▶ 0:15:47Chair Blackburn: Good morning, welcome to everyone. Senator hickenlooper is close at hand so we will go ahead and begin to stay on time this morning. I want to welcome each of you for being here today, and thank you. 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.
▶ 0:16:19Chair Blackburn: In tennessee, whether it is saturdays at naylor stadium, and I think I can include all americans in this, tennesseens love there sports, cheering for their teams. They unite people. They teach young people about teamwork, discipline, sacrifice, and fair play.
▶ 0:16:47Chair Blackburn: American sports are not just this nation's pastime. They are a global symbol of competition watched by hundreds of millions of people around the globe. 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.
▶ 0:17:14Chair Blackburn: Unfortunately though there have recently been some high-profile examples of match fixing at the nba and mlb. What this does is challenge americans' trust in the integrity of sports and this has been inflamed by the rapid explosion of legal sports betting across our entire country.
▶ 0:17:45Chair Blackburn: What was once limited to a handful of locations is now available in almost every single corner of the country. It is carried with you night and day. It is right there on your mobile device. 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.
▶ 0:18:18Chair Blackburn: And the introduction of sports event contracts on prediction markets has exposed more people to sports betting, 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.
▶ 0:18:45Chair Blackburn: While sports betting is often a source of entertainment for responsible adults, it does have its risk. Like I mentioned, we have seen scandals involving professional athletes, referees, and suspicious betting activity.
▶ 0:19:04Chair Blackburn: College athletes are reporting harassment and threats from angry bettors, and americans, including young people, are being inundated with advertisements on social media. Their favorite influencers and sports figures are introducing minors to betting.
▶ 0:19:29Chair Blackburn: Our young men are in crisis with over one third of boys between the ages of 11-17 admitting to gambling last year. 60% of those who have been gambling and have seen this gambling content online said they had it surface through their social media algorithms. It was served up to them.
▶ 0:20:00Chair Blackburn: They didn't search for it. This is not safe. It needs to stop. Advertising to minors is disgusting. 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.
▶ 0:20:30Chair Blackburn: Thomas thomas who is with us today, the integrity monitors, and the prediction markets and online sports books. We will dive into this hearing today. It is one that we have worked to assemble. We are very grateful to our witnesses for joining us as we begin to build our book of work around this topic. At this time I turn to the ranking member for his opening statement.
▶ 0:21:00Sen. Hickenlooper: Thank you, madam chair. It's been a pleasure working with you on this issue and others. And looking at the, as you describe it, inappropriately regulated betting markets, specifically and particularly the recent explosion of prediction markets every day. I, this from a different point of view. I share your frustration.
▶ 0:21:26Sen. Hickenlooper: 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. My mother's second husband passed away. I was the youngest of four kids and I didn't do very well in those early years. I was vulnerable and in elementary school, middle school, and high school where I had real challenges and I was equipped to handle them.
▶ 0:21:57Sen. Hickenlooper: I wasn't ready. If I had been faced with this landscape -- I was impulsive. I was attracted, like many people, the chance. There is a beam of light coming down touching me. We have to get this right. 24/7 online access to sports betting has increased at this risk to consumers in a manner that I think far outweighs the traditional brick-and-mortar gambling facilities.
▶ 0:22:25Sen. Hickenlooper: This is especially true in the prediction markets. Sports betting makes up 40% of the trades on polymarket and 90% on kalshi. Fan book -- prediction markets have been in the headlines recently for permitting government officials inside information to place bets on events relating to the death of iranian leader khamani, the
▶ 0:23:01Sen. Hickenlooper: Induction of president maduro. These are clear risks to our national security when there is inside information being leaked out. This shouldn't be happening. We have introduced the bets are off act to ban wagering on government actions, war, terrorism, assassinations by people with inside information. Inside trading issues exist in sports betting prediction markets. Is there a bet on a specific player's actions, will they miss the foul shot?
▶ 0:23:29Sen. Hickenlooper: Will that be a way to make a quick $10 on a wager? That's nuts. The fact that we are betting on that, which should be a random outside event -- the fact that so many people, especially young people, young men wager on this has to be a real concern. Prediction markets claim there are sports events contracts which pose the same risk to consumers is online sports betting.
