Senate Commerce Committee holds hearing on sports betting and integrity

[4:40] Good morning. Welcome to everyone. Senator Hickenlooper is close at hand, so we are going to go ahead and begin so that we stay on time this morning. And I want to welcome each of you for being here today, and thank you. [4:59] This is a hearing that we have wanted to get to, and it is an important hearing. I've heard about this issue quite a bit. In Tennessee, whether it's Saturdays in Nayland Stadium, tonight's at the Bridgestone Arena, watching the Predators, Tennesseans, and I think I can include all Americans in this, love their sports. [5:26] They love cheering for their teams. Sports bring our families together. They unite people. They teach young people about teamwork, discipline, sacrifice, and fair play. [5:41] And American sports are not just this nation's pastime. They're a global symbol of competition watched by hundreds of millions of people around the globe. [5:53] When Americans watch their favorite sports team, they don't want to worry about the game being rigged. They don't want to worry that their favorite player missed a free throw to make an extra buck on the side. [6:09] Unfortunately, though, there have recently been some high-profile examples of match-fixing at the NBA and MLB. [6:21] What this does is to challenge Americans' trust in the integrity of sports, and this has all been inflamed by the rapid explosion of legal sports betting across our entire country. [6:37] What was once limited to a handful of locations is now available in almost every single corner of the country. [6:49] It is carried with you night and day. It is right there on your mobile device. [6:55] Americans can now place bets instantly during games, on individual plays, on college athletes, and it is all done with a single touch of the screen. [7:11] And the introduction of sports event contracts on prediction markets has exposed more people to sports betting. [7:20] While prediction markets represent financial innovation across many sectors, there are real concerns that they function much like traditional sports betting without the enforcement of state regulators and attorneys general. [7:39] While sports betting is often a source of entertainment for responsible adults, it does have its risk. [7:48] Like I mentioned, we have seen scandals involving professional athletes, referees, and suspicious betting activity. [7:58] College athletes are reporting harassment and threats from angry bettors. [8:04] And Americans, including young people, are being inundated with advertisements on social media. [8:11] Their favorite influencers and sports figures are introducing minors to betting. [8:19] Our young men are in crisis with over one-third of boys between the ages of 11 and 17 admitting to gambling last year. [8:35] Sixty percent of those who have been gambling and have seen this gambling content online said they had it surfaced through their social media algorithms. [8:50] It was served up to them. [8:54] They didn't search for it. [8:57] This is not safe. [8:59] It needs to stop. [9:01] And advertising to minors is disgusting. [9:05] As we look to protecting the integrity of American sports and protecting the most vulnerable, like our young people and those with addiction risk, it will take all of us working in good faith from state regulators like Ms. Thomas, who is with us today, the integrity monitors, and the prediction markets and online sports books. [9:32] So, we're going to dive into this hearing today. [9:36] It is one that we have worked to assemble. [9:40] We are very grateful to our witnesses for joining us as we begin to build our book of work around this topic. [9:51] And at this time, I turn to the ranking member for his opening statement. [9:55] Thank you, Madam Chair. [9:58] It's been a pleasure working with you on this issue and others and looking at the, as you describe it, the inappropriately regulated betting markets specifically and particularly the recent explosion of prediction markets posed every day. [10:14] I come at this from a different point of view, but I share your frustration. [10:20] I don't talk about this all the time, but my father got sick when I was five years old and died when I was eight. [10:28] I was my mother's second husband who passed away. [10:30] So, I was the youngest of four kids and I didn't do very well in those early years. [10:37] And I was vulnerable in elementary school, but especially in middle school and high school, where I had real challenges and I wasn't equipped to handle them. [10:49] I wasn't ready. [10:51] If I had been faced with this landscape, I was impulsive. [10:55] I kind of was attracted, like many people, to gambling and to chance. [11:00] I believe there was a beam of light coming down from heaven that was touching me. [11:03] We got to get this right. [11:08] 24-7 access to online sports betting has increased these risks to consumers in a manner that I think far outweighs the traditional brick-and-mortar gambling facilities. [11:20] This is especially true in the prediction markets. [11:23] Sports betting makes up 40% of the trades on Pauli market and a staggering 90% on Kalshi. [11:29] Online sports books like Fan Duels and DraftKings have started their own prediction markets to, in some way, bypass or negotiate state laws. [11:40] Prediction markets have been the headliners recently for permitting government officials to incite information to place bets on events relating to the death of Iranian leader Khomeini, abduction of President Maduro. [11:54] These are clear risks to our national security when there's inside information being leaked out. [12:02] This shouldn't be happening. [12:03] We've introduced the Bets Off Act to ban wagering on government actions, on war, terrorism, and assassinations by people with inside information. [12:14] Similar inside trading issues exist in sports betting prediction markets. [12:18] Is there a bet on a specific player's actions? [12:21] Are they going to miss that foul shot? [12:23] Is that somehow going to be a way to make a quick $10 on a wager? [12:28] That's nuts. [12:30] That's nuts. [12:30] The very fact that we're betting on that, which is clearly a – should be a random outside event, the fact that so many people, especially young people, especially young men, are wagering this has got to be a real concern. [12:44] Prediction markets claim that their sports event contracts, which pose the same risk to consumers as online sports betting, they say that they're investments and not subject to state or tribal gambling laws. [12:55] The CFTC, you know, if they're not subject to those laws, then they are – the regulator is the Commodity Futures Trading Commission. [13:05] But the CFTC has literally no experience in regulating sports betting. [13:09] Even worse, CFTC has failed to use the authority it does have to protect sports bettors from insider training, market manipulation, predatory advertising, and financial instability. [13:20] This workaround is merely a way for prediction markets to skirt state consumer protection laws. [13:26] I think prediction markets fail to protect young people who are particularly vulnerable to gambling addiction. [13:32] We have a lot of young men, especially, that are vulnerable to this, and we're doing nothing. [13:37] Gambling addiction is at the additional risk of being a silent illness. [13:41] Unlike alcohol and drug addiction, the financial and psychological harms that come with gambling addiction are hard to see. [13:47] And gamblers are unlikely, rarely share when they've lost. [13:51] But, of course, when they've won, they're telling all their friends. [13:53] And so there's that sense that gets translated in our virulent social media that it's great, that it's positive, it's going to be a good thing. [14:02] Many states, including my home state of Colorado, prohibit sports books from advertising to minors under 21, restrict advertising to those who are already struggling with gambling addiction. [14:12] However, the CFTC does not currently apply the same protections to prediction markets. [14:17] One study found that between 2018 and 2023, the amount of money that people spent on sports gambling rose while their net investments fell nearly 14%. [14:30] In other words, they don't have the money to invest because they're spending it on gambling. [14:34] That's the inescapable reality of that. [14:36] To really bring this home, I'll share that, you know, back in the days of my restaurant owner days, we had a bartender and a waiter, a waitstaff member, and she and he fell in love. [14:50] It was, for the whole restaurant, a wonderful moment. [14:53] They were going to get married. [14:55] And he decided he wanted a bigger down payment for the house they were going to buy together with their monies being commingled. [15:02] Sure enough, he lost everything. [15:04] Their relationship, their love, their marriage, their future marriage was destroyed. [15:11] That's when you see that firsthand, how an instant someone's life can be damaged, probably forever. [15:18] You see the seriousness of this. [15:19] And that's one story that I saw personally. [15:22] This has been happening by the thousands, the hundreds of thousands. [15:26] I mean, I'm not saying, and I'm a supporter, it's a victimless crime. [15:30] I'm not sure we, I was not in favor of sending people to prison for gambling, but to let the hounds of hell, the incredible power of mass marketing and social media, to let that untethered prey on our young people, I think is unconscionable. [15:48] And I think it's irresponsible. [15:49] I yield back to the chair. [15:51] I thank the ranking member. [15:53] I know that Chairman Cruz and ranking member Cantwell had wanted to make statements today. [16:00] And we will insert them when they're able to get here. [16:04] I do have two letters to submit for the record. [16:08] Um, and we'll ask to do so. [16:12] Um, Senator Cortez Masto had a statement she wanted to make for the record. [16:18] And then the SEC, that is in Southeast Conference, the best conference, by the way, go Vols. [16:31] Uh, they have a letter they wanted to submit for the record. [16:35] Okay, our witnesses today, our first witnesses, Mr. Bill Miller, president and chief executive officer of the American Gaming Association. [16:46] He's led the AGA for seven years, and over that time, the organization has experienced expansive growth of sports gambling in the U.S. [16:56] Our second witness is Mirbeth Thomas, who serves as the executive director of the Tennessee Sports Wagering Council. [17:06] She is an experienced gaming regulator and lawyer who works closely with other state regulators to strengthen consumer protections on legal gambling. [17:16] She is also a native Nashvillian, and I have known her since she was three years old. [17:21] She is really a great regulator. [17:25] Our third witness is Mr. Scott Sadeen. [17:31] He is the co-founder and chief executive officer at Integrity Compliance 360. [17:38] With a background in financial market compliance, he created one of the leading sports integrity monitoring firms in the United States. [17:46] And I thank you for your time yesterday. [17:48] Our fourth witness is my good friend, former Congressman Patrick McHenry, who I think was the best deputy, chief deputy whip that the House ever had, because I was one of those deputy whips. [18:04] He is currently serving as the senior advisor for the Coalition for Prediction Markets. [18:10] During his 20 years in the House of Representatives, Congressman McHenry served on the House Financial Services Committee for many years, including as chairman, and we welcome him back to Capitol Hill. [18:24] Our final witness today, Dr. Harry Levant. [18:29] Dr. Levant is an internationally certified gambling counselor and currently serves as director of gambling policy at the Public Health Advocacy Institute. [18:41] He is also a recovering gambling addict himself and advocates for policies he believes will help more addicts recover and avoid relapsing. [18:53] I want to welcome each of you at this point. [18:57] We will begin your time for testimony. [19:00] Each of you will have five minutes, and then we will begin our rounds of questioning. [19:06] Mr. Miller, you're recognized for five minutes. [19:10] Thank you, Madam Chairman. [19:12] Chairman Blackburn, Cruz, ranking members Hickenlooper, Cantwell, members of the subcommittee, [19:18] thank you for the opportunity to be here today on behalf of the legal, state, and tribal regulated gaming industry, [19:24] one of the most highly regulated industries in the United States. [19:27] We are an essential part of the American economy. [19:30] The legal gaming industry supports 1.8 million American jobs. [19:34] We have more than 1,000 casinos, tribal and commercial, across 42 states, suppliers, manufacturers, and sports betting. [19:42] Our industry has created economic vitality in areas left behind by other industries. [19:47] We generate more than $100 billion in employee wages. [19:51] We deliver $18 billion annually in state and local taxes to fund critically important community projects [19:58] like education, infrastructure, and public service. [20:02] The legal gaming industry, our regulators, and sports leagues are aligned on our shared mission to protect sports integrity. [20:10] Together, the industry monitors, flags, and reports suspicious activities and threats to that integrity. [20:17] Since PASPA was reversed in 2018, 40 states and the District of Columbia have thoroughly worked to build sports betting frameworks [20:26] centered around integrity, consumer protection, responsible gaming, and accountability. [20:32] Other states, like Utah, Texas, and Georgia, have chosen not to legalize sports betting. [20:37] Yet there continues to be a robust offshore illegal market that provides consumers no protections while receiving about $700 billion in American bets. [20:49] And now, gaming integrity frameworks are being undermined by so-called prediction markets [20:54] who are evading state, local, and tribal authorities. [20:58] The legal state and tribal regulated gaming market has proven safeguards. [21:02] More than 8,400 state and tribal regulators who oversee our industry. [21:09] Licensed sports books operate under strict rules regarding age verification, AML compliance, geolocation, [21:17] integrity monitoring, responsible gaming, advertising standards, and flagging suspicious activity. [21:24] Prediction markets, they don't comply with most of these important regulatory protections, [21:29] and they allow 18-year-old teenagers to bet on sports. [21:33] And although a vast majority of their business is in the sports space, [21:37] prediction markets have also drawn attention for offering death markets [21:41] and other odious bets that threaten our national security. [21:45] We market ourselves accurately. [21:47] We're part of the entertainment economy. [21:49] These so-called prediction markets are deceptively calling sports betting, financial contracts, and investing. [21:55] Despite messaging designed to beguile policymakers and the public, [22:00] they are increasingly being exposed as backdoor sports betting operations. [22:04] We know it, they know it, and the American people know it. [22:09] As Senator Hickenlooper said, nearly 90 percent of Cal State's wagers revolve around sports betting. [22:15] They advertise it themselves. [22:17] Sports betting, legal in all 50 states. [22:19] A bipartisan coalition of 41 state attorneys general agree. [22:24] So-called sports events contracts are actually sports betting, and the states must regulate them. [22:31] We believe that prediction markets are evading state and tribal authorities, [22:35] and it has cost those states and tribal authorities close to a billion dollars in lost tax revenue [22:40] that would otherwise go to social services. [22:43] In closing, so-called prediction market platforms jeopardize the integrity of sports. [22:48] States, tribes, regulators, leagues, and operators are working together [22:53] to improve consumer protections, to reinforce responsible gaming. [22:59] Our process protects the integrity of sports. [23:03] Why the prediction markets don't want to play by these rules? [23:06] It's for them to explain. [23:08] The CFTC was created to regulate markets critical to the functioning of the nation's economy, [23:15] not to regulate Monday Night Football. [23:17] In 2024, Cal State stated this in federal court. [23:22] As the legislative history directly confirms, Congress did not want sports betting to be conducted [23:28] on derivative markets. [23:30] And just a few months later, they were offering an overwhelming menu of sports bets, [23:35] from the NFL playoffs to the Super Bowl to March Madness. [23:39] Prediction markets aided by a rogue CFTC are making a mockery of congressional intent. [23:45] The prediction markets are running national sports books, [23:48] and it's time to hold them accountable in the same way we are. [23:51] Thank you for having us here today, and look forward to our conversation. [23:57] Ms. Thomas, you're recognized for five minutes. [24:01] Chairman Blackburn, Ranking Member Hickenlooper, and members of the subcommittee, [24:05] it is an honor to be here today, especially in front of my U.S. senator. [24:08] Thank you for the opportunity to speak on the Tennessee Sports Gaming Act [24:13] and the priorities in place that we have to protect consumers [24:17] and to regulate previously unlicensed sports wagering activity through formal oversight. [24:25] In Tennessee, it is a taxable privilege to offer sports wagering pursuant to a license issued by our council. [24:31] Since sports betting went live in 2020, Tennessee has collected close to $450 million [24:36] in privilege taxes from licensed sports books, with 5% of that, or close to $23 million, [24:43] dedicated to problem gambling, prevention, and treatment. [24:48] Tennessee recognizes that gambling is risky and can become problematic for some players [24:53] if the right procedures are not enforced. [24:55] To that end, our law prohibits individuals under the age of 21 from wagering. [25:00] It requires sports books to make available and enforce exclusionary measures [25:05] for those who do not wish to access gaming platforms or receive marketing materials. [25:10] In support of this requirement, our state agency manages a statewide self-exclusion program [25:15] to ensure communication of these exclusions across every licensed sports book in our state, [25:20] no matter where the exclusion originated. [25:22] Our law prohibits credit card deposits and the extension of credit, [25:26] and requires sports books to provide the ability for players to set limits on time and money deposited. [25:31] After all, sports betting in Tennessee is viewed as a form of entertainment