrand from New 
York, and every Governor, including New York Governor Cuomo, to 
join with the Seneca Nation and other Indian Tribes to protect 
the existing jobs that exist at our bricks and mortar Tribal 
government gaming facilities, and to preserve our right, if new 
Internet gaming is authorized, to participate as equal 
partners.
    In recent years, big gaming and State regulatory interests 
in Nevada and New Jersey have pushed for Federal Internet 
gaming legislation that would give them monopolistic control of 
Internet gambling operations throughout the United States. This 
brazen power grab is based on a lie, a fiction that big Nevada 
and New Jersey interests alone are sophisticated enough and 
strong enough to operate Indian gaming businesses. They are 
determined to shove Indian gaming away from the table or at 
best, to deal Indian gaming a short hand.
    But the fact of the matter is that the Seneca Nation and 
dozens of other Indian nations are at least as sophisticated, 
if not more so, in terms of management, security, oversight and 
regulation than the biggest and best operators in Atlantic City 
and in Las Vegas. Tribal job creation and economic 
diversification in our regions should be respected, protected 
and cultivated, not attacked, undermined or assaulted.
    The Seneca Nation, like dozens of other Indian Tribes, is 
one of the largest employers in our geographic region. 
Collectively, Tribal government gaming injects billions of 
dollars into the regional economies that surround Indian 
Country. Tens of thousands of American workers, both Indians 
and non-Indians who are our neighbors, depend on the health and 
vitality of Tribal government gaming operations for their jobs. 
These jobs exist directly or indirectly, such as through the 
contractors and vendors who rely upon our gaming enterprises 
for their livelihoods. These family breadwinners have invested 
their lives in Indian gaming as chefs, as slot machine 
technicians, as construction workers and suppliers and so on. 
In an unbelievable and ironic twist of fate, it could literally 
be said that many Indian nations and Tribes carry the 
responsibility of feeding and clothing our non-Indian neighbors 
along with our own citizens.
    The interests of the Seneca Nation and our neighbors in New 
York are aligned and congruent when it comes to the threat of 
Internet gaming and lottery operations. Our common interests 
are to protect local jobs and local commerce that will create 
more local jobs. Internet gaming, if not tied to local 
facilities and local operations that trade in ancillary local 
entertainment and local commerce, does not create local jobs 
and local economic activity within a State. Internet gaming, if 
it is not controlled locally, and connected to local commerce, 
will bleed dry the regions surrounding Indian Country and cause 
great injury to all of us who depend upon our existing 
businesses.
    My request today is simple. Send your colleagues a message 
that you will not tolerate any new legal authority that will 
result in job losses in Indian Country or that shoves aside 
large and successful Tribal gaming operations from any new 
Internet gaming table. Indian nations not only demand a seat at 
the table, we insist that we already own our own table and that 
we should not have it stolen from us, as has too often been the 
case in the past.
    American history is littered with predatory Federal Indian 
policies and illegal and immoral confiscations of Native 
property and wealth. Whenever non-Indians have discovered that 
the Indians have possessed something of value, the non-Indians 
have tried to grab it for themselves and too often succeeded. 
Recently, Indian gaming slipped through the cracks of this 
sordid history and for the last 30 years, a rare economic 
revitalization has occurred for some Indian nations located in 
population centers in States that did not authorize gambling 
otherwise.
    But now these cash-starved States are embracing casino 
gaming with great enthusiasm. These predatory actions are 
eroding Tribal exclusivity interfering with existing compacts 
and threatening the jobs that Indian gaming has created.
    I will leave it to others on the panel to pick apart the 
Wire Act. And if I could, Mr. Chairman, I realize my time has 
expired. I would like to take a moment to conclude.
    If the New York lottery, for example, offers electronic 
gaming, without the participation of the Seneca Nation and 
other Tribal casinos, it will violate our existing compact and 
undermine our bricks and mortar business. We cannot stand for 
the disruption of these compacts either in New York or anywhere 
in Indian Country. There is much that we can do together, there 
is much that we can do collaboratively that will benefit all.
    In conclusion, we have serious concerns that Internet 
gaming will undermine our efforts to lift ourselves up as a 
people after centuries of economic deprivation. This will 
imperil our jobs and revenues that we have created for 
ourselves and for our neighbors. Should this Congress authorize 
some form of Internet gaming, the Seneca Nation insists that it 
be done in a way that protects our inherent and treaty-
recognized sovereign right to engage in Internet gaming 
activity on terms that reflect the economic interests of 
ourselves and that of our neighbors in western New York.
    Nya-weh, and I would be glad to take any questions.
    [The prepared statement of Mr. Porter follows:]

   Prepared Statement of Hon. Robert Odawi Porter, President, Seneca 
                           Nation of Indians
Introduction
    Nya-weh Ske-no. Mr. Chairman and members of the Committee, I am 
thankful that you are well and I am pleased to appear today to discuss 
the testimony I am submitting for the record on behalf of the Seneca 
Nation of Indians.
    My purpose in testifying is this--I believe it is in the interest 
of each member of this Committee, as well as the other senators 
representing Indian Country, like our Senator Schumer and Senator 
Gillibrand, to join with the Seneca Nation and with other Indian tribes 
in protecting the existing jobs at tribal brick-and-mortar gaming 
facilities and in preserving the right of Indian nations to 
meaningfully and substantially participate, from the outset, in any new 
Internet gaming authorized under federal or state law.
    Cultivating job creation within Indian country and ensuring 
meaningful, substantial, early and fair participation by Indian nations 
in Internet gaming, be it poker, lottery, or other games, is in the 
mutual self-interest of Indian nations, of our neighbors and of the 
states whose lands adjoins ours. It is also sound federal Indian 
policy.
    The Seneca Nation, like dozens of other Indian tribes, is one of 
the largest employers and economic enterprises in our region. The 
ancillary impact of tribal gaming operations on regional economies 
surrounding Indian tribes is in the millions if not billions of dollars 
each year. Tens of thousands of American workers--our neighbors--depend 
on the health and vitality of tribal gaming operations for their jobs, 
either directly with Indian nations as their employers or as vendors or 
nearby enterprises who rely on our gaming casino activity for their 
upstream or downstream business activity.
    We ask that you join with Indian tribes to protect against any move 
by powerful gaming interests who will try to force Nevada-only or New 
Jersey-only control over Internet gaming. This is not idle speculation. 
Last year, some senators released draft legislation which would have 
shut out Indian tribes from any competitive involvement in Internet 
gaming, as if we are inferior and irrelevant gaming operations who are 
incapable of meeting or exceeding Nevada or New Jersey regulatory 
standards. The approach embodied in the draft bill was certainly short-
sighted, as it would have threatened existing jobs.
    The governors of New York, and Arizona, California, Florida, 
Connecticut, Michigan, Minnesota, Oklahoma, Oregon, Washington, 
Wisconsin, all know full well how robust and capable and sophisticated 
Indian gaming is today. This Committee certainly knows it. And I am 
confident this Committee will not tolerate anyone in the United States 
Senate giving serious consideration to a power grab by Nevada and New 
Jersey gaming interests that would result in job losses in Indian 
country and would shove aside our large and successful tribal gaming 
operations from the Internet gaming table. Far too much is at stake, in 
terms of the interests of tribal nations, our employees, our business 
partners and our neighbors. And while history does sometimes repeat 
itself, we know one of the missions of this Committee and of you, Mr. 
Chairman, is to avoid repeating the errors of previously misguided 
federal Indian policy. More on that later. But first, I wish to 
describe my Nation, where we've been and where we are going.

Background on the Seneca Nation of Indians
    Our Nation was one of America's earliest allies, historically 
aligned with the other members of the historic Haudenosaunee (Six 
Nations Iroquois) Confederacy and living in peace with the American 
people since the signing of the Canandaigua Treaty nearly 217 years ago 
on November 11, 1794, 7 Stat. 44. In that Treaty, the United States 
promised that it would recognize the Seneca Nation as a sovereign 
nation and that the title of our lands would remain forever secure and 
that we would retain the ``free use and enjoyment'' of our lands. This 
promise has served as the basis for a level of freedom possessed by the 
Seneca people that we believe is unmatched by other indigenous peoples 
in the United States.
    Because of this treaty-protected freedom, our Nation has been able 
to achieve success in recent years as we continue to strive towards 
recovering from nearly 200 years of economic deprivation inflicted upon 
us by the United States due to devastating losses of our lands and 
resources. Both our Seneca Nation government and individual Seneca 
citizens have benefited from the opportunity to expanding into economic 
trade with non-Indians during the last 40 years, focusing primarily on 
the tobacco and gaming businesses. We have fought hard for our recent 
economic success--just as we have fought hard to protect our lands--but 
the fact remains that we are under constant assault from hostile forces 
such as the State of New York and private sector predators who seek to 
deprive us of economic prosperity and return us to the poverty of a 
prior era. This Internet gaming and lottery issue is merely the latest 
in a long line of battlefronts. Like most threats, it also offers great 
opportunities.

The Seneca Nation of Indians Enforces Its Own Comprehensive Laws 
        Within Its Own Territory
    The Seneca Nation has a rich history of actively regulating and 
enforcing economic activity within our Territories. For example, our 
Council enacted a comprehensive Import-Export Law in 2006 to regulate 
sales of tobacco and other products from its Territories. The Nation's 
Import-Export Commission regulates all aspects of tobacco sales and 
distribution on our Territories. As a result of the enactment and 
enforcement of our own tribal law, the Nation has gained regulatory 
control of tobacco and other sales activities on its Territories. The 
Nation's aggressive implementation of its Import-Export law has greatly 
enhanced its capacity to enforce the law on our Territories.
    We also have comprehensive ordinances governing class II and class 
III gaming activities at our bingo halls and casinos on our 
Territories. Under these tribal laws, the Nation's gaming regulatory 
body, the Seneca Gaming Authority, oversees and ensures the integrity 
of our highly successful gaming enterprises. And the Seneca Gaming 
Authority works closely with its federal counterpart, the National 
Indian Gaming Commission, in the regulation of our class II gaming and 
with both the National Indian Gaming Commission and the New York State 
Racing and Wagering Board in the regulation of our class III casino 
gaming activity.
    I raise these examples to remind everyone that Indian tribes, like 
the Seneca Nation, are governments. We govern the people and activity 
within our own Territories. This is reflected in the U.S. Constitution 
that governs how the United States government is supposed to deal with 
us--nation to nation. How America has actually dealt with Indian 
nations, however, is twisted into unconstitutional shapes.

Seneca Nation History Is Replete With Irony
    If you look at American history from the perspective of a Seneca 
Nation citizen--or of any American Indian for that matter--it is filled 
with many cruel ironies.
    American economic development has chronically and habitually by-
passed Indian Country or has extracted value and then abandoned Indian 
Country like a mere colony.
    Native American history is one of nearly complete loss of what we 
once had. We have lost most of our lands and nearly everything of value 
and significance associated with them. We have lost most of our natural 
resources, such as the beaver belt and the buffalo herds. We have lost 
most of our stockpiles of gold, uranium, oil, gas, salt, and gravel. We 
have had the use of most of our remaining lands taken for railroads, 
highways, non-Indian homes and reservoirs for hydroelectric dams. In 
the late 19th Century, the United States forced upon the Seneca Nation 
long-term leases for nominal payment to accommodate the establishment 
of the City of Salamanca on the Allegany Territory and to legitimize 
the leases obtained by railroad corporations through unsavory means. 
And just 45 years ago, the United States again broke the Canandaigua 
Treaty and took 10,000 acres of our Allegany Territory for the Kinzua 
Dam and Allegheny Reservoir so that a license could be granted to a 
private mega-corporation to make millions of dollars from the sacrifice 
of our lands and the burning of our homes.
    Even when Indian nations were paid for our property, it was often 
at confiscatory prices under coercive agreements pushed down our 
throats for only pennies on the dollar of the actual value taken by 
outsiders.
    Whenever I read the founders of American capitalism, and the great 
treatises defending the fundamental sanctity of property rights in 
American law, I cannot help but recall how Indian property is the 
glaring exception to the rule of property law. Any unvarnished view of 
American history will reveal that, when it comes to the property of 
indigenous people, federal and state law has subverted the natural 
order of property ownership. All too often the United States has 
appropriated, or has allowed states and others to steal, like common 
thieves, valuable property held by Native Americans. This, whether 
anyone likes it or not, is the common strain of American history 
towards the aboriginal occupants of this land. And, just a few years 
ago, the federal courts legitimized theft of Indian property by 
adopting the theory that if the stealing happened long enough ago, it's 
okay. We ask that you not tolerate any further repetition of this 
history.

Discovery Has Led to Confiscation
    The storyline of American Indian history has been the same, time 
after time. When non-Indians ``discover'' that the Indians possess 
something of value to the non-Indians . . . then the non-Indians grab 
it for themselves. No money can adequately compensate Indian Country 
for these takings, and precious little money has ever been offered.
    Recently, Indian gaming slipped through the cracks of this history 
and for the last 30 years a thousand flowers bloomed for Indian Nations 
with territories near large population centers in states where the law 
frowned upon gambling. Because gambling was disfavored by state law but 
craved by state citizens, neighboring Indian gaming markets thrived. 
The recognition by the U.S. Supreme Court of tribal sovereignty in the 
pivotal Cabazon case, although constrained soon thereafter by the 
Indian Gaming Regulatory Act, resulted in a temporary but tangible 
advantage for some tribal economies.
    But now big casino industry and cash-starved states are embracing 
casino gaming in nearly every state market. This is eroding tribal 
exclusivity and thus, tribal gaming market share, and threatening the 
jobs that Indian gaming has created directly for our employees and 
indirectly for vendors and our neighbors whose businesses our employees 
and customers frequent. Once again, Indians have been discovered to 
possess something the non-Indian economic interests want for 
themselves. As inevitable as the sun's rising in the East, discovery of 
tribal government gaming is leading to its confiscation. Once again, 
Indian nations possess something our neighbors covet.
    In New York, as in some other states, the governor has decided to 
try to grab gaming exclusivity away from the Indian tribes, tearing up 
the agreement his predecessors struck with us. Governor Cuomo can 
expect a fight this time. And we have lots of allies this time who are 
not simply going to let Albany pull the rug out from under us and them.
    The Seneca Nation is one of the largest employers within the 
borders of western New York State. If the governor kills our gaming 
enterprises by breaking the exclusivity agreement we negotiated with 
the State of New York, thousands of people will be put out of work and 
the economy of our entire region will be disrupted.
    With the request it made to the U.S. Department of Justice last 
year, it appears that the New York Lottery is seeking to offer an 
electronic lottery gambling to customers over the Internet within New 
York. If--instead of working with the Seneca Nation and other existing 
tribal casinos within the borders of New York--the New York Lottery 
seeks to directly compete with our brick-and-mortar casinos by putting 
the equivalent of slot machines in every living room in New York--we 
will make every effort to see that its effort is a commercial failure.
    There is much that we can do together--New York State and the 
Indian nations with whom New York shares borders--that will be in our 
mutual self-interest and help us together, as neighbors, withstand the 
competitive influences of New Jersey and other surrounding states. But 
if New York will not join with us, we are all the weaker. The tobacco 
trade is a fresh example of how not to respond; of how short-sighted 
New York interests combined with (Big Tobacco) interests outside New 
York to short-change the interests of New York taxpayers.

Can Indian Diversification Outpace the Tidal Waves of Non-Indian 
        Confiscation?
    Until last year, the Seneca Nation had a robust and diversified 
trading economy based in large part on the sale of tobacco and fuel 
products to non-Indians. Unlike many other places in Indian Country, 
Seneca Nation Territories had a decades-old, private sector economy 
comprised of competitively-driven Seneca entrepreneurs. Our Seneca 
entrepreneurs traded products for years in bricks and mortar, over the 
counter transactions and, when the World Wide Web offered additional 
avenues for trade and commerce, they expanded their market reach into 
the Internet tobacco trade and they created many, many jobs for Indians 
and non-Indians alike.
    Like with gaming, our Indian Internet trade in tobacco slipped 
through the cracks of history and for a time it blossomed, and the 
entire Western New York region was the beneficiary of the successes of 
our Seneca entrepreneurs. Because tobacco use was disfavored by state 
law but craved by state citizens, the Indian Internet tobacco trade 
thrived. But when jealous Big Tobacco industry interests combined with 
the avaricious appetites of state taxing authorities, their envy 
colluded to persuade the U.S. Congress that they alone, not Indian 
Nations, and their terms, not ours, should govern trade in tobacco 
products.
    Two years ago, the U.S. Senate and the U.S. House of 
Representatives chose to over-ride strenuous objections from the Seneca 
Nation and enact the Prevent All Cigarette Trafficking Act of 2010, the 
so-called PACT Act. The PACT Act single-handedly destroyed our Internet 
tobacco trade. It levied prohibitively costly fines and penalties on 
anyone connected with the common carriers and the U.S. Postal Service 
from moving our trade in tobacco products. It brought Seneca Nation's 
booming e-commerce tobacco trade to a grinding halt and threw hundreds 
of families out of work.

Is Internet Gaming the New American Frontier?
    Some Senators, as well as many other observers of the American 
economic future, appear to believe that Internet gaming is the new 
American economic ``frontier''. If it is, what warning signals can we 
learn for Indian Country and our allies on this Committee and in 
Congress and the Administration? What lessons can we draw from the 
history of how the United States, and the various states, and American 
economic interests, have shaped the American frontier, from timber and 
gold and water to gaming 25 years ago and to the Indian tobacco trade 
two years ago?
    One lesson is unavoidable. Isn't it time the property rights of 
Indian Nations are respected and protected? If not now, when? Isn't it 
time non-Indians respect the inherent and treaty-recognized rights of 
Indian Nations to control what happens on and from our own land? That's 
exactly what the Treaty of Canandaigua promised the Seneca Nation and 
the Seneca people.
    I and many tribal leaders have no patience for the empty lip-
service being paid in these hallways to a pseudo concern for Indian 
country jobs and the diversification of Native economies.
    If that concern is real, then honor Indian treaties. Respect tribal 
sovereignty. Let Indian nations trade as sovereigns. Stop undermining 
Indian casino gaming with Internet gaming proposals, or Internet gaming 
proposals that preclude Indian nations from participating on fair 
terms.