▶ 0:23:58Sen. Hickenlooper: They say there are investments and not subject to state or tribal gambling laws. The cftc, if they are not subject to those laws, then the regulator is a commodities futures trading commission, but the cftc has literally no experience in regulating sports betting and it has failed to use the authority it does have to protect sports bettors from insider trading, market manipulation, predatory advertising, financial instability.
▶ 0:24:28Sen. Hickenlooper: The workaround is merely a way for prediction markets to state consumer protection laws. Failing to protect young people who are particularly vulnerable to gambling addiction. We have a lot of young men especially who are vulnerable to this and we are doing nothing. Gambling addiction, the additional risk of being a silent illness. The financial and psychological harms that come with gambling addiction are hard to see. The gambler is unlikely and rarely share when they lost.
▶ 0:24:58Sen. Hickenlooper: But when they win they tell all their friends so there is a sense on social media that it's great. It's positive. A good thing. Many states, including my home state of colorado, prohibit sports books from advertising to minors under 21 and restrict advertising to those already struggling with gambling addiction, but the cftc doesn't currently apply the same protections to prediction markets.
▶ 0:25:24Sen. Hickenlooper: One study found that between 2018 and 2023 the amount of money the people spent on gambling, sports gambling, rose while their net investments fell nearly 14%. In other words, they don't have the money to invest because they are spending it on gambling. That's the inescapable reality of that. To bring this home, I will share that in the days of my restaurant-owner days, we had a bartender and a wait staff member. She and he fell in love.
▶ 0:25:56Sen. Hickenlooper: For the whole restaurant it was a wonderful moment. They were going to get married. He decided that he wanted a bigger down payment for the house they would buy together with their money being co-mingled. He lost everything. Their relationship, love, marriage, future marriage was destroyed. When you see the first time how in an instant someone's life can be damaged, probably forever, you see the seriousness of this.
▶ 0:26:26Sen. Hickenlooper: That's one story that I saw personally. This has been happening by the thousands, the hundreds of thousands. I'm not saying that I am a supporter. 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, preying on our young people I think is unconscionable and irresponsible. I yield back to the chair.
▶ 0:26:56Chair Blackburn: I think the ranking member of. I know chairman cruz and ranking member cantwell wanted to make statements today. We will insert them when they are able to get here. I do have two letters to submit for the record and will asked to do so. Senator cortez masto had a statement she wanted to make for the record.
▶ 0:27:24Chair Blackburn: The sec, southeast conference, the best conference, by the way, go vols, they have a letter they wanted to submit for the record. Ok, our witnesses today, our first witness is Mr. bill miller, the president and chief executive officer of the american gaming association.
▶ 0:27:52Chair Blackburn: He has led the aga for seven years and over that time the organization has experienced expansive growth of sports gambling in the U.S.. Our second witness is mary beth thomas who serves as the executive director of the tennessee sports wagering council. She is an experienced gaming regulator and lawyer who works closely with other state regulators to strengthen consumer protections on legal gambling.
▶ 0:28:22Chair Blackburn: She is also a native nashvillian and I have known her since she was three years old. She is really a great regulator. Our third witness is Mr. scott sadin the cofounder and chief officer of integrity compliance 360. He created one of the leading sports integrity monitoring firms in the united states.
▶ 0:28:51Chair Blackburn: I thank you for your time yesterday. Our fourth witness is 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. He is currently serving as the senior advisor for the coalition for prediction markets.
▶ 0:29:17Chair Blackburn: During his 20 years in the house of representatives congressman mchenry served on the house financial services committee including as chairman. We welcome him back to capitol hill. Our final witness today, Dr. harry labonte. Dr.
▶ 0:29:36Chair Blackburn: Lavon is an internationally certified gambling counselor and currently serves as director of gambling policy at the public health advocacy in fist -- institute and is also a recovering gambling addict himself and advocates for policies he believes will help more addicts recover and avoid relapsing. I want to welcome each of you.
▶ 0:30:05Chair Blackburn: Each of you will have five minutes. Then we will begin our rounds of questioning. Mr. miller, you are recognized for five minutes.
▶ 0:30:15Mr. Miller: Thank you, madam chairman, chairman blackb urn, cruz, ranking member hickenlooper, members of the subcommittee, thank you for being here. One of the most highly regulated industries in the united states, an essential part of the american economy. The legal gaming industry supports 1.8 million american jobs.