for adults, [25:37] not a way for college kids to pay the rent. [25:40] Importantly, our law respects the concerns of teams, schools, leagues, and players [25:46] about particularly risky wagering markets by prohibiting individual college player prop bets, [25:52] live team prop bets for any college sport, and any types of wagers on injuries or penalties. [25:59] Our law also allows teams, leagues, and schools to ask the council to prohibit other types of wagering markets [26:09] that may be contrary to the public interest or that could impact the integrity of a particular sport. [26:17] Sports books are required, and they do cooperate with investigations by our office, [26:21] sports governing bodies, and law enforcement. [26:23] And also, importantly, our agency is empowered under our law to investigate and fine unlicensed sports books [26:31] who choose to operate in our state, unregulated. [26:34] Our council has promulgated extensive rules to further support our statute's consumer protections, [26:40] which we have strengthened over time as technology has advanced. [26:44] Those include strong know-your-customer regulations to identify players [26:48] and prevent access by minors and other prohibited players, [26:52] secondary identity verification requirements to prevent identity theft and proxy betting, [26:57] multi-factor authentication requirements to prevent bad actors from taking over accounts, [27:03] robust geolocation checks at multiple points in time and access, [27:08] and required account suspension and reporting related to minors and prohibited players. [27:13] A sports book's internal controls, which we approve and regularly audit, [27:18] must have procedures to immediately notify our office of unusual or suspicious wagering activity. [27:25] And this reporting obligation goes far beyond money laundering or fraud. [27:30] It includes anything that could indicate match fixing, event manipulation, or the misuse of inside information. [27:38] In many ways, our sports books do act as the first line of defense, [27:41] but you cannot describe their reporting as self-certification. [27:45] As state regulators, we proactively identify and work to correct gaps in sports book compliance [27:52] with multiple checks during the term of their licensure. [27:55] We review all material, technological, and operational changes, [27:59] as well as all changes to house rules and terms and conditions prior to implementation. [28:05] We require our sports books to undergo annual third-party operational and security assessments [28:10] that are reported directly to us for review. [28:13] Sports books are also required to perform their own internal audit [28:17] and report findings and remedial measures to us. [28:21] We audit compliance with financial requirements and player-facing technical components, [28:25] as well as wagering catalogs to see whether impermissible markets are being offered. [28:30] We review incident reports related to operational issues, [28:33] which helps us not only ensure compliance, [28:35] but helps keep us up to date on issues that we might hear from a player, [28:39] because we also serve as the resource for the resolution of all player complaints in Tennessee. [28:45] Although it may seem like there has been a growth of cases regarding athlete manipulation or information sharing, [28:51] my experience has been that legal and regulated sports betting has greatly increased the volume of data available, [28:57] which has led to a higher number of incidents being reported and addressed. [29:01] Any criminal behavior can be difficult to complete, completely prevent, [29:06] but it can often be detected, investigated, and enforced with the right tools and collaboration. [29:14] Thank you very much. [29:17] Mr. Sadin, I recognize. [29:21] Thank you, Chairman Blackburn, ranking member, Hickenlooper, and members of the subcommittee. [29:26] Thank you for the opportunity to appear before you today. [29:28] My name is Scott Sadin, and I'm the co-founder and co-CEO of Integrity Compliance 360, known as IC360. [29:36] We are a regulatory technology and compliance services firm specializing in comprehensive integrity solutions [29:42] for stakeholders across sports, sports betting, and prediction markets. [29:47] We work closely with both collegiate and professional sports leagues, licensed sports betting operators, [29:52] prediction market exchanges, state regulators, and law enforcement across the United States and abroad. [29:56] In these few minutes, I want to highlight two core principles I believe about today's existing integrity monitoring ecosystem. [30:04] First, the integrity infrastructure that protects American sport is not theoretical. [30:09] Since the Supreme Court's 2018 decision in Murphy versus the NCAA, [30:13] a robust framework has developed across leagues, operators, regulators, law enforcement, and integrity providers like us. [30:21] That framework has identified, investigated, and resolved a meaningful number of integrity matters, [30:26] from suspicious wagering patterns, to the misuse of insider information, to active match-fixing inquiries. [30:32] The infrastructure exists, and it has worked. [30:34] But just like any vertical within a complex industry, the integrity ecosystem has room to improve and mature [30:41] as the space around it develops and evolves. [30:45] Second, the sports betting and prediction market ecosystems involve, as mentioned, a wide range of stakeholders. [30:51] And I believe that no single participant can address its integrity challenges alone. [30:57] The integrity of competition depends on the connective tissue between those participants. [31:02] The quality of information sharing, the depth of collaboration, and the consistency of transparency. [31:09] IC360's mission is direct to assist the successful maturation of the regulated sports betting and event contracts ecosystems [31:16] through products and services that help protect the integrity of sport. [31:19] We work closely with many of the stakeholders I have just mentioned. [31:24] And that breadth of our partner network is, in our view, a precondition for credible integrity work. [31:29] We regularly see the specific and often unique integrity challenges that each group is facing. [31:35] That cross-participant visibility allows us to identify patterns, risks, and emerging vulnerabilities. [31:42] And one of our central responsibilities is to bring those insights back to relevant partners [31:46] who may have been impacted by a circumstance, assist in investigating the issue, [31:52] and then collaborate to mitigate any remaining areas of risk. [31:55] In short, we endeavor every day to embody the very connective tissue necessary for cross-stakeholder integrity success. [32:02] I'd like to highlight three lines of work that help us play that role. [32:07] The first is integrity monitoring. [32:09] Our system and team of dedicated resources conduct 24-hour-a-day surveillance [32:13] of regulated markets for potentially suspicious activity. [32:15] We maintain a vast distribution network that allows operators to expeditiously disseminate [32:21] and respond to circumstances of potential risk. [32:24] Integrity alerts often come either from us or directly from an operator themselves. [32:29] This alerting structure affords stakeholders' holistic and actionable insight quickly and efficiently. [32:36] I'd also like to highlight an IC360 product called Proabet. [32:40] Most sports leagues maintain a population of individuals, athletes, coaches, officials, and other personnel, [32:45] who should be prohibited from wagering on their own sport. [32:48] Because of regular access to inside information and the ability to exert undue influence. [32:54] Proabet is the secure infrastructure through which those designations move from governing body [32:58] to sportsbook operators and prediction markets, [33:01] allowing participating platforms to automatically permission accounts [33:05] before a prohibited transaction ever takes place. [33:08] In our experience, this level of proactivity is incredibly consequential [33:12] in preserving market and competition integrity. [33:15] Lastly, I want to touch on the significance of education. [33:18] The prohibited patron population I described in the context of Proabet is also the population [33:24] I believe most vulnerable to approach, pressure, and targeting by bad actors. [33:30] Their awareness regarding the threats they may face, the rules that apply to them, [33:33] and the reporting pathways available when something feels wrong [33:36] are significant contributing factors in maintaining the integrity of sports. [33:42] IC360 has delivered hundreds of presentations [33:44] and has reached hundreds of thousands of athletes, coaches, and administrators, [33:48] and we look forward to continuing that work in close partnership with sports leagues. [33:53] I'd like to close by reiterating the importance of collaboration [33:56] and the connective tissue between industry stakeholders. [33:59] Integrity monitoring is only effective because operators report information, [34:03] leagues share intelligence, and regulators share casework. [34:06] Proabet only works because governing bodies designate, operators screen, [34:11] and the infrastructure between them is trusted. [34:14] Education is only impactful because leagues and institutions invest the time [34:18] and attention of the people closest to competition. [34:21] The value we believe IC360 brings is helping to make the collaborative work [34:25] of integrity possible at the scale and speed that the contemporary market requires. [34:30] I appreciate the subcommittee's attention to these issues, [34:32] and I welcome your questions and conversation. [34:34] Thank you. [34:35] Congressman McHenry. [34:38] Thank you, Chairman Blackburn, [34:40] Ranking Member Hickenlooper, [34:42] and distinguished members of the committee. [34:44] Thank you for the opportunity to testify, [34:46] and thank you for the warm welcome on this side of the capital complex [34:50] for a lowly former House member. [34:53] I will say the chambers are much nicer over here. [34:57] I appear before you on behalf of the Coalition for Prediction Markets, [35:01] including U.S. regulated companies like CalSheet, Crypto.com, [35:04] Robinhood, Coinbase, and Underdog. [35:06] My experience as a former chair of the House Financial Services Committee [35:10] is grounded in financial markets, regulation, market structure, and market integrity, [35:14] not in sports betting or traditional sports books, [35:17] and that's the lens through which I will speak today. [35:21] Throughout my time in Congress, [35:22] I focus on policies that expanded participation in financial markets [35:25] for average, everyday Americans, [35:28] democratized access to financial tools historically reserved [35:31] for large financial institutions, [35:33] modernized our laws to foster innovation and facilitate capital formation, [35:38] and strengthen confidence in market integrity. [35:41] My work with the Coalition for Prediction Markets [35:42] is a continuation of those same principles. [35:45] The question before us is not whether innovation should exist, [35:49] but whether emerging market-based products [35:51] will operate inside a transparent, federally regulated, [35:54] onshore framework [35:55] with robust consumer protections and oversight. [35:58] Casinos and traditional online sports books [36:01] and prediction markets [36:02] are fundamentally different products [36:04] governed by different legal frameworks [36:07] and subject to different regulatory structures, [36:10] and conflating the two [36:11] does little to advance our sheer goal of protecting consumers. [36:15] In a casino or sports book, [36:17] the house sets the odds and profits when customers lose. [36:21] In a prediction market exchange, [36:23] participants trade with one another [36:25] while the platform earns transaction fees [36:28] for facilitating the market. [36:30] As a result, [36:32] the incentives are fundamentally different. [36:34] Prediction markets benefit from greater participation, [36:38] liquidity, and more accurate information, [36:40] not from consumers losing money. [36:43] That distinction was recently reinforced [36:45] by the Third Circuit Court of Appeals, [36:47] which held that sports events contracts [36:49] are governed by the Commodities Exchange Act [36:52] and the Dodd-Frank Act. [36:54] It's also important to recognize [36:57] that sports event contracts [36:58] are only one part of a much broader market [37:00] as categories like entertainment and politics [37:03] grow quickly and share. [37:06] These products are a part of a broader trend [37:08] toward democratizing access [37:10] to financial and informational tools [37:12] that were once limited to institutions [37:14] and large market participants. [37:18] Coalition members and coalition companies [37:20] share the league's interest [37:22] in protecting sports integrity [37:24] and want to work collaboratively [37:25] and want to work collaboratively [37:25] to address concerns. [37:27] And where appropriate, [37:28] share information and data [37:30] that help protect the ecosystem. [37:33] Customers must trust that suspicious activity [37:37] will be identified and addressed appropriately. [37:40] Unlike many sports books [37:41] and unregulated operators, [37:43] coalition members do not offer micro bets [37:45] that are particularly vulnerable to manipulation, [37:47] such as wagers on the next pitch [37:49] or the next play. [37:50] Notably, the sports integrity scandals [37:52] that have made headlines in recent days [37:54] and recent years and recent days [37:57] involving the NBA and MLB players [38:01] using insider information [38:03] and compromised game outcomes [38:05] occurred on traditional online sports books, [38:07] not on prediction markets exchanges. [38:11] Coalition members are federally regulated [38:12] and overseen by the CFTC [38:14] and operate under extensive compliance obligations, [38:17] including real-time surveillance, [38:19] trade reporting requirements, [38:20] Bank Secrecy Act compliance, [38:22] Know Your Customer [38:22] and Anti-Money Laundering controls, [38:25] and comprehensive rule books reviewed [38:27] by federal regulators. [38:31] They have extensive monitoring [38:32] that is ongoing, [38:34] and regulated prediction markets [38:35] prohibit trading [38:36] not only by individuals [38:38] with material non-public information, [38:41] but also by anyone capable [38:43] of influencing the outcome of a contract, [38:45] including players, coaches, [38:48] referees, league employees, [38:50] and even members of Congress [38:51] on political contracts. [38:54] Protections that, frankly, [38:56] go well beyond federal securities laws' requirements [39:00] and beyond standards applied [39:02] to traditional sports books as well. [39:05] Importantly, customers on our platforms [39:08] are also subject to uniform federal protections [39:11] that apply nationwide, [39:12] exceeding the consumer protections [39:15] of casinos and sports books, [39:18] which are governed by a patchwork of state laws. [39:21] While not the focus of this hearing, [39:22] coalition members also share concerns [39:24] about contracts tied to war, [39:26] assassination, and acts of violence, [39:28] and those are proliferating [39:30] in unregulated platforms, [39:32] and we share the interest of [39:33] that those are not in the public interest. [39:37] These kinds of contracts [39:38] are already prohibited under U.S. law. [39:41] And welcome your questions today [39:43] on the ways that we can enhance market integrity, [39:47] protect the integrity of sports, [39:49] and consumer protection writ large. [39:51] I yield back. [39:52] Dr. LeVon. [39:54] Good morning. [39:55] Chairman Blackburn, [39:56] Ranking Member Hickenlooper, [39:58] members of the subcommittee, [39:59] thank you for the privilege of testifying today [40:02] and the privilege of joining [40:03] this panel of distinguished witnesses. [40:06] Before I begin, [40:07] take just a moment, [40:09] Chairman Blackburn, [40:10] and extend my thanks to you. [40:12] Specifically, [40:13] it was December of 2024 [40:15] when I testified [40:16] before the Senate Judiciary Committee. [40:18] And following that hearing, [40:19] you and I had a brief exchange [40:20] in which you said to me, [40:22] I am going to remain involved in this issue [40:26] to protect children and families. [40:28] You have been a person of your word. [40:31] The people of Tennessee benefit from that. [40:33] And frankly, [40:34] the people and families of America [40:35] benefit from you remaining involved [40:37] in this important issue. [40:39] I thank you for that. [40:40] During that same conversation, [40:42] I was joined by Senator Durbin, [40:46] Senator Blumenthal, [40:47] and Senator Tillis, [40:49] all expressing similar feelings. [40:51] This is not a Republican issue [40:53] or a Democrat issue. [40:54] This is a human issue [40:56] regarding an addiction crisis [40:59] that needs to be addressed and prevented. [41:02] I am a gambling addict in recovery. [41:04] I made my last bet on April 27, 2014, [41:07] and survived a near-suicide attempt [41:10] that same night. [41:12] I made my first bet [41:13] when I was 15 years old [41:14] and went to the casino [41:15] for the first time when I was 16. [41:17] I never had a healthy relationship [41:19] with gambling, [41:19] but it would take 30 years [41:20] until I fully understood that. [41:22] It was in 2013 [41:23] that my world was collapsing, [41:25] much like Senator Hickenlooper [41:27] described someone he knew. [41:28] And I reached for my drug of choice, [41:30] which was gambling. [41:31] And I annihilated myself [41:33] and everything in my wake. [41:35] I went through all of my money, [41:37] all money I could borrow, [41:38] and eventually all money I could steal. [41:40] And on February 13, 2015, [41:43] I stood in a courtroom [41:44] in Philadelphia, Pennsylvania, [41:46] not unusual for me [41:47] since I'd been a lawyer [41:48] for almost 25 years, [41:49] but on this day, [41:50] I stood in that courtroom [41:51] as a defendant. [41:52] And I pled guilty [41:53] to 13 financial felonies, [41:55] all related to my gambling addiction. [41:58] And during my sentencing hearing, [41:59] I made a vow. [42:00] And that vow was, [42:02] if I could get well, [42:03] and at that time, [42:04] it was a very big if, [42:05] but if I could get well, [42:06] I would dedicate [42:07] whatever my future looked like [42:09] to helping prevent, [42:12] prevent being the operative word, [42:13] other people, [42:14] particularly young men, [42:15] from suffering a similar fate. [42:18] That led me, [42:19] after four or five years of treatment, [42:21] to