Internet Gaming--A 21st Century Gold Rush
    In recent years the Big Gaming interests, not unlike Big Tobacco, 
have allied themselves with state regulatory interests in Nevada and 
New Jersey and pushed for federal Internet gaming legislation that 
would bestow upon them a monopolistic control of Internet gambling 
operations. That brazen power grab is premised on the fiction that the 
big Nevada and New Jersey interests are alone sophisticated enough to 
operate Internet gaming in the first wave.
    Like land homesteaders and gold stake claimers before them, these 
Nevada and New Jersey moguls see Indian gaming as a competitive threat 
and are determined to shove Indian gaming away from the table or, at 
best, deal Indian gaming a short hand. Make no mistake about it. 
Internet gaming in the sole hands of these Big Gaming moguls absolutely 
threatens the jobs that Indian country has created at its brick-and-
mortar gaming facilities through years of innovation and investment in 
Indian country. And it further threatens to undermine the regional 
economies that Indian gaming has created.
    Moreover, the Seneca Nation and dozens of other tribal gaming 
operations are as or more sophisticated in terms of management, 
security, oversight and regulation than the biggest and best operators 
in Atlantic City and Las Vegas. In addition, until this Congress and 
this Administration recently shut it down with enactment of the PACT 
Act, the Seneca Nation regulated one of the most robust Internet 
commerce operations in America--the tobacco trade. It is an affront to 
our dignity for the Congress to give any credence to the insulting 
notion that the Seneca Nation is somehow ``not ready'' or inexperienced 
or otherwise ill-equipped to conduct Internet gaming from Nation 
Territory, according to Nation laws and regulations, anywhere the 
Internet markets take our game and our trade.
    Our treaty rights to conduct commerce--from our land, on our own 
terms, and without restraint by any outside power--must be respected 
and honored. That must apply to both over-the-counter trade and 
Internet commerce like Internet gaming. And our job creation and 
economic diversification in our regions should be both respected and 
cultivated, not attacked.
    This Congress and this Administration bowed to Big Tobacco and Big 
State interests last year with the PACT Act and devastated the Seneca 
economy. I urge this Committee, to find its true identity--as a strong 
ally of tribal sovereignty and as a stalwart defender of Indian 
treaties--and fight to the death to ensure that no Internet gaming 
legislation is enacted unless it guarantees to Indian Nations the right 
to set all terms and reap all benefits of all e-commerce that 
originates on Indian Country.
    Internet gaming developments are the most recent, modern-day threat 
to tribal sovereignty. I must ask this Committee--will Congress roll 
over once again and, PACT-like, squash tribal sovereignty and tribal 
ingenuity by acquiescing to the powerful Internet gaming interests in 
Nevada and New Jersey and the cash-envious state and federal 
treasuries?
    I don't think you will. Your hearing today heartens me. It is 
exposing the mutual interests that best define what Indian tribes and 
state governments can do together. Our common interests are to protect 
local jobs and local commerce that creates more local jobs. Internet 
gaming, if not tied to local facilities and local operations that trade 
in ancillary local entertainment and local commerce, does not create 
local jobs and local economic activity within a state. Internet gaming, 
if it is not controlled locally and connected to local commerce, will 
bleed our region dry. Internet gaming, and the new technologies that 
make it possible, actually is the occasion for combining the local 
interests of states like New York and nations like Seneca and the 
interests we hold in common as neighbors. The interests of the Seneca 
Nation and our neighbors in New York are aligned and congruent when it 
comes to Internet gaming and lottery operations. We are sending this 
message here today because we are convinced that our New York senators 
will sooner or later recognize, like Speaker Tip O'Neill is said to 
have said years ago, that all politics is local.

Conclusion
    The Seneca Nation asks that this Committee to avoid taking action 
that does anything other than cultivating the job creation and economic 
diversification that Indian gaming has created in our respective 
regions. We have serious concerns that Internet gaming will undermine 
our efforts to-date to lift ourselves up from centuries of economic 
depression and will threaten many of the existing jobs that our Indian 
gaming enterprises have created.
    Should this Committee believe that Internet gaming is nevertheless 
the right answer for Indian country and the American people, the Seneca 
Nation asks that this Committee ensure that the U.S. Congress, in 
conformity with its responsibility under the U.S. Constitution, honor 
our treaties and protect our inherent, sovereign right to engage in 
Internet gaming activity on terms that reflect the economic interests 
of ourselves and that of our neighbors in New York.
    We believe it is in the interest of Senators to join with the 
Seneca Nation and with other Indian tribes in protecting the right of 
Indian nations to meaningfully and substantially participate, from the 
outset, in any new Internet gaming authorized under federal or state 
law.
    Specifically, and urgently, we ask that you join with Indian tribes 
to protect against any move by powerful gaming interests who are trying 
to force Nevada-only or New Jersey-only control over Internet gaming.
    Thank you for this opportunity to provide testimony and we ask that 
it be made part of the record of this hearing.
    Nya-weh.

    The Chairman. Thank you very much, Mr. President.
    In your testimony, you state that it is mutually beneficial 
for the Tribe and the State to ensure that local jobs and local 
commerce are protected. My question to you is, what impacts do 
you think the DOJ opinion could have on New York State 
generally and the Seneca Nation specifically?
    Mr. Porter. Mr. Chairman, our nation is fortunate enough to 
employ almost 4,000 Natives and non-Natives in our gaming 
business in New York. We are the fifth largest employer. If 
Internet gaming is allowed to commence and proliferate, I 
strongly believe that we will lose jobs and economic resources 
from our businesses in an area of the United States that is 
very under-served economically.
    So to us, it portends a great threat that we have to be 
very cautious about and be very concerned that the Congress 
would injure our existing business.
    The Chairman. Do you think other commercial gaming entities 
have a level of expertise in the area of Internet gaming 
different from Indian Tribes that should allow them to have 
first access into this market?
    Mr. Porter. Mr. Chairman, I do not believe that non-Indian 
gaming businesses have any technological or business savvy 
beyond what we have. I believe that our businesses are more 
regulated than other businesses. I believe our technical 
expertise is superior. And I am absolutely confident that we 
can provide high quality services, we can provide opportunity 
in this area no differently than we have with bricks and mortar 
businesses.
    The Chairman. Thank you.
    Let me now call on our Vice Chairman for his questions.
    Senator Barrasso. Thank you, Mr. Chairman.
    Thank you, Mr. Porter, I appreciate your being here. As you 
said, you have read the testimony of the next group. I was just 
noting that in the next panel Mr. Rose is going to talk about 
in the wake of the Department of Justice opinion that the 
States are going to be moving, or they will move quickly in 
light of this opinion, to legalize and establish different 
regulatory approaches or schemes for Internet gaming.
    So what do you specifically feel will be the biggest 
challenges for the Tribes if Internet gaming is then left to 
State regulation?
    Mr. Porter. Mr. Vice Chairman, I believe the significant 
problem is that many of our business agreement are tied to a 
geographic exclusivity. They are obviously not tied in many 
cases to our territory, per se, but are tied to a region of the 
State, for example.
    So that is what we have negotiated for. We have paid for 
that, we have invested, in our case, nearly a billion dollars 
on physical infrastructure tied to that geographic area. 
Opening up Internet gaming beyond those geographic borders, and 
allowing, whether in the case of the particular Wire Act 
opinion, the New York State lottery, to prey upon and seize 
business opportunity from patrons in our exclusivity zone I 
think is the greatest threat and presents the greatest 
challenge for the Congress in marshaling a solution to 
protecting our geographic based businesses. I think it is a 
very difficult problem, but it is something that needs to be 
addressed.
    Senator Barrasso. And it is not just in your home State, 
but you are looking at it in each individual State?
    Mr. Porter. Exactly.
    Senator Barrasso. Because of the geographic component, and 
then the bricks and mortar location and the impact on the 
people who are there working. Thank you. Do you want to add to 
that?
    Mr. Porter. No, that is fine.
    Senator Barrasso. Okay, thank you. Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Barrasso.
    Senator Udall?
    Senator Udall. Thank you, Chairman Akaka.
    The Seneca Nation's history and success with Internet 
commerce is very impressive. And your experience with how 
Internet commerce can aid local development and local economies 
I think is an important piece of the discussion.
    What do you see as the future of Tribal gaming and should 
it involve Internet gaming? Could you explain a little bit more 
when you talk about the exclusivity zone and the geographic 
components to this?
    Mr. Porter. Certainly, Senator. I think that in terms of 
just capability, as I mentioned before, our ability to 
participate in an Internet economy exists. But it can't do so 
in a way that undermines our existing businesses. In our case, 
the compact that we have entered into with New York State 
defines a 16-county geographic region in western New York that 
is our exclusive zone for the offering of slot machines. And we 
pay for that right, 25 percent off the top is otherwise due to 
the State and local government associated with that right.
    Everything associated with our business model that we have 
under our 21-year compact is tied to that geographic region. 
The Congress, in very many ways, if we are to just simply open 
up this opportunity of Internet gambling without regard to that 
existing platform, which is common in Indian Country, I believe 
would produce serious injury and impairment to our contractual 
relationships with not just the State, but with our creditors, 
with our business partners and would inflict a tremendous 
degree of economic injury to us that could significantly 
destabilize, if not destroy, our businesses.
    So finding that solution, if the Internet gaming 
legislation moves forward, is a critical one to assure that in 
many ways, Indian Country is held harmless from the 
consequences.
    Senator Udall. Do you believe the ongoing Internet poker 
that is conducted through international sites has already been 
a deterrent or a benefit to gaming Tribes, and how specifically 
has it impacted the Seneca Tribe?
    Mr. Porter. In our particular instance, I am not sure that 
we can say that the Internet poker has induced tremendous harm. 
Our businesses remain strong and because of the integrity of 
the compact and the geographic exclusivity, we are able to 
create and have created resort destinations that bring in 
patrons from Canada and other States.
    But obviously, it has a certainly slippery slope element to 
it, that if it simply opens up in all forms of gaming, that is 
where we have to be concerned about how it will affect our 
business.
    Senator Udall. Thank you, President Porter. Thank you, 
Chairman Akaka.
    The Chairman. Thank you very much, Senator Udall.
    President Porter, currently Tribal gaming is the only 
federally-authorized and regulated gaming in the United States. 
If Federal legislation is enacted, some of that exclusivity 
would be threatened. As we have seen in IGRA, it is important 
to ensure that Federal and Tribal interests are balanced in any 
legislation. In your opinion, what would Tribes need to see in 
the Federal legislation to ensure that this exclusive right is 
maintained?
    Mr. Porter. Mr. Chairman, I have long held troubled 
feelings about this notion that should be balancing the 
interests of Indian sovereignty and our treaty rights. We paid 
for the freedoms of our land and our sovereignty 200 years ago. 
Unfortunately, in our view, in my view, the Indian Gaming 
Regulatory Act reflects once again a restriction and a curb on 
our rights as sovereign Indian nations.
    As the Congress moves forward to deal with this issue of 
Indian gaming, I would ask that we no longer have to pay again 
for the freedoms that we have already paid for. This gaming 
business has done very well for us in many places in Indian 
Country, and it has provided resources to help our people and 
provide services that never before existed.
    So the simple ask would be to hold us harmless, ensure that 
we are not paying again for something that we have already paid 
for more than once.
    The Chairman. Thank you very much, Mr. Porter.
    Are there any further questions of Mr. Porter?
    Well, I want to thank you very much for your responses. 
Without question, it will be helpful to us as we move forward 
in possible legislation that we have. I thank you very much for 
being part of this hearing, Mr. Porter.
    Mr. Porter. Nya-weh. Thank you very much.
    The Chairman. I would like to invite the second panel to 
the witness table. Serving on our second panel is Mr. Kevin 
Washburn, the Dean of the School of Law Administration at the 
University of New Mexico; Mr. I. Nelson Rose, Senior Professor 
at the Whittier School of Law; and Mr. Alex Skibine, Professor 
at the S.J. Quinney College of Law at the University of Utah.
    Mr. Washburn, would you please proceed with your testimony?

STATEMENT OF KEVIN K. WASHBURN, DEAN, UNIVERSITY OF NEW MEXICO 
                         SCHOOL OF LAW

    Mr. Washburn. Thank you, Mr. Chairman and Mr. Vice Chairman 
and Senator Udall. And thank you, Senator Udall, for those kind 
words.
    Senator Udall is one of the alums that we are most proud of 
at the University of New Mexico.
    The OLC opinion that was issued just before Christmas 
created kind of a chaotic atmosphere. Professor Rose has noted 
this in his own testimony. It created kind of a wild west type 
situation, and it is has really forced, I think, Congress' 
hand. I think Congress does need to act here.
    And I think I have two points to make today. One is that 
there is a strong Federal interest in Indian gaming. This was 
viewed as a very important resource for Tribes by the Federal 
Government. When the Indian Gaming Regulatory Act was passed in 
1988, it had bipartisan support. Senator Udall's uncle, Mo 
Udall, was a big Democrat who was very involved in its passage.
    But the Reagan Administration also was very supportive of 
the Indian Gaming Regulatory Act. Ronald Reagan signed the 
bill. And keep in mind that they might have had slightly 
different reasons for being supportive of this bill, but they 
were both supportive. Reagan wanted to foster Indian gaming as 
a means of self-sufficiency for Tribes. I think on the other 
side of the aisle, the idea was just to increase Tribal 
resources to improve self-governance and self-determination. 
But there was tremendous bipartisan support for the idea of 
Indian gaming.
    And Indian gaming has provided incredibly well for the 
needs that otherwise, and for many Tribes, the Federal 
Government might well be providing. So Indian gaming is getting 
the Federal Government off the hook in a great measure for 
funds that would otherwise need to be expended by the Federal 
Government, at least in some measure.
    So that is an important background principle, as this 
Internet gaming boom begins. We have to protect this Federal 
resource, really, for Tribes. Tribes need to have access to 
this resource that has been so important for their self-
determination and self-governance.
    Now, I think Congress needs to get involved, and I think 
OLC at the Justice Department has largely forced your hand. I 
think it is very, very important. We have long had a 
schizophrenic approach to gambling in the United States. Why is 
that? It is not entirely clear. But one of the things is that 
we have these 50 State laboratories that get to decide gaming 
policy each on their own. And it is very important that States 
be able to decide their own views toward gambling. There is a 
question about how much their own views ought to apply on the 
Indian reservation.
    But it is true that States do have differing views on 
gambling. We still have a couple of States that largely 
prohibit gambling. We do have, though, broad agreement that if 
gambling is going to exist, it should be a public resource. One 
of the areas, when we look at these charts, we see between 
lotteries and VLTs and Indian gaming, those are all 
governmental forms of gaming, in essence. That is almost 60 
percent of the gaming on this chart.
    So there is common belief that gaming should be a public 
resource. It should help develop governmental resources, and 
that is what we have used it for.
    I think that States should be able to opt out of gaming, if 
they wish. But if they wish to have gaming, most States agree 
on all the things that are harmful about gaming. The regulatory 
interests that all States have about gaming are largely the 
same. They want to try to minimize compulsive gambling, for 
example. They want to prevent money laundering and prevent 
organized crime from infiltrating casinos or gambling. They 
want consumer protection. They want the gambling to be fair to 
the people who do it. And they want to ensure, of course, that 
the governmental fees that are large underpinning of all this 
gaming, that taxes or fees are paid.
    So they all have the same interest in how we regulate 
gaming. So I think that tells us to some degree we don't need 
each State doing it individually, because they all have the 
same interest. It would be far more efficient to have one 
entity at the Federal level that does that, that handles that 
regulation of gaming. And that entity at the Federal level 
should be keenly focused on protecting the importance of Indian 
gaming to Indian Tribes. Because we have created a resource 
here, $30 billion in 2009, that is being used by Tribal 
governments all over the Country, and it is absolutely 
fundamentally important. Internet gaming causes some risk to 
that very strong revenue source. And if that revenue source 
goes away, that is going to be Federal responsibility to meet 
those needs.
    So I think Congress should act. I think Congress should get 
right in the middle of this and Federalize the regulation of 
Internet gaming.
    Thank you.
    [The prepared statement of Mr. Washburn follows:]

Prepared Statement of Kevin K. Washburn, Dean, University of New Mexico 
                             School of Law

    The Chairman. Thank you very much, Mr. Washburn.
    Mr. Rose, will you please proceed with your testimony?