▶ 0:30:40Mr. Miller: We have more than 1000 casinos, tribal and commercial, across 42 states. Suppliers, manufacturers and sports betting. Our industry created economic vitality in areas left behind by other industries. We generate more than $100 billion in employee wages. We deliver $18 billion annually in state and local taxes to fund critically important community projects like education, infrastructure, and public service.
▶ 0:31:07Mr. Miller: The legal gaming industry, regulators, and sports leagues are aligned. Our shared mission is to protect sports integrity. Together, the industry monitors, flags, and reports suspicious activities and threats to that integrity. Since 2018, 40 states and the district of columbia have thoroughly worked to build sports betting framework centered around integrity, consumer protection, responsible gaming, and accountability.
▶ 0:31:37Mr. Miller: Other states, like utah, texas, and georgia have chosen not to legalize sports betting. There continues to be a robust offshore illegal market that provides consumers no protections while receiving about $700 billion in american vets. Now, the gaming integrity frameworks are being undermined by so-called prediction markets who are evading state, local, tribal authorities.
▶ 0:32:05Mr. Miller: Illegal state and tribal regulated gaming market have proven safeguards. More than 8400 state and tribal regulators who oversee our industry. Licensed sports books operate under strict rules regarding age verification, aml compliance, geolocation, integrity monitoring, responsible gaming, advertising standards, and flagging suspicious activity.
▶ 0:32:30Mr. Miller: Prediction markets don't comply with most of these important regulatory protections and they allow 18-year-old teenagers to bet on sports. Although a vast majority of their business is in sports betting, prediction markets have drawn attention for offering death markets and other odious bets that threaten our national security. We market ourselves accurately, part of the entertainment economy.
▶ 0:32:55Mr. Miller: The prediction markets are calling sports betting financial contracts and investing. They are increasingly being exposed as backdoor sports betting operations. We know it, they know it, the american people know it. As senator hickenlooper said, nearly 90% of kalshi's wagers revolve around sports betting. They advertise it themselves.
▶ 0:33:23Mr. Miller: Sports betting, legal in all 50 states. A bipartisan coalition of 41 state attorneys general agree. So-called sports events contracts are actually sports betting and the states must regulate. We believe that prediction markets are evading state and tribal authorities and has caused those states and tribal authorities close to $1 billion in lost tax revenue that would otherwise go to social services.
▶ 0:33:49Mr. Miller: In closing, so-called prediction market platforms jeopardize the integrity of sports. States, tribes, regulators, leagues, and operators are working together to improve consumer protections, to reinforce responsible gaming. Our process protects the integrity of sports. Why the prediction markets don't want to play by these rules is for them to explain.
▶ 0:34:15Mr. Miller: The cftc was created to regulate markets, critical to the functioning of the nation's economy. Not to regulate monday night football. In 2024 a, call she stated this in federal court. As the legislative history directly confirms, congress did not want to sports betting to be conducted on derivative markets. A few months later they were offering an overwhelming menu of sports bets from the nfl playoffs to the super bowl to march madness.
▶ 0:34:44Mr. Miller: Prediction markets, aided by a rogue cftc, are making a mockery of congressional intent. The prediction markets are running national sports books and it's time to hold them accountable in the same way we are. Thank you for having us here today, and I look forward to our conversation.
▶ 0:35:00Chair Blackburn: Ms. thomas, you are recognized for five minutes.
▶ 0:35:06Ms. Thomas: Jenna blackburn, -- chairwoman blackburn, ranking member hickenlooper, it is honored to be here today. Thank you for the opportunity to speak on the tennessee sports gaming act and the priorities we have in place to protect consumers and to regulate previously unlicensed sports regulating activity through formal oversight. In tennessee, it's a taxable privilege to offer sports labeling pursuant to a license issued by our counsel.
▶ 0:35:37Ms. Thomas: Since sports betting went live, tennessee has collected close to 450 million dollars from license to sports books. With 5% of that close to $23 million dedicated to problem gambling prevention and treatment. Tennessee recognizes that gambling is risky and can become problematic for some players if the right procedures are not enforced. To that end, our law prohibits individuals under the age of 21 from wagering.