LaSalle University [42:23] in Philadelphia [42:23] where I earned a master's [42:24] in professional clinical counseling [42:26] and upon graduating, [42:27] began treating people [42:28] suffering with gambling addiction. [42:30] But I realized [42:31] I wasn't doing anything [42:32] on the prevention side. [42:33] So I went back to school again, [42:35] earned a doctorate [42:35] in public policy [42:36] where my research is all about [42:38] how to address prevention. [42:40] And in the couple of minutes [42:41] I have left, [42:41] I want to address three issues [42:43] and then look forward [42:44] to a more robust conversation. [42:46] Issue number one, [42:48] are prediction markets gambling? [42:50] Most certainly yes [42:52] when it comes to sports contracts. [42:54] And there's two simple reasons why. [42:56] First, [42:56] meets the very basic definition [42:58] of gambling, [42:59] which is defined as [43:00] betting or staking [43:01] something of value [43:02] with consciousness of risk [43:03] and hope of gain on the outcome [43:05] of a game, contest, [43:07] or an uncertain event [43:08] whose result may be determined [43:10] by chance or accident. [43:12] That's gambling. [43:12] That's what prediction markets do. [43:14] Next, [43:15] to the end user, [43:17] American public, [43:18] there's absolutely [43:18] no discernible difference. [43:20] They are gambling. [43:21] Most importantly, [43:24] the prediction market companies [43:25] themselves have acknowledged [43:27] it is gambling. [43:29] And I'll quote that later on. [43:30] I want to move forward though [43:31] to integrity [43:32] and offer to this committee [43:34] a broader definition [43:36] of integrity. [43:37] Integrity isn't just [43:39] can the American people [43:40] trust the result [43:41] of the Cubs-Cardinals game. [43:42] Each of us now [43:44] have to make that decision [43:44] for ourselves [43:45] because sports [43:46] have sold their integrity [43:47] to the gambling industry. [43:48] There's a much broader issue here [43:51] which is how [43:52] the sports leagues [43:54] including the NCAA, [43:56] the owners, [43:57] the players [43:58] have partnered [43:59] for enormous financial gain [44:02] in the billions [44:03] with the gambling industry [44:05] and prediction markets [44:06] to sell their real-time data [44:09] to the gambling industry [44:11] to create something [44:12] called micro-betting [44:13] and its close cousins [44:14] same-game parlays [44:15] and prop bets. [44:16] This is what is crushing [44:19] people and families [44:21] particularly young men. [44:23] It is called micro-betting [44:24] and I'm here today [44:25] to talk to you about it [44:26] because I'm also here [44:28] to issue a warning. [44:29] The Senate doesn't do something. [44:31] The Congress doesn't do something. [44:33] Our friends at the NFL [44:34] have just in the last [44:35] three months announced [44:36] in partnership [44:38] with their partners [44:39] a company called Genius Sports [44:40] the launch of a brand new product [44:43] called BetVision [44:44] which they describe [44:45] and I quote [44:46] as an immersive [44:47] intelligent interactive tool [44:49] to convert [44:51] traditional fans [44:52] into high engagement [44:53] in-play bettors [44:54] which are significantly [44:56] more profitable [44:57] for Genius [44:58] and for our [44:59] sportsbook partners. [45:00] They have their eyes [45:02] on us and our children [45:03] to convert [45:04] into [45:05] in-game micro-betters. [45:08] It is fundamentally dangerous. [45:09] I look forward to speaking [45:10] in more detail about it. [45:12] Thank you. [45:13] And thank you [45:13] and I don't think [45:14] anyone would have made a bet [45:16] that we would have had [45:17] five witnesses [45:18] who stuck to five minutes. [45:19] I congratulate you all. [45:21] You're recognized [45:22] Chairman Cruz. [45:23] Well, I think that bet [45:25] may have been [45:26] on the prediction markets. [45:28] Good morning. [45:31] Americans love sports. [45:34] Nearly 70% of Americans [45:35] that's about 232 million people [45:39] consider themselves sports fans. [45:41] I am certainly one of them. [45:44] I'm a sports fan [45:45] for the same reason [45:46] everyone else is. [45:48] Sports [45:48] showcase human talent [45:51] and grit [45:52] and drive. [45:55] They put us on the edge [45:56] of our seats [45:56] as we wait [45:58] and hope [45:59] for the thrill [46:00] of the next big play, [46:02] the come-from-behind win. [46:05] From high school football [46:06] which is a religion [46:07] in the great state of Texas [46:08] to college basketball [46:10] to the professional leagues, [46:13] sports unite us [46:15] at a time [46:15] when it seems [46:16] everything else divides us. [46:18] Today, [46:20] many sports fans [46:21] are also sports bettors. [46:23] 39 states [46:24] and the District of Columbia [46:25] have legalized [46:26] some form of sports betting, [46:29] though my home state [46:30] of Texas [46:30] has not. [46:33] Even in those states [46:34] where sports betting [46:35] is legal, [46:36] everyone agrees [46:37] that it carries risks [46:38] and serious risks. [46:41] It should be regulated [46:42] and it should be done [46:43] if at all [46:44] in moderation. [46:47] This hearing [46:47] is not about [46:48] rolling back [46:49] legalized gambling [46:50] in states [46:51] that have chosen [46:51] to authorize it. [46:53] There are two different [46:54] questions instead [46:55] before us at this hearing. [46:58] First, [46:59] in a world [46:59] where sports betting exists, [47:02] how do we preserve [47:03] the integrity [47:04] and authenticity [47:05] of the sports [47:06] that we love? [47:08] And second, [47:09] are prediction markets [47:10] operating within the law [47:12] or are they defying [47:15] the law [47:15] and improperly infringing [47:17] on state sovereignty? [47:19] On the first question, [47:20] integrity is the foundation [47:23] of sports. [47:25] We want athletes [47:25] competing on merit, [47:27] but the opportunity [47:30] to make money [47:31] can tempt gamblers [47:32] and sometimes even [47:34] athletes themselves [47:35] to guarantee [47:37] a sure bet. [47:39] Consider a few recent cases. [47:42] NBA players and coaches [47:43] are accused [47:44] of manipulating performance [47:45] and providing insider information [47:48] to win bets. [47:50] Two Major League [47:51] baseball pitchers [47:52] allegedly rigged [47:54] their own pitches [47:55] in exchange for money. [47:59] MLS banned two players [48:01] for intentionally [48:03] getting yellow cards [48:04] to win bets. [48:07] And the UFC [48:08] has canceled matches [48:09] and terminated contracts [48:11] because of suspected [48:13] match fixing. [48:16] These incidents [48:16] sow doubt [48:17] in the minds of fans. [48:21] It is not uncommon [48:22] for fans [48:23] scrolling Twitter [48:24] on a Sunday afternoon [48:25] in the fall [48:26] to see posts speculating [48:28] that a controversial call [48:29] by an official [48:30] was related to gambling. [48:34] That is why sports leagues [48:35] and casinos [48:36] and regulators [48:37] have to work together [48:38] to identify, [48:40] to investigate, [48:41] and to root out manipulation. [48:44] Fans need to be assured [48:45] that game rigging [48:46] is rare [48:47] and that anyone [48:48] caught doing it [48:49] will be punished [48:50] harshly, [48:51] if not banned [48:52] forever from the game. [48:55] They're also grappling [48:56] with a newcomer [48:57] to the sports [48:58] integrity matrix. [49:00] Prediction markets [49:01] like Polymarket [49:02] and Calsi. [49:04] Prediction markets [49:05] have started offering [49:06] quote, [49:07] event contracts [49:09] on sporting events, [49:11] which for all intents [49:12] and purposes [49:13] are sports bets. [49:15] Now, of course, [49:16] there are real [49:17] and serious questions [49:18] about the legal propriety. [49:22] At a minimum, [49:23] any prediction market [49:25] that offers event contracts [49:27] on sports [49:27] should be expected [49:30] to join serious efforts [49:32] to detect [49:33] and prevent [49:34] the rigging of sports. [49:36] We must also acknowledge [49:38] the existence [49:39] of unregulated [49:40] offshore sports books [49:41] that have existed [49:43] for decades. [49:45] That issue [49:45] may well be one [49:48] for law enforcement, [49:50] Treasury, [49:51] or the State Department [49:52] to solve. [49:54] Today's hearing [49:55] is designed [49:55] to focus [49:56] on the use of tools [49:57] in the regulated market [49:59] to catch [50:01] and to prevent [50:02] game manipulation. [50:05] My hope is [50:06] that today's discussion [50:07] will showcase [50:08] the work already underway [50:09] to protect [50:10] the integrity of sports [50:12] and at the same time [50:13] identifying [50:14] where we can [50:15] and should [50:15] do more. [50:17] I look forward [50:18] to hearing [50:18] from our witnesses. [50:20] Thank you, [50:21] Mr. Chairman. [50:22] We will begin [50:23] our round [50:23] of questioning. [50:25] Now, Ms. Thomas, [50:26] I want to come to you. [50:28] When we speak [50:29] about sports integrity, [50:30] our states [50:31] have really been [50:32] on the front line [50:34] when it comes [50:35] to protecting [50:35] fair play [50:36] and also [50:38] protecting consumers [50:39] from harm. [50:40] You talked about this [50:41] in your opening. [50:43] I know that Tennessee [50:45] has taken [50:46] a technology-first [50:49] approach [50:50] in dealing [50:51] with this. [50:53] So, I want you [50:53] to talk a little bit [50:55] about Tennessee's [50:56] approach [50:56] and how you have [50:59] handled [51:00] or will handle [51:01] potential instances [51:03] when it comes [51:04] to match-fixing [51:05] and questionable bets. [51:08] Thank you [51:09] for the question. [51:10] Yes, we are [51:12] a technology-forward agency [51:13] and recognize [51:14] that we need [51:15] to move [51:15] at the speed [51:16] of business [51:17] and not always [51:18] at the speed [51:19] of government [51:19] to keep up [51:20] with our industry [51:21] and mitigate [51:22] all risks [51:23] that we can. [51:24] And I've described [51:25] what our rules require, [51:27] but I want to emphasize [51:29] that our standard [51:30] of what our sports books [51:32] and their vendors [51:33] can use [51:34] is one of commercial [51:35] and technological [51:36] reasonableness, [51:37] which, of course, [51:38] evolves and improves [51:39] over time. [51:41] That gives our sports books [51:43] flexibility [51:43] to run their operations [51:45] and use vendors [51:46] that they believe [51:47] are best suited [51:48] for their needs [51:48] or develop technology [51:50] in-house. [51:52] We also, [51:53] internally, [51:54] in our agency, [51:55] use technology [51:56] to monitor [51:57] what is going on [51:59] with all of our sports books. [52:00] We ingest data [52:01] from our sports books, [52:03] from our vendors, [52:05] related to compliance issues, [52:06] related to any kind [52:09] of technological changes, [52:11] any changes [52:12] to any of their [52:12] operating systems [52:14] comes to our office. [52:15] And we also ingest data [52:18] from players [52:18] that gives us insight [52:21] into issues [52:22] that they are seeing. [52:24] So, let me jump in. [52:25] You're taking vendor data [52:26] and player data? [52:28] And sports book data. [52:29] Yes, ma'am. [52:30] And sports book. [52:30] Okay. [52:31] Yes. [52:32] And then we're able [52:33] to use that data [52:36] to look at patterns [52:39] of what might be happening [52:40] with compliance areas. [52:43] Now, with integrity issues, [52:45] that may be a way [52:46] that we identify [52:47] integrity issues. [52:49] But we also have [52:50] back office access [52:51] to all of our sports books [52:53] platforms. [52:53] So, we can see [52:54] real-time account-level data. [52:57] We can also see [52:58] their integrity providers [53:01] like IC360 and IBIA. [53:04] We can see their platforms. [53:05] And so, we can see [53:06] what's being reported [53:07] by those sports books [53:08] in real-time [53:09] and how others [53:10] are responding. [53:11] We also have [53:13] a platform access [53:14] to geolocation data. [53:16] So, we can see [53:17] wagering geolocation pings [53:19] when deposits are made, [53:21] when wagering activity [53:22] takes place, [53:23] when odd movements happen [53:26] or differences [53:28] in geographical locations [53:30] and wagers [53:31] that are taking place. [53:32] And that allows us [53:34] to have a lot of data [53:36] at our fingertips [53:36] to analyze [53:37] when there is suspected activity [53:40] of match fixing [53:41] or otherwise [53:41] that we can then package [53:43] and send to sports [53:44] governing bodies, [53:45] send to law enforcement [53:46] and investigate. [53:47] And we have done that. [53:49] I want to make sure [53:50] I get my numbers straight. [53:51] but as of May 14th, [53:54] we had investigated [53:55] 25 potential integrity cases [53:57] where suspicious wagering [53:58] activity occurred [53:59] in Tennessee [54:00] that could have indicated [54:02] the use of inside information. [54:05] A few of these cases [54:06] are currently pending, [54:07] but 17 of these matters [54:08] were closed [54:09] and were referred [54:10] to sports governing bodies [54:12] and law enforcement, [54:13] including 13 of those [54:15] to the FBI. [54:17] And where an integrity matter [54:18] is not criminally referred, [54:20] it is because we identified [54:22] that it was just [54:23] somebody had a good day. [54:26] Thank you. [54:27] Mr. Miller, [54:28] do your members [54:29] advertise to youth? [54:31] We do not. [54:32] Do you advertise [54:33] on social media platforms? [54:36] We do have members [54:37] that advertise [54:38] on social media platforms, yes. [54:40] And you consider [54:41] that as not advertising [54:43] to youth? [54:44] I think that the algorithms [54:45] that are built around [54:46] the idea of... [54:47] They don't build their algorithms [54:49] and they don't open them. [54:51] Mr. McHenry, [54:51] do your members [54:55] advertise to youth? [54:56] No. [54:57] Do you advertise [54:58] on social media platforms? [55:00] Yes. [55:01] And we welcome [55:01] the additional tools. [55:03] And as a parent, [55:04] I laud your goals [55:05] of protecting our kids online. [55:08] We want enhanced tools [55:10] so we can make sure... [55:11] So why are you on those platforms? [55:12] Pardon me? [55:12] Why are they on those platforms? [55:14] Because they're very popular. [55:15] They're a very popular platform. [55:16] With kids. [55:18] And we've got a problem [55:18] with an 11-year-old. [55:20] The average age... [55:21] Let me ask you this. [55:23] I want to talk a little bit [55:24] about the prediction market [55:25] approach to regulation [55:27] and consumer protection. [55:29] And let's go to a LinkedIn post [55:32] that Calci CEO Mansoor wrote [55:35] about the company [55:36] taking a regulatory first approach, [55:39] his term, [55:40] to accelerate growth. [55:42] And I agree that innovators need [55:44] like-touch rules [55:46] and prediction markets [55:47] are a great place [55:48] for innovation. [55:51] We realize that. [55:53] I think that it is important [55:55] that we take action [55:57] to make certain these marketplaces [55:59] are going to be safe. [56:01] So talk for a moment [56:02] about how your association [56:05] is approaching consumer protections [56:08] and what you are going to do [56:12] to be certain [56:13] that you're not on these platforms [56:15] where children are the primary user [56:18] of these platforms. [56:20] Yes. [56:20] And thank you. [56:21] And thank you for your leadership [56:22] on protecting our kids online. [56:24] As a parent, [56:25] I share your goals. [56:27] I very much share your goals. [56:29] Our coalition members [56:30] adhere to best practices [56:31] on advertising. [56:32] There's a complete ban [56:34] of anyone under 18 [56:35] from touching these products. [56:36] We understand there's a conversation [56:38] about the age requirements [56:39] for prediction markets. [56:41] We welcome that conversation. [56:43] But to be clear, [56:44] these financial products, [56:45] just like securities, [56:46] are available to 18 and older. [56:48] 97% of our users [56:50] of the volume [56:50] on prediction markets [56:52] are over 21. [56:53] The average age is 33. [56:55] The goal is to get customers [56:57] that will be repeat customers [56:58] that are interested [56:59] in participating, [57:01] but not targeting kids. [57:03] And every enhanced tool [57:04] that we can take [57:05] and our members companies can take [57:06] to ensure that [57:07] under 18 don't even see [57:09] our advertising online [57:11] is a very important mark [57:13] that we take and undertake. [57:14] But we lack fully the tools [57:16] necessary to block that. [57:19] Our member companies [57:20] will take enhanced surveillance [57:21] of those that they think [57:23] may be using their parent [57:25] or someone else's phone. [57:27] We take extra effort [57:28] to make sure that [57:29] they don't have that access. [57:31] And we follow the best tools [57:33] that are available [57:34] to make sure that we know [57:35] if anyone has any touch points [57:37] to the leagues [57:38] or the folks that we view [57:41] as insiders [57:42] and they're banned [57:43] from using our products. [57:45] Full ban. [57:46] They can't even trade. [57:47] And that is an undertaking [57:49] that's very different [57:50] than the rest of the ecosystem. [57:51] Okay. [57:52] Thank you for that. [57:53] Ms. Dr. Levant, [57:54] I can tell you want [57:55] to respond to that, [57:56] but as a courtesy [57:57] to my colleagues, [57:59] I'm going to call back, [58:00] come back to you [58:01] for that response. [58:03] Senator Hickenlooper, [58:05] you're recognized. [58:06] Thank you, Madam Chair. [58:07] I thank all of you for coming. [58:10] And Dr. Levant, [58:10] I particularly think [58:13] your life experience [58:14] is relevant and real. [58:18] Mr. McHenry, [58:19] and thank you for your service. [58:21] You bring a reputation [58:22] from the House, [58:24] but I think you need [58:25] to be very careful [58:26] of how you're using that. [58:28] I think prediction markets, [58:31] you know, [58:31] largely advertise themselves [58:33] as financially life-changing tools [58:35] for average people [58:36] that can allow users [58:37] to earn money [58:39] through their prediction accuracy. [58:42] Now, one example I can give you, [58:44] Kalshi partnered [58:44] with a young woman on TikTok [58:45] who said, [58:47] this is a partnership, [58:49] who said that she struggled [58:50] to pay her rent, [58:52] but by placing bets [58:53] on Kalshi, [58:54] she was able to win enough [58:56] to cover her rent [58:58] for two years. [58:59] I know you're welcoming [59:00] conversations, [59:01] but do you think [59:02] that's responsible [59:03] to hold that up [59:04] as a model [59:05] for people [59:05] that are having trouble [59:06] making their rent, [59:07] that they should go [59:08] on to prediction markets [59:09] because they're going [59:10] to be better [59:11] at predicting [59:11] what is clearly [59:12] a random occurrence? [59:16] These contracts [59:17] are not fully random. [59:20] And these contracts [59:20] are true- [59:21] They're not fully random, [59:22] but if it's truly, [59:23] if there's no inside information, [59:24] they are largely random. [59:26] The predictive capacity [59:29] and the specificity [59:30] of the case you raise, [59:32] I'm unaware of. [59:33] I'm telling you, [59:34] now you're aware of it, [59:35] and this isn't a case [59:37] of some random person. [59:39] This is a business partnership [59:40] with the people [59:41] that are paying [59:42] your consulting fee. [59:44] So thank you. [59:45] I will attempt [59:46] to answer your question, [59:47] which is, [59:48] these are two-sided markets [59:49] established by peer-to-peer. [59:52] I get that. [59:53] I'm talking about [59:53] what the incentive [59:55] that advertising plays [59:57] in these types of markets. [1:00:00] Let's move on. [1:00:01] I think I look at the age issue [1:00:04] as every bit as important [1:00:05] as encouraging people [1:00:07] that are struggling [1:00:07] to make ends meet. [1:00:09] I think it's specifically [1:00:10] dangerous for minors [1:00:12] to get into sports betting [1:00:14] and especially on prediction markets. [1:00:16] That's why almost all the states [1:00:18] say it's 21, [1:00:19] not 18, but 21. [1:00:20] Prediction markets, [1:00:21] let users as young as 18 [1:00:24] bet on sports, [1:00:25] but they also market [1:00:26] their products [1:00:27] to younger, [1:00:27] more vulnerable audiences [1:00:29] who are in many cases [1:00:31] adept at getting around [1:00:32] the platform precautions. [1:00:34] There have been reports [1:00:35] that Kalshi has been using [1:00:37] young social media influencers [1:00:39] as young as 15 years old [1:00:40] to promote its platform [1:00:42] to young consumers. [1:00:43] Is that true? [1:00:45] Not to my awareness. [1:00:47] And you wouldn't sanction that? [1:00:49] Young 15-year-old influencers [1:00:51] saying why these prediction markets [1:00:53] are useful and a valuable [1:00:55] investment of the risk [1:00:58] of their money. [1:00:58] I wouldn't condone anyone [1:00:59] using TikTok, [1:01:00] but that's a separate matter. [1:01:02] Yeah. [1:01:03] Let's put it this way. [1:01:05] Does Kalshi have any age restrictions [1:01:07] at all on the influencers [1:01:08] that it works with, [1:01:10] basically hires, [1:01:10] in order to influence the market [1:01:15] or the audience [1:01:16] that it markets to? [1:01:18] They're one of the member companies [1:01:19] for the prediction markets. [1:01:21] I can direct you to them [1:01:22] answering that specific question. [1:01:23] No, no. [1:01:24] I'm talking about Kalshi. [1:01:25] I don't want to go through [1:01:26] the rigmarole. [1:01:27] I mean, [1:01:27] you're saying we're open [1:01:28] to the conversation. [1:01:29] Why isn't these prediction markets, [1:01:30] why isn't Kalshi, [1:01:32] out in front [1:01:32] and picking out these issues [1:01:34] and saying, [1:01:34] all right, [1:01:35] we're going to deal with this [1:01:35] and here's how we're going to [1:01:36] one, two, three. [1:01:37] We shouldn't have to go [1:01:38] through hearings [1:01:39] and slow it down. [1:01:40] Every day that they can stall, [1:01:42] they're going to make more money. [1:01:43] I get that. [1:01:44] But that means all the more [1:01:45] if you want to be [1:01:46] the responsible supporter, [1:01:50] you need to help them [1:01:51] get out in front of this. [1:01:52] Well, they are [1:01:53] and our members are. [1:01:55] These are onshore, [1:01:56] regulated by the CFTC [1:01:58] and they comply with federal law [1:02:01] and the regulations [1:02:02] and they've complied [1:02:03] with all the court cases. [1:02:04] But the CFTC, [1:02:05] we know is inexperienced, [1:02:07] doesn't have any real regulations [1:02:08] around sports betting. [1:02:09] They've been doing this for [1:02:10] minors. [1:02:10] They are easily manipulable. [1:02:13] I think the self-certification [1:02:15] process is a good example. [1:02:17] The CFTC allows prediction markets [1:02:19] to launch new contracts [1:02:20] just one business day [1:02:22] after filing them [1:02:23] without any CFTC review at all. [1:02:26] No, no. [1:02:26] The CFTC reviews those contracts. [1:02:28] Not in one day they don't. [1:02:29] Yes, they do. [1:02:30] As they do for the rest [1:02:31] of the commodities marketplace [1:02:32] and furthermore, [1:02:34] the CFTC has regulatory [1:02:35] authority to remove contracts [1:02:37] or unwind contracts [1:02:39] after the fact [1:02:40] if they view that it was manipulated [1:02:42] or there's fraudulent activity. [1:02:44] The CFTC is a cop on the beat, [1:02:46] has the capacity [1:02:46] to oversee this market, [1:02:49] just as they've done [1:02:50] with the broader commodities marketplace [1:02:51] that's been around [1:02:53] and well-versed for decades. [1:02:55] There is literally no one [1:02:57] that I know. [1:02:57] You're the first person [1:02:58] who's told me [1:02:58] you think that they think [1:03:00] the CFTC is up to the standards. [1:03:03] Let me go last. [1:03:05] No, it's okay. [1:03:06] It's okay. [1:03:07] Mr. Miller, [1:03:09] you stated that regulated gambling benefits [1:03:12] from the revenues [1:03:15] they collect on taxes from gaming. [1:03:17] Colorado collected $45 million last year. [1:03:20] It's in the billions [1:03:21] over the last number of years [1:03:23] if you look at all the states [1:03:24] and the tribes. [1:03:26] If prediction markets continue [1:03:28] to operate as unlicensed sportsbooks, [1:03:30] paying no taxes, [1:03:31] is it going to reduce [1:03:33] the resources available in Colorado? [1:03:35] We use that for water projects [1:03:38] and all kinds of outdoor [1:03:40] recreation opportunities. [1:03:42] Are those resources available [1:03:44] to states like Colorado [1:03:44] going to be diminished? [1:03:45] Well, thank you for the question. [1:03:48] Of course, [1:03:49] what we've seen [1:03:50] is basically a tsunami [1:03:51] that has been created [1:03:53] by the prediction markets [1:03:54] in a completely unregulated manner. [1:03:57] There's not one single person [1:03:58] on this dais [1:03:59] or anybody that was around [1:04:00] during 2010 [1:04:01] when we did Dodd-Frank [1:04:03] that believed [1:04:03] that we were enabling [1:04:04] and creating [1:04:05] the federal department of gambling. [1:04:07] So, yes, [1:04:08] they are absolutely [1:04:09] not competent [1:04:11] to handle this [1:04:12] and, two, [1:04:13] they are absolutely [1:04:14] hurting tribes and states. [1:04:16] Thank you. [1:04:17] I yield to the chair. [1:04:19] Senator Curtis. [1:04:21] Thank you. [1:04:22] Mr. McHenry, [1:04:23] I'm conflicted [1:04:25] whether I call you chairman, [1:04:26] congressman, speaker, [1:04:29] but I will tell you [1:04:31] it is a delight [1:04:32] to see you again [1:04:33] and really enjoyed [1:04:34] serving with you. [1:04:36] If I'm honest, [1:04:37] even a couple months ago, [1:04:38] I would not have been able [1:04:39] to tell you [1:04:39] what a prediction market was. [1:04:41] And so, [1:04:42] could you help me [1:04:42] just like in one sentence [1:04:44] to the man and woman [1:04:45] back in Utah, [1:04:46] what is a prediction market [1:04:47] just like in one sentence? [1:04:49] It is an open exchange. [1:04:51] It is under commodities [1:04:53] regulation called a swap. [1:04:55] You have folks [1:04:56] that have a contract. [1:04:57] Some say yes, [1:04:58] some say no, [1:05:00] and they determine it. [1:05:01] The marketplace, [1:05:02] the consumers, [1:05:03] and the participants [1:05:03] determine what is [1:05:05] the ratio on the contract, [1:05:06] the likelihood [1:05:07] of something happening. [1:05:08] And what's exactly happening [1:05:10] when a purchase event contract [1:05:12] is purchased? [1:05:13] Just very, [1:05:14] very like for the people [1:05:15] on the ground [1:05:16] who don't understand [1:05:16] the technicalities of this. [1:05:18] Tell me exactly what's happening. [1:05:18] The easiest thing [1:05:19] for me to explain [1:05:20] is in the political setting. [1:05:21] Right? [1:05:21] In the political setting [1:05:22] is John, Jane, or Joe [1:05:26] going to win the election. [1:05:28] And after the election, [1:05:31] the contract is certified [1:05:32] based off of information [1:05:34] on whether or not [1:05:35] that happened. [1:05:36] And then people are paid out [1:05:38] based off the ratio [1:05:39] of that final contract. [1:05:41] Okay. [1:05:41] If I were hearing that [1:05:43] back in Utah, [1:05:43] I would say, [1:05:44] I think something might happen. [1:05:47] I'm going to put money down on it. [1:05:49] And I have the chance [1:05:50] of either making more money [1:05:51] or losing money on that. [1:05:53] Is that accurate? [1:05:54] Yes. [1:05:54] And it's an uncertain outcome, [1:05:56] just like whether or not [1:05:57] you're going to have [1:05:58] a crop that comes in this fall [1:06:00] or not based off of weather [1:06:02] and unpredictable events [1:06:03] along the way. [1:06:04] So if I'm talking [1:06:06] to these folks back home [1:06:07] in a town hall meeting, [1:06:08] they're going to say to me, [1:06:09] tell me how that is [1:06:10] not gambling, right? [1:06:11] It seems to me [1:06:12] every definition of gambling. [1:06:15] Well, this has, [1:06:17] I understand how that is viewed. [1:06:21] When grain futures came [1:06:23] to fruition over 100 years ago, [1:06:27] it was viewed much the same. [1:06:29] This is an uncertain outcome [1:06:31] on whether or not [1:06:31] your crop will come in the fall. [1:06:33] And you can hedge against it [1:06:35] in the marketplace [1:06:36] about an uncertain event [1:06:37] that is driven largely [1:06:39] by acts of God, [1:06:41] Mother Nature, [1:06:42] and yields, crop yields. [1:06:45] Can I interrupt you? [1:06:46] Only because of time. [1:06:47] I know what you're saying [1:06:49] is important, [1:06:49] but as you know, [1:06:50] we have very limited time. [1:06:51] My father was an insurance agent [1:06:52] and taught me [1:06:54] that you buy insurance [1:06:55] for things you can't afford [1:06:56] to pay for. [1:06:56] And it feels like we've moved [1:06:59] from the farmer [1:07:00] who's buying crop insurance [1:07:02] because he can't afford it [1:07:04] if he'll be wiped out, right, [1:07:06] versus betting [1:07:07] for an income [1:07:09] or perhaps loss on that. [1:07:11] And I guess my fundamental question [1:07:13] is, [1:07:14] how is that any different [1:07:15] than a sports wager [1:07:16] or roulette betting? [1:07:18] Well, it's based off [1:07:19] the business model. [1:07:20] The business models [1:07:21] are fundamentally different [1:07:22] from a sports book. [1:07:23] The sports book, [1:07:24] the house sets the line, [1:07:25] and when the consumer loses, [1:07:27] they profit. [1:07:29] And for an exchange like this, [1:07:31] the exchange is based off [1:07:32] of two individuals [1:07:34] that benefit [1:07:35] and they pay a fee, [1:07:37] just a flat fee, [1:07:38] for that engagement. [1:07:39] The business models [1:07:40] are very different. [1:07:41] The question is, [1:07:42] what do we do about [1:07:43] these societal truths [1:07:44] and how we regulate it? [1:07:45] I don't want to cut you off, [1:07:46] but you know the drill here. [1:07:48] We're just so limited time. [1:07:50] Dr. Levant, [1:07:51] you have not had much chance [1:07:53] to weigh in. [1:07:53] I'd love you to weigh in [1:07:55] on the speaker's thoughts. [1:07:58] Excuse me. [1:07:59] It's difficult to know [1:08:00] where to start, [1:08:00] but let me take [1:08:01] the most recent comment. [1:08:03] Poker and pari-mutuel horse racing [1:08:05] have the exact same business model. [1:08:07] No one would dispute [1:08:07] their gambling. [1:08:09] Sports futures contracts [1:08:10] are gambling. [1:08:11] The business model [1:08:12] is just to take the money [1:08:13] off the top. [1:08:14] The house has to win [1:08:15] every time [1:08:16] and the public loses. [1:08:17] That's sports contracts. [1:08:19] The other part [1:08:20] I want to address [1:08:21] is the, [1:08:22] I would have used tsunami, [1:08:23] but Mr. Miller used it. [1:08:24] I'll use avalanche [1:08:26] of unregulated advertising [1:08:29] on social media. [1:08:31] I've, over the last year, [1:08:32] spoken in six prep schools [1:08:34] in four different states. [1:08:36] This is not exactly [1:08:36] a scientific survey, [1:08:37] but I ask the students [1:08:38] in each of these schools [1:08:40] at the start, [1:08:41] how many of you know [1:08:42] what Calci is? [1:08:44] 95% of the hands go up. [1:08:46] I ask how many of you [1:08:47] know what a same game [1:08:48] parlay is. [1:08:50] 95% of the hands [1:08:51] in a room go up. [1:08:52] And it's all [1:08:53] from social media. [1:08:54] And I'm going to, [1:08:54] sorry, [1:08:55] I'm going to do the same thing [1:08:55] to you. [1:08:56] We're just so short on time. [1:08:57] So, [1:08:57] Congressman McHenry, [1:09:01] let's just put that [1:09:03] aside for a minute. [1:09:04] Just overall, [1:09:05] why do we regulate [1:09:06] gambling, [1:09:07] as we all know gambling [1:09:08] and would all agree [1:09:09] to gambling in this room? [1:09:10] Why is it we regulate it? [1:09:14] Because society has determined [1:09:16] that this is not in society, [1:09:17] well, [1:09:18] elected officials have determined [1:09:19] it's not in society's interest [1:09:21] and therefore put weights [1:09:23] and measures around [1:09:24] and protections. [1:09:25] Great. [1:09:25] And Dr. Levant, [1:09:26] we know you're going to agree. [1:09:27] This is why we regulate it. [1:09:29] It's a known addictive product [1:09:31] just like heroin. [1:09:32] That's why we regulate it. [1:09:33] This is where I really want [1:09:34] to point out [1:09:35] the state of Utah [1:09:36] and the state of Hawaii. [1:09:38] We've made a conscious decision [1:09:39] because of these impacts [1:09:41] to not allow gambling [1:09:44] of any kind [1:09:45] in our state. [1:09:45] And it won't surprise you [1:09:46] to know from that perspective, [1:09:48] I see this very differently [1:09:49] than a lot of my other colleagues. [1:09:53] So, [1:09:53] you can see why I take [1:09:54] a close interest [1:09:55] whenever platforms begin [1:09:57] offering something [1:09:58] that feels like gambling, [1:09:59] that talks like gambling, [1:10:01] that smells like gambling. [1:10:02] And several months ago, [1:10:04] Senator Schiff and I [1:10:05] introduced a bill. [1:10:06] It's called [1:10:06] the Prediction Markets [1:10:07] or Gambling Act [1:10:08] to stop the CFTC [1:10:10] regulated exchange [1:10:11] from offering sports betting [1:10:12] and casino-style contracts. [1:10:15] And quite frankly, [1:10:16] for me, [1:10:17] it's about preserving [1:10:17] the state's rights [1:10:18] and protecting our state's [1:10:20] ability to do that. [1:10:22] I wish I had more time. [1:10:24] Just a real quick question [1:10:24] for Mr. Miller. [1:10:25] I'd like to build on that. [1:10:27] I think this is [1:10:28] a similar question you have. [1:10:29] States and tribes [1:10:30] have spent decades [1:10:31] establishing [1:10:32] their own approaches [1:10:33] to gaming. [1:10:34] Some allow it [1:10:35] under strict regulation. [1:10:36] Others, like Utah, [1:10:37] choose not to allow it at all. [1:10:38] These decisions reflect [1:10:40] local values, [1:10:41] consumer protections, [1:10:42] and in many cases, [1:10:43] significant economic interest. [1:10:46] So help me understand this. [1:10:47] If products [1:10:48] that closely resemble [1:10:49] sports betting [1:10:50] can be offered nationwide [1:10:51] under a federal [1:10:51] regulatory framework, [1:10:53] what does that mean [1:10:54] for the ability of states [1:10:55] and tribes [1:10:55] to actually enforce [1:10:56] the choices they've made? [1:10:58] And if I can intervene, [1:10:59] the gentleman is a minute [1:11:00] and a half over. [1:11:02] If you'll have that submitted. [1:11:03] Very good. [1:11:04] Very appropriate. [1:11:05] Thank you, Madam Chair. [1:11:06] Senator Baldwin. [1:11:07] Thank you. [1:11:08] I'll go along those [1:11:10] same lines, [1:11:11] Senator Curtis. [1:11:12] The Commodity Futures [1:11:14] Trading Commission [1:11:15] prohibits registered entities [1:11:17] from listing trades, [1:11:19] agreements, contracts, [1:11:20] transactions, [1:11:21] or swaps [1:11:22] that relate to gaming. [1:11:24] The rule exists [1:11:25] to protect consumers [1:11:27] from fraud [1:11:27] and preserve the integrity [1:11:29] of sports competitions. [1:11:32] I understand [1:11:32] that the Trump administration, [1:11:34] under the Trump administration, [1:11:36] the commission does not intend [1:11:38] to regulate [1:11:39] or review prediction market platforms [1:11:42] that offer sports betting. [1:11:44] Yet, [1:11:45] Wisconsin tribes [1:11:46] offering these exact same services [1:11:49] operate under multiple state [1:11:51] and federal regulations. [1:11:53] Mr. Miller, [1:11:54] can you walk us through [1:11:55] the types of review [1:11:57] and regulation [1:11:58] that tribal gaming operations [1:12:00] offering sports betting [1:12:02] must go through [1:12:03] in Wisconsin? [1:12:04] Yes, Senator. [1:12:05] Thank you for the question. [1:12:07] Tribal nations [1:12:08] are recognized by IGRA [1:12:10] and are governed [1:12:12] under that federal statute. [1:12:14] But importantly, [1:12:15] the tribes negotiate [1:12:17] with the state government [1:12:18] as a sovereign equal. [1:12:20] They work to gain exclusivity. [1:12:22] They work on terms. [1:12:24] They work on ensuring [1:12:24] that they abide by [1:12:26] all of the protocols [1:12:28] that are important [1:12:28] from a regulatory perspective. [1:12:30] and that that is why [1:12:32] that when prediction markets [1:12:34] have come into Wisconsin [1:12:35] recently, [1:12:36] the attorney general there [1:12:37] has acted. [1:12:39] And we applaud that. [1:12:40] We applaud the other [1:12:41] 40 attorney generals [1:12:42] that have also done that. [1:12:43] It's unfortunate [1:12:44] that the CFTC [1:12:45] has