 STATEMENT OF I. NELSON ROSE, DISTINGUISHED SENIOR PROFESSOR, 
                      WHITTIER LAW SCHOOL

    Mr. Rose. Thank you and good afternoon, Chairman Akaka, 
aloha, and Senator Udall, thank you for inviting me.
    My name is I. Nelson Rose. I am a distinguished senior 
professor at Whittier Law School and the author of Gambling and 
The Law and Internet Gaming Law.
    I prepared a written statement, but what I want to do here 
is focus on the two big questions: what did that announcement 
by the Department of Justice mean for State legal gambling and 
what does it mean for the Tribes?
    We are in what I call the third wave of legal gambling. 
This is the third time in American history that gambling has 
spread everywhere. Historically, it has always been up to the 
States to decide their own public policy toward gambling. And 
the role of the Federal Government has simply been to help the 
States. Federal laws can be seen as basically enforcement 
statutes.
    So if you look over all the Federal statutes, they all 
require that the gambling be illegal for the Federal statute to 
apply. The only two exceptions are the Federal anti-lottery 
statutes, which have express exemptions for State lotteries, 
and the Wire Act. The Wire Act was the main weapon that was 
used by the Department of Justice in its war of intimidation, 
to try to scare players, payment processors and operators out 
of the American market.
    That weapon is now gone. There basically is now no Federal 
statute that would prevent a State from legalizing virtually 
any form of Internet gambling with the exception of sports 
betting. And even that is under attack in the court. States can 
legalize, they can form compacts for interstate and even 
international to create pools of players. They can take bets 
from each other.
    The first to act, and they are already starting, are the 
State lotteries. Because they don't need the statutes, they can 
pass regulations. There are at least six State lotteries that 
are already selling lottery tickets through the Internet by 
subscription. They now can sell individual tickets.
    The big question is, will they go with instant lottery. 
Because if you put a scratcher on a video screen, it becomes 
almost indistinguishable from a slot machine.
    But we are not going to be just limited to lotteries. Every 
State looks at gambling as a painless tax. They are all 
desperate for revenue. So they are all looking to get into 
Internet poker, Internet casinos if they can. They are doing 
this to raise money, which means if the big players are the 
local operators, then they are the ones who are going to get 
the licenses.
    In New Jersey, where there are no Tribes, New Jersey will 
be legalizing Internet casinos this year, and all of the 
licenses will go to Atlantic City casinos. If Connecticut 
legalizes, then the two licenses will go to the two large 
Indian gaming Tribes. But in every other State, what the Tribes 
are going to be forced to do is basically compete for a very 
limited number of licenses.
    The problem is, and I have looked at this law very 
carefully, under Cabazon and IGRA, the Tribes have two tests. 
You look to see what is permitted in the State and then the 
Tribes can do it. But it seems to me pretty clear the courts 
are going to say they are limited to taking bets from people 
who are physically on their land.
    Now, they can take bets off-reservation. But that is if and 
only if the States agree. In other words, for a Tribe to do 
Internet gambling and take patrons who are off reservation, 
that is a privilege, not a right.
    So the question is, what is this going to mean for the 
Tribes, and in some cases, the big Tribes, the ones that are 
well-established, can protect themselves. They have the 
political power, they have compacts in place.
    But it is really up to Congress to protect the rest, 
particularly small Tribes that are not near cities that are 
basically not going to be getting the licenses and are now 
going to have this additional competition with no reason to go 
onto their reservation to gamble.
    In fact, one point that I want to raise that hasn't been 
raised, it is not even clear that Tribes can keep Internet 
gambling off their land if a State legalizes. There are some 
precedents that say State lotteries can sell on Indian land.
    Of course, any attempt to expand Indian gaming rights is 
obviously going to meet with strong opposition from most of the 
States. The problem is, it is a problem that has to be resolved 
now. In 1962, there were no State lotteries in the United 
States. Half a century later, we have State lotteries in every 
State, with only a half a dozen that don't have State 
lotteries. But the Internet, the speed of change on the 
Internet is like dog years. It is not going to take four or 
five decades. Within much less than one decade we are going to 
see Internet gambling legalized by all the States. And unless 
Congress figures out a way to protect particularly the small 
Tribes, I think that a lot of the Tribes are going to be out of 
luck.
    I want to thank you, mahalo, and I am looking forward to 
your questions.
    [The prepared statement of Mr. Rose follows:]

 Prepared Statement of I. Nelson Rose, Distinguished Senior Professor, 
                          Whittier Law School

    As a completely unexpected gift to the states, announced two days 
before Christmas, the United States Department of Justice (DoJ) 
declared that states are now free to legalize almost every form of 
Internet gambling, and not be worried about federal laws. This might 
not have been the intent--the ruling dealt with state lottery 
subscription sales--but the result will be an explosion of poker, 
instant lotteries and casino games on the Internet, run or licensed by 
the states. And, although the DoJ was careful to say the opinion is 
limited to intra-state gambling, there is now nothing stopping states 
from entering into compacts for online gambling with other states, and 
even foreign nations.
    Many tribes, especially those with established landbased gaming 
operations, are worried that they might not be included in this coming 
proliferation of state-operated and -licensed Internet gambling. And 
they have every reason to worry.
    Although tribes have the right to operate any form of gambling 
permitted under the laws of the state where the tribe is located, it 
seems likely that courts would limit that right to patrons who are 
physically on Indian lands. Tribes are not prohibited from taking bets 
from throughout a state. But that would be a privilege granted by a 
state, not a right. And, the state could not be sued for bad faith if 
it refused to let tribes accept off-reservation wagers. This puts 
tribes in the position of having to compete for a limited number of 
Internet gambling licenses, to be issued by not always friendly state 
governments.
    The tests for Indian gaming seem clear, based on the decision of 
the U.S. Supreme Court in California v. Cabazon Band of Mission 
Indians, 480 U.S. 202, 107 S.Ct. 1083 (1987), and the declarations of 
Congress in the subsequent Indian Gaming Regulatory Act (IGRA), 25 
U.S.C.   2701-21 and 18 U.S.C.   1166-68. First, what is permitted 
in the state? This is a shorthand for requiring tribes to follow the 
public policy of the state toward specific forms of gambling. Second, 
tribes regulate, sometimes with, sometimes without, state or federal 
governments, but only if the gambling is conducted on Indian lands. 
Tribes in Nevada can operate casinos and sports books; tribes in Utah 
have none.
    This limit on tribal gaming to Indian lands is particularly true 
with Class II gaming. So, if a state legalized Internet bingo or poker, 
tribes could also conduct those games online, and would not need a 
tribal-state compact. But players would have to be physically present 
on Indian lands. There might be ways around this--proxy play for bingo 
has been tried--but that would not work with poker.
    The argument for limiting Class III gambling to Indian lands is 
weaker. There is an express exemption in IGRA for tribal lotteries from 
the federal anti-lottery statutes, 18 U.S.C.   1301-1304 (IGRA  
2720). But this only proves Congress intended to allow tribes to send 
lottery tickets across state lines and through the U.S. Mail. The 
lottery would have to be conducted pursuant to a tribal-state compact, 
and the statutes do not necessarily indicate Congress intended to allow 
sales off-reservation. Tribes also can clearly operate off-track 
betting (OTB), even though the races are taking place on non-Indian 
lands. But even though states have to agree to compacts allowing their 
tribes to operate OTBs, it is not clear that states would have to allow 
tribes to accept wagers from bettors who are not physically on Indian 
land. A majority of states allow remote betting conducted by state-
licensed OTBs through Advanced Deposit Wagering (ADW), where players 
fund their accounts in advance over the phone or through the Internet. 
Even though a state might agree to tribal ADWs, that does not mean it 
had to.
    I think courts would find tribes could demand compacts if states 
legalized Internet lotteries, casinos, sports betting and other Class 
III gaming. But, again, the bettors would have to be on Indian lands.
    The Unlawful Internet Gambling Enforcement Act (UIGEA), 31 U.S.C.  
  5361 et seq., does allow tribes to go across state lines for inter-
tribal Internet gambling, Class II or III, but players are, again, 
expressly limited to those on Indian lands. 31 U.S.C.   5362(10)(C).
    The reason for the coming explosion of state-legal Internet 
gambling was the declaration by the Barack Obama administration that 
the major federal anti-gambling statute, the Wire Act, 18 U.S.C.  
1084, applies only to bets on sports events and races. State 
legislators and governors are desperate to find ways to raise revenue 
without raising taxes. Gambling is seen as a painless tax, so every 
state is looking into expanding legal gaming. They can now do so. The 
only exception is sports betting, which cannot be introduced into a 
state that does not already have it, due to a different federal 
statute, the Professional and Amateur Sports Protection Act (PASPA), 28 
U.S.C.   3701-3704. And, New Jersey, which would like to also have 
true sports betting, has filed a court challenge to the PASPA.
    Federal anti-gambling statutes can be seen as being merely 
enforcement laws, not legalizing or prohibiting any form of gambling. 
So, with only two exceptions, all federal anti-gambling statutes apply 
only to gambling that violates some other federal or state law. Only 
the federal anti-lottery statutes and the Wire Act can apply to 
gambling that is legal under state law. But, long before Powerball, 
states found ways of getting around the federal prohibitions on 
interstate lotteries, by having no money, only information, cross state 
lines. And state lotteries are now expressly allowed to have multi-
state lotteries, 18 U.S.C.  1301.
    So, the only remaining barrier that blocks states from legalizing 
games like Internet poker--which is not a lottery--has been the DoJ's 
expansive view of the Wire Act. For example, when the American Virgin 
Islands and Nevada passed legislation licensing online casinos, the DoJ 
stopped state regulators from issuing licenses by saying they would 
arrest operators under the Wire Act. Now that the Department charged 
with enforcing the law has limited that statute to cross-border sports 
bets, there is literally no federal law standing in the way of a state 
authorizing intra-state online games, and even entering into compacts 
with other states and nations to pool players.
    The political fights will be over who gets the licenses. There is 
so much legal gambling in the U.S. that it is easy for politicians to 
say, ``We've already got casinos, racetracks and a state lottery. 
What's the big deal about Internet poker?'' Of course, there is so much 
legal gambling in the U.S. that those casino and racetrack owners, and 
even the state lottery, respond, ``Internet poker is fine, as long as 
we get to run it.''
    But state lawmakers are not proposing legalization to protect local 
operators; it is solely to raise money. Even in states as big as 
California, the existing cardclubs, tribal casinos and racetrack do not 
have anywhere near enough financial strength to outbid outsiders, such 
as the largest Nevada casino companies and Internet gambling operators.
    Giving the exclusive right to Internet games to the State Lottery 
might bring in more money in the long run, but the states are desperate 
for cash, now. Only outside companies, like Caesars Entertainment, can 
come up with the $100 million or so the state will want up front. But 
California's long-established and politically powerful cardclubs and 
tribal casinos will not quietly accept an outsider setting up a 
competing operation that brings legal gambling into every home in the 
state.
    Still, there is so much money at stake that political deals will be 
made. In states like Nevada and New Jersey, where the local operators 
are the big money, the landbased casino companies will get the Internet 
gambling licenses. In states like California, local operators will get 
a license or two, but others will also be sold to the highest bidders.
    The great irony is that this coming explosion of legal Internet 
gambling in the U.S. was created in part by a conservative Republican 
attempting to outlaw online gaming. When the GOP controlled Congress 
and George W. Bush was President, Bill Frist (R-TN), then majority 
leader of the U.S. Senate, attached the UIGEA to a must-pass anti-
terrorist bill, the SAFE Port Act. But, the UIGEA has many loopholes, 
accidentally opening the door to many forms of online gaming, including 
fantasy sports, skill games, and intra-state gambling. The UIGEA has an 
express exemption for gambling where the bettor and operator are in the 
same state. It explicitly declares that legal gambling does not violate 
the UIGEA, even if the wires carrying the gambling information pass 
into another state.
    It was the last that led to the announcement by the DoJ. The DoJ 
had always taken the position that the Wire Act outlawed all forms of 
gambling, and that that federal law applied so long as the gambling 
information crossed, even briefly, into another state.
    The DoJ decided the only way out of this conflict with the UIGEA 
was to reinterpret the Wire Act. If this statute applied only to sports 
bets, then it wouldn't matter if phone lines happened to carry lottery 
or poker bets across other states.
    The timing was also interesting. Although written months earlier, 
the DoJ made its announcement on Christmas weekend, when news staffs 
are at their absolute minimum. This prevented it from getting any 
immediate great attention. Even anti-gambling activists did not notice 
it for days. Plus, the tie-in to Christmas may not have been 
accidental. This was a gift of hundreds of millions of dollars and 
thousands of jobs to the states from Pres. Obama, at a time when they 
desperately need help to continue recovering from the Great Recession.
    The Memorandum Opinion was written by Virginia A. Seitz, Assistant 
Attorney General, in the DoJ's Office of Legal Counsel, and represents 
the official position of the Obama administration. It was written in 
response to inquiries, some more than two years old, from Illinois and 
New York. Technically, it answered the question: ``Whether proposals by 
Illinois and New York to use the Internet and out-of-state transaction 
processors to sell lottery tickets to in-state adults violate the Wire 
Act.'' But, it also ended up responding to the letter sent by the 
Majority Leader of the U.S. Senate, Harry Reid (D-NV), and Jon Kyl (R-
AZ), the number two Republican in the Senate. They had written to the 
DoJ, after the District of Columbia Lottery announced it was going to 
open Internet gaming in Washington, demanding that the Department 
clarify its position on Internet gambling.
    They now have their answer, though it may not have been what they 
had wanted. Instead of declaring the D.C. Lottery's Internet plans 
illegal, federal prosecutors will now only use the Wire Act when the 
gambling involves sports events or races across state lines. Because 
interstate horse racing already has its own statute, the only federal 
prohibition remaining on state-legal gambling is on sports betting, and 
even that might be changing.
    The PASPA grandfathers-in Nevada, Delaware and a half-dozen other 
states, while prohibiting any other state from legalizing sports 
betting. This is now being challenged in the courts, because New Jersey 
voters approved sports betting in November 2011. My guess is that the 
PASPA will be declared unconstitutional. It is as legally irrational as 
saying that only some states can have movie theaters with sound. And it 
is possibly the only federal statute in history that tells the states 
they cannot change their public policies on gambling.
    The immediate beneficiaries will be the eight state lotteries that 
are already using the Internet. Now, they can use out of state payment 
processors and will quickly expand into selling individual tickets, not 
just subscriptions. The big question is whether they will sell instant 
tickets online. Because, if you put a scratcher on a video screen, it 
becomes almost indistinguishable from a slot machine. Every state 
lottery is also looking into whether it can offer other games, 
including online poker, as the DC Lottery already has authority to do. 
After all, most of the provincial lotteries in Canada are already 
operating Internet poker and other online gambling games, or are about 
to.
    State legislatures are looking at how much revenue they can raise 
by changing their laws to license Internet gambling. Nevada is furthest 
along, having issued regulations for Internet poker. The Silver State 
already has online and telephone sports betting. It allows remote 
wagering on casino games from dedicated computer pads, limited to 
casino grounds and excluding hotel rooms. But Nevada will probably not 
license true Internet casino games, as long as the state's brick and 
mortar casinos fear the competition.
    States will then enter into compacts with other states, and even 
foreign nations. In fact, there is no reason to wait. Nevada and the 
District of Columbia can immediately agree that players in Las Vegas, 
Reno and Washington can play online poker on sites operated by the D.C. 
Lottery or a Nevada-based casino company. The main barriers will be 
licensing and tax-revenue sharing. But multi-state and multi-national 
lotteries show these difficulties can be overcome.
    They should also be talking with the governments of England, 
Alderney and the dozens of other foreign jurisdictions that license 
Internet gaming. So long as they stay away from sports betting and 
lotteries, there is no federal barrier to having truly international 
games.
    This surprise Christmas present from the DoJ will spur other states 
to legalize. Iowa will probably be first. The Iowa Legislature mandated 
a report, which has already been submitted, concluding that intra-state 
poker can be operated safely and will raise money. This is the third 
year the Legislature has considered the issue. Since it meets for only 
100 days, it will act quickly, one way or another.
    California is desperate for any source of revenue, and it has so 
much legal gambling that the only question is which operators are going 
to be the big winners.
    In New Jersey, the Democratic-controlled Legislature approved 
intra-state online gaming, but the bill was vetoed by Gov. Chris 
Christie (R-NJ). Christie understands his state needs the money, so he 
will help put the issue on the ballot in November. It should probably 
be done through a constitutional amendment, to eliminate the present 
language limiting gaming to Atlantic City. The main author, state 
senator Ray Lesniak (D-Union), will probably not limit online patrons 
to New Jersey, as his original bill stated, but instead will accept 
players from any other state and nation where Internet gambling is 
legal.
    Questions remain. The Wire Act still applies to bets on horse 
races. In December 2000, Congress amended the Interstate Horseracing 
Act, 15 U.S.C.   3001-3007, to expressly allow the states to decide 
for themselves whether their residents can make bets on horse races by 
phone and computer. More than half the states have opted in under the 
Interstate Horseracing Act to allow residents to bet by phone or 
computer, including across state lines. But the DoJ's official position 
is still that the ADW operator and the bettor have to be in the same 
state. No one else, including the World Trade Organization, agrees with 
the DoJ. And payment processors have to figure out who is right.
    The control of gambling has always been left up to the states. A 
federal licensing law would not really change things that much: States 
have to be able to opt in or out. Congress will not impose the same 
gambling policy on Nevada and Utah.
    The problem for federally recognized tribes is that gambling 
remains a public policy decision left to the states. We are in what I 
call the Third Wave of Legal Gambling. This is the third time in 
American history that legal gambling has spread nearly everywhere. 
Historically, it has always been up to the states to decide their own 
public policy toward gambling. That is why Utah and Nevada can share a 
common border, yet have completely different gaming laws. The role of 
the Federal Government has, until recently, always been limited to 
helping the states enforce their public policies. Congress only acts 
when it has to, as with interstate horseracing and Indian gaming, or 
when the states have asked for federal assistance, as with the Wire Act 
and other statutes designed to fight organized crime. Even IGRA 
codifies the Supreme Court's decision in Cabazon that federally 
recognized tribes can only operate those forms of gaming permitted by 
the state where the tribe is located.
    There are so many statements in the IGRA referring to ``gaming on 
Indian lands,'' that there can be little doubt that Congress intended 
to set up a system for allowing tribes to have legal gambling on their 
land, if the games were low-stakes social or traditional, Class I, or 
permitted by the laws of the state where the tribe is located, Class II 
and III. A typical statement comes at the beginning of IGRA in the 
Findings, 25 U.S.C.  2701(5): ``Indian tribes have the exclusive right 
to regulate gaming activity on Indian lands if the gaming activity is 
not specifically prohibited by Federal law and is conducted within a 
State which does not, as a matter of criminal law and public policy, 
prohibit such gaming activity.'' IGRA contains no similar statement 
referring in any way to allowing tribes to conduct any part of their 
gaming off Indian lands.
    Even the statement in IGRA, quoted above, that tribes have the 
exclusive right to regulate gambling on their lands might not be true. 
At least one judge has found that state lotteries may sell their 
tickets on Indians lands, and that the state regulation of gambling, in 
this case, was not preempted by IGRA or by any other federal law. 
Confederated Tribes and Bands of the Yakama Indian Nation v. Lowry, 968 
F.Supp. 531 (E.D.WA. 1996), judgment vacated by Confederated Tribes & 
Bands of Yakama Indian Nation v. Locke, 176 F.3d 467 (9th Cir. 1999). 
Although the decision is non-binding, it indicates that tribes might 
find it difficult to convince courts to keep Internet gaming off their 
land once a state has made it legal.
    The attempts to make Indian gaming available to the general 
population of a state, without patrons having to come onto Indian 
lands, have not met with much success. The Coeur d'Alene Tribe's 
attempt to sell its National Indian Lottery tickets by telephone to 
patrons in most of the states met with such severe legal challenges 
that the Lottery folded. Many of the cases were resolved on legal 
technicalities. But it is clear that a number of judges rejected the 
Tribe's argument that the Lottery was being conducted on the Tribe's 
land in Idaho, merely because the drawings took place there. Some 
judges even objected to tribes ever offering any gambling off-
reservation, even if the tribe has express permission from the state. 
See, e.g., the dissent in AT&T Corporation v. Coeur d'Alene Tribe, 295 
F.3d 899, 910 (9th Cir. 2002) (Gould, Dissenting); see also State of 
Missouri v. Coeur d'Alene Tribe, 164 F.3d 1102 (8th Cir. 1999); AT&T 
Corporation v. Coeur d'Alene Tribe, 45 F.Supp.2d 995 (D.Idaho 1998), 
reversed, 295 F.3d 899 (9th Cir. 2002).
    It is theoretically possible that the DoJ could someday reverse its 
conclusion that the Wire Act's ``prohibitions relate solely to sport-
related gambling activities in interstate and foreign commerce.'' But 
that is highly unlikely. Not only are such reversals rare, but they 
tend to be limited to issues a new presidential administration 
considers important, such as Pres. Obama's reversal of the DoJ's 
approval of torture under Pres. George W. Bush. Perhaps more 
importantly, the DoJ's position is the one that is legally correct, and 
is supported by almost all federal court decisions, including 
consolidated class actions from throughout the U.S. decided by the 
Fifth Circuit Court of Appeals. In Re MasterCard International Inc., 
313 F.3d 257 (5th Cir. 2002), affirming 132 F.Supp.2d 468 (E.D.LA. 
2001). See also, Jubelirer v. MasterCard International, Inc., 68 
F.Supp.2d 1049 (W.D.Wis. 1999). The only published opinion declaring 
that the Wire Act does cover non-sports wagering was United States v. 
Lombardo, 639 F. Supp. 2d 1271 (D. Utah. 2007).
    The Wire Act was part of Attorney General Robert F. Kennedy's war 
on organized crime and was designed to cut the telegraph wires illegal 
bookies used to get the results of horse races before their bettors. 
Using a 1961 law designed for telegraph wires against Internet poker 
has always been like using stone tools to perform brain surgery: It 
might work, but it would be extremely messy.
    It is worth noting that the UIGEA and other federal anti-gambling 
laws have not been rendered irrelevant by the DoJ's new position on the 
Wire Act. The Black Friday indictments, where the U.S. Attorney for the 
Southern District of New York closed down the largest online poker 
sites then taking money bets from America, never mentioned the Wire 
Act. In that case, the Federal Government bootstrapped New York state 
anti-gambling misdemeanors into federal organized crime felony charges. 
This shows that the DoJ has known for quite a while that the Wire Act 
does not cover poker. It also illustrates the continuing importance of 
state anti-gambling laws in a federal context.
    I want to make it clear that I am not passing judgment on whether 
it is a good or bad thing that tribes have no inherent rights under 
Cabazon or IGRA to accept off-reservation patrons for Internet gaming. 
There are some constitutional issues, dealing with federalism and state 
and tribal sovereignty. But it is mainly statutory: Congress wrote IGRA 
to make it clear that tribes could run legal gambling, open to the 
public, but only on Indian lands.
    IGRA was also intended to strengthen tribal governments. So there 
is nothing preventing a tribe from accepting bets off-reservation, if 
the tribe can reach an agreement with the state.
    Some tribes can protect their gaming operations from the coming 
explosion of online competition, for example, through compacts that are 
already in place. But it is up to Congress to protect the rest. Of 
course, any attempt to expand Indian gaming rights will undoubtedly be 
met with strong opposition from most of the states.
    Congress should not put off looking at these issues. States are 
acting. Now. In 1962, there were no legal state lotteries in the U.S. 
It took more than 45 years before almost all the states made lotteries 
legal. Internet years are like ``dog years.'' Developments now happen 
so fast, that it won't take four decades before Internet gambling is 
legal in almost every state. And many tribes may be out of luck.