▶ 0:36:07Ms. Thomas: It requires sports books to make available and enforce exclusionary measures for those who do not wish to access gaming platforms or receive marketing materials. In support of this requirement our state agency manages a statewide self- exclusion program across every licensed sports book in our state no matter where the exclusion originated. Our law prohibits credit heart deposits and requires sports books to provide the ability for players to set limits on time and money deposited.
▶ 0:36:37Ms. Thomas: After all, sports betting in tennessee is viewed as a form of entertainment for adults, not a waiver college kids to pay the rent. Importantly, our love respects the concerns of teens, schools, leagues, and players about particularly risky waging markets by prohibiting individual college player prop bets, and any types of wagers on injuries or penalties.
▶ 0:37:06Ms. Thomas: Our law also allows teams, leagues, and schools to prohibit other types of wagering markets -- to ask the council to prohibit other types of wagering markets that may be contrary to the public interest or could impact the integrity of a particular sport. Sports books are required, and they do cooperate with investigations by our office, sports governing bodies, and law enforcement.
▶ 0:37:31Ms. Thomas: Importantly, our agency is empowered to investigate and fine unlicensed sports books who operate in our state unregulated. Our counsel has promulgated expensive rules to support our statutes consumer protections which we strengthened over time as technology has advanced. Those include strong know your customer regulations to identify players and prevent access by minors and other prohibited players.
▶ 0:38:00Ms. Thomas: Secondary identity verification requirements to prevent identity theft and proxy betting. Multifactor identification requirements. Robust geolocation checks at multiple points and access, and required account suspension and reporting related to minors and prohibited players.
▶ 0:38:20Ms. Thomas: Sports books internal controls, which we approve and regularly audit, must have procedures to immediately notify our office of unusual or suspicious wagering activity. This reporting obligation goes far beyond money laundering or fraud. It includes anything that could indicate match fixing, event manipulation, or the use of inside information.
▶ 0:38:44Ms. Thomas: Our sports books act as the first line of defense in many ways, but you cannot describe their reporting a self certification. State regulators proactively identify and work to correct gaps in sports book compliance with multiple checks during the term of their licensure. We review all material technological and operational changes, as well as all changes to house rules and terms and conditions prior to implementation.
▶ 0:39:11Ms. Thomas: We require our sports books to undergo annual third-party operational and security assessments reported directly to us for review. Sports books are also required to perform their own internal audit and report findings and remedial measures to us. We audit compliance with financial requirements and player-facing technical components and wagering catalogs to see if impermissible markets are being offered.
▶ 0:39:37Ms. Thomas: We review incident reports related to operational issues which helps us not only ensure compliance but keep us up-to-date on issues that we might hear from a player, because we also serve as the resource for the resolution of all player complaints in tennessee. Although it may seem like there has been a growth of cases regarding athlete manipulation or information sharing, my experience has been that legal and regulated sports betting has greatly increased the volume of data available, which has led to a higher number of incidents being reported and addressed.
▶ 0:40:08Ms. Thomas: Any criminal behavior can be difficult to complete -- completely prevent, but it can often be detected, investigated, and enforced with the right tools and collaboration. Thank you very much.
▶ 0:40:21Chair Blackburn: Mr. sadin.
▶ 0:40:26Mr. Sadin: Thank you for the opportunity to appear before you today. My name is scott sagan and I am the cofounder and ceo of integrity compliance 360, ic360. We are a regulatory technology and compliant services firm specializing in copperheads of integrity solutions for stakeholders across sports, sports betting, and prediction markets.
▶ 0:40:53Mr. Sadin: We work with collegiate and professional sports leagues, licensed sports betting operators, prediction market exchanges, state regulators, and law enforcement across the united states and abroad. I want to highlight two key principles I believe about today's existing integrity monitoring ecosystem. First, the integrity of a structure that protects american sport is not theoretical.
▶ 0:41:15Mr. Sadin: Since the supreme court's 2018 decision in murphy versus the ncaa a robust framework has developed across leagues, operators, regulators, law enforcement, and integrity providers, like us. The framework has identified, investigated, and resolved a meaningful number of integrity matters.