chosen [1:12:46] to sue the state of Wisconsin [1:12:47] because of that [1:12:48] and really harm [1:12:50] tribal sovereignty [1:12:51] and the state's right [1:12:53] to determine [1:12:53] what sort of gambling exists [1:12:55] in that state of Wisconsin. [1:12:57] Yeah. [1:12:57] And Mr. Miller, [1:12:58] how does this regulatory framework [1:13:03] compare to prediction market platforms [1:13:06] offering essentially [1:13:08] identical services? [1:13:09] Well, as again, [1:13:10] as I made in my opening statement, [1:13:12] you know, [1:13:12] we're one of the most [1:13:13] highly regulated industries [1:13:15] in the country. [1:13:16] You know, [1:13:16] from everything from, [1:13:18] you know, [1:13:18] internal controls, [1:13:19] licensing, auditing, [1:13:21] and being actively overseen [1:13:23] by the state [1:13:24] and tribal governments, [1:13:26] this is quite, [1:13:27] it stands in quite [1:13:28] contrast [1:13:29] with the prediction markets [1:13:31] that are now [1:13:31] entering into really [1:13:33] every state, [1:13:34] including those [1:13:35] that Senator Curtis mentioned [1:13:37] in the state of Utah [1:13:39] and Hawaii [1:13:40] that have chosen [1:13:41] not to have gaming, [1:13:42] either tribal [1:13:43] or commercial. [1:13:44] Yeah. [1:13:45] Mr. McHenry, [1:13:46] are your members [1:13:47] willing to undergo [1:13:49] review and regulation [1:13:50] by state [1:13:51] and federal regulators [1:13:53] that is comparable [1:13:54] to what Mr. Miller [1:13:55] just described [1:13:56] for tribal gaming operations? [1:13:58] There are fundamentally [1:14:00] different products [1:14:01] and fundamentally [1:14:01] different business models. [1:14:04] And what our member [1:14:06] The answer would be no? [1:14:07] Well, [1:14:08] if I would finish, [1:14:10] they are willing [1:14:11] and do submit themselves [1:14:13] to state reviews [1:14:14] just like everybody else [1:14:15] regulated by the CFTC [1:14:17] and just like every other [1:14:19] federal financial product. [1:14:21] And so that is similar [1:14:22] for everything [1:14:23] from grain futures [1:14:25] to an event contract [1:14:27] on who is going to win [1:14:28] the next governor's race. [1:14:30] And so everything in between [1:14:32] is regularly the same [1:14:34] and taxes are paid [1:14:37] at both the federal [1:14:37] and state level [1:14:38] as a result of those contracts [1:14:40] as well. [1:14:40] So the answer is no? [1:14:46] Well, [1:14:46] they are federally regulated. [1:14:47] So if you wish [1:14:49] in our federalism system [1:14:51] and according [1:14:52] to the Third Circuit ruling [1:14:54] that these are CFTC regulated products [1:14:58] under the Commodities Exchange Act [1:14:59] But your members [1:15:00] would not be willing [1:15:01] to undergo the type of review [1:15:02] and regulation [1:15:03] by state and federal regulators [1:15:05] that is comparable [1:15:06] to tribal. [1:15:07] What I would say [1:15:07] is our member companies [1:15:09] have enhanced surveillance [1:15:11] greater than any casino [1:15:13] and greater than any sports book [1:15:15] in the country. [1:15:16] We do more market surveillance. [1:15:18] We ban users [1:15:19] on a proactive basis [1:15:20] rather than a reactive basis. [1:15:23] And we have [1:15:24] a different business model [1:15:25] that says [1:15:27] no matter what happens [1:15:28] with a contract, [1:15:28] there's a small fee [1:15:30] to the exchange. [1:15:32] And the sports book [1:15:33] is incentivized [1:15:34] as opposed to a sports book [1:15:35] that is incentivized. [1:15:36] They profit off of losers, [1:15:38] not off of winners. [1:15:39] Mr. Miller, [1:15:40] any retort? [1:15:42] Sure. [1:15:42] At the end of the day, [1:15:44] there's a lot of conversations [1:15:46] about what it is [1:15:47] these entities are doing. [1:15:48] At the end of the day, [1:15:50] they're running sports books [1:15:51] at a national level [1:15:52] without any of the [1:15:53] regulatory constraints [1:15:55] and frameworks [1:15:56] that have been created [1:15:57] either in Tennessee [1:15:58] or in any of the other states [1:16:00] that have chosen [1:16:01] to legalize sports betting [1:16:02] or any other gaming. [1:16:04] Thank you. [1:16:04] Senator Schott? [1:16:08] Thank you, Chair. [1:16:10] Thank you, all of you, [1:16:11] for being here. [1:16:12] Mr. Sadan, [1:16:14] in your work [1:16:14] as an integrity monitor, [1:16:16] are there some categories [1:16:17] of bets more likely [1:16:18] to threaten the integrity [1:16:19] of the sport than others? [1:16:21] Yeah, I certainly [1:16:22] would categorize [1:16:23] a couple of different [1:16:25] types of markets [1:16:26] as more vulnerable [1:16:27] or more susceptible [1:16:28] to manipulation. [1:16:30] What are they? [1:16:31] I would say, [1:16:32] generally speaking, [1:16:33] player props, [1:16:34] micro betting, [1:16:35] in-game markets, [1:16:36] circumstances in which [1:16:37] an individual [1:16:38] or singular person [1:16:39] may have more impact [1:16:40] than a group. [1:16:41] And the microprop thing [1:16:43] is insidious [1:16:44] in the particular way [1:16:46] that it can be manipulated [1:16:47] a little more easily [1:16:48] by a player [1:16:49] or by anyone else [1:16:51] or a sort of an injury [1:16:53] proposition bet [1:16:54] or anything like that. [1:16:55] And then the sort of, [1:16:56] the bigger you get, [1:16:58] the harder it is to fix, [1:16:59] not impossible, [1:17:00] of course, [1:17:01] but even a player prop, [1:17:02] say, [1:17:04] Terry Rogier gets [1:17:07] six rebounds [1:17:08] this evening [1:17:09] is a little harder [1:17:11] to game [1:17:11] than Terry Rogier [1:17:12] shoots the ball [1:17:13] or doesn't, right? [1:17:15] And so, [1:17:15] the more micro you get, [1:17:18] the more insidious [1:17:18] it is from an integrity [1:17:19] standpoint, [1:17:20] but also, [1:17:21] to Dr. Levant's point, [1:17:23] it also sort of taps [1:17:25] into the addictive, [1:17:27] manic, [1:17:27] algorithmically driven [1:17:29] problem that we're [1:17:30] dealing with. [1:17:30] Is that fair to say? [1:17:31] Yeah, I think that's fair [1:17:32] to say. [1:17:32] It's nuanced [1:17:33] and there's certainly [1:17:33] a continuum, [1:17:34] but generally speaking, [1:17:35] that's accurate. [1:17:36] I would say, [1:17:37] just to be clear, [1:17:37] that I still would be [1:17:38] a strong proponent [1:17:39] of wrapping regulation [1:17:40] around those types [1:17:42] of markets [1:17:42] as opposed to pushing [1:17:43] that activity offshore. [1:17:45] Oh, well, okay, [1:17:46] so let's go to [1:17:46] the offshore question. [1:17:47] Mr. Miller, [1:17:47] could you speak [1:17:48] to the problem [1:17:48] of illegal offshore [1:17:50] sports books [1:17:50] and how they impact [1:17:52] the integrity [1:17:52] of sports [1:17:53] in the United States? [1:17:54] I know the answer [1:17:55] to this question, [1:17:56] which is basically, [1:17:57] they don't work [1:17:57] with people like you, [1:17:58] but go ahead. [1:18:00] Well, thank you [1:18:00] for the question, [1:18:01] Senator. [1:18:02] You know, [1:18:03] it has been a challenge. [1:18:04] I've been in this job [1:18:05] now seven and a half years. [1:18:06] I think I've sent letters [1:18:07] to every director [1:18:08] of the FBI [1:18:09] and the head [1:18:09] of the Department [1:18:10] of Justice [1:18:10] asking this [1:18:12] to be prioritized [1:18:13] because it's very important. [1:18:15] It's very easy [1:18:16] for people, [1:18:19] people of age [1:18:20] and people under age [1:18:21] to access [1:18:22] the offshore [1:18:23] illegal marketplace. [1:18:24] And so, [1:18:25] there is obviously [1:18:27] a role for, [1:18:27] important role [1:18:28] for law enforcement [1:18:29] at the federal level, [1:18:32] State Department, [1:18:33] others that have [1:18:33] the ability [1:18:34] to actually put [1:18:35] the pressure [1:18:36] on some of these [1:18:37] countries [1:18:37] that house [1:18:38] and facilitate [1:18:39] illegal sports betting operations. [1:18:42] And for us here, [1:18:43] you know, [1:18:44] it's $700 billion [1:18:45] of money [1:18:46] that goes out [1:18:47] of the pocket [1:18:47] of Americans [1:18:48] into offshore, [1:18:50] online, [1:18:50] illegal betting operations [1:18:52] without any [1:18:53] of the consumer protections [1:18:54] of the legal market. [1:18:55] Yeah, we think [1:18:56] we legislatively [1:18:57] have a pathway here. [1:19:00] And it doesn't [1:19:01] solve every problem [1:19:02] and it certainly [1:19:02] doesn't solve [1:19:03] every problem [1:19:04] as it relates [1:19:04] to the challenges [1:19:07] that individuals [1:19:07] and society [1:19:08] is facing [1:19:09] with gambling. [1:19:10] But, [1:19:10] if you empower [1:19:12] the FTC [1:19:12] to go after [1:19:13] the payment processors [1:19:14] and then [1:19:17] they would have [1:19:18] a perfect right [1:19:19] to go and say, [1:19:20] hey, you may not [1:19:20] work with these [1:19:21] offshore shops [1:19:23] if they're not [1:19:23] complying [1:19:24] with the federal law [1:19:25] having to do [1:19:25] with microprop bets. [1:19:27] So, Dr. Luant, [1:19:28] thank you [1:19:28] for your personal story. [1:19:30] I was sort of [1:19:30] staring at my phone [1:19:31] as one does. [1:19:32] I apologize. [1:19:33] And as soon as [1:19:33] you started to talk, [1:19:34] I really applaud [1:19:37] your life's journey [1:19:38] and your life's mission now. [1:19:40] Thank you, Senator. [1:19:41] I want to keep [1:19:42] talking about [1:19:43] microprop bets. [1:19:44] A study out of Australia [1:19:45] found that sports bettors [1:19:46] who bet on micro events [1:19:47] that of that cohort, [1:19:51] 78% met the criteria [1:19:53] for gambling [1:19:54] that may cause [1:19:54] significant harm [1:19:55] to their lives. [1:19:56] Tell me about [1:19:57] why microprop bets [1:19:58] are different. [1:19:59] Senator, [1:19:59] they're a fundamentally [1:20:00] different, [1:20:01] inherently dangerous, [1:20:03] and frankly, [1:20:03] defectively designed [1:20:04] gambling product. [1:20:05] The human brain [1:20:06] is not built [1:20:07] to absorb [1:20:07] an addictive product [1:20:09] every 10 seconds [1:20:10] or less. [1:20:11] The bigger problem [1:20:12] is the business model. [1:20:13] In order for micro-betting [1:20:15] to work, [1:20:16] it involves the leagues [1:20:17] selling their data [1:20:18] for billions of dollars. [1:20:20] It involves [1:20:20] technology and AI companies, [1:20:22] sports books, [1:20:23] and now prediction markets. [1:20:24] They all want [1:20:25] a piece of the pie. [1:20:27] The only way [1:20:27] to keep that pie going [1:20:29] is to get [1:20:30] the American public [1:20:31] to gamble [1:20:32] more often, [1:20:33] more quickly, [1:20:34] on more highly profitable, [1:20:36] i.e. addictive products. [1:20:38] That's the quote [1:20:38] I just read to you [1:20:39] from Genius Sports. [1:20:40] That's the business model. [1:20:42] And this is where [1:20:43] Congress has to come in. [1:20:44] This is not [1:20:45] what the American public [1:20:46] wanted [1:20:47] when the Murphy case [1:20:48] was decided. [1:20:49] We loved our sports. [1:20:50] Sports have become [1:20:51] the equivalent [1:20:52] of a nonstop slot machine [1:20:53] because of these data deals. [1:20:55] And the only way [1:20:56] to protect the public [1:20:57] is at the federal level [1:20:58] with minimum [1:20:59] federal safety standards. [1:21:00] Thank you, Dr. Levant. [1:21:02] And we'll be talking [1:21:03] to Republicans [1:21:04] and Democrats [1:21:05] on this committee [1:21:05] and their staff [1:21:06] about our legislative proposals. [1:21:09] And again, [1:21:09] it's not going to solve [1:21:10] every problem, [1:21:11] but I think [1:21:11] this particular problem [1:21:13] is especially acute [1:21:14] and needs to be dealt [1:21:15] with immediately. [1:21:18] Senator Cruz. [1:21:20] Thank you, Madam Chair. [1:21:23] Prop Betzer [1:21:23] at the center [1:21:24] of recent [1:21:25] game rigging allegations. [1:21:27] For instance, [1:21:28] bettors wagered [1:21:29] that Terry Rozier [1:21:30] would underperform [1:21:32] during an NBA game [1:21:33] when Rozier took himself [1:21:35] out of the game early, [1:21:37] allegedly to help [1:21:37] the bettors cash in. [1:21:40] Other gamblers [1:21:41] wagered [1:21:41] that two Cleveland [1:21:42] Indian pitchers [1:21:43] would throw balls [1:21:44] instead of strikes [1:21:46] after the pitchers [1:21:47] allegedly tipped off gamblers. [1:21:50] Similar incidents [1:21:51] have occurred [1:21:51] in other professional leagues. [1:21:54] Mr. Miller, [1:21:55] two questions. [1:21:56] First, [1:21:57] are there certain [1:21:59] prop bets [1:22:00] that sportsbooks [1:22:01] should not offer [1:22:02] because of the [1:22:04] integrity risks [1:22:05] they pose? [1:22:06] Senator, [1:22:07] thank you for the question. [1:22:08] I would answer [1:22:09] that question [1:22:09] by saying that [1:22:10] one, [1:22:12] the regulated markets [1:22:14] in each of the [1:22:15] individual states [1:22:16] have made determinations [1:22:17] with regard to prop bets. [1:22:18] I think you have seen [1:22:19] a movement [1:22:20] to limit [1:22:21] and or eliminate [1:22:23] prop bets [1:22:24] in the states [1:22:24] and believe [1:22:25] and believe [1:22:25] that in those states [1:22:26] they are the best [1:22:27] determined to make [1:22:28] those determinations [1:22:30] around which props [1:22:31] should or should not [1:22:33] be allowed. [1:22:34] So second question, [1:22:35] do you agree [1:22:36] that if a league [1:22:37] comes to a sportsbook [1:22:39] and says a bet [1:22:40] creates an integrity risk, [1:22:42] the sportsbook [1:22:44] should not offer the bet? [1:22:45] I do agree with that. [1:22:48] Congressman McHenry, [1:22:49] in a recent advisory, [1:22:51] the CFTC suggested [1:22:53] prediction markets [1:22:54] should consider [1:22:54] the input [1:22:55] of a sports league [1:22:56] before offering [1:22:58] event contracts [1:22:59] on its events. [1:23:01] If a sports league [1:23:02] tells a prediction market [1:23:03] not to offer [1:23:04] certain event contracts [1:23:05] such as those [1:23:06] that resemble prop bets, [1:23:08] should the prediction market [1:23:09] honor that request? [1:23:10] Yes, [1:23:11] and they have. [1:23:14] Over the past five years, [1:23:16] several athletes [1:23:17] have been caught [1:23:18] manipulating their performance [1:23:19] or giving insider information [1:23:22] to sports gamblers. [1:23:24] Independent integrity [1:23:25] monitors often play [1:23:26] a leading role [1:23:26] in detecting this activity. [1:23:29] When suspicious [1:23:30] betting patterns emerge, [1:23:31] monitors quickly [1:23:32] circulate information [1:23:34] among state regulators, [1:23:36] sportsbooks, [1:23:37] and leagues. [1:23:38] Mr. Seydin, [1:23:40] you founded and lead [1:23:41] one of these integrity monitors. [1:23:44] Can you provide [1:23:45] an example of how [1:23:46] the current system [1:23:47] has identified [1:23:48] and caught game manipulation? [1:23:51] Thank you for the question, [1:23:52] Senator, [1:23:52] and I'm happy to. [1:23:54] I can share a couple [1:23:55] of different examples. [1:23:55] Anonymize, [1:23:56] for obvious reasons, [1:23:57] what I would say [1:23:58] is that in the first [1:23:59] circumstance, [1:24:00] our analytical work [1:24:01] identified what we call [1:24:03] inverse line movement [1:24:04] across correlated markets. [1:24:06] Essentially, [1:24:07] what that means is [1:24:07] first half, [1:24:09] full game point spread, [1:24:10] those are correlated markets. [1:24:11] You would expect them [1:24:11] to move in tandem [1:24:12] with one another. [1:24:13] We identified a circumstance [1:24:15] in which they were [1:24:16] moving materially [1:24:17] in opposite directions. [1:24:19] We surfaced [1:24:20] that circumstance [1:24:21] by an alert [1:24:22] to our broad [1:24:24] sportsbook operator network [1:24:26] and very promptly [1:24:27] received feedback [1:24:28] from about 10 to 12 [1:24:29] different regulated [1:24:30] sportsbook operators [1:24:31] that said we're also seeing [1:24:33] pretty significant movement [1:24:35] and potentially suspicious activity [1:24:36] across those markets. [1:24:38] Our system automatically [1:24:40] parses all of that feedback [1:24:41] and consolidates it [1:24:42] into a report [1:24:43] that we then surfaced [1:24:44] to the appropriate [1:24:45] state regulators, [1:24:46] to the appropriate [1:24:47] sports governing body, [1:24:48] and then obviously back [1:24:49] to the impacted [1:24:50] sportsbook operators. [1:24:51] That's the circumstance [1:24:52] in which we identified something, [1:24:53] but there are dozens, [1:24:54] hundreds, [1:24:55] perhaps thousands [1:24:56] of circumstances [1:24:57] in which operators [1:24:58] identify directly to us [1:25:00] a circumstance [1:25:01] they've highlighted [1:25:02] and then we disseminate it [1:25:03] out across the ecosystem. [1:25:05] Do you have any suggestions [1:25:06] for improving the system [1:25:07] to make it easier [1:25:08] to catch game manipulation? [1:25:10] Generally speaking, [1:25:11] I would probably refer back [1:25:12] to my written statement, [1:25:15] which is anything [1:25:16] that would further [1:25:17] collaboration, [1:25:18] engagement, [1:25:19] and transparency [1:25:20] across the myriad stakeholders [1:25:21] that operate [1:25:22] in this space. [1:25:23] So from an integrity [1:25:24] monitoring perspective, [1:25:25] I would probably urge [1:25:26] platforms to widen [1:25:27] the parameters [1:25:28] in which they deem [1:25:29] suspicious activity [1:25:30] may have taken place [1:25:31] for reporting purposes. [1:25:33] For Pro-A-Bet, [1:25:35] I think implementing [1:25:36] a list of prohibited patrons [1:25:37] on a proactive basis [1:25:39] to ensure you're [1:25:40] preventing transactions [1:25:41] from prohibited individuals [1:25:42] before they ever happen [1:25:44] is crucial. [1:25:45] And then obviously [1:25:45] from an education standpoint, [1:25:48] vanilla, [1:25:49] same old training [1:25:50] is not going to work. [1:25:51] This is a new frontier. [1:25:53] There are emerging vulnerabilities [1:25:54] that are bad actors [1:25:55] that are constantly innovating. [1:25:56] We need to make sure [1:25:57] that curriculum is refreshed [1:25:59] and constantly reinforced. [1:26:01] There is serious disagreement [1:26:04] about whether the CFTC [1:26:06] can unilaterally allow [1:26:07] prediction markets [1:26:08] to offer sports event contracts [1:26:10] pursuant to the [1:26:11] Commodity Exchange Act. [1:26:14] Many simply see prediction markets [1:26:16] as