    The Chairman. Thank you very much, Mr. Rose, for your 
testimony.
    Mr. Skibine, please proceed with your testimony.

 STATEMENT OF ALEX T. SKIBINE, PROFESSOR, S.J. QUINNEY COLLEGE 
                   OF LAW, UNIVERSITY OF UTAH

    Mr. Skibine. Thank you, Chairman Akaka, Senator Udall. It 
is a pleasure to testify today on this important issue on 
Internet gaming. I thank you for inviting me to this hearing.
    Before I became a professor of law, I worked for Morris 
Udall, your uncle, for about 10 years, at a time that the IGRA 
was first enacted into law. And it is a good thing to see that 
the two main movers at that time were Senator Inouye and 
Senator Udall, at least from the Indians' point of view. It is 
great to see that we still have a chairman from Hawaii and a 
Udall involved in Indian affairs.
    I am here to testify about why, if Internet gaming is 
otherwise legalized, the special problems of Indians should be 
taken into consideration. I think there are two reasons for 
this. One, for sure for many Indian Tribes that have Tribal-
State compacts, Internet gaming would be legal under their 
compacts. There is no reason to treat Internet gaming as a new 
form of gaming. If there is poker that is allowed as a form of 
gaming, Internet poker should follow.
    However, for other Tribes, it may not be the case. If so, 
as a result of the Seminole Tribe, which is a Florida Supreme 
Court decision, those Tribes would have a very hard time 
amending their compacts, since under that decision, Tribes can 
no longer sue the State in Federal court if the State raised 
their sovereign immunity rights.
    Number two, and Professor Rose alluded to that, even for 
those Tribes for whom it is legal under their existing compact, 
they may be restricted to wagering originating on Indian land. 
This limitation in effect makes no sense when it comes to 
Internet gaming, since Internet gaming is borderless. And the 
reason for that limitation is that IGRA was enacted with a 
concept of land-based sovereignty that is just not applicable 
or translatable when it comes to Internet gaming.
    Having said that, then if Internet gaming is going to be 
addressed by new legislation, I think it is very important that 
the bargain struck in the original IGRA by Chairman Udall and 
Chairman Inouye should be respected. As you know, and I'm sure 
Mr. Porter would tell you, the Tribes objected to IGRA when it 
was first enacted. Because they viewed this as an invasion of 
their sovereignty. Eventually, IGRA was able to work for Indian 
Tribes.
    But in the process, Inouye and Udall made some bargain with 
those people that were opposed to Indian gaming. So I think in 
my mind, IGRA has three major components, or ideas. First, it 
respected the victory that the Tribes gained in the Cabazon 
case, which I am sure the next witness will mention. That means 
that Tribes have a right to conduct gaming, as long as it is 
not prohibited in the State where they are located. I think 
that bargain should still be upheld.
    Number two, we made a decision when we drafted the very 
first Udall bill. And I think Morris Udall was the first one to 
introduce a bill regulating Indian gaming. Gaming was going to 
be limited on the reservation to Tribally-owned establishments. 
So in effect, we viewed Tribes as both the owners and the 
regulators of gaming. And there is a lot of reason why we did 
that. I think one of the reasons why we thought that Tribes do 
not enjoy tax-based revenues that other governments have. So we 
thought that they needed something. And as a result, by the 
way, by the time IGRA was introduced, there were privately-
owned casinos on Indian land. But we basically made the option 
that Tribes are going to be both the owners and the regulators. 
That bargain should also be followed.
    And finally, the third one, when Morris Udall introduced 
his first bill, some people were opposed to it because they 
thought that it was going to give an unfair benefit to the 
Tribe. As a result, they demanded a level playing field 
between, with the Tribes, that was their war cry, so to speak. 
Eventually, we decided, yes, we are going to maintain this by 
having a Tribal-State compact. And that was the essence of the 
bargain, that the Tribe and the State would get together, would 
negotiate a compact.
    And then we also had this provision that Tribes could sue 
States that did not negotiate in good faith. The Supreme Court 
got rid of that section and as a result IGRA today does not 
represent a fair balance between Tribal interests and State 
interests.
    I see my time has expired. Thank you very much.
    [The prepared statement of Mr. Skibine follows:]

Prepared Statement of Alex T. Skibine, Professor, S.J. Quinney College 
                       of Law, University of Utah

    Chairman Akaka, members of the Committee, it is a pleasure to 
testify today on the important issue of Internet gaming and I thank you 
for inviting me to this hearing. It is an important issue because 
Internet gaming is already by some estimates, a $30 billion industry 
worldwide and it has been estimated that $6 to $7 billion of that come 
from gamblers residing within the United States. If it is legalized in 
this Country, it could very well be the next big thing in gaming and 
there is no reason why Indian tribes should be left out of this 
economic development opportunity.
    My testimony will focus on ``what is at stake for tribes'' and not 
on the Justice Department's opinion concerning the scope of the Wire 
Act. I tend to agree with that opinion and leave to others the task of 
casting a critical eye on its reasoning. Instead, I want to focus my 
testimony on ``what is at stake for tribes.''
    First, I want to emphasize why, if general legislation legalizing 
and regulating Internet gaming is enacted, the special issues and 
concerns facing Indian tribes should be addressed.
    Secondly, while I do believe that it might not be politically wise 
to amend IGRA in order to address the special problems facing tribal 
Internet gaming, I also believe that any legislation addressing such 
Internet gaming should respect the essential bargain that was struck in 
IGRA between the interests of the Tribes, the States, and the Federal 
Government.
    Finally, I will make some suggestions about how Internet Gaming 
should be regulated when it comes to Indian tribes.

1. The Need to Specifically Address the Special Issues Facing Indian 
        Tribes and Internet Gaming
    The major reason to specifically address the issues facing Indian 
Internet gaming is that without some specific legislation, Internet 
gaming would be controlled by the Indian Gaming Regulatory Act. IGRA 
divides gaming into three classes. Since Internet gaming is not 
included in either Class I or II gaming activities, it would 
automatically be included in Class III. Class III is regulated pursuant 
to Tribal State Compacts. Of course, a very good argument can be made 
that under current law, Internet gaming is authorized under some 
existing compacts. Under that argument, ``Internet'' gaming would not 
be considered to be a ``new form'' of gaming under existing compacts. 
Under that view, if the compact allowed electronic blackjack for 
instance to be played in a tribal casino, that game would be 
automatically authorized as an Internet game. In the event that states 
or others may not agree with this position, perhaps any legislation 
legalizing Internet gaming generally should have a provision stating 
that any Internet game that is otherwise authorized as a non-Internet 
game in a tribal state compact would be deemed authorized under federal 
law.
    The major problem here is that while Internet gaming, if otherwise 
legal under federal law and within the state where the reservation is 
located, may be legal for some tribes under their tribal state 
compacts, it may not be an authorized form of gaming for many others. 
This would mean that for many tribes, Internet gaming would not be 
authorized unless they could persuade the states to amend their 
compacts. This would be an uphill battle and an unlikely scenario for 
many tribes because the Supreme Court in Seminole Tribe v. Florida 
struck down a key component of IGRA which allowed tribes to sue states 
in federal court if the states failed to negotiate a compact in good 
faith. As a result of this Supreme Court's decision, IGRA no longer 
strikes the appropriate balance between tribal and state interests that 
Congress had worked so hard to achieve when the legislation was first 
enacted. Therefore, unless IGRA is amended to restore such appropriate 
balance between tribal and state interests, I do not believe that 
Internet gaming, if found not to be authorized under a compact, should 
be regulated as a Class III game or subject to a tribal state compact.
    Such a Seminole fix would be very simple to achieve but probably 
very complicated politically. The Congress would just have to declare 
that tribes could sue state officials who failed to negotiate in good 
faith under the doctrine of Ex Parte Young. It would be a simple and 
elegant solution that would not disturb the constitutional part of the 
Supreme Court decision.
    Even for those tribes where Internet gaming would be already legal, 
the problem is that IGRA is very land specific. It is based on a 
physical and geographical concept of sovereignty. This is why IGRA 
limits itself to gaming on ``Indian lands'' and contains a very 
specific definition of what are ``Indian lands'' for the purposes of 
IGRA. Thus some may make the argument that even if arguably authorized 
under a compact, Indian tribes should only be able to offer Internet 
gaming to people located on Indian land. Such a limitation would be 
ludicrous and incompatible with the very nature of the Internet. The 
Internet is not land based. It does not have geographical boundaries. 
It is to a great extent, borderless. Indian tribes should be able to 
handle wagering from any customer located in a state that allows 
Internet gaming.
    Many people think that archaic conceptions of land based 
sovereignty are ill adapted to regulation of the Internet. In any case, 
for the following reasons, Tribes should be able to extend their 
economic opportunities as sovereigns beyond the reservation borders.
    First, one has to look at the historical context behind the 
creation and location of Indian reservations. Indian tribes used to own 
the whole country, and at least initially were able to reserve 
substantial amount of lands for themselves in the early treaties. Later 
on, however, after first being removed to out of the way and distant 
places, many tribes saw their treaty land base reduced as a result of 
warfare, and unilateral abrogation by the United States. Finally, the 
tribes lost around 90 million acres through the allotment process, 
which also resulted in a large influx of non-Indians within the 
reservations. Indian reservations during the removal and later periods 
were never created with Indian economic development in mind. Quite the 
contrary, their location was selected, and their size reduced so that 
non-Indians could proceed with economic development on land previously 
owned by the tribes.
    Second, it has to be understood that, when it comes to economic 
development, Indian tribes are not just acting as businesses to make 
money for their shareholders when venturing beyond their reservations. 
They are in the process of raising governmental revenues because they 
do not have a tax base on the reservation. They lack such tax base 
because the Supreme Court has severely curtailed their power to tax 
non-members, while at the same time allowing state taxation of non-
Indians, and Indian land held in fee, located within reservations. In 
addition, the tribes cannot tax land held in trust by the United States 
for individual tribal members.
    Third, the concept of territorial sovereignty, both in the United 
States and abroad, has been significantly eroded or modified, and there 
are no valid reasons why especially when it comes to economic 
development opportunities, tribal sovereign interests should be 
strictly limited to the reservation setting. The general concept of 
sovereignty has evolved from a concept focusing uniquely on territorial 
sovereignty to a more malleable concept recognizing the 
interrelationship between various sovereign actors. With the advent of 
the European Union, and the development of cyberspace, and the 
Internet, the very concept of sovereignty has evolved and is being 
challenged. Under traditional understanding of sovereignty, in order to 
be sovereign, a state had to have complete and exclusive control of 
everything within its borders. Under such concept, tribes and states 
such as Utah, could not be considered sovereign. Today, however, that 
concept of territorial sovereignty is on the decline, and scholars have 
recognized that there is more than one conceptual framework for 
defining sovereignty. In a world where everything is interconnected, 
largely because of the Internet, scholars have moved away from the 
traditional concepts of territorial sovereignty, to a more malleable 
concept, that some scholars have called relational sovereignty. In 
Appendix B which is attached at the end of this statement, I further 
describe how the United States courts and the Congress have already 
recognized the validity of tribal sovereign interests beyond the 
reservation border.
    While I believe that because the Supreme Court invalidated parts of 
IGRA, IGRA no longer incorporates the balance between tribal-state and 
federal interest sought by Congress when it initially enacted that law, 
I do believe that any future legislation should uphold the initial 
compromise reached in IGRA. I now turn to what were the key provisions 
of this agreement.

2. The Essence of the Bargain Reached in IGRA
    The dual purpose of IGRA was to recognize gaming as a legitimate 
activity for economic development on Indian reservations while at the 
same time ensuring that Indian gaming remained clean and legitimate by 
not coming under the influence of organized crime. However, the crucial 
aspect of the legislation was the recognition that the tribes, the 
states, and the Federal Government all had legitimate interests 
relating to gaming on Indian reservations. While the legislation 
recognized perhaps for the first time that states did have a role to 
play in the tribal-federal relation, it also recognized that tribes 
should be incorporated as sovereign governments into our ``dual'' 
system federalism. In other words tribes should be integrated as 
governments into what was before only a federal-state relationship.
    With this in mind, what are the essential aspects of IGRA that 
achieved those goals:

        First, one cannot talk about IGRA without mentioning the 
        Cabazon Supreme Court decision, the 25th anniversary of which 
        we are celebrating this year. In Cabazon, the Court held that 
        states did not have jurisdiction to regulate gaming on Indian 
        reservations although they could prohibit it altogether if the 
        prohibition was applied throughout the state. IGRA incorporated 
        this part of the decision by mandating that states had to 
        negotiate in good faith on any game that was otherwise 
        authorized under state law.

        Second, IGRA recognized that Tribes could be both operators and 
        regulators of Indian gaming. The very first bill introduced to 
        regulate gaming on Indian reservations was introduced by my 
        former boss, Morris Udall. Under that initial bill, gaming on 
        Indian reservations would have been legal if authorized by a 
        tribal law and approved by the Secretary of the Interior. The 
        tribal law had to meet certain key criteria. One such criteria 
        was that Indian casinos had to be tribally owned. The reason 
        for this was two-fold. First we were aware that many tribes 
        lacked the essential tax base normally enjoyed by any other 
        governments. Tribes, therefore, were badly in need of an 
        additional source of governmental revenues. Secondly, we were 
        also aware that many states had been successful in raising 
        revenues through the operation of state owned lotteries. This 
        indicated that governments, such as tribal governments, could 
        be both gaming operators and regulators. That essential feature 
        of the original Udall Bill was maintained in the final version 
        of IGRA.

        Third, maintaining a level playing field. The initial Udall 
        Bill was forcefully criticized by many on Capitol Hill on the 
        ground that Indians would gain an unfair advantage under such 
        legislation. The operative words were that Indians had to be 
        operating on a ``level playing field'' with the non-Indian 
        gaming operators. Although initially those who opposed the 
        original Udall bill were thinking of a level playing field 
        between the tribal casinos and the privately owned non-Indian 
        casinos, we on the Udall staff agreed to another type of level 
        playing field and that was between the states as owners and 
        regulators of gaming and Indian tribes as owners and 
        regulators. In the end, it is this kind of level playing field 
        that IGRA incorporated.

3. How Do You Best Maintain the Historic Compromise Reached in Igra as 
        First Enacted
    1. Tribes should continue to be recognized as sovereign governments 
with the authority to regulate gaming occurring on the reservations.