▶ 0:41:38Mr. Sadin: The infrastructure exists and it has worked, but like any vertical in a complex industry the integrity ecosystem has room to improve and mature as the space around it develops and evolves. Second. The sports betting and prediction market ecosystem involves a wide range of stakeholders. I believe no single participant can address its integrity challenges alone. The integrity of competition depends on the connective tissue between those participants.
▶ 0:42:07Mr. Sadin: The quality of information sharing, the depth of collaboration, and the consistency of transparency. Ic360's mission is to assist the successful maturation of the regulated sports betting and event contracts ecosystems through products and services that help protect the integrity of sport. We work closely with many stakeholders I mentioned. Our partner network is a precondition for integrity work.
▶ 0:42:35Mr. Sadin: We regularly see the specific and unique integrity challenges that each group is facing. The cross participant visibility allows us to identify patterns, risks, and emerging vulnerabilities. One of our central responsibilities is to bring those insights back to relevant partners who may have been impacted by a circumstance, assist in investigating the issue, and collaborate to mitigate any remaining areas of risk.
▶ 0:43:01Mr. Sadin: In short, we endeavor every day to embody the connective tissue necessary for cross stakeholder integrity success. I would like to highlight three lines of work that help us play that role. First, integrity monitoring. Our system and team of resources conducted 20 surveillance of regulated markets for potentially suspicious activity. -- conduct 24/7 surveillance of regulated markets for potentially suspicious activity.
▶ 0:43:30Mr. Sadin: Integrity alerts often come from us or directly from an operator. This alerting structure affords stakeholders holistic and actionable insight quickly and efficiently. I would like to highlight a product called prohibet. Most maintain a population of individuals like athletes and coaches and personnel who should be prohibited from wagering on their own sport because of access to inside information and the ability to exert undue influence.
▶ 0:44:00Mr. Sadin: It is the secure infrastructure through which those designations move from governing body to sports book operators and prediction markets, allowing participating platforms to automatically permission accounts before prohibitive action takes place. This level of productivity is consequential in preserving market and competition integrity. Lastly, the significance of education.
▶ 0:44:25Mr. Sadin: The prohibited patron population I described in the prohibet is also the most vulnerable to approach, pressure, and targeting by bad actors. The awareness regarding the threats they may face and rules that apply to them and reporting pathways available when something goes wrong are significant contributing factors in maintaining the integrity of sports.
▶ 0:44:48Mr. Sadin: Ic360 has delivered hundreds of presentations and reached hundreds of thousands of athletes, coaches, and administrators and look forward to continuing that in close partnership with sports leagues. I would like to reiterate the importance of collaboration and the connective tissue between industry stakeholders. Integrity monitoring is only effective because operators report information, leagues share intelligence, regulators share casework. Prohibet works because operators screen and the infrastructure between them is trusted.
▶ 0:45:21Mr. Sadin: Education is impactful because leagues and institutions invest the time and attention of people closest to competition. The value ic360 brings is making the collaborative work of integrity possible at the scale/speed the contemporary market requires. I welcome your questions and conversation. Thank you.
▶ 0:45:40Chair Blackburn: Congressman mchenry.
▶ 0:45:43Hon. Mchenry: Thank you, chairman blackburn, ranking member hickenlooper, distinguished members of the committee for the opportunity to testify and for the warm welcome for a lowly former house member. I will say that the chambers are much nicer over here. I appear before you on behalf of the coalition for prediction markets including U.S.
▶ 0:46:07Hon. Mchenry: Regulated companies like kalshi, robin hood, and underdog. My experience is grounded in financial markets regulation market structure and market integrity, not sports betting or traditional sports books. That is the lens through which I will speak today.
▶ 0:46:27Hon. Mchenry: Throughout my time in congress I focus on policies that expanded participation for average everyday americans, modernized our laws to foster innovation and facilitate capital formation and strength and strengthen confidence in market integrity. My work with the coalition for prediction markets is a continuation of those principles.
▶ 0:46:53Hon. Mchenry: The question is not whether innovation should exist but whether emerging market-based products will operate inside a transparent, federally regulated, onshore framework with a robust consumer protection and oversight. Casinos and traditional online sports books and prediction markets are fundamentally different products governed by different legal frameworks and subject to different regulatory structures. Conflating the two does little to advance our shared goal of protecting consumers.