a workaround [1:26:17] to state gambling laws. [1:26:19] The courts are split. [1:26:20] But ultimately, [1:26:22] unless Congress act, [1:26:23] the Supreme Court [1:26:24] may have to decide the issue. [1:26:26] Congressman McHenry, [1:26:28] when Congress debated Dodd-Frank, [1:26:31] some senators expressed concern [1:26:32] that event contracts [1:26:34] could become a vehicle [1:26:35] for sports gambling. [1:26:37] Isn't that, in fact, [1:26:39] what has come to pass? [1:26:39] The CFTC argues [1:26:41] that sports event contracts [1:26:43] fit the Commodity Exchange Act's [1:26:45] definition of a swap [1:26:47] because sports outcomes [1:26:49] have economic consequences. [1:26:50] But what is the economic consequence [1:26:53] of, say, [1:26:54] whether a pitcher will throw [1:26:55] a ball or a strike? [1:26:56] Well, getting a playoff game [1:26:58] has a material impact [1:26:59] on the economy around that stadium [1:27:01] and that town. [1:27:02] So you can see economic impact [1:27:04] on whether or not [1:27:05] you get a playoff game [1:27:06] in your town [1:27:07] or the T-shirt manufacturer [1:27:10] on the Super Bowl outcome. [1:27:12] So there is economic connectivity [1:27:14] for that. [1:27:14] But the debate around Dodd-Frank, [1:27:16] in my experience [1:27:17] in Dodd-Frank [1:27:17] over on the lowly House side, [1:27:20] we did not have [1:27:22] any substantial discussion [1:27:24] about the nature of swaps [1:27:25] in my committee. [1:27:27] But in the Ag Committee, [1:27:29] both here in the Senate [1:27:30] and in the House, [1:27:32] there was a wide new definition [1:27:33] for swaps. [1:27:34] And that authority [1:27:35] was given to the CFTC. [1:27:37] And then the chair of the CFTC, [1:27:40] Gary Gensler, [1:27:41] wrote rules [1:27:41] that encompassed a wide array [1:27:43] and definitions of swaps. [1:27:46] So what about an answer [1:27:47] to the specific question [1:27:48] about what is the economic consequence [1:27:49] of whether a pitcher [1:27:50] throws a ball or a strike? [1:27:52] It is up to the consumers [1:27:54] to decide that [1:27:54] under swaps, [1:27:56] under swaps definition. [1:27:59] And it will be for the courts [1:28:00] and the Congress [1:28:01] to decide whether or not [1:28:02] they like that. [1:28:03] They've, [1:28:04] under the Commodities Exchange Act, [1:28:05] onion futures are banned. [1:28:07] I don't think we have [1:28:08] a serious debate about onions, [1:28:10] but at the time, they did. [1:28:12] So we welcome Congress's input here [1:28:14] and the rulemaking of the CFTC [1:28:15] on these definitions. [1:28:17] Okay. [1:28:17] Ranking Member Cantwell. [1:28:19] Thank you, Mr. Chairman. [1:28:20] And thank you to [1:28:21] Senator Blackburn [1:28:22] and Hickenlooper [1:28:23] for doing this subcommittee. [1:28:24] And I think that last conversation [1:28:26] is illuminating [1:28:27] and I'd like to follow up on it. [1:28:28] But I'd like to remind everybody [1:28:30] we had a financial collapse [1:28:32] of our economy [1:28:32] because we didn't do the job [1:28:34] of regulating derivatives. [1:28:35] And I remember somebody [1:28:36] on the Senate floor [1:28:37] actually saying, [1:28:39] we can't regulate them. [1:28:40] We don't know what they are. [1:28:41] That's exactly when [1:28:42] and it had a conservative [1:28:43] journalist who basically said [1:28:46] the lack of clarity [1:28:48] is fraud. [1:28:50] If you can't understand it, [1:28:51] then yes, [1:28:52] there is something [1:28:53] behind the situation. [1:28:55] So to this, [1:28:57] I definitely want to say [1:28:58] that fans must have confidence [1:28:59] that games are being played [1:29:01] fairly and honestly. [1:29:02] So I agree with the chairman on that. [1:29:04] That's what makes competition great. [1:29:06] And that is why [1:29:08] Senator Cruz and I [1:29:08] are conducting bipartisan inquiry [1:29:10] into how the leagues, [1:29:11] the sports books [1:29:12] and the stakeholders [1:29:13] are protecting the integrity [1:29:14] of sports and teams. [1:29:17] But I believe [1:29:18] that this integrity crisis [1:29:19] goes beyond [1:29:20] how we monitor players [1:29:22] and betting activities. [1:29:24] We must also ask [1:29:24] why would a professional athlete [1:29:26] making millions of dollars [1:29:28] risk losing everything [1:29:28] to place a bet? [1:29:29] In many cases, [1:29:30] it's the same answer. [1:29:31] Online betting platforms [1:29:32] can be highly addictive. [1:29:34] So I'm glad our witness, [1:29:35] Dr. Levant, [1:29:36] is talking about that today. [1:29:37] Whether you're a star athlete [1:29:39] or a struggling college student [1:29:40] and once they're hooked, [1:29:43] they're designed [1:29:43] to keep them coming back [1:29:44] from war. [1:29:45] So the conversation [1:29:47] that we just had, [1:29:49] Mr. Miller, [1:29:49] I'm just trying to understand [1:29:51] because our former colleague here, [1:29:56] Congressman McHenry, [1:29:59] talked a little bit [1:30:00] about the history. [1:30:01] But in 2010, [1:30:02] Congress amended [1:30:03] the Commodity Exchange Act [1:30:04] in the wake of that [1:30:05] financial crisis I just said. [1:30:07] And under Section 5, [1:30:08] Congress authorized the CFTC [1:30:10] to prohibit prediction markets [1:30:12] from offering contracts [1:30:13] that involved gaming [1:30:14] and gaming activities. [1:30:16] And in 2011, [1:30:17] they issued Rule 40.11, [1:30:19] which banned prediction markets [1:30:21] from offering contracts [1:30:22] involving gaming activities. [1:30:24] In doing so, [1:30:25] they stated the rule [1:30:25] was consistent [1:30:26] with our congressional intent. [1:30:28] And the CFT prohibited [1:30:30] sports betting contracts [1:30:31] for more than 15 years [1:30:33] under this rule. [1:30:35] But all of a sudden, [1:30:36] starting in 2025, [1:30:37] prediction markets [1:30:38] began offering [1:30:39] sports gambling contracts. [1:30:41] So my state wants to know [1:30:43] why the Indian gaming associations [1:30:47] who basically have lived [1:30:50] by the rules in their state [1:30:51] and lived by the rules [1:30:53] of a regulated entity [1:30:54] are now all of a sudden competing [1:30:56] with somebody that is not [1:30:57] a regulated entity [1:30:58] that's basically offering [1:30:59] the same product. [1:31:01] So in 2025, [1:31:02] the Indian gaming industry [1:31:03] generated more than [1:31:04] 680,000 jobs [1:31:06] for rural Americans [1:31:07] and it has served [1:31:08] as an economic livelihood. [1:31:10] If the prediction markets [1:31:11] are allowed to keep [1:31:12] operating unchecked, [1:31:13] does this pose [1:31:14] an existential threat [1:31:16] to both tribal sovereignty [1:31:18] and to Indian country? [1:31:19] And what can Congress do [1:31:20] to better protect Indian gaming? [1:31:22] Well, thank you, [1:31:24] ranking member. [1:31:25] Clearly, [1:31:26] we share the same view. [1:31:28] As someone who was around [1:31:30] during Dodd-Frank [1:31:31] and recognizing [1:31:32] that this was a response [1:31:34] to a financial crisis [1:31:35] that was created [1:31:36] by lax regulation [1:31:37] or, in fact, [1:31:39] no regulation, [1:31:40] it's really hard to believe [1:31:42] that anybody could [1:31:43] pull from that [1:31:44] the idea that we could create [1:31:46] a national sports book [1:31:48] run through the CFTC. [1:31:50] It's hard to even imagine [1:31:53] that anybody could [1:31:54] make the argument, [1:31:55] but we're here today. [1:31:57] In fact, [1:31:58] there were federal statutes [1:31:59] on the books [1:32:00] when Dodd-Frank [1:32:01] was amended [1:32:02] and created. [1:32:04] IGRA, [1:32:05] which established [1:32:05] the framework [1:32:06] for Indian gaming. [1:32:08] PASPA, [1:32:09] which actually was [1:32:09] struck down in 2018 [1:32:13] and the Wire Act. [1:32:14] All federal statutes [1:32:15] that should have been [1:32:16] at least looked at [1:32:18] and modified [1:32:19] if the CEA [1:32:21] was going to be amended [1:32:22] to create the Federal [1:32:23] Department of Gambling. [1:32:25] Of course, [1:32:25] it was not. [1:32:26] It was never intended [1:32:27] to be that. [1:32:27] And then finally, [1:32:28] when in 2018, [1:32:30] when the Supreme Court [1:32:31] actually debated [1:32:33] Murphy v. NCAA, [1:32:35] even the Supreme Court [1:32:36] didn't understand [1:32:38] and or recognize [1:32:39] that there was [1:32:40] a backdoor opportunity [1:32:43] for the sports betting industry [1:32:44] through prediction markets [1:32:46] back in 2018. [1:32:48] So, yes, [1:32:49] there's real harm here. [1:32:51] Chairman Bean, [1:32:52] who is one of your constituents [1:32:53] who runs [1:32:54] the Indian Gaming Association, [1:32:56] he and I are very aligned [1:32:58] on this. [1:32:59] Indian country is scared. [1:33:01] They believe that [1:33:02] gaming has been [1:33:03] a transformational [1:33:04] economic opportunity [1:33:06] for some of the people [1:33:07] that have been treated [1:33:08] worse than almost anybody else [1:33:10] in this country's history. [1:33:11] And gaming has created [1:33:14] economic vitality [1:33:15] and an opportunity [1:33:16] for them. [1:33:17] And that opportunity [1:33:19] is very much at risk [1:33:20] because of prediction markets. [1:33:22] Well, I just looked it up [1:33:24] because I wanted to make sure [1:33:25] I didn't get that quote [1:33:27] quite right before. [1:33:28] It was P.J. O'Rourke [1:33:29] and he said, [1:33:30] complexity is fraud. [1:33:32] His point was, [1:33:34] complexity, [1:33:35] if it's so complex [1:33:36] and you can't understand it, [1:33:37] then complexity is the fraud. [1:33:39] So, that's where we are today. [1:33:40] No one can answer the question. [1:33:42] Why? [1:33:42] We have two competing [1:33:43] businesses here. [1:33:44] Well, we have Indian Gaming [1:33:46] that is off for sports betting [1:33:47] and then another entity [1:33:48] that's off for sports betting, [1:33:50] but it's not regulated [1:33:51] in the same way. [1:33:52] So, I think we've got [1:33:53] to get answers to that. [1:33:55] Mr. Levant, [1:33:56] I know you've probably [1:33:57] been asked this [1:33:57] by our colleagues already, [1:33:59] but what do we do [1:34:00] about this larger issue? [1:34:03] In, you know, [1:34:05] there was recent data [1:34:06] from Washington Health Survey [1:34:07] shows that troubling trends [1:34:08] with youth in gambling, [1:34:09] that these include [1:34:11] material increases [1:34:12] in the number [1:34:13] of 10th graders [1:34:14] who are saying [1:34:14] they've engaged [1:34:15] in gaming across states. [1:34:17] And how does that [1:34:18] online betting help? [1:34:20] I mean, [1:34:21] are people just being targeted [1:34:23] at this young age? [1:34:24] People are being targeted [1:34:26] relentlessly, [1:34:27] and this discussion [1:34:28] of prediction markets [1:34:29] has done something [1:34:30] that others would have [1:34:32] predicted small p impossible [1:34:35] as Mr. Miller and I [1:34:36] agreeing on an issue. [1:34:38] The prediction markets [1:34:40] take this, [1:34:41] and not only infringing [1:34:42] upon sovereign rights [1:34:43] tribal gaming, [1:34:44] but 18-year-olds, [1:34:46] and they're being told [1:34:47] it's investment. [1:34:48] I've had six clients [1:34:50] in my recovery group [1:34:52] who have relapsed [1:34:53] because they were told [1:34:55] this is an investment. [1:34:56] I'm not gambling, [1:34:57] I'm making an investment. [1:34:59] This is just so fundamentally wrong. [1:35:01] And where I disagree [1:35:04] with Mr. Miller [1:35:04] is there's a huge need [1:35:07] for federal oversight [1:35:08] because of what's happening [1:35:09] with children [1:35:10] and young adults [1:35:11] and families [1:35:12] with online sports gambling. [1:35:14] But it's significantly worse now [1:35:17] with prediction markets [1:35:18] because they're acting [1:35:19] under color of federal law, [1:35:21] targeting people [1:35:22] as young as 18. [1:35:24] They don't have to comply [1:35:25] with things like self-exclusion. [1:35:27] They're just doing [1:35:28] whatever they want to do, [1:35:30] and the harm [1:35:32] is growing exponentially. [1:35:34] Well, I thank the chair. [1:35:39] I've gone over my time, [1:35:41] but I'm asking him [1:35:42] about the impact on youth. [1:35:44] And the chairwoman and I [1:35:46] have worked diligently [1:35:47] on a lot of legislation [1:35:48] to protect young people online. [1:35:50] So we'll add this to the list. [1:35:52] So thank you so much. [1:35:53] Thank you, Madam Chair. [1:35:54] Senator Rosen. [1:35:56] Thank you. [1:35:57] I want to thank you, Madam Chair. [1:35:59] Thank you to the witnesses [1:36:00] for being here. [1:36:02] You know, I'm just so concerned [1:36:04] about all this circumventing [1:36:05] the rules. [1:36:07] As they say, [1:36:08] a rose by any other name [1:36:09] still smells as sweet. [1:36:11] If it walks like a duck [1:36:12] and quacks like a duck [1:36:13] and looks like a duck, [1:36:14] it's probably a duck. [1:36:15] So I want to talk about [1:36:16] responsible gaming loophole [1:36:18] because licensed sports books [1:36:19] are required by state laws [1:36:21] to implement [1:36:21] responsible gaming programs, [1:36:23] which include deposit limits, [1:36:25] cooling off periods, [1:36:26] mandatory disclosures. [1:36:28] Under the CFTC, [1:36:29] no equivalent requirements [1:36:30] apply to prediction markets. [1:36:33] Dr. Levent, [1:36:33] I have a lot of questions, [1:36:34] so if you would be brief on this, [1:36:36] you're working with people [1:36:38] with sports betting problems. [1:36:39] Is there a fundamental difference [1:36:40] between this problem, [1:36:41] a sports bet [1:36:42] versus an event contract [1:36:43] arose by any other name [1:36:45] is the same? [1:36:46] And what is the risk [1:36:47] by allowing prediction markets [1:36:49] to circumvent meaningful, [1:36:52] mandatory consumer protections? [1:36:54] You're just trying [1:36:54] to get around the rules. [1:36:56] There's no discernible difference. [1:36:57] In fact, [1:36:58] people are using it [1:36:59] as another form of gambling, [1:37:01] and you're absolutely right, [1:37:02] Senator. [1:37:03] It circumvents [1:37:05] all the rules, [1:37:06] including rules designed [1:37:08] to keep people safe [1:37:09] at the state level. [1:37:10] Completely disregards them. [1:37:11] Thank you. [1:37:12] I appreciate that. [1:37:13] And I want to talk again [1:37:15] about circumventing the rules [1:37:16] because most of the country [1:37:17] has only had legalized sports betting [1:37:19] less than 10 years. [1:37:21] But, [1:37:21] excuse me, [1:37:23] while most countries [1:37:23] only legalized sports betting [1:37:25] less than 10 years ago, [1:37:26] Nevada has a long [1:37:27] and, of course, [1:37:28] storied history [1:37:28] with regulated sports betting, [1:37:30] legalizing it [1:37:30] nearly 100 years ago. [1:37:33] Nevada was a pioneer, [1:37:34] and now some of the strongest [1:37:35] and most comprehensive [1:37:36] state rules [1:37:37] to promote safe [1:37:38] and legal sports betting [1:37:39] occur in my state of Nevada. [1:37:41] Historically, [1:37:42] federal action [1:37:43] on legal sports betting [1:37:44] is often unintentionally [1:37:46] pushed gaming underground [1:37:48] and outside [1:37:48] of legitimate regulated markets. [1:37:51] Therefore, [1:37:51] any federal action [1:37:52] must recognize [1:37:53] the strong preexisting [1:37:54] state and tribal [1:37:56] gaming regulatory regimes [1:37:58] that ensure [1:37:59] all sports betting, [1:38:00] no matter what you call it, [1:38:04] what it's branded as, [1:38:05] and it's covered [1:38:05] under current state [1:38:06] and tribal law. [1:38:07] So, Ms. Thomas, [1:38:08] the next few questions [1:38:09] are for you. [1:38:11] And I'm going to ask you [1:38:13] to answer, [1:38:14] and then I have three questions, [1:38:16] so we'll try to be as brief, [1:38:18] I guess, as we can. [1:38:20] What does full compliance [1:38:21] with sports betting laws [1:38:22] today look like in practice? [1:38:24] And more specifically, [1:38:25] what guardrails [1:38:26] and compliance measures [1:38:27] from licensing, [1:38:28] background checks, [1:38:29] to ongoing geolocation requirements, [1:38:32] age verification for apps, [1:38:34] are part of your state's [1:38:36] regulatory regime? [1:38:38] Yes, thank you. [1:38:39] So, first of all, [1:38:40] you have to be over 21 [1:38:41] to wager, 21 or over. [1:38:44] You have to have, [1:38:44] sportsbooks must make available [1:38:46] and enforce exclusionary measures [1:38:48] for those who choose to gamble, [1:38:50] and our office oversees [1:38:52] a statewide exclusion list [1:38:54] to make sure [1:38:54] that information is communicated. [1:38:56] Credit card deposits [1:38:57] are prohibited. [1:38:58] Extension of credit [1:38:59] is prohibited. [1:39:02] It is, [1:39:02] we review all markets [1:39:05] before they're offered, [1:39:06] and leagues and teams [1:39:08] can request [1:39:09] that those are not allowed [1:39:11] if they're risky. [1:39:12] Really comprehensive. [1:39:13] Yes. [1:39:13] Really comprehensive. [1:39:14] So, just a simple yes or no. [1:39:17] Do you believe prediction markets [1:39:18] or prediction markets [1:39:20] are not currently required [1:39:21] to comply with any [1:39:22] of the safeguards you describe? [1:39:24] Would that be correct [1:39:25] for the most part? [1:39:27] That is correct. [1:39:27] Okay, I'm going to ask [1:39:28] a similar question [1:39:29] going forward. [1:39:32] So, what is required [1:39:34] of legal sports betting companies [1:39:35] to comply with [1:39:36] anti-money laundering rules, [1:39:38] responsible gaming safeguards, [1:39:39] cyber security, [1:39:40] and integrity monitoring? [1:39:42] It's extensive. [1:39:43] All of those things [1:39:44] are required, [1:39:45] both federal reporting [1:39:47] by the sportsbooks [1:39:48] for anti-money laundering [1:39:49] and state reporting [1:39:51] for anti-money laundering [1:39:52] and unusual [1:39:53] and suspicious activity. [1:39:55] So, you're watching this [1:39:56] to prevent criminal activity [1:39:57] and other cyber incidents. [1:40:00] So, yes or no, again, [1:40:01] please, Ms. Thomas. [1:40:02] Prediction markets [1:40:03] are not currently required [1:40:04] to comply with any [1:40:05] of these safeguards [1:40:06] as we just described. [1:40:07] Anti-money laundering, [1:40:08] responsible gaming safeguards, [1:40:10] cyber security, [1:40:11] and integrity monitoring. [1:40:13] No, not to my knowledge. [1:40:15] Not to your knowledge. [1:40:15] Thank you. [1:40:16] I'm going to ask [1:40:17] a similar question again. [1:40:19] How