    2. Tribes should be able to conduct Internet gaming with customers 
located in any jurisdiction that allows Internet gaming even if these 
customers are not located in the state where the tribe is located.

    3. Another part of the agreement reached in IGRA called for no 
state taxation of tribal gaming revenues. This too should be respected 
and extended to Internet gaming.

    4. To the extent that Internet gaming is not already authorized 
under existing compacts, Internet gaming should not be treated as Class 
III but as a new type of gaming activity.

    5. There is no reason why Internet gaming, if it is considered a 
new type of gaming, cannot be regulated jointly by the NIGC and the 
Indian tribes operating such Internet gaming.

    A federal court once referred to IGRA as a prime example of 
``cooperative federalism.'' The evolution of congressional legislation 
in Indian affairs (described in Appendix A) shows a move toward what 
has been referred to as cooperative federalism--instead of imposing 
federal laws, regulations, and programs on tribes directly, more recent 
legislation call on the Federal Government to negotiate compacts with 
the tribes or make federal funds contingent on tribal compliance with 
federal directives. The goal here should be both to define the role of 
the state in the federal-tribal trust relationship and integrate the 
tribes into what was previously a dual federalism comprised of only the 
states and the Federal Government. The legislative model selected for 
tribal Internet gaming regulation should represent the best approach 
for establishing a system some may call cooperative tri-federalism.
    One option worth exploring would be for the NIGC and the tribes to 
follow the informal rule-making model set out in the Administrative 
Procedure Act, or more likely, in the Negotiated Rulemaking Act of 
1990. Under the informal rule-making model, Congress would enact 
comprehensive legislation outlining general federal requirements and 
guidelines which would include protections of legitimate state 
interests. These federal requirements could be similar to the ones 
currently contained in IGRA. The Tribes would negotiate with the NIGC 
to create a gaming compact with the Federal Government. The legislation 
would provide for state interests to be represented during these 
negotiations. The negotiated compact would then be published as a 
proposed rule in the Federal Register. Interested parties, including 
the state and local interests, would then have another chance to 
comment on the proposed compact before it is issued as a final rule in 
the Code of Federal Regulations. This option would side-stepped the 
hurdles created by the Supreme Court decision in Seminole Tribe v. 
Florida and re-establish the balance between competing tribal, federal, 
and state interests that the original IGRA had sought to achieve. I 
also believe that, as shown in Appendix A, it would be consistent with 
the evolutionary trend in federal Indian legislation.
    Attachments
    Appendix A: The Evolutionary Trend in Federal Indian Legislation
    The purpose of this section is not to do a comprehensive in-depth 
analysis of all major congressional legislation affecting Indian 
affairs, but to analyze the evolution of such legislation, to discern 
the normative assumptions behind the different models, and to determine 
which model is best suited for the regulation of tribal Internet gaming 
and achieving what could be called cooperative tri-federalism: a 
version of federalism involving the Tribes, the Federal Government, and 
the States.
    Congressional legislation after the treaty period which ended in 
1871 can be divided into four eras: The Allotment Era, the Indian 
Reorganization Era, the Self-Determination Era, and the current period, 
which could be called the Self-Governance Era.
    The first model, the treaty model, was in effect for almost 100 
years, much longer if one includes the pre-constitutional colonial 
period. This period of tribal-federal relationship was mostly defined 
by the various treaties and the federal role as a trustee was mostly 
limited to providing whatever was mandated under the various treaties. 
Even though the Indian nations acknowledged their ``dependence'' on the 
United States in many of those treaties, the assumption behind the 
treaties was that Indian nations were to remain separate and distinct 
sovereign political entities. Indians were not citizens of the United 
States and no federal laws, at least initially, extended to Indians 
within Indian country. The first law extending federal criminal 
jurisdiction over Indians committing crimes against non-Indians in 
Indian Country was enacted in 1817.
    Things changed drastically after 1871, the year Congress enacted 
legislation prohibiting the making of any further treaties with Indian 
tribes. During that period, known as the Allotment Era, the Court 
recognized state criminal jurisdiction over crimes committed by non-
Indians against other non-Indians within Indian country, and the Court 
upheld the power of Congress to enact laws, such as the Major Crimes 
Act, specifically aimed at assuming political control over Indian 
tribes.
    During the Allotment Era, Congress was most interested in assuming 
control of tribal land and natural resources. The model legislation 
then was the leasing statutes. These statutes reserved total control to 
the Federal Government. Some of the leasing acts did not even require 
tribal consent, and the Supreme Court upheld the power of Congress to 
delegate plenary authority to the Secretary of the Interior in the 
management of tribal natural resources.
    The next era came about with the Indian Reorganization Act of 1934 
(IRA). The IRA's major goal was to put an end to the allotment policy. 
The proto-typical statute of this era is the Indian Mineral Leasing Act 
(IMLA). Although tribes obtained more control over their resources, 
Professor Judith Royster has asserted that ``tribes had more authority 
over resource development on paper than in practice . . . . [T]he 
Federal Government retained most of the practical decisionmaking about 
Indian natural resources development and use.''
    Except for a brief time when Congress embraced a termination 
policy, the next era, the Self-Determination Era, began in the 1970s. 
Besides the Indian Self-Determination and Education Assistance Act, 
perhaps the most important legislation enacted during this era was the 
Indian Child Welfare Act of 1978 (ICWA). Congress also enacted statutes 
to govern the development of natural resources during the Self-
Determination Era, like the Indian Mineral Development Act of 1982 
(IMDA). The IMDA allowed tribes to negotiate the terms of their mineral 
development and enter into new types of arrangements.
    The final generation of statutes is part of a new era which could 
be called the Tribal Self-Governance Era. An indicative progression 
from self-determination to self-governance has been the evolution of 
the Indian Self-Determination and Education Assistance Act, from an act 
only allowing tribes to assume the management of federal programs 
pursuant to a procurement contract type model, to a model based on 
tribal federal agreements, allowing each tribe to design its own 
program with its own funding priorities. In the natural resources area, 
a good example of the evolution from the previous model to the new one 
is the difference between the Indian Mineral Development Act of 1982 
and the Indian Tribal Energy Development and Self-Determination Act of 
2005 (ITEDSA). Under the ITEDSA, tribes can enter into Tribal Energy 
Resource Agreements (TERA's) with the Secretary of the Interior. Once 
the agreement is approved by the Secretary, tribes can enter into 
leases or other agreements concerning development of natural resources 
with third parties without any additional federal approval 
requirements.
    The process provided for in the ITEDSA shares some similarities 
with the one adopted in the Tribal Self-Governance Act of 1994. Both 
acts provide for an initial foundational agreement between a tribe and 
a federal agency, after which federal controls are diminished and the 
tribe assumes primacy over the program. Peculiar to the ITEDSA, 
however, is that at the same time as the Federal Government releases 
its daily management and ultimate control over tribal natural 
resources, the Congress is also giving more of a voice to affected 
third parties. Thus, under the ITEDSA, the Secretary of the Interior 
has to request public comments on the final TERA proposal, and has to 
take such public comments into consideration when deciding whether to 
approve a TERA. Professor Royster has stated that ``[m]any of the 
public input provisions of the ITEDSA . . . conflict sharply with 
tribal self-governance.'' Other provisions in the Act require tribes to 
establish environmental review processes providing for public notice 
and comment, as well as providing consultation with state governments 
concerning any potential off-reservation impacts. There is also a 
provision allowing any interested party to petition for Secretarial 
review of the Tribe's compliance with the TERA.
    While the Act does maintain the overall trust relationship between 
the Federal Government and the tribes, Professor Royster concluded that 
``[t]ribes can take advantage of new options and increased practical 
sovereignty, but in exchange the [federal] government has a deeply 
discounted trust responsibility.'' For instance, while the Secretary 
has to ``act in accordance with the trust responsibility . . . and in 
the best interests of the Indian tribes,'' the Act also provides that 
``the United States shall not be liable to any party (including any 
Indian tribe) for any negotiated term of, or any loss resulting from 
the negotiated terms'' of any agreement reached pursuant to an approved 
TERA.
    In some important aspects, both the Self Governance Act and ITEDSA 
follow the model adopted for the implementation of some of the federal 
environmental laws, a model which has been described as cooperative 
federalism. Starting in the mid 1980s Congress did include Indian 
tribes in legislation such as the Clean Air Act, the Clean Water Act, 
and the Safe Drinking Water Act, and Congress provided that, for some 
of the sections and under certain conditions, tribes could be treated 
as states for the purposes of assuming primacy for the regulation of 
the environment within their reservations.

  Appendix B: Domestic Law Recognition of Tribal Sovereign Interests 
                         Beyond the Reservation

1. Treaties and Agreements With and Among Indian Tribes
    Treaties entered between the United States and various Indian 
tribes have been recognized as confirming hunting and fishing rights to 
tribes beyond their reservations borders. Such treaties have been held 
to immunize tribal members from some state regulations. In addition, 
tribes can enforce tribal regulations of treaty rights on their own 
members beyond the reservation. Such tribal regulations may even, in 
certain cases, preempt state regulations. Usually, however, because 
tribal treaty rights outside the reservation are said to be held ``in 
common'' with the citizens of the state, states have been given 
concurrent jurisdiction to regulate treaty hunting and fishing rights 
for the purpose of conservation. Such state regulations have to be 
reasonable and necessary, and cannot discriminate against Indians 
exercising their treaty rights.
    Although there may be some limitations derived from the Supreme 
Court's statement that tribes have been divested of the power to 
``independently . . . determine their external relations,'' tribes can 
and have entered into binding agreements and treaties with other 
tribes. In addition, tribes can and have entered into compacts with 
states which have recognized some form of tribal authority over tribal 
members or exemptions from state power beyond the reservation border. 
For instance, tribes in Michigan have entered into tax compacts with 
the state which recognize some tribal exemptions from state taxing 
authority in ``agreement areas.'' As stated by professor Matthew 
Fletcher, ``[t]he `agreement area' concept developed over the course of 
the negotiations in order to smooth over many of the difficulties 
created by the lack of a clearly designated Indian Country for most 
Michigan Indian Tribes.'' Therefore, according to Professor Fletcher 
``[f]ew of the lines and boundaries affecting the [tax] exemptions 
contained in the agreement have any relationship whatsoever to 
reservation boundaries or Indian Country.''

2. Legislation Recognizing Tribal (Sovereign?) Interests Beyond the 
        Reservation
    I put a question mark after the word sovereign because one of the 
issues here is whether this section should be written in terms of 
tribal sovereignty interests or something else: cultural, religious, or 
socio-political interests. Talking in terms of sovereignty often 
invites conflicts because sovereignty is connected with an assertion of 
power, often exclusive power. Framing the discussion about cultural or 
economic rights, on the other hand, seems less confrontational and more 
aimed at seeking accommodations. Whether described in term of 
sovereignty, cultural rights, or just economic rights, the United 
States Congress has enacted a substantial amount of legislation aimed 
at protecting such off-reservation tribal interests.
    Perhaps the most far reaching legislation recognizing tribal 
sovereign interests beyond the reservation borders is the Indian Child 
Welfare Act (ICWA) of 1978. In addition to mandating exclusive tribal 
court jurisdiction over certain child custody proceedings when the 
Indian child is domiciled on the reservation, the ICWA allows for 
concurrent tribal and state jurisdiction in such proceedings for Indian 
children residing off the reservation. Furthermore, the Act allows for 
transfer of cases from state to tribal courts in the absence of good 
cause or objections by either parent. As pointed out by Patrice Kunesh, 
one section of the ICWA recognized exclusive tribal court jurisdiction 
over non-reservation Indian children when these children are ``wards'' 
of the tribal court. Furthermore, professor Kunesh also demonstrated 
that even before the passage of ICWA, some courts had recognized 
exclusive tribal court jurisdiction in such off reservation child 
custody proceedings. Having stated that the unique tribal interest in 
its Indian children ``coalesces with the essentiality of tribal 
governance in child welfare matters, to compose an uber-tribal interest 
that transcends territorially-defined jurisdictional limits,'' 
professor Kunesh concluded that ``[t]he welfare of Indian children lies 
at the heart of tribal sovereignty. Thus, there are no real boundaries 
to protecting these essential tribal relations . . . . ''
    Just as was done in the ICWA, Congress has also enacted federal 
legislation mandating that full faith and credit be given by federal 
and state courts to certain orders of tribal courts. Examples of such 
legislation are the Child Support Orders Act, the Violence Against 
Women Act, the Indian Land Consolidation Act, the National Indian 
Forest Management Act, the American Indian Agricultural Management Act, 
and arguably the Parental Kidnapping Act. These statutes are important 
to the issue being discussed here because their ultimate effect is to 
extend the sovereign actions of Indian tribes beyond the reservation 
borders. In addition, as professor Robert Clinton has argued, 
legislation providing for full faith and credit, rather than comity, 
more clearly ``integrate'' Indian tribal courts into Our Federalism on 
the same par with state and federal courts.
    Congress has also enacted amendments to federal environmental 
statutes such as the Clean Air Act, Clean Water Act, and the Safe 
Drinking Water Act, providing for treatment of tribes as states (TAS). 
Such treatment as states allows Indian tribes to extend the reach of 
their sovereignty beyond the reservation borders. As the Seventh 
Circuit stated in Wisconsin v. EPA, ``once a tribe is given TAS status, 
it has the power to require upstream off-reservation dischargers, 
conducting activities that may be economically valuable to the state . 
. . to make sure that their activities do not result in contamination 
of the downstream on-reservation waters.'' The Seventh Circuit also 
acknowledged that even though ``this was a classic extraterritorial 
effect,'' it was not prohibited by the Oliphant-Montana line of cases 
which implicitly divested tribes of the power to independently control 
their external relations.
    Perhaps the most important statute focusing on tribal cultural 
interests is the Native American Graves Protection Act of 1990 
(NAGPRA). Once described as human rights legislation, NAGPRA not only 
provides for the repatriation of Native American human remains and 
cultural items in the possession of Federal agencies and museums to the 
tribes, but also gives certain protections to Native American graves 
and burial grounds located on tribal and federal lands. Under NAGPRA, 
if an Indian burial ground is discovered during excavation activities, 
the appropriate tribes have to be notified. Once a tribe is notified, 
however, it only has thirty days to decide how to remove, or otherwise 
make provisions for the disposal of, human remains and cultural items 
associated with the burial site. After the thirty day period, 
activities around the site may resume.
    Tribal interests in off-reservation sites were also recognized in 
the 1979 Archeological Resource Protection Act (ARPA) and the 1966 
National Historic Preservation Act (NHPA). ARPA prohibits the removal 
and excavation of ``archeological resources'' from federal and Indian 
land without a permit. Under the Act, the appropriate Indian tribe has 
to be notified if the issuance of a permit could result in harm or 
destruction to any site, considered as having some cultural or 
religious importance to that tribe. Under the 1992 amendments to NHPA, 
federal agencies have to consult with the appropriate tribes if a 
federal undertaking is likely to affect a historic property of 
religious or cultural significance to that tribe. However, while 
consultation allows tribes to be involved in the process, it does not 
give them a right to veto any federal undertakings.

3. Judicial Recognition
    One clear example where tribal immunity from state power has 
survived even outside the reservation is in the doctrine of tribal 
sovereign immunity from suit. Thus in Kiowa Tribe v. Manufacturing 
Technologies, the Supreme Court upheld the sovereign immunity of the 
tribe even though the tribe was being sued over commercial activities 
which had occurred off the reservation. The majority specifically 
refused the dissent's invitation to limit the tribe's sovereign 
immunity to non-commercial tribal affairs occurring on the reservation.
    The peculiar situation of Alaskan tribes provides a fertile ground 
to debate the extent of tribal sovereignty beyond the reservation 
borders. As a result of the Supreme Court decision in Alaska v. Native 
Village of Venetie, the Native Tribes in Alaska have been described as 
``sovereigns without territorial reach.'' Yet in spite of Venetie, the 
Alaska Supreme Court, in John v. Baker, allowed a tribal court 
jurisdiction over a child custody dispute between tribal members, even 
in the absence of any Indian country falling under the jurisdiction of 
that tribe. After stating that ``[t]he federal decisions discussing the 
relationship between Indian country and tribal sovereignty indicate 
that the nature of tribal sovereignty stems from two intertwined 
sources: tribal membership and tribal land,'' the Alaska Supreme Court 
held that Alaska Native villages have inherent, non-territorial 
sovereignty allowing them to resolve domestic disputes between their 
own members. Although the decision has been criticized, it is now 
almost ten years old and has not been modified.
    The Alaska Supreme Court relied on precedents such as Wheeler, 
Montana, Merrion, Fisher, and Iowa Mutual, to find that under United 
States Supreme Court jurisprudence, ``The key inquiry . . . is not 
whether the tribe is located in Indian country, but rather whether the 
tribe needs jurisdiction over a given context to secure tribal self-
governance.'' Finally, relying on Kiowa Tribe of Oklahoma v. 
Manufacturing Technologies, the Alaskan Court concluded that 
``Decisions of the United States Supreme Court support the conclusion 
that Native American nations may possess the authority to govern 
themselves even when they do not occupy Indian country.''

    The Chairman. Thank you very much, Mr. Skibine.
    Mr. Washburn, you state in your testimony, ``It is time for 
the United States to formulate a coherent approach toward 
Internet gaming.'' Do you think that coherent approach should 
include a provision to allow Tribes the same access to enter 
the market as any other commercial entity?
    Mr. Washburn. Mr. Chairman, I do believe that. I do believe 
that Tribes should at least have an equal opportunity to engage 
in Internet gaming. Keep in mind that currently, Federal 
gaming, Indian gaming is the only Federal gaming, and all of 
those revenues go towards Indian Tribes. Every nickel of the 
only federally-authorized gaming goes towards Indian Tribes.
    So Tribes have become dependent on that revenue. So if we 
risk that revenue to Tribes by creating a different regime, we 
need to ensure that they are able to keep their revenues. And 
there are several different ways to get there, I think. They 
certainly should be allowed to participate, those Tribes that 
wish to participate in Internet gaming, on an equal and fair 
basis.
    Thank you for the question, Mr. Chairman.
    The Chairman. Mr. Rose, you described the DOJ opinion as an 
unexpected gift to the States.
    Mr. Rose. Yes.
    The Chairman. That is a quote. Can you elaborate on which 
States you think would benefit most, and whether this gift 
would extend to Indian Tribes?
    Mr. Rose. Thank you, Chairman Akaka. The gift was really 
unexpected, because the Department of Justice had been saying 
that the Wire Act covered all gambling and it covered even 
legal intra-State gambling if a wire happened to go into 
another State and come back, which given the Internet and 
modern technology is the world. It is a gift because the States 
can use that to legalize Internet gambling, bring in hundreds 
of millions of dollars and create thousands of jobs.
    Your question which States, I actually have created a Power 
Point presentation, and I have found very few States that won't 
be doing it. Utah won't, Alabama might not. Literally there is 
only a handful of States. I practiced law in Hawaii for three 
and a half years, Hawaii might not but probably will join. 
Because every State is projecting a budget deficit, and they 
can't have budget deficits.
    So they are going to start with the State lotteries, mostly 
traditional games, then go on to faster forms. They are going 
to be looking at Internet poker, which is viewed as being 
safer. But in some cases like New Jersey, it will be Internet 
casinos. And I think every State is very seriously looking at 
this, with only a couple exceptions.
    Will the Tribes benefit? I think the politics of this are, 
this is a State issue. There is so much legal gambling in this 
Country that the politicians who are desperate for money say, 
there is no big harm with legalizing one more form, like 
legalizing Internet poker. But there is so much legal gambling 
in this Country that we have established local operators.
    Where the money is the same, they will get the licenses. 
But in places like California, which have on the order of 110 
federally-recognized Tribes, I think there are now currently 80 
card clubs. They don't have the big Nevada operators. The State 
wants to either give it to the State lottery to maximize its 
money or to sell licenses to people like Caesars-Entertainment. 
I expect a license will cost $100 million cash up front, which 
the Tribes and the card clubs don't have.
    But politically, the Tribes at least have enough power to 
say okay, if you are going to give three licenses, then at 
least one has to go to a Tribe or consortium of Tribes. But the 
rest of the Tribes are going to get cut out. And certainly the 
small Tribes that aren't near population centers don't have the 
political power, they usually don't have a compact that will 
protect them. And they are going to get cut out.
    The Chairman. Thank you, Mr. Rose.
    Mr. Skibine, as I mentioned earlier, Indian gaming is 
currently the only federally-authorized and regulated gaming in 
the United States. Indian gaming currently makes up 40 percent 
of total gaming revenue in the U.S. market. Internet gaming 
could be seen as a threat to that exclusivity.
    Given your experience in writing IGRA, what do you think 
Federal legislation would need to contain to ensure that Tribal 
exclusivity is maintained in any expansion of gaming?
    Mr. Skibine. Thank you. As a matter of fact, I am looking 
at your chart, I can see that if Internet gaming was there 
worldwide, it probably would represent the biggest percentage 
of games. So it would be a threat, definitely. I think right 
now it is an estimated $7 billion comes from the United States, 
and it is another $30 billion worldwide.
    I think there are four essential points that any decision 
would have to address. Number one, Tribes should continue to be 
recognized as sovereign governments with the authority to 
regulate gaming occurring on their reservation. Number two, 
Tribes should be able to conduct Internet gaming with customers 
located in any jurisdiction that allows Internet gaming, even 
if those customers are not located in the State where the Tribe 
is located.
    Number three, another part of the agreement reached in IGRA 
called for no State taxation of Tribal gaming revenues. And 
that principle should be continued. And number four, to the 
extent that Internet gaming is not already authorized in 
existing compacts, I do not think that Tribes should have to 
negotiate or amend their compacts. Because they will not be 
able to do so, they are going to have a very hard time as a 
result of the Seminole Tribe decision.
    So there is no reason why new Internet gaming cannot be 
regulated jointly by the Tribe and the NIGC. I have suggested 
in my testimony a kind of an involved mechanism by which the 
NIGC could sit down with the Tribe and interested parties like 
the States and negotiate a type of informal rulemaking that 
would be in effect a compact. Thank you.
    The Chairman. Let me say that all of your entire statements 
will be placed in the record.
    Mr. Washburn, some see the DOJ opinion as opening the door 
for intra-State online gaming. In your opinion, would this 
create opportunities or be detrimental for Tribes?
    Mr. Washburn. Thank you, Mr. Chairman. I would say both. It 
is detrimental to Tribes in one respect. Many States have 
promised Tribes this exclusivity to engage in gaming. And if 
the State begins Internet gaming, intra-State Internet gaming, 
it will destroy that exclusivity, and Tribes won't be 
responsible to pay most of these States the gaming revenue 
shares that they have promised. So I don't know if that is a 
detriment or a benefit in some respects. But Tribes would 
presumably stop needing to pay those revenue shares.
    I think that Tribes have this situation now where they have 
exclusivity in some Tribal-State compacts and they have 
exclusivity from the Federal Government. Because they operate 
the only federally-authorized gaming. If they lose that 
exclusivity, they must be compensated for that. That is a very 
important principle. Because they have learned to rely on these 
gaming revenues.
    So I am not sure, I think the world is changing rapidly, 
and it is hard to see exactly whether the detriments will be 
greater or the benefits will be greater. But Congress must act 
to help ensure that Tribes get to remain in the same place with 
governmental resources. Thank you, Mr. Chairman.
    The Chairman. Thank you.
    Mr. Rose, you mentioned that since the DOJ opinion, there 
is no Federal law prohibiting a State from authorizing 
interstate online games and even entering into compacts with 
other States and nations. Where do you see Tribes fitting into 
this equation?
    Mr. Rose. I think the problem for Tribes is they are not 
fitting in. They are left out unless the State voluntarily 
brings the Tribe in. In other words, if a State says, we are 
going to have three licenses and a Tribe gets one of those, 
just competing against Caesars and big other online operators.
    The UIGEA, the Unlawful Internet Gambling Enforcement Act, 
does say the Tribes can go interstate. But it is also clear the 
players have to be physically on Indian lands. So the main 
problem is that the Tribes simply haven't been included in 
this, that the IGRA is very much land-based. It was designed, 
in fact, primarily for bingo more than anything else. And the 
Tribes can do a lot, but only on their land and on other Indian 
lands, unless the States agree or Congress acts.
    The Chairman. Thank you.
    Mr. Skibine, in your testimony, you mentioned the outcomes 
of the Cabazon decision, including the Indian Gaming Regulatory 
Act. Do you see the DOJ opinion as a precursor to Federal 
legislation?
    Mr. Skibine. I think it will be, because if you are going 
to have, if there is going to be Internet gaming, it is going 
to have to be regulated. And right now, I think the United 
States first adopted a position that Internet gaming was 
illegal. Now they seem to have changed their mind. I think if 
it is going to be legal, it will have to be regulated and it 
will have to be regulated by the Federal Government, because of 
the nature of the Internet. So yes.
    The Chairman. Well, I want to thank you very much for your 
responses. It is good to have your responses from these 
different areas, as well as your opinions on how it will impact 
the Tribes. And of course, all of this on the record will help 
us in looking forward to further legislation.
    So I want to thank you very much for being part of this 
hearing.
    I would like to invite the third panel to the witness 
table. Serving on our panel is Mr. Patrick Fleming, litigation 
support director of the Poker Players Alliance and Mr. Glenn 
Feldman, Attorney at Mariscal, Weeks, McIntyre & Friedlander. I 
want to welcome you to the table here in this hearing.
    Mr. Fleming, will you please proceed with your testimony?

 STATEMENT OF PATRICK W. FLEMING, LITIGATION SUPPORT DIRECTOR, 
                     POKER PLAYERS ALLIANCE

    Mr. Fleming. Thank you very much and good afternoon, 
Chairman Akaka, members of the staff of this Committee.
    I consider it an honor to be asked to testify before you 
today. And I do hope that you will find my testimony useful.
    I come here today as an attorney. I am simply an attorney 
from Portsmouth, New Hampshire. But more importantly, I come 
before you today as the litigation support director for the 
Poker Players Alliance.
    For anybody not familiar with us, the Poker Players 
Alliance is a grassroots organization of American citizens. We 
have 1.2 million members dedicated to the great American game 
of poker, to advancing the game, to supporting the game and to 
protecting our ability to play the game.
    Our members come from all walks of life. They play the game 
for fun, they play the game for the spirit of competition and 
even a good number of our members play the game professionally. 
They play the game at home, they play the game on their 
computers, they play it in bars, they play it in charity-
sponsored tournaments and they play it in casinos, including, 
important for this Committee, Tribal casinos.
    As I begin, Your Honor, I would like to reiterate what was 
said by the Chairman of the Poker Players Alliance, former 
Senator Alfonse D'Amato, when he testified before this 
Committee last November. The PPA, with respect to online poker, 
is committed to seeing a broad, cross-border market for online 
poker. We expect to see that with strong regulation, with 
maximum consumer protection and most importantly, for this 
Committee, a market that fosters as much competition as 
possible between game operators. And that absolutely includes 
the very important Tribal gaming operators to be very vital 
participants.
    The Committee asks essentially a legal question, but I 
think the legal question has already been answered and 
relatively explained. The short answer with respect to the DOJ 
opinion letter is that States are now free to do whatever they 
wish with respect to Internet gambling, except of course for 
sports betting. This opens up an entire Pandora's box of 
possibilities, and most of those possibilities have been 
discussed already.
    But what I would like to do with my few remaining minutes 
is concentrate on the area that I think I bring some unique 
expertise to, and that area is poker. Poker, Mr. Chairman, is 
different. That is the single most important message I would 
like to get across to this Committee and to members of 
Congress. We talk about Internet gambling, but it is important 
to realize that there is Internet gambling and then there is 
Internet poker. The two are not exactly the same. The nature of 
the games are different. Poker is different
    Poker is different in three important aspects. Those 
differences lead to an important different conclusion. Poker is 
a social game, poker is a game played between people, and poker 
is a game of skill that requires active participation and 
competition among the players. This leads me to conclude that 
Internet poker is not a threat to Tribal gaming interests.
    One important factor we have noted and is noted in my 
written testimony is that poker itself only represents 1 
percent of Tribal gaming revenue. It brings people to Tribal 
gaming casinos because of its popularity. But it is not the 
game that supports their existence or helps benefit their 
operations. It benefits them by virtue of bringing people 
there, and providing, in that social connectivity that keeps 
customers coming back.
    So it is clear that at the very least, Internet poker is 
not a threat to Tribal operations.
    But I also believe that Internet poker can actually be a 
benefit to Tribal operations. Whereas things like State-run 
lotteries that may choose to, as Professor Rose said, have 
instant scratch-off tickets online, which would effectively 
been an online slot machine, one can easily see how that would 
directly compete with Indian gaming operations. But with 
respect to Internet poker, there is actually a symbiotic 
relationship between those who play poker online and those who 
play poker live.
    Years ago, there were hardly any organized poker rooms in 
Las Vegas or Atlantic City. But then the online poker boom 
happened, and a new generation of Americans discovered this 
great traditional American game and learned to play it and 
learned to enjoy it.
    But what they did, unlike what players of the other 
traditional casino games do, is they then took that online 
experience and brought it to the casino, to the card rooms, to 
the Tribal reservations, because they wanted to be in a social 
environment where they could play that game.
    I see I am running out of time, Mr. Chairman, and I am 
happy to take any questions the Committee has. But that is my 
bottom line. When we look at this and we look at protecting 
Tribal interests in the future world of Internet gaming, what I 
think is very important and certainly most important to the 
members of my organization is that we realize that Internet 
poker functions differently from Internet slot machines, 
Internet roulette and other traditional casino games, and 
presents not, in my opinion, a threat to the Tribes, but 
actually an opportunity. They too can use poker to bring people 
into their land-based casinos and support their operations.
    Thank you very much, Mr. Chairman.
    [The prepared statement of Mr. Fleming follows:]

Prepared Statement of Patrick W. Fleming, Litigation Support Director, 
                         Poker Players Alliance