do operators today [1:40:20] coordinate with state [1:40:21] and tribal gaming regulators? [1:40:23] Our sports leagues, [1:40:24] you've touched on this, [1:40:27] law enforcement [1:40:27] and integrity monitoring firms [1:40:29] to identify suspicious activity [1:40:31] and protect consumers. [1:40:33] We are in constant contact [1:40:35] with all stakeholders, [1:40:37] leagues, integrity monitors, [1:40:39] our partners in other states, [1:40:40] including Nevada. [1:40:42] We are very close [1:40:43] with all of our partners [1:40:45] and we have to be [1:40:46] in constant communication [1:40:47] so we can share [1:40:48] important information. [1:40:49] You're very diligent in this. [1:40:51] And so, yes or no, [1:40:51] again, Ms. Thomas, [1:40:53] prediction markets [1:40:53] are not currently required [1:40:55] to comply with any [1:40:56] of these safeguards. [1:40:57] Would that be correct [1:40:58] to the best of your knowledge? [1:41:00] Yes, correct. [1:41:01] Not to the best of my knowledge. [1:41:03] Thank you. [1:41:04] Mr. Miller, [1:41:06] we talked a little bit, [1:41:07] you talked about [1:41:08] as Senator Cantwell [1:41:09] touched on gaps [1:41:10] in compliance, [1:41:11] particularly in our [1:41:12] tribal communities, [1:41:13] but both for state [1:41:13] and tribal. [1:41:15] You know, [1:41:15] when products [1:41:16] that are functioning [1:41:16] identical to legal [1:41:18] sports betting, [1:41:18] they're allowed [1:41:19] to operate completely, [1:41:20] completely outside [1:41:21] of state and tribal [1:41:22] laws and regulations, [1:41:24] what protections, [1:41:25] oversight mechanisms, [1:41:26] and accountability [1:41:27] structures, [1:41:28] do you believe [1:41:29] they're able [1:41:29] to circumvent? [1:41:30] And would you say [1:41:31] this is a fair [1:41:32] and level playing field? [1:41:35] Well, I think that, [1:41:36] Senator, [1:41:37] thank you for the question. [1:41:38] I certainly don't believe [1:41:39] it's a fair [1:41:40] and level playing field. [1:41:42] We believe that [1:41:43] getting a gaming license, [1:41:45] whether it be in Nevada [1:41:46] or in any other state, [1:41:48] is a privilege. [1:41:49] It requires [1:41:49] significant due diligence [1:41:52] for suitability [1:41:53] of that licensure. [1:41:54] the regulations [1:41:55] around the licensee [1:41:59] and what they apply for [1:42:00] and then how they behave [1:42:01] as a licensee. [1:42:03] We are all, [1:42:05] as licensees, [1:42:06] we are held to account [1:42:09] by 8,400 regulators [1:42:11] in the states [1:42:12] and tribes [1:42:13] all over this country. [1:42:15] And I think that [1:42:15] that itself [1:42:17] shows that the system [1:42:18] is, you know, [1:42:19] it's iterative, [1:42:20] it's continuing [1:42:21] to get better, [1:42:21] but the notion [1:42:23] that somehow or another [1:42:23] the prediction markets [1:42:25] and the 500 people [1:42:26] that work at the CFTC, [1:42:28] the CFTC 500 people [1:42:30] is less than the number [1:42:32] of regulators [1:42:33] in the state [1:42:34] of Pennsylvania. [1:42:35] Right. [1:42:35] That somehow or another [1:42:36] they could manage [1:42:37] and facilitate [1:42:38] a nationwide [1:42:40] sports betting network [1:42:41] is laughable. [1:42:43] So you would agree [1:42:44] that you just ask [1:42:46] for a fair [1:42:47] and level playing field? [1:42:49] That's correct. [1:42:49] Thank you. [1:42:50] I'm going to ask you [1:42:50] a little bit, Mr. Miller, [1:42:51] about ongoing litigation. [1:42:55] Oh, my time is up. [1:42:55] Are you waiting [1:42:56] for Senator Lujan? [1:42:57] Do you want me [1:42:57] to keep going? [1:42:58] I knew he was coming, [1:42:59] so thank you. [1:43:01] As soon as Senator Lujan [1:43:02] gets here, [1:43:03] we'll defer to him. [1:43:04] And if the gentlelady [1:43:06] will pause for a moment. [1:43:08] Senator Hickenlooper [1:43:10] and I each have [1:43:11] some additional questions. [1:43:14] But I think [1:43:14] Senator Blunt-Rochester [1:43:16] is planning to return. [1:43:18] And no. [1:43:21] Okay. [1:43:21] But Senator Lujan [1:43:22] is planning to return. [1:43:25] And Klobuchar. [1:43:28] No. [1:43:28] Okay. [1:43:29] All right. [1:43:29] We will continue. [1:43:31] Go ahead. [1:43:31] Thank you, Madam Chair. [1:43:32] I appreciate it. [1:43:33] I knew he was on the way, [1:43:34] so I didn't realize [1:43:36] it was this far over. [1:43:37] But I appreciate [1:43:38] your consideration. [1:43:39] So, Mr. Miller, [1:43:40] you know Nevada [1:43:40] is among many states [1:43:42] that have been pulled [1:43:43] into costly litigation [1:43:44] with prediction markets [1:43:45] to defend its right [1:43:46] to regulate gaming [1:43:48] within its borders. [1:43:49] We want to regulate gaming [1:43:50] within the state of Nevada. [1:43:51] And so, [1:43:52] what does the nationwide [1:43:53] litigation landscape [1:43:55] look like today? [1:43:56] And how long might it take [1:43:57] for these questions [1:43:58] to be resolved [1:43:59] if it's left to the courts? [1:44:00] And in your view, [1:44:02] what are the risks [1:44:02] if Congress doesn't step in [1:44:04] to reaffirm [1:44:05] that states are the primary regulators [1:44:07] when it comes to gaming [1:44:08] and that Congress [1:44:09] never intended [1:44:10] the CFTC [1:44:11] to regulate gambling [1:44:12] nationwide? [1:44:15] Well, thank you [1:44:16] for the question. [1:44:16] I clearly agree with you. [1:44:19] Congress never, [1:44:19] it was never Congress's intent [1:44:21] to create a federal [1:44:23] department of gambling [1:44:24] through the CFTC. [1:44:25] The fact that we have, [1:44:27] you know, [1:44:27] federalism in this country, [1:44:29] that states have the rights [1:44:30] of self-determination [1:44:31] and tribal nations similarly. [1:44:35] This is how we've created [1:44:36] a system that works in America. [1:44:38] 8,400 regulators [1:44:40] working every day [1:44:41] to make sure [1:44:41] that there's integrity [1:44:42] in the matches, [1:44:43] that the consumers [1:44:45] are protected [1:44:45] and that the state [1:44:47] and or tribe [1:44:47] benefits from this. [1:44:49] And so, [1:44:49] as it relates to litigation, [1:44:51] I think that we're in [1:44:52] nine of the 12 circuits [1:44:54] and 41 state attorneys general [1:44:57] have written the CFTC [1:44:58] saying, [1:44:59] stop it, [1:44:59] knock it off. [1:45:00] It's not your purview. [1:45:02] And these are attorneys general [1:45:03] that span the spectrum [1:45:06] from the farthest left [1:45:07] to the farthest right, [1:45:08] all agreeing [1:45:09] that the states [1:45:10] have the right to do this. [1:45:12] And they are spending [1:45:13] extraordinary amounts [1:45:14] of money in litigation [1:45:16] against Calci, [1:45:17] against the prediction markets, [1:45:19] and now against the CFTC [1:45:21] who has inserted themselves [1:45:23] as a party [1:45:24] using taxpayer dollars [1:45:25] to assert their control [1:45:28] and dominance [1:45:29] in a world [1:45:30] that they, quite frankly, [1:45:31] have no business being in. [1:45:32] Well, this is my last [1:45:33] and final question [1:45:34] to follow up on this. [1:45:36] The CFTC's current approach, [1:45:38] prediction market platforms [1:45:39] self-certify their own contracts [1:45:41] for trading. [1:45:42] It's like the hen [1:45:42] of the wolf guarding [1:45:44] the hen house, right? [1:45:45] And so that means [1:45:46] they decide for themselves [1:45:47] whether a new product [1:45:48] complies with the law. [1:45:49] They don't have to [1:45:50] get any other audit [1:45:51] and the CFTC [1:45:52] has 90 days to review. [1:45:53] Can you name [1:45:54] any other [1:45:55] federal or state regulator [1:45:57] that allows the entities [1:45:59] it regulates [1:45:59] to approve their own products [1:46:01] in this way? [1:46:02] I'd love to say [1:46:05] the short answer is no. [1:46:06] The short answer is no. [1:46:07] But I've never, [1:46:08] I have tried to find [1:46:09] another agency [1:46:10] at the local, [1:46:12] state, [1:46:12] or federal level [1:46:13] that allows participants [1:46:15] that are regulated entities [1:46:16] to self-certify [1:46:18] that they're adhering [1:46:19] to government protocol. [1:46:20] Yeah. [1:46:20] Aren't you going to let, [1:46:21] always let you, [1:46:21] give yourself the benefit [1:46:22] of the doubt, [1:46:23] I guess, right? [1:46:24] Thank you. [1:46:25] Appreciate it. [1:46:25] Thank you. [1:46:26] Senator Lujan, [1:46:27] you are recognized. [1:46:29] Got all my questions. [1:46:35] Thank you. [1:46:37] Mr. Miller, [1:46:39] last week, [1:46:40] four New Mexico tribes [1:46:41] sued Calci [1:46:42] alleging the company's [1:46:43] illegal offering [1:46:44] sports betting [1:46:45] on tribal lands [1:46:46] in violation [1:46:47] of the Federal [1:46:49] Indian Gaming Regulatory Act. [1:46:52] Now, [1:46:52] there's other lawsuits [1:46:53] that have also [1:46:54] been out there. [1:46:57] My question is, [1:46:57] yes or no, [1:46:58] has Congress provided [1:46:59] exclusive gaming rights [1:47:00] for Indian tribes? [1:47:02] They have. [1:47:03] And is it your belief [1:47:04] that some of these [1:47:06] sports betting [1:47:08] and other predictive models [1:47:10] are in violation [1:47:11] of state [1:47:13] and federal gaming laws [1:47:14] by operating [1:47:15] on tribal land? [1:47:16] I do believe [1:47:17] that's true. [1:47:18] So, [1:47:19] is there agreement [1:47:21] on the panel [1:47:21] that Congress [1:47:22] needs to do something [1:47:23] to weigh in here? [1:47:24] Mr. Miller? [1:47:25] My view is, [1:47:26] Congress needs to reaffirm [1:47:27] the rights of states [1:47:29] and tribes. [1:47:30] Ms. Thomas? [1:47:32] I agree with Mr. Miller. [1:47:35] Mr. Salvin? [1:47:37] Say it then, sorry. [1:47:38] It's okay. [1:47:39] You know, [1:47:39] my perspective is, [1:47:40] anyone that's offering [1:47:41] markets on sports, [1:47:42] no matter what, [1:47:43] should be engaging [1:47:44] in some type of control [1:47:45] to make sure [1:47:46] the integrity [1:47:46] of the sport [1:47:47] is preserved. [1:47:49] Representative? [1:47:50] I believe we have [1:47:51] to see the CFTC [1:47:52] rulemaking [1:47:53] that's going on. [1:47:54] And if Congress [1:47:55] wants to step in [1:47:56] and assert its authority, [1:47:57] we welcome the conversation. [1:47:59] But as for now, [1:48:00] the courts [1:48:00] and the Third Circuit [1:48:01] in particular [1:48:02] has given prediction markets [1:48:04] this capacity [1:48:05] to offer these contracts. [1:48:07] Should these folks [1:48:07] be able to advertise [1:48:08] to kids? [1:48:10] No, [1:48:10] and the members [1:48:11] of our coalition [1:48:12] do not. [1:48:13] Number one, [1:48:14] there's a solid ban [1:48:15] at 18. [1:48:16] Congress can debate [1:48:17] what is the appropriate [1:48:18] option for securities, [1:48:20] for commodities, [1:48:20] for whatever it is [1:48:21] in society. [1:48:22] We would like [1:48:23] to be engaged [1:48:24] in that conversation [1:48:25] if Congress [1:48:26] wants to do that. [1:48:27] But for our markets, [1:48:29] for prediction markets, [1:48:30] they comply [1:48:31] with market surveillance, [1:48:32] AML requirements, [1:48:33] know your customer [1:48:34] requirements. [1:48:35] We, all of our members, [1:48:37] maintain an active ban list [1:48:38] of folks [1:48:40] that we've coordinated [1:48:40] with leagues. [1:48:41] We'd like to have [1:48:41] relationships with all of them [1:48:43] to ban folks [1:48:45] that are insiders [1:48:46] as designated [1:48:47] by the people [1:48:48] they work with [1:48:49] or work around. [1:48:51] And we maintain that [1:48:52] by using technologies [1:48:53] like I-360, [1:48:55] other surveillance techniques [1:48:56] like geolocation. [1:48:57] And in particular, [1:48:58] when it comes [1:48:59] to tribal issues, [1:49:00] I think it's very important [1:49:01] that anyone [1:49:02] who's engaged [1:49:03] with tribes [1:49:04] respect their treaty rights [1:49:06] that have been longstanding [1:49:07] in this country [1:49:08] and have been [1:49:09] and should be affirmed [1:49:10] by the courts [1:49:11] and Congress. [1:49:12] I appreciate your thorough response [1:49:14] on that last one. [1:49:16] I should have said [1:49:16] Mr. Chairman, [1:49:17] but it's always good [1:49:17] to see you, Patrick. [1:49:19] Dr. Levant? [1:49:20] Congress most certainly, [1:49:21] and I think this hearing [1:49:22] proves it, [1:49:23] must certainly step in [1:49:24] with prediction markets. [1:49:26] But Congress needs [1:49:26] to go further. [1:49:27] And this is where [1:49:28] I come back to [1:49:29] my disagreement [1:49:30] with Mr. Miller [1:49:31] and the AGA. [1:49:32] It's ironic to me [1:49:33] that the AGA [1:49:34] is asking Congress [1:49:35] for help [1:49:35] with prediction markets, [1:49:36] but yet telling you [1:49:37] at the same time [1:49:38] you have no role [1:49:39] in regulating sports betting. [1:49:41] There needs to be [1:49:43] minimum federal safety standards [1:49:45] enacted governing sports betting, [1:49:47] which will also recognize [1:49:49] the sovereignty of states [1:49:50] to go further [1:49:51] if they like. [1:49:52] But this is too big, [1:49:53] involving too many entities. [1:49:55] There's no way [1:49:57] to prevent harm [1:49:58] without Congress [1:49:59] stepping in [1:50:00] and creating minimum [1:50:01] federal safety standards, sir. [1:50:03] I appreciate it. [1:50:04] I agree with that, sir. [1:50:05] Now, Madam Chair, [1:50:06] while I know [1:50:07] this hearing [1:50:07] is on the subject [1:50:09] of sports betting [1:50:11] integrity in America, [1:50:13] there's one thing [1:50:14] I wanted to raise today [1:50:15] because it's [1:50:16] sports betting proximate. [1:50:20] And maybe there's [1:50:22] some folks in this room [1:50:22] that like to collect [1:50:24] trading cards, [1:50:26] baseball cards, [1:50:26] soccer cards, [1:50:27] Pokemon cards, [1:50:29] cards of cards. [1:50:30] There's even cards [1:50:30] of members of the Senate [1:50:31] and the House of Representatives. [1:50:33] The reason I'm raising this [1:50:34] is I don't know [1:50:35] how many of you, [1:50:35] has anyone in this room [1:50:36] heard about [1:50:37] whatnot.com? [1:50:42] Anybody? [1:50:44] I see a few yeses. [1:50:46] Look, this is [1:50:48] a company [1:50:49] that's being sued [1:50:50] right now [1:50:51] over illegal [1:50:52] lottery and gambling. [1:50:54] And what they do [1:50:55] is you buy in [1:50:56] to this website [1:50:57] and they draw your name, [1:51:00] they spin whatever [1:51:00] the hell that they do, [1:51:02] and they let kids [1:51:02] start doing this [1:51:03] with credit cards. [1:51:04] And people have [1:51:05] gotten in debt. [1:51:07] And I just certainly hope [1:51:08] that when we choose [1:51:09] to clamp down [1:51:10] on protecting kids, [1:51:13] that we do it [1:51:13] in all these spaces. [1:51:14] This is ridiculous [1:51:15] that people are getting [1:51:16] addicted to this kind [1:51:17] of nonsense, [1:51:18] that kids are getting [1:51:18] in debt, [1:51:19] they're getting their [1:51:19] parents in debt, [1:51:20] they're driving up [1:51:20] credit cards. [1:51:21] And I certainly hope [1:51:22] these people get put [1:51:23] out of business [1:51:24] with the kind of nonsense [1:51:25] with what they're doing [1:51:26] to prey on some of [1:51:26] the most vulnerable [1:51:27] people in America. [1:51:28] I do not want to [1:51:29] distract from this [1:51:30] important hearing [1:51:30] on what we're doing here. [1:51:32] But Madam Chair, [1:51:33] I know this is an area [1:51:34] of interest when we talk [1:51:35] about kids. [1:51:36] I just certainly hope [1:51:37] that we can dig in, [1:51:38] we can ask the experts [1:51:39] and we can look at this [1:51:40] and that we don't forget [1:51:41] about people like this [1:51:42] that are also preying [1:51:44] on kids as well. [1:51:45] So thank you [1:51:45] for the indulgence, [1:51:46] for the time, [1:51:46] and everyone that's here [1:51:47] today. [1:51:47] I really appreciate [1:51:48] your time today. [1:51:49] Well, you raise [1:51:50] an important point. [1:51:52] And what we do have [1:51:54] to realize is there [1:51:55] are laws and there are [1:51:58] rules in the physical [1:51:59] space over certain [1:52:01] activities, [1:52:02] but in the virtual space, [1:52:04] there are no laws [1:52:06] or rules. [1:52:08] And as I have many times [1:52:09] said, product safety design [1:52:12] exists in every single [1:52:15] industrial sector in this [1:52:17] country except in the [1:52:20] virtual space. [1:52:21] If you buy a car, [1:52:22] there are safety standards. [1:52:24] They don't tell you [1:52:25] how to drive the car, [1:52:26] but they tell you the car [1:52:27] is safe to drive. [1:52:30] And what we're seeing [1:52:32] is growth in these industries [1:52:34] where the standards have [1:52:37] not been put in place [1:52:39] and the industries have [1:52:41] taken off on their own. [1:52:44] And then regulation [1:52:45] is being discussed [1:52:47] on the backside. [1:52:49] Dr. Levant, [1:52:50] I said I would come back [1:52:51] to you and I do want [1:52:53] to go to on this issue [1:52:54] of advertising to children. [1:52:57] I know Mr. Miller [1:52:58] says they don't. [1:53:01] Congressman McHenry [1:53:02] says they don't. [1:53:04] But we know the dirty truth [1:53:08] of a lot of this is [1:53:10] they are on these websites [1:53:14] that are targeting children [1:53:17] and are trying to build [1:53:20] databases of children. [1:53:23] Eyeballs, the number of eyeballs, [1:53:26] the amount of time [1:53:27] they capture them, [1:53:28] the amount of time [1:53:29] they're online, [1:53:30] then that is going to give [1:53:34] them richer data, [1:53:34] that richer data [1:53:35] is worth more money. [1:53:38] So the issue [1:53:40] of where children engage [1:53:42] with these activities [1:53:44] is a part. [1:53:46] Senator Lujan [1:53:47] just mentioned it. [1:53:48] Senator Cantwell [1:53:49] just mentioned it. [1:53:51] Senator Curtis [1:53:52] is looking at this issue. [1:53:55] And that presence [1:53:58] of gaming [1:54:00] or prediction markets [1:54:02] on those sites [1:54:04] and trying to pull [1:54:05] those children [1:54:06] into that [1:54:06] and then algorithmically [1:54:08] being pulled further. [1:54:11] You've spoken to that [1:54:12] in the issue of addiction. [1:54:15] So when it comes [1:54:16] to advertising to children, [1:54:18] what has your research [1:54:19] shown you [1:54:20] and what is that engagement? [1:54:22] Senator, what we're seeing [1:54:23] when we hear, [1:54:24] I'm going to call them [1:54:25] gambling