    Chairman Akaka and Members of the Committee, I am pleased to have 
this opportunity to testify before you today. I come here as an 
attorney and, more specifically, in my role as Litigation Support 
Director for the Poker Players Alliance (PPA), an organization of 1.2 
million Americans who like to play a great American game of poker in 
both commercial and Tribal casinos, in their homes, in bars, in 
charitable games and on the Internet. They do so for recreation, for 
camaraderie, for intellectual challenge and stimulation, and some of 
them do it for a living.
    To introduce myself briefly, I am an attorney from Portsmouth, New 
Hampshire and have been a member of the bar in New Hampshire since 
1985. The primary focus of my legal practice has been criminal defense 
and that has always included a good familiarity with gambling law. I 
have also been a lover of competitive games since childhood, and I 
consider poker to be the quintessential competitive game of skill. I 
joined the PPA in 2007 and, through a process of recommendation and 
effort, helped create the PPA's Litigation Support Network in order to 
assist poker players with the many legal questions that surround their 
ability to play their favorite game. In 2008, I was named Director of 
the Network and since then have devoted significant time and effort, 
with the help of many other poker-playing lawyers, to fully 
understanding the nature and details of the Federal gambling laws and 
the gambling laws of the 50 States. It is my hope today that I can use 
some of that knowledge and experience to assist this Committee.
    Let me begin by reiterating something that PPA's Chairman, former 
Senator Alfonse D'Amato said in this Committee's previous hearing on 
Internet gaming: the PPA supports a robust, competitive, regulated 
interstate market in which Tribal gaming interests are vital players.
    Today, as I understand it, the Committee seeks to determine the 
ways in which the recent change in policy by the U.S. Department of 
Justice (DOJ) regarding the scope of the Wire Act may affect the future 
of Tribal gaming. The short answer is that this change in policy is 
likely to have far-reaching effects, few of which are certain at this 
time, but the many of which may place Tribal Gaming operators at 
significant disadvantages with respect to other gaming operators. The 
bottom line is that if Tribal gaming is going to continue to be a 
competitive operator in the gaming industry, it will most likely need 
the assistance of this Congress through the passage of new legislation 
in order to meet the future challenges.
    In order to understand the basis for this conclusion, a brief 
outline of existing Federal and State law is in order.
    There are eight Federal laws which concern gambling and gaming (I 
use both words because which games when played for money constitute 
gambling games is not consistent across the law): The Wire Act (18 
U.S.C.  1084), the Interstate Horseracing Act (IHA, 15 U.S.C.  3002), 
the Professional and Amateur Sports Protection Act (PASPA, 28 U.S.C.  
3701), the Indian Gaming Regulatory Act (IGRA, 27 U.S.C.  2701), The 
Travel Act (18 U.S.C.  1952), the Illegal Gambling Business Act (18 
U.S.C.  1955), the Unlawful Internet Gambling Enforcement Act (UIGEA, 
31 U.S.C.   5361-5367), and the Lottery Acts (18 U.S.C.   1301-1304 
).
    Without going into too much detail regarding each, PASPA is not 
germane to the discussion as it is essentially a prohibition against 
additional States allowing sports betting. The IHA also need not be 
discussed at length as it merely codifies a mechanism for remote 
wagering on horse racing and to the best of my knowledge there are no 
Tribal racing operations. And the Lottery Acts are clearly limited to 
physical transactions involving lottery tickets.
    The Travel Act, the IGBA, and the UIGEA all create Federal criminal 
offenses for certain gambling activity, live or online. But none of 
these three laws independently identifies an act as an offense. 
Instead, each of these statutes require that any prosecution commenced 
pursuant to the statute also include, as an element of the offense, 
that the defendant has violated some other substantive gambling law. 
Under the UIGEA, it may be a Federal or State substantive gambling law; 
under the Travel Act and the IGBA, it must be a State substantive 
gambling law.
    Thus the only Federal statute which independently creates a 
substantive Federal gambling offense, and therefore can act as an 
independent Federal prohibition on conduct, is the Wire Act.
    Prior to December 23, 2011, there was a live dispute regarding the 
reach of the Wire Act's prohibition. Most legal scholars and two 
Federal courts (In re MasterCard Int'l Inc., 313 F.3d 257 (5th Cir. 
2002)) interpreted the Wire Act to only be applicable to gambling that 
involved wagering on the outcomes of sporting events and sporting 
contests. The DOJ, however, consistently maintained that the Wire Act 
applied to all wagering activity otherwise conducted in the manner 
proscribed by the statute. Throughout the first 10 years of this 
century, the DOJ had asserted its position not only in the courts (U.S. 
v. Lombardo, 639 F. Supp. 2d 1271 (D. Utah 2007); but also, according 
to numerous press reports, when providing information to various State 
legislatures. In numerous reported instances, beginning with North 
Dakota in 2005 \1\ the DOJ was said to have informed State legislatures 
that State laws, which would have allowed non-sports wagering over the 
Internet, would violate the Wire Act and would therefore be pre-empted 
by Federal law.
---------------------------------------------------------------------------
    \1\ http://www.Internetnews.com/busnews/article.php/3632206/
North+Dakota+a+Gambling+Haven.htm
---------------------------------------------------------------------------
    Thus prior to 2011, no State acted to specifically allow and 
implement gambling or gaming activity over the Internet (other than, of 
course, wagering on horse racing pursuant to the IHA). Indeed, Nevada 
and the Virgin Islands had actually passed laws intending to allow 
Internet wagering, but neither fully implemented those laws in light of 
the Federal opposition.
    In June of 2011, Nevada once again passed a law, Assembly Bill 258, 
allowing and implementing Internet wagering, though limited only to the 
game of poker. Yet even then, that Nevada law was subject to an 
explicit limitation that no actual operation would commence until it 
was deemed clearly legal under Federal law.
    Also in 2011, the Lottery Commissions of two States, New York and 
Illinois, sought guidance from the DOJ on the issue of using the 
Internet as a means of selling lottery tickets within State borders. 
Another inquest was made by Senators Kyl and Reid, seeking a broad 
clarification of the Wire Act's parameters.
    And on December 23, 2011, the DOJ responded to these inquiries. The 
letters publicly issued on that date not only answered questions, they 
announced a complete change in position. After reviewing its prior 
stance and acknowledging its previous insistence to the contrary, the 
new DOJ position is that the Wire Act, after all, really does only 
apply to gambling that is in the nature of wagering on sporting events. 
And although the DOJ opinion is not a court ruling with precedent-
setting impact, if a prosecuting authority announces it believes 
certain conduct is not proscribed by a statute, one ought to at least 
expect that the same authority will not bring prosecutions based on 
that conduct.
    Thus with that communication, the DOJ removed the sole Federal 
barrier that it had for years argued was a complete bar to Internet 
wagering activity in the United States.
    As a direct result, for any gambling, gaming or wagering activity 
conducted on the Internet to be currently illegal, it must be illegal 
under a valid State law.
    Currently only nine States (Illinois, Indiana, Louisiana, Montana, 
Nevada, Oregon, South Dakota, Washington and Wisconsin) have statutes 
which expressly address wagering activity on the Internet (other than 
horse racing). In each of those States except Nevada, conducting as a 
business any wagering activity over the Internet is either expressly 
illegal or illegal except for horse race wagering. Nevada's recently 
passed law expressly allows for the game of poker to be conducted over 
the Internet by operators licensed in the State of Nevada. That Nevada 
law also allows its licensed operators to offer Internet poker to 
people located in other jurisdictions provided the law of the other 
jurisdiction does not make such activity illegal.
    It should also be noted that New Jersey is seriously considering a 
law similar to Nevada's and that the New Jersey legislation is not 
limited to poker, but would also allow all the other casino games such 
as slot machines and blackjack to be offered in an online version.
    It is impossible to state for certain what the law is for the 41 
States that have no express provision regarding Internet wagering. All 
the statutes in these other States predate the Internet, often by 
decades, and sometimes by centuries. A lawyer or court seeking an 
answer regarding Internet wagering's legality must take the existing 
statute and try and apply it to this new situation. In some cases this 
may be easier than in others. For example, it would not be surprising 
to see a court rule that Maryland's statute ( 12-102), which simply 
states that ``A person may not: (1) bet, wager, or gamble'', applies to 
all methods of wagering including those conducted over the Internet. On 
the other hand, it is extremely difficult to infer legislative intent 
regarding Internet wagering when faced with a statute such as South 
Carolina's  16-19-40: ``Unlawful games and betting. If any person 
shall play at any tavern, inn, store for the retailing of spirituous 
liquors or in any house used as a place of gaming, barn, kitchen, 
stable or other outhouse, street, highway, open wood, race field or 
open place at (a) any game with cards or dice . . . .''
    Another aspect of State law is that States define gambling and 
wagering in a number of different ways. For example, the game of poker 
is a ``lottery'' according to the Kansas Supreme Court (State ex rel. 
Stephan v. Finney, 867 P.2d 1034 (1994)), but its neighbor, the 
Missouri Supreme Court, has specifically declared the opposite (Harris 
v. Missouri Gaming Comm'n, 869 S.W.2d 58, 62 (Mo. 1994)). Similarly, 
different State courts may make different determinations even when 
using the same legal definitions. In most States, a game played for 
money is ``gambling'' if the outcome of the game is predominantly 
determined by chance rather than the skill of the players. The PPA, not 
surprisingly, considers poker to be a game where skill predominates, 
but not all agree. Indeed, many games, such as backgammon, scrabble and 
poker, are games where the elements of chance and skill are 
significantly intertwined. It is very easy to see a future where 
scrabble and poker (played for money) are legal in State A, only 
scrabble in State B, and neither in State C.
    The bottom line is that, with a few exceptions, current State law 
does not lend itself to easy answers when one poses a question 
regarding the legality of a specific Internet gaming activity. Usually 
the best that can be said is that the activity is clearly illegal in 
some States and maybe or maybe not illegal in others. It will be very 
interesting to see who, if anyone, will attempt to take advantage of 
these issues in current State law now that the Wire Act is limited to 
wagering on sporting events.
    But far more important to the question at hand is the obvious fact 
that States can change their laws. And with the lack of any national 
Federal guideline other than the Wire Act's now limited prohibition on 
sports wagering, what that future State legislation may look like is 
limited only by imagination, and, possibly, the US Constitution's 
Commerce Clause, specifically the ``dormant commerce clause'' 
principle.
    Regarding what can be imagined, there are already some real 
examples: Nevada's passage of online poker legislation and New Jersey's 
contemplation of passing legislation allowing all casino games to be 
conducted online. Other proposals have been made and are being 
considered in State legislatures throughout the country. Among the many 
proposals, all vary as to what specific games will be allowed, the 
circumstances under which they will be allowed, and as to what entity 
or entities will get to operate the online games.
    Trying to list all the various possible legal online gaming schemes 
States may choose from is a herculean task, but thankfully not 
necessary to address this committee's concerns. There are really only 
two questions that matter with respect to future State online gambling 
laws and Tribal gaming interests. Those are, what games will be allowed 
and will Tribal gaming operations be able to compete in the offering of 
those games.
    With respect to which games will States choose to authorize, the 
basic distinction is already provided in law and practice. The IGRA 
already distinguishes between Class 2 games (bingo and card games where 
the players compete against each other such as poker) and Class 3 games 
(all other gambling games including traditional casino games like slot 
machines, blackjack, and roulette). Similarly, the distinction most 
often discussed among State legislatures is between allowing online 
poker alone (as in Nevada) or allowing all casino games online (as 
contemplated by New Jersey).
    With respect to allowing operators there is again a dichotomy, this 
time between open markets and closed markets. Nevada's new law is an 
open market, allowing anyone to operate an online poker site so long as 
they are able to obtain a license. But many State lottery operators are 
suggesting that a closed market be created along the same design as 
that of the State lotteries: one State operator. And at least one 
State, California, has considered adopting a monopoly model that would 
allow only a set number of licensed operators.
    With these distinctions in mind, it is then possible to chart the 
ramifications on Tribal gaming of the various possible new State online 
gambling laws.
    First, it is clear that there will be far less impact on Tribal 
gaming operators if new State gambling laws are limited to games such 
as poker (and any other card game meeting IGRA's ``Class 2'' 
definition). According to the 2010 Spectrum Study prepared for the 
National Indian Gaming Association, Tribal poker operations account for 
only 1 percent of Tribal gaming revenue and thus any change in this 
market is not likely to have profound effects on Tribal gaming 
operations.
    Additionally, all the preliminary evidence strongly suggests that 
there is a healthy relationship between online poker and live poker. 
Poker is, at its core, a social game of person against person. Hence 
poker players as a general rule enjoy both settings and use one to 
compliment the other. While there are some poker players who prefer 
live games and some who prefer online games, the majority play both 
with equal enthusiasm. Since online poker can be offered at stakes far 
below the minimum needed to make a profit from live games, most poker 
players use the online game as means of quick entertainment and/or 
practice. Then, when looking for a long evening's entertainment or 
after having accumulated enough winnings and experience to try higher 
stakes, they go to a live game.
    With respect to other casino games, the opposite of the first point 
is clear and the opposite of the second point is highly likely. Slot 
machines and table games account for the majority of Tribal gaming 
revenue, so anything that will affect these games may have significant 
effect.
    And it seems, again from preliminary study, that those who play 
games ``against the house'' do not really care that much about the 
nature of their ``house'' opponents. While some may still see the 
casino as a special place to go, most simply want to play the games and 
may well see the ease of play at home as a good reason not to go 
elsewhere to play the same game.
    One final point should also be made with respect to the distinction 
between Class 2 social games and Class 3 casino games. It is well known 
that Class 2 gaming on the Internet requires a larger body of available 
players to satisfy customer demands and thus be a profitable operation; 
the need for active opponents to run the game dictates the need for a 
large player pool from which an active player pool can be guaranteed to 
always be present. States with small populations, and so Tribal gaming 
interests in those same States, will therefore need to arrange for 
cross-border Class 2 games. There is nothing in current Federal law to 
currently prevent this from happening, but there is also no framework 
in which to make it happen. It remains to be seen whether smaller 
States interested in allowing Class 2 games will be able to come to 
terms with each other on issues such as regulation, consumer protection 
and taxation and so allow cross-border games. It is equally speculative 
as to whether these States will decide to include Tribal interests in 
such interstate compacts.
    Regarding the question of being allowed to participate in the 
market, at first glance it would appear Tribal gaming must be allowed 
into the market under the provisions of the IGRA. Those provisions, 
however, may well be outdated in the Internet age. Section 2710 of the 
IGRA guarantees the Tribes the right to offer games as they are allowed 
by the State in which the Tribal lands are located. Unfortunately, the 
specific wording of that section only allows the Tribes to offer those 
games ``on Tribal land.'' And ``Tribal land'' is specifically defined 
in 27 U.S.C. 2703.4 as the confines of the reservation or similarly 
owned and governed land.
    Although the current status of Federal law is still emerging in 
this area, the cases that have tackled the issue so far would suggest 
that a Tribal online gaming operation that allowed players to access 
the site from outside the reservation would be found to be operating, 
at least partially, other than ``on Tribal land.'' Although a very 
different context, when offshore sports betting operator Jay Cohen was 
arrested for violating the Wire Act by accepting sports bets from New 
York made through the Internet to his business in Aruba, he made the 
argument in court that the betting took place in Aruba and so there was 
no jurisdiction for the U.S. to prosecute him. Both the trial court and 
the 2nd Circuit Court of Appeals disagreed (U.S. v. Cohen, 260 F.3d 68, 
76 (2nd Cir. 2001)). This would strongly suggest that a Tribal online 
gaming operation which accepts play from people not on Indian land is 
not operating ``on Indian land'' just because that is where the games 
are run.
    There thus seems the real possibility that despite its stated 
purposes and intentions, the IGRA does not, as currently written, 
guarantee the Tribes the same online gaming rights as the States now 
have. In short, the likely result of the DOJ's new position on the Wire 
Act will be this: each jurisdiction will determine who, if anyone, can 
take play from individuals located in that jurisdiction. If Tribal 
gaming enterprises in that jurisdiction wanted to take Internet bets 
from people on Indian land, they would be entitled to do so per the 
IGRA. But if those same Tribal gaming enterprises wanted to take 
Internet bets from people outside their reservations, they would have 
to seek licenses and/or other direct permission from the States in 
which those players are located.
    Additionally, many States are discussing allowing their State 
lottery operations to also conduct games on the Internet. A law 
allowing this was passed right here in Washington, D.C., but was also 
recently repealed. The majority of these proposals envision the lottery 
having a monopoly on other Internet games similar to the current 
monopoly they have with respect to lotteries. This sort of law seems 
especially dangerous for Tribal gaming operations, especially when one 
considers the possibility of instant lotteries or the online equivalent 
of lottery scratch tickets. An Internet version of either of these 
games, while technically not a ``slot machine'' game, would 
nonetheless, be virtually indistinguishable from an online slot and so, 
as noted before, would compete directly with the main revenue generator 
for Tribal gaming.
    Lastly on this point, some States are considering a closed in-State 
gaming market with participation being limited to a few specific 
operators. In some cases, the limited operators may include Tribal 
gaming operators. At first blush this may seem protective of Tribal 
interests, but it also may be a false protection. The Commerce Clause 
of the U.S. Constitution (Article I, Section 8, Clause 3) has been 
interpreted to require that unless Congress specifies otherwise (and it 
has not in this situation), State law may not unfairly discriminate 
against out-of-State commerce. See, e.g., United States v. Lopez, 514 
U.S. 549 (1995) (''. . . the Court's Commerce Clause decisions dealt . 
. . almost entirely with the Commerce Clause as a limit on State 
legislation that discriminated against interstate commerce.''). It is 
therefore a reasonable proposition that once a State allows a form of 
Internet gambling to be conducted within its borders by private 
entities, it cannot then prevent out of State interests from seeking to 
participate in that same form of commercial activity. Some have 
suggested that a State's traditional police power over gambling may 
give States extra rights in this context, but there is as yet no case 
law to support this argument. At best, it would appear that while 
States maintain the right to either allow or prohibit gambling within 
its borders, once it chooses to allow such activity, it cannot 
significantly discriminate against out-of-State interests in favor of 
in-State interests. Illustrative of this point is the case of Rousso v. 
Washington (239 P.3d 1084 (2010)) in which the Washington Supreme Court 
rejected a Dormant Commerce Clause argument that sought to overturn 
Washington's ban on Internet gambling. That Court accepted that the 
Dormant Commerce Clause applied to the situation, but rejected the 
argument based on the finding that Internet gambling and live gambling 
(which Washington allows) were different areas of commerce and both in-
State and out-of-State interests where equally barred from the Internet 
market.
    Accordingly, while it may seem tempting to establish an intrastate 
monopoly as a way to protect in-State interests (perhaps including 
Tribal interests), given the undeniable interstate nature of the 
Internet, that protection may be just as fleeting as the attempt by New 
York to grant a steamboat monopoly to Robert Fulton on New York 
waterways (Gibbons v. Ogden, 22 U.S. 1 (1824)).
    Finally, there is the question of the practical ability of Tribal 
gaming interests to compete with the larger and more broadly 
established corporate gaming interests. I am far from an expert in this 
field, but it appears to be common sense that at least the smaller, 
less capitalized Tribal gaming operators would have significant 
disadvantages when trying to compete nationally, or even in-State, with 
well-financed commercial casino operations. There are, however, ways to 
participate in certain online gaming markets that do not require direct 
competition, but instead foster cooperation that benefits all.
    I have remarked above on the fact that players of Class 2 social 
games are more likely to use Internet play as a means to supplement and 
support live play than players of Class 3 house-banked games. This 
aspect of social games supports the prospect of direct interaction 
between live game operators and Internet game operators. It is a well-
known fact that social games are not a major source of casino or Tribal 
gaming revenue and that higher profits are made from the house-banked 
games. But social games have the additional effect of bringing people 
into a casino who otherwise would not visit. And, of course, it is 
well-known in the gaming industry that getting customers through the 
door is the key to a successful operation. In this context, it is easy 
to see a correlation between online social gaming operations and local 
live operations. A website for online poker linked to a local venue is 
likely to generate additional live business for the local venue, both 
through increased interest in the game and through the offering of 
promotions redeemable at the local venue. With respect to social games 
such as poker, the efficacy of ``affiliates'' as marketing portals is 
well established. Affiliates are simple websites through which a player 
is connected to the larger website that actually provides the games. 
Typically affiliates earn a percentage of the money earned from the 
player who participates through them and, probably more importantly, 
the affiliate establishes the personal relationship with the player. So 
at least with respect to social games, the ability of small regional 
operations to participate and benefit as affiliates to larger 
operations is clearly established. Indeed, Tribal interests may well 
have an advantage in setting up these kinds of affiliate relationships 
as they are typically located in areas otherwise without alternative 
live venues. A poker player in Arizona may well prefer that his status 
as a customer is rewarded by promotions available at his local tribal 
casino rather than the casino in Las Vegas that he may only visit once 
or twice a year.
    In conclusion, the basic answer to the Committee's question is 
clear: the DOJ's new position that the Wire Act does not apply to 
gaming other than wagering on sporting events will have large and 
significant ramifications for Tribal gaming interests. Depending on 
future developments in State laws, those ramifications will present 
Tribal gaming operators with significant competition issues that 
current law leaves them woefully unprepared to meet. The actual effects 
will depend upon the decisions made by the various States with respect 
to future laws regarding Internet gambling and on whether the Federal 
government acts to establish a new national policy with respect to 
Internet gambling.
    For Tribal gaming interests specifically, I believe there are three 
essential issues that must be addressed: (1) whether the IGRA must be 
updated to clearly allow Tribal interests the same gaming rights on the 
Internet as States allow themselves or private companies, (2) whether 
it would better protect Tribal interests by adoption of new Federal 
legislation that allows only Class 2 social games like poker to be 
conducted over the Internet, and (3) whether Tribal interests should 
also be protected by Federal legislation that ensures unfettered 
interstate competition, but in a manner that directly allows and 
supports participation by local interests.
    I thank you, and am available for any questions.

    The Chairman. Thank you very much, Mr. Fleming.
    Mr. Feldman, will you please proceed with your testimony?

   STATEMENT OF GLENN M. FELDMAN, ATTORNEY, MARISCAL, WEEKS, 
         McINTYRE & FRIEDLANDER, P.A., PHOENIX, ARIZONA

    Mr. Feldman. Chairman Akaka, I appreciate the opportunity 
to testify here today on this important issue.
    By way of background, I am a lawyer in private practice in 
Phoenix, Arizona, with the law firm of Mariscal Weeks. For more 
than 30 years, my practice has been devoted exclusively to 
Federal Indian law, representing Tribes and Tribal entities 
around the Country.
    Among other things, I have served as outside general 
counsel to the Cabazon Band of Mission Indians since 1979. And 
it was my great good fortune to argue and win the case of 
California v. Cabazon Band, the so-called Cabazon Case, before 
the U.S. Supreme Court.
    Since that time, I have been actively involved in 
negotiating Tribal-State compacts for Tribes in a number of 
States, as well as litigating a variety of other Indian gaming 
issues.
    Now, I am not here as an advocate for or against Federal 
legislation in the area of Internet gaming. Rather, what I hope 
to do is to provide you with some thoughts, based on my own 
personal experience in dealing with Indian gaming for more than 
30 years, on how this Committee might want to proceed as it 
considers this important issue.
    Let me say at the outset: I believe that lawful Internet 
gaming in the United States is inevitable. And so the advice 
that I give all of my Tribal clients is the same, just saying 
no is not an effective strategy for dealing with inevitable 
change. In my view, Tribes need to be at the table, need to be 
active participants in the developments of legislation and need 
to be flexible and smart in their thinking in order to be sure 
that they share in the benefits and avoid the problems that 
Internet gaming may bring.
    Part of my message here today, however, is that there is no 
need to rush to enact Federal Internet gaming legislation. I do 
not necessarily share the views of those who suggest that the 
recent Justice Department opinion is immediately going to open 
the floodgates to unlicensed and unregulated Internet gaming in 
the United States. While such gaming may not be prohibited by 
the Federal Wire Act under the Justice Department's opinion, 
there are certainly existing proscriptions under the Unlawful 
Internet Gaming Enforcement Act, the Unlawful Gaming Business 
Act, RICO and other Federal civil and criminal forfeiture 
statutes.
    As a result, I think Congress would make a serious mistake 
if it were to rush into enacting Federal legislation without 
the careful, deliberate process the subject deserves. In this 
connection, I think there are some useful parallels to be drawn 
between where Congress finds itself today with Internet gaming 
and where Congress was in the late 1980s when it was 
considering Indian gaming legislation after the Cabazon 
decision. Both situations presented a complex and controversial 
mix of Federal, Tribal, State and commercial interests. And 
both Tribal gaming then and Internet gaming now are likely to 
have important economic and societal consequences.
    But despite these facts, Congress did not rush to enact 
Indian gaming legislation in the 1980s. Twenty months elapsed 
between the time of the Cabazon decision and the date that the 
Congress passed the Indian Gaming Regulatory Act of 1988. And 
what must also be kept in mind, though, is that Congress had 
actually been considering Indian gaming legislation three years 
before the Cabazon decision came down.
    So at the time IGRA was enacted and signed into law by 
President Reagan in 1988, Congress had devoted more than four 
full years to that legislation process.
    Now, I am not suggesting that Congress needs to study this 
issue to death. But at the same time, I don't want to minimize 
the difficulty or the complexity of the negotiations that 
resulted in the final version of the Indian Gaming Regulatory 
Act. As Professor Skibine recalls, all of us who were involved 
in that process left a lot of blood, sweat and tears on the 
floors of many meeting rooms over a long period of time. But in 
the end, that long, deliberative process worked and produced a 
legislative framework that despite its flaws has proven to be a 
pretty good compromise that is now pumping more than $25 
billion annually into Indian Country.
    And I think the situation today involving Internet gaming 
represents the same kind of situation and the same kind of 
challenge. We don't need to rush. Certainly, Congress has a 
role to play in this. But I think rushing to enact fast 
legislation is not the best solution. Taking the time to enact 
good legislation ought to really be the goal.
    So let me make my final point here. That is, Indian Tribal 
governments need to be full and active participants in all 
processes by which Federal Internet gaming legislation is 
developed. And Tribes are entitled to have the full right to 
develop, use and benefit from Internet gaming to the extent 
they wish to do so. Legislation that limits or restricts the 
ability of Tribal governments to reap the benefits of Indian 
gaming is simply unacceptable.
    Internet gaming today, like Indian gaming 25 years ago, is 
complicated and controversial. But it is coming. So Tribal 
governments need to be smart and flexible in their thinking on 
the issue and Congress needs to recognize that Tribes must have 
a seat at the table where those decisions are going to be made.
    That concludes my testimony. I would be happy to answer any 
questions.
    [The prepared statement of Mr. Feldman follows:]

  Prepared Statement of Glenn M. Feldman, Mariscal, Weeks, McIntyre & 
                           Friedlander, P.A.

    Mr. Chairman and members of the Committee:
    I appreciate the opportunity to testify here today on this 
important issue. By way of background, I am a lawyer in private 
practice in Phoenix, Arizona. For more than 30 years, my practice has 
been devoted exclusively to federal Indian law, representing tribes and 
tribal entities around the country. Among other things, I have served 
as outside General Counsel to the Cabazon Band of Mission Indians since 
1979, and it was my great good fortune to argue--and win--California v. 
Cabazon Band (the so-called ``Cabazon case'') before the U.S. Supreme 
Court in 1987. Since that time, I have been actively involved in 
negotiating tribal-state gaming compacts for tribes in a number of 
states as well as litigating a variety of other Indian gaming Issues. A 
more complete biography is attached to this testimony.
    Let me begin by saying that I am not here as any sort of self-
appointed spokesman for Indian Country. Given the complexity of the 
Internet gaming issue and the wide divergence of opinion among tribes 
on the subject (including among my own tribal clients), I'm not sure 
that anyone can--or should--try to perform that role.
    Nor am I here as an advocate for or against federal legislation in 
the area of Internet gaming. Rather, what I hope to do is provide the 
Committee with some thoughts on how it, and Congress as a whole, might 
want to proceed as it considers this difficult issue.
    Let me say at the outset that I believe that lawful Internet gaming 
in the United States is inevitable. I don't see how anyone can look at 
the technological advances of recent years and not understand that the 
Internet is going to become an important component of the gaming 
industry in the future. The only real questions are how and when. And 
so, the advice that I give all my tribal clients is the same: just 
saying ``no'' is not an effective strategy for dealing with inevitable 
change. In my view, tribes need to be at the table; need to be active 
participants in the development of the legislation and the systems; and 
need to be flexible and smart in their thinking in order to be sure 
that they share in the benefits and avoid the problems that Internet 
gaming will bring.
    Part of my message today, however, is that there is no need to rush 
to enact federal Internet gaming legislation. I do not share the views 
of those who suggest that the recent Justice Department opinion is 
immediately going to open the floodgates of unlicensed and unregulated 
Internet gaming in the United States. While such gaming may not be 
prohibited by the federal Wire Act under the Justice Department's 
recent opinion, interstate Internet gaming is still subject to the 
proscriptions of UIGEA and may well run afoul of the Unlawful Gambling 
Business Act, RICO and other civil and criminal forfeiture statutes. As 
a result, I think Congress would be making a serious mistake if it 
rushed into enacting federal legislation without the careful, 
deliberative process the subject deserves.
    In this connection, I think there are some useful parallels to be 
drawn between where Congress finds itself today with respect to 
Internet gaming and where Congress was in the late 1980's, when it was 
considering Indian gaming legislation after the Cabazon decision.
    Both situations presented a complex and controversial mix of 
federal, tribal, state and commercial interests and both tribal gaming 
then, and Internet gaming now, are likely to have important economic, 
political and societal consequences. But despite these facts, Congress 
did not rush to enact Indian gaming legislation in the 1980s. Twenty 
months elapsed between the time of the Cabazon decision, in February, 
1987 and the enactment of the Indian Gaming Regulatory Act in October, 
1988. But what must be kept in mind is that Congress had been actively 
considering Indian gaming legislation as early as 1984, a full three 
years before Cabazon. So by the time IGRA was signed into law by 
President Reagan in 1988, Congress had devoted more than four full 
years to that legislative process.
    Now, I'm not suggesting that Congress necessarily needs to devote 
that much time to the Internet gaming issue and I'm not proposing that 
Congress ``study the issue to death.'' Nor do I want to minimize the 
difficulty or complexity of the negotiations that resulted in the final 
version of the Indian Gaming Regulatory Act. As Professor Skibine 
recalls, all of us left blood, sweat and tears on the floors of those 
meeting rooms. But in the end, that long, deliberative process worked 
and produced a legislative framework that, despite its flaws, has 
proven to be a pretty good compromise that is now pumping more than $25 
billion annually into Indian Country.
    The situation involving Internet gaming today presents a very 
similar challenge. It involves many moving parts and potentially 
competing interests. But precisely for those reasons, the issue 
deserves thoughtful attention and not a rush to judgment. Authorizing 
the use of this technology in gaming to maximize its benefits and 
minimize its potential problems requires no less.
    While I'm talking about parallels, let me mention one more. In 
IGRA, and particularly in the definition of ``class II gaming,'' 
Congress in 1988 declared that tribes were entitled to incorporate 
future technologic advancements (or what the statute calls 
``electronic, computer or other technologic aids'') into their gaming 
activities. As this Committee's Report on S. 555 plainly stated,

         [t]he Committee specifically rejects any inference that tribes 
        should restrict class II games to . . . current technology. The 
        Committee intends that tribes be given the opportunity to take 
        advantage of modern methods of conducting class II games and 
        the language regarding technology is designed to proved maximum 
        flexibility.

        Senate Committee Report, page 9.

    I think the parallel here is obvious. If Congress is going to 
continue to keep that promise it made to tribes about allowing them to 
incorporate technologic advances into their gaming activities, then 
that same commitment needs to apply to Internet gaming now.
    This leads me to the final premise of my testimony. Indian tribal 
governments need to be full and active participants in all processes by 
which federal Internet gaming legislation is developed, and tribes are 
entitled to have the full right to develop, use and benefit from 
Internet gaming to the extent they wish to do so. Legislation that 
limits or restricts the ability of tribal governments to reap the 
benefits of Internet gaming is simply unacceptable.
    Admittedly, not all tribes will choose to make this leap across the 
digital divide. And for those that do, there will be any number of 
potential models as to how that involvement might be structured. The 
IGRA format--involving tribal ownership, operation and regulation of 
the gaming operation--has proven its worth over the last 25 years and 
could be one option for some tribes.
    But that is certainly not the only model. In California, for 
example, a group of 29 gaming and non-gaming tribes has joined forces 
with an equal number of commercial cardrooms to form the California 
Online Poker Association. That group is promoting state legislation 
under which California would create, license, regulate and derive state 
revenues from an intrastate Internet poker system. Again, this may not 
be the right answer for every tribe, but for those that choose that 
path, they ought to have that right.
    Internet gaming today, like Indian gaming 25 years ago, is 
complicated and controversial. But it's coming, and so tribal 
governments need to be smart and flexible in their thinking on the 
issue, and Congress needs to recognize that tribes must have a seat--in 
fact, given the wide diversity of opinions on the subject in Indian 
Country, they are probably entitled to several seats--at the tables 
where these decisions are going to be made.
    That concludes my testimony and I would be happy to respond to any 
questions the Committee members may have.

    The Chairman. Thank you very much, Mr. Feldman.
    Mr. Fleming, you testified in favor of Federal legislation 
regulating Internet poker. You view poker legislation as more 
beneficial to Tribes than open-ended Internet gaming. Can you 
elaborate on why Tribes would far better under poker-only 
legislation, rather than other contemplated legislation?
    Mr. Fleming. Thank you very much for that question, Mr. 
Chairman. I would be happy to elaborate on that point.
    My personal conclusion is that that is clear. We have heard 
today and we have seen in the various written testimony that 
has been submitted to the Committee of the dangers of States 
and certain private interests being able to unfairly, 
essentially, compete with Tribal interests. We heard from 
President Porter about how the Tribal interests specifically 
bargained for their right to a certain amount of geographic 
exclusivity. But we all also realize that there is no such 
thing as geographic exclusivity with respect to the Internet.
    So if there is a State lottery commission that decides it 
is going to start offering games that are the functional 
equivalent of the games that are offered on Tribal lands, then 
clearly there is going to be a competition there. There is 
really no way to create a geographic barrier there. And that 
could seriously undermine Tribal gaming revenue as it exists 
today.
    With respect to poker, as I said earlier, currently the 
revenue Tribal gaming gets from poker is 1 percent of their 
total revenue. But more importantly, as I tried to say in my 
limited time, poker has a symbiotic relationship with local 
gaming and the Internet. And there is absolutely a direct 
available way for Tribal gaming interests to take advantage of 
online poker in a manner that wouldn't really exist with other 
forms of gaming. And that is to draw the poker player to the 
Tribal casino.
    A Tribal casino that either operates its own site or is 
part of a network, or in the industry they often call 
affiliates, is a Tribal casino that could market itself to that 
same geographic area where it currently has exclusivity. It 
could market itself to the people in that area, those people 
would become part of the Internet poker network through the 
Tribal casino affiliate. And the Tribal casino would then have 
that personal relationship with the customer and could also, 
because affiliates are given a percentage of the revenue, could 
also afford to adopt promotions that would entice the online 
poker player to come to the online casino.
    And I can tell you, as a poker player, we like to play 
poker a lot, we don't like to have to drive hours to play poker 
or fly hours to play poker. There is nothing better than having 
a game nearby. And we can be drawn into that much more 
efficiently than you could ever do with any of the other games 
that are being talked about today.
    The Chairman. Thank you.
    Mr. Feldman, in your testimony you state that lawful 
Internet gaming is likely inevitable. What comparison can you 
make to this new potential market for Tribes and the climate 
under which the Cabazon decision was made and IGRA was enacted?
    Mr. Feldman. Chairman Akaka, in the late 1980s, I think 
Indian gaming presented an uncertain market with unknown 
potential. At that time, shortly after the Cabazon decision, as 
IGRA was adopted, nobody really knew where Indian gaming was 
going to go. As someone mentioned, at that point there were a 
handful of small casinos and bingo parlors scattered around the 
Country. And where it was going to go couldn't be determined. 
If my memory serves me correctly, I think around 1990, the 
total revenue for Indian gaming nationally was somewhere in the 
neighborhood of $200 million.
    We look today at the chart up here and we are looking at 
$26.48 billion. So I am not sure anybody could have predicted 
that level of growth 20, 25 years ago.
    With the Internet gaming market, though, sitting here 
today, I think we have a better sense of what is going on out 
there. As has been discussed, the number that people tend to 
use for lawful Internet gaming in jurisdictions where it is 
permitted is somewhere around $30 billion with $7 billion or $8 
billion of that coming from the United States. So my guess is, 
if Internet gaming were legalized in the United States, all the 
legal obstacles removed, we would see a dramatic expansion, and 
I think the market is probably unlimited in terms of where 
Internet gaming could go.
    That is why I am so adamant that Tribes need to be given 
full participation. Their entitlement needs to be recognized in 
any legislation that Congress considers. They need to have full 
participation.
    And the other part of it is they need to be given as much 
flexibility as they can. One model is not going to fit all 
Tribes. There are a lot of different ways that Tribes may 
choose to get involved in Internet gaming.
    So in addition to full participation, I think the other 
component there is flexibility, so the Tribes can decide for 
themselves what is the best approach for them to get into that 
industry. Thank you.
    The Chairman. Thank you.
    Mr. Fleming, do you read the DOJ opinion to now allow 
States, through their State lotteries, to engage in any type of 
Internet gaming except sports betting? If so, what is the 
potential impact to Tribal gaming as it currently exists?
    Mr. Fleming. Thank you for that question, too, Mr. 
Chairman. I think I answered a little bit of that question in 
my previous answer.
    Yes, I definitely see, the interesting part as I explained 
in detail in my written testimony is that while there are other 
Federal laws that control gambling to a certain extent, all of 
the other Federal laws besides the Wire Act, and Professor Rose 
mentioned this, too, all of the other laws besides the Wire Act 
require as part of the offense, part of the conduct that is 
prohibited, that that conduct also violate a State law. Thus, 
if you have an activity that a State does not make illegal or 
specifically allows, it is now, per this new DOJ opinion, 
outside of the purview of the Wire Act.
    So yes, the States now are essentially totally open to 
adopting any kind of online gaming they wish to, except for 
that specifically federally prohibited area of sports betting.
    And as I said last time, the impact here on Tribal gaming 
is because that will go directly to where most of the Tribal 
gaming revenue comes from, from the traditional casino games 
like blackjack and roulette. And more importantly, because in 
many States the Tribes have exclusive markets to slot machines, 
there would be direct competition.
    And unlike poker, there is not the same symbiotic 
relationship. People who like to play slot machines like to 
play slot machines. It is not a social game that draws them to 
a particular place. They go where the games are available. If 
the games are available on their home computer, then certainly 
they have much less incentive to visit a Tribal casino to play 
the same game. They are not interacting with other people, they 
don't need other people to play the game, they don't need a 
large number of people to make the game viable.
    So I see the potential for significant negative effect. 
Again, there are numerous ways to answer it. One could hope in 
some States they would take the effort to be protective for the 
Tribes like they should be. But there is nothing in the Federal 
legislation as it currently exists that mandates that they do 
that.
    The Chairman. Thank you very much.
    You did mention, I think you did mention that there were 
three things with poker. One was it was a social game. What are 
the other two?
    Mr. Fleming. I am sorry if I wasn't clear. It is my first 
time testifying.
    Mr. Chairman, aside from being a social game, it is not a 
game that is played against the house. Every other game that 
takes place in the casino pits the customer against the casino. 
Whereas with poker, the customer is playing against the other 
customers. That is a fundamental factual difference. It also 
makes for an entirely different structure of a poker market, 
and an online poker market. It is one of the reasons we at the 
Poker Players Alliance are so insistent on a broad poker 
market. Because when you need other customers to play against, 
you have to have a wide pool of players.
    The third major difference is that poker is a game that 
requires active involvement. A poker player doesn't sit down 
and just push a button and make his bet and wait for a result. 
A poker player has to make decisions throughout the game, 
strategic decisions, many times complex and very difficult 
decisions that actually engage the player in the game. And this 
again leads to the cohesive nature of poker, the reason why 
poker brings people together and why playing it online is not 
going to stop people from playing it in live venues.
    The Chairman. Thank you very much.
    Mr. Feldman, if there is an expansion of federally-
authorized gaming into Internet gaming, should Tribal 
governments be compensated for their loss of exclusivity?
    Mr. Feldman. Mr. Chairman, I think that there needs to be 
some accommodation for that loss of exclusivity. Tribes have a 
lot to lose. Tribes probably have more to lose with the 
expansion of Internet gaming than any other segment of the 
gaming industry. And I think we need to be cognizant of that, 
and I think any legislation that Congress considers, I don't 
have the solution, I can't give you the formula. But I think it 
is entirely appropriate for Congress to give some consideration 
to that potential loss of exclusivity and to protect it in some 
way so that this $26 billion in revenue, which today is 
funding, as you said in your opening statement, health 
programs, education programs, senior citizen programs, Tribes 
can't afford to lose that revenue stream.
    So the legislation, any Federal legislation, needs to 
incorporate some form of protection to ensure that that revenue 
stream is not threatened by whatever form of Internet gaming is 
authorized.
    The Chairman. Thank you very much for your responses to our 
questions. Thank you for basing it on your experiences and the 
work you have done already with Tribes. I want to say mahalo, 
thank you, to all of our witnesses who participated in today's 
hearing.
    The discussion has been very informative and has given us 
all a lot to think about as this issue continues to really 
develop. The Committee will continue to work closely with 
Tribes, our Senate colleagues and other interested parties in 
any Internet gaming legislation that may be moving forward.
    Without question, this, may I call it industry, is really 
developing and growing. It is well that we look closely at what 
is happening and the direction it is moving in, and help to 
guide it with our expertise and of course, guidance whether it 
is executive or legislative, to help out the cause.
    So thank you all, our witnesses, for your responses. And we 
look forward to continuing to hear from you in this area.
    Thank you very much. This hearing is adjourned.
    [Whereupon, at 4:02 p.m., the Committee was adjourned.]

                                  
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