companies [1:54:26] inclusive of prediction market companies. [1:54:28] When they say [1:54:29] we don't advertise to children, [1:54:30] they're speaking about advertising [1:54:32] on primetime TV, [1:54:35] on network television. [1:54:37] That's not where kids [1:54:38] are getting their entertainment. [1:54:40] Children are getting [1:54:41] their entertainment online, [1:54:42] on their phones, [1:54:43] on Instagram, [1:54:44] unfortunately on TikTok, [1:54:45] on a variety of platforms. [1:54:48] That advertising [1:54:49] is completely unregulated [1:54:51] and it is inundated. [1:54:53] Social media is inundated [1:54:55] with various levels [1:54:57] of gambling advertising. [1:54:58] One of the most sinister [1:54:59] is something [1:55:00] the gambling industry [1:55:01] calls affiliates. [1:55:02] People they pay [1:55:04] to talk about [1:55:05] their platforms, [1:55:07] to host about [1:55:09] their platforms. [1:55:10] The pop-up ads [1:55:11] are relentless [1:55:12] and they're completely [1:55:13] unregulated. [1:55:15] States can't address that. [1:55:17] Congress has to address that [1:55:18] because once these companies [1:55:20] go on social media, [1:55:22] they are going to, [1:55:23] as night follows day [1:55:24] and day follows night, [1:55:26] they're going to pull in [1:55:27] the eyes of children [1:55:29] and young adults. [1:55:30] And once those eyes have hit [1:55:31] and the algorithms [1:55:32] have been triggered, [1:55:33] it will continue [1:55:34] without any safeguards. [1:55:37] So what we're talking about [1:55:39] is delivery of advertising [1:55:41] of a known addictive product [1:55:43] to children long before [1:55:46] the risk-reward system [1:55:47] of the human brain [1:55:48] is fully formed. [1:55:49] That doesn't happen to you [1:55:50] in about 25 or 26. [1:55:51] So by its very definition, [1:55:53] what they are doing [1:55:55] is endangering children [1:55:58] for their benefit. [1:56:00] It certainly doesn't [1:56:00] benefit the kids. [1:56:02] That is problematic. [1:56:04] Okay. [1:56:05] Mr. Sadeen, [1:56:06] what do you see [1:56:07] in your research [1:56:08] about the advertising? [1:56:11] How are you seeing [1:56:12] these kids engaged? [1:56:14] Yeah. [1:56:15] Thank you for the question, [1:56:16] Senator. [1:56:16] I don't have a tremendous [1:56:18] amount of visibility [1:56:18] into the demographic types [1:56:22] that are engaging [1:56:23] in this type of product. [1:56:24] For us, [1:56:25] our central goal [1:56:26] is regardless of [1:56:28] sort of who you are, [1:56:29] where you are, [1:56:30] you are insured [1:56:31] to be protected [1:56:32] on these platforms [1:56:33] with respect [1:56:34] to the integrity of sports. [1:56:36] And so if you are [1:56:37] a participant, [1:56:38] if you are [1:56:38] a prohibited participant, [1:56:39] if you have some access [1:56:40] to inside information, [1:56:41] if you are somehow [1:56:43] have the ability [1:56:44] to exert undue influence, [1:56:46] then you're being tracked [1:56:47] and then you're being [1:56:48] proactively permissioned [1:56:49] to ensure [1:56:50] you're not transacting [1:56:51] in markets. [1:56:51] I also want to ask you [1:56:54] a little bit, [1:56:55] and we talked a little bit [1:56:56] about this yesterday, [1:56:57] fair play, [1:56:58] and the match fixing [1:57:00] that is going on. [1:57:03] I wonder what your take is [1:57:07] and how instructive [1:57:09] you think what you've seen [1:57:11] in that is [1:57:12] to the broader sports [1:57:14] and to the micro-targeting [1:57:17] that is going on. [1:57:20] I mean, I think, [1:57:21] generally speaking, [1:57:24] individuals who are [1:57:25] closest to the level [1:57:26] of play, [1:57:27] the sport themselves, [1:57:29] are the ones [1:57:30] that are most vulnerable, [1:57:31] the ones that are [1:57:32] at the most risk, right? [1:57:34] So whether that be [1:57:34] collegiate stakeholders, [1:57:36] student-athletes, [1:57:37] administrators, [1:57:38] trainers, coaches, [1:57:39] equipment managers, [1:57:40] et cetera, [1:57:41] they are the ones [1:57:43] that are the most vulnerable [1:57:44] to bad act [1:57:46] or harm [1:57:47] and threats [1:57:48] and approaches. [1:57:50] And so I think [1:57:50] getting them educated [1:57:51] to make sure [1:57:52] that they know [1:57:53] how to deal [1:57:53] with those types [1:57:54] of threats [1:57:55] and vulnerabilities [1:57:56] is essential. [1:57:59] Congressman McHenry, [1:58:00] I think there's been [1:58:02] a lot of discussion [1:58:04] around the CFTC [1:58:05] as the sole regulator, [1:58:08] but we know [1:58:08] there are lawsuits [1:58:09] that are in the states. [1:58:11] I think Tennessee [1:58:12] has an active lawsuit [1:58:14] right now. [1:58:16] So I believe [1:58:18] that our state regulators [1:58:19] and our state's [1:58:20] attorneys general [1:58:22] have a role to play [1:58:24] in protecting consumers [1:58:26] from harm. [1:58:28] So you pivot toward [1:58:31] only the CFTC. [1:58:33] So how are your members [1:58:35] engaging? [1:58:37] Because if you don't have [1:58:39] this comprehensive coverage [1:58:42] at the federal level, [1:58:44] the protection does lie [1:58:46] with the states. [1:58:47] So why would they not [1:58:51] engage with the states [1:58:53] to make certain [1:58:54] that consumers [1:58:54] are protected? [1:58:55] Because they adhere [1:58:56] to higher standards [1:58:57] than what is the average [1:58:58] state standard? [1:58:59] Give you one example. [1:59:00] In the states [1:59:00] that have legalized gambling, [1:59:02] there are a dozen [1:59:03] that do not ban [1:59:04] advertising to children. [1:59:06] So at the state level, [1:59:08] it's imperfect as well. [1:59:09] You have 35 states [1:59:10] that allow sports books [1:59:12] in their state regime. [1:59:15] What we have [1:59:16] with the CFTC is a requirement [1:59:19] for know your customer, [1:59:21] any money laundering, [1:59:22] market surveillance. [1:59:24] The regulator approves [1:59:25] contracts before they go [1:59:26] on the market. [1:59:27] Then within 24 hours, [1:59:29] they can unwind [1:59:29] those contracts [1:59:30] if they think [1:59:31] there's fraudulent activity. [1:59:33] They have the ability [1:59:34] to ban certain types [1:59:35] of contracts. [1:59:36] You have the CFTC [1:59:37] engage with the leagues [1:59:39] on data sharing. [1:59:40] You have products [1:59:41] like I-360 [1:59:42] that our members use [1:59:44] to ensure that they police [1:59:46] against insider trading [1:59:47] and fraudulent activity. [1:59:48] We do have very high standards [1:59:50] for the members [1:59:51] that are part of our coalition. [1:59:54] So to say that there's [1:59:54] no federal standard [1:59:55] in this realm [1:59:57] is not true. [1:59:59] In the general realm [2:00:00] that you're describing, [2:00:01] the broader digital realm, [2:00:02] you're absolutely right. [2:00:04] It is a very complicated space. [2:00:06] But for these regulated [2:00:07] prediction markets, [2:00:08] what they're doing [2:00:09] is using new technology [2:00:10] to access a very old [2:00:12] type of exchange [2:00:14] of a swaps market [2:00:15] that has been around [2:00:16] for 100 years, [2:00:17] has been regulated [2:00:18] at the state level, [2:00:19] then to the federal level [2:00:20] with the creation [2:00:21] of the CFTC. [2:00:22] So this is a time-honored [2:00:24] set of things [2:00:25] with new contracts [2:00:26] offered with a new piece [2:00:28] of technology. [2:00:29] And with that, [2:00:30] we do have struggles [2:00:31] of how it develops. [2:00:32] And the rulemaking regime [2:00:33] that is ongoing, [2:00:35] the CFTC, [2:00:35] is very important [2:00:36] to get right [2:00:37] so we do have [2:00:38] the best consumer protection [2:00:40] available and possible. [2:00:41] Thank you. [2:00:44] Senator Hickenlover. [2:00:45] Thank you, Madam Chair. [2:00:47] Dr. Levant, [2:00:48] I've got a couple [2:00:50] questions for you. [2:00:51] The, obviously, [2:00:52] 35 states, [2:00:52] including Colorado [2:00:53] and Tennessee, [2:00:54] prohibit gamblers [2:00:56] from borrowing money [2:00:57] to make wagers. [2:00:58] And these rules exist [2:01:00] to protect consumers [2:01:01] so they don't end up [2:01:03] trapped in a cycle [2:01:03] of debt [2:01:04] and dealing [2:01:05] with their addiction [2:01:06] and paying off loans. [2:01:08] Kalshi recently asked [2:01:09] the CFTC [2:01:10] for approval [2:01:10] to offer its consumers [2:01:11] these same admittedly [2:01:14] risky loans [2:01:15] so they can place bets [2:01:17] using money [2:01:17] they don't have. [2:01:19] This week, [2:01:20] we sent a letter [2:01:20] to the CFTC [2:01:21] urging them to reject [2:01:23] Kalshi's application. [2:01:24] Based on your experience, [2:01:26] working with people [2:01:26] affected by problem gambling, [2:01:29] is it dangerous [2:01:30] for consumers [2:01:31] to borrow money [2:01:32] to bet on prediction markets? [2:01:33] It's extremely dangerous. [2:01:35] No one should be borrowing [2:01:36] money to gamble with, [2:01:38] period. [2:01:39] In addition to that, [2:01:41] I will tell you [2:01:43] who does borrow money [2:01:44] to gamble. [2:01:46] Addicts borrow money [2:01:46] to gamble [2:01:47] and people prone [2:01:48] to addiction [2:01:49] borrow money [2:01:49] to gamble. [2:01:51] Thank you. [2:01:52] I agree with that. [2:01:54] Let me also ask you, [2:01:55] since I've got you [2:01:56] on the mic, [2:01:59] comeback programs [2:02:00] often called, [2:02:03] referred to as [2:02:03] VIP retention [2:02:04] or win back, [2:02:06] generally are used [2:02:08] to reactivate [2:02:09] lapsed accounts. [2:02:10] they do so [2:02:12] by flagging accounts [2:02:13] for aggressive [2:02:13] re-enrollment, [2:02:15] often highlighting [2:02:16] their previous [2:02:17] big wins, [2:02:18] that same [2:02:19] addictive juice [2:02:21] that is almost, [2:02:23] for some people, [2:02:23] is almost unavoidable [2:02:24] or irresistible, [2:02:26] I should say. [2:02:27] When utilized [2:02:28] on players [2:02:29] who have proactively [2:02:30] blocked themselves [2:02:31] from the app, [2:02:32] which they call [2:02:33] self-exclusion, [2:02:34] these tactics [2:02:34] are highly controversial. [2:02:37] I think in some cases [2:02:38] they are illegal, [2:02:41] I mean, [2:02:41] self-exclusion [2:02:42] should be, [2:02:43] to my understanding, [2:02:45] irreversible, [2:02:46] and it should last [2:02:49] six months [2:02:50] or to a lifetime, [2:02:51] whatever someone [2:02:51] makes that decision. [2:02:53] Shouldn't they be protected [2:02:54] from this type [2:02:55] of advertising? [2:02:56] Self-exclusion, [2:02:57] unfortunately, [2:02:58] is a state-by-state-by-state [2:02:59] matter. [2:03:00] We don't have a federal [2:03:00] self-exclusion. [2:03:01] I will share with you [2:03:02] two real-life events. [2:03:05] One just happened [2:03:07] last week. [2:03:07] A client who had gone [2:03:09] on a one-year [2:03:10] self-exclusion [2:03:11] took this person [2:03:12] quite a while [2:03:13] to get to the point [2:03:14] to have the courage [2:03:14] to go on the one-year [2:03:15] self-exclusion. [2:03:16] And at 40 seconds [2:03:18] past the hour [2:03:19] of the exact one year, [2:03:22] this client received [2:03:23] an email [2:03:23] that was offering them [2:03:25] a welcome-back opportunity [2:03:27] and a welcome-back bonus. [2:03:28] And when I looked [2:03:29] at the fine print [2:03:29] on the offer, [2:03:30] it was tailored [2:03:31] to their player number [2:03:33] that they had had before. [2:03:36] I will also, [2:03:37] and I'm happy [2:03:37] to make this available [2:03:38] to the committee, [2:03:39] I brought with me today [2:03:40] the copy of an email [2:03:41] that a client of mine [2:03:43] was receiving. [2:03:43] This client was not [2:03:44] on self-exclusion, [2:03:45] but they had been [2:03:46] a very active gambler [2:03:47] and for six weeks [2:03:49] didn't make a bet. [2:03:49] They were in treatment, [2:03:50] they didn't make a bet. [2:03:51] About six weeks later, [2:03:52] they received an email [2:03:54] from what is labeled [2:03:56] the DraftKings VIP [2:03:57] Comeback Series. [2:03:59] And it starts with, [2:04:00] I've got some exciting news [2:04:02] for you. [2:04:03] Your account [2:04:03] has caught our eye [2:04:05] and we're thrilled [2:04:06] to extend an invitation [2:04:07] and it goes on from there. [2:04:09] That is as predatory [2:04:11] as it gets. [2:04:12] And if this were [2:04:14] another addictive product, [2:04:15] if this were alcohol [2:04:16] or tobacco, [2:04:17] we'd shut it down [2:04:18] instantly [2:04:20] if a bar was [2:04:21] exhibiting [2:04:22] that type of [2:04:23] predatory behavior. [2:04:24] In gambling, [2:04:25] they call them [2:04:26] VIP programs. [2:04:27] Yet another reason [2:04:29] Congress needs [2:04:30] to step in [2:04:31] and create [2:04:31] minimum federal [2:04:33] safety standards [2:04:34] and stop this [2:04:35] from happening [2:04:35] because it's [2:04:36] ruining lives, [2:04:37] it's ruining families. [2:04:38] Well, I think [2:04:39] the ultimate, [2:04:39] the goal should be [2:04:40] that the industry [2:04:41] reaches out [2:04:43] and helps us [2:04:43] establish those standards [2:04:44] instead of avoiding that. [2:04:46] I suppose in Nirvana, [2:04:48] yes, [2:04:48] but as I pointed out earlier, [2:04:50] Mr. Miller [2:04:51] and his organization, [2:04:52] on their website, [2:04:53] they specifically state [2:04:54] that the federal involvement [2:04:56] in sports gambling [2:04:57] is, [2:04:58] I believe the words are, [2:04:59] a non-starter. [2:05:01] So when an industry [2:05:02] demonstrates an unwillingness [2:05:04] to regulate itself [2:05:06] and it's an addictive product, [2:05:09] most respectfully, [2:05:10] that's where Congress [2:05:11] has to step in. [2:05:11] We've seen this before [2:05:12] with tobacco. [2:05:13] We've seen it [2:05:14] with the opioid industry. [2:05:15] We have an opportunity [2:05:16] to get in front of this now, [2:05:17] but we can't wait [2:05:18] for the industry to do it. [2:05:19] I won't speak for the chair, [2:05:20] but I think this hearing [2:05:21] qualifies as a starter. [2:05:24] Ms. Thomas, [2:05:25] thank you for all your work [2:05:26] on this. [2:05:27] And many states [2:05:28] like Tennessee [2:05:29] have created regulations [2:05:31] on gambling advertisements [2:05:33] to ensure that consumers [2:05:35] are protected. [2:05:36] Can you please outline, [2:05:38] and here we are talking [2:05:39] about some of these, [2:05:41] again, [2:05:42] Dr. Levant referred to this [2:05:44] as predatory advertising. [2:05:46] Can you just describe [2:05:47] some of the advertising [2:05:47] guardrails [2:05:48] and positive impact [2:05:49] that they've had [2:05:50] on consumers? [2:05:51] Yes, thank you. [2:05:52] So first of all, [2:05:53] I believe that the issue [2:05:55] he was speaking to [2:05:56] goes to not only advertising, [2:05:58] but a responsible gaming problem. [2:06:00] Absolutely. [2:06:00] And in our state, [2:06:02] we require our operators [2:06:04] to provide a written [2:06:06] responsible gaming plan, [2:06:08] training outline, [2:06:10] the mechanics by which [2:06:12] they oversee that, [2:06:14] RG, [2:06:14] and data about who [2:06:17] and how many, [2:06:18] not who, [2:06:19] but how many they've excluded [2:06:20] and what steps they've taken. [2:06:22] Part of their plans, [2:06:24] and I can tell you [2:06:25] that every operator [2:06:26] in Tennessee [2:06:26] as part of their plans [2:06:28] has in there [2:06:29] that they will not market [2:06:30] it to anybody [2:06:31] who was ever [2:06:31] on an exclusion list. [2:06:33] So that is a very [2:06:34] positive thing. [2:06:35] Otherwise, by statute, [2:06:37] we have, [2:06:37] obviously, [2:06:38] we can't advertise [2:06:39] to minors. [2:06:40] Our office receives [2:06:41] all advertising terms [2:06:42] and promotions. [2:06:43] There is disclosure [2:06:44] about 1-800-GAMBLER [2:06:47] and 1-800-RESET, [2:06:49] which are gambling [2:06:50] help lines, [2:06:51] and individuals [2:06:52] can call those [2:06:53] and be directed [2:06:54] to assistance [2:06:55] within Tennessee. [2:06:56] I also would like [2:06:58] to touch on the fact [2:06:59] that we spoke [2:07:00] about a lot [2:07:01] of predatory behavior [2:07:02] targeting really young minors, [2:07:06] 10th graders, [2:07:06] I think the chairman said. [2:07:08] I see so much of that [2:07:09] with illegal sports books, [2:07:11] and our office [2:07:12] has spent so much time [2:07:13] and effort targeting those, [2:07:15] and especially working [2:07:16] with Google and Apple [2:07:18] to get any illegal apps [2:07:20] off the store [2:07:21] so that they can't target minors. [2:07:22] Thank you. [2:07:25] I'll yield back to the chair, [2:07:26] but I feel that all five of you [2:07:29] are willing and engaged [2:07:31] to fix some of these [2:07:33] serious, glaring problems [2:07:34] and look forward [2:07:36] to working with the chair [2:07:37] to provide us [2:07:39] a sense of urgency. [2:07:41] These are real people's lives [2:07:43] that are being negatively [2:07:44] impacted right now. [2:07:46] And I thank all of our members [2:07:49] that have been here today, [2:07:50] and I thank our witnesses. [2:07:51] You've been an excellent panel. [2:07:54] This does allow us [2:07:56] to start to build [2:07:56] where we should move [2:07:58] in regulation, [2:08:00] and also looking at the division [2:08:02] between what should be federal [2:08:04] and what should be state, [2:08:06] and preserving those states' rights [2:08:09] in order to move forward with this. [2:08:13] I will have to say, [2:08:15] Chairman Cruz, [2:08:16] who's no longer here, [2:08:18] talked about how big [2:08:20] the football Friday nights [2:08:23] are in Texas, [2:08:24] but I would like to point out [2:08:26] for the record [2:08:27] that Texas finally gave in [2:08:31] and joined the SEC, [2:08:33] which is the greatest football conference. [2:08:36] So they finally saw the light, [2:08:39] and they're going to join with the SEC. [2:08:42] I do want to remind you all [2:08:45] that members of the panel [2:08:47] are going to have until May 27th [2:08:49] to submit questions. [2:08:51] I will remind you [2:08:52] that you need to respond to those [2:08:55] within seven business days, [2:08:59] so that's going to give you [2:09:00] until the close of business [2:09:02] on June 10th [2:09:03] to submit your responses [2:09:05] to the questions for the record. [2:09:07] You've done a superb job [2:09:09] in helping us establish this baseline. [2:09:11] We are grateful for your time. [2:09:12] It's this time hearing adjourned.