▶ 0:47:21Hon. Mchenry: In a casino or sports book the house sets the odds and profits when customers lose. In a prediction market exchange, participants trade with one another while the platform earns transaction fees for facilitating the market. As a result, incentives are fundamentally different. Prediction markets benefit from greater participation, liquidity, and more accurate information, not from consumers losing money.
▶ 0:47:49Hon. Mchenry: That distinction was recently reinforced by the third circuit court of appeals which held sports events contracts are governed by the commodities exchange act and the dodd frank act. It's also important to recognize that sports event contracts are only one part of a much broader market, as categories like entertainment, politics grow quickly in share.
▶ 0:48:12Hon. Mchenry: These products are part of broader trend towards democratizing access to tools that were once limited to institutions and large market participants. Coalition members, coalition companies share the league's interest in protecting sports integrity and want to work collaboratively to address concerns and where appropriate share information and data that help protect the ecosystem.
▶ 0:48:40Hon. Mchenry: Customers must trust that suspicious activity will be identified and addressed appropriately. Unlike many sports books and unregulated operators, coalition members don't offer micro-bets that are particularly vulnerable to manipulation such as wagers on the next play.
▶ 0:48:57Hon. Mchenry: The sports integrity scandals that have made headlines in recent days and recent years involving the nba and mlb players using insider information and compromised game outcomes occurred on traditional online sports books, not prediction markets exchanges.
▶ 0:49:17Hon. Mchenry: Coalition members are federally regulated and overseen by the cftc and operate under extensive compliance obligations including real-time surveillance, trade reporting requirements, bank secrecy act compliance, anti-money laundering controls, and rule books reviewed by federal regulators. They have extensive monitoring that is ongoing.
▶ 0:49:39Hon. Mchenry: Regulated prediction markets prohibit trade, not only by individuals with material nonpublic information, but by anyone capable of influencing the outcome of a contract, including players, coaches, referees, league employees, and even members of congress on political contracts.
▶ 0:50:00Hon. Mchenry: Protections that frankly go well beyond federal securities laws requirements and beyond standards applied to traditional sports books as well. Customers on our platforms are also subject to uniform federal protections that apply nationwide. Exceeding the consumer protections of casinos and sports books, which are governed by a patchwork of state laws.
▶ 0:50:26Hon. Mchenry: While not the focus of this hearing, coalition members share concerns about contracts tied to war, assassinations, and acts of violence and those are proliferating on unregulated platforms. We share the interest that those are not in the public interest. These kinds of contracts are already prohibited under U.S. law.
▶ 0:50:49Hon. Mchenry: We welcome your questions in ways that we can enhance market integrity, protect the integrity of sports, and consumer protection writ large.
▶ 0:50:58Dr. Levant: Good morning. Chairman blackburn, ranking member hickenlooper, members of the subcommittee, thank you for the privilege of testifying today and privilege of joining this panel of distinguished witnesses. Before I begin, take a moment chairman blackburn and extend my thanks to you. Specifically december of 2024 that I testified before the senate judiciary committee.
▶ 0:51:24Dr. Levant: Following that hearing you and I had a brief exchange in which you said to me, I am going to remain involved in this issue to protect children and families. You have been a person of your word. The people of tennessee benefited from that, and frankly the people and families of america benefit from you remaining involved in this important issue. I thank you for that.
▶ 0:51:47Dr. Levant: In that same conversation I was joined by senator durbin, senator blumenthal, and I believe senator tillis all expressing similar feelings. This is not a republican or democrat issue. This is a human issue regarding an addiction crisis that needs to be prevented. I am a gambling addict in recovery. I made my last bit april 27, 2014 and survived a near suicide attempt that same night.
▶ 0:52:17Dr. Levant: I made my first bet when I was 15 years old. I went to the casino for the first time when I was 16. I never had a healthy relationship with gambling but it would take 30 years to fully understand that. 2013 my world was collapsing like senator hickenlooper described as someone he knew. My drug of choice was gambling. I annihilated myself and everything in my wake. I went through all of my money, all of the money I could borrow, and eventually all of the money that I could steal.
▶ 0:52:48Dr. Levant: February 13, 2015i stood in a courtroom in pennsylvania -- not unusual for me since I had been a lawyer for 25 years. This day I was a defendant and pled guilty to 13 financial felonies all related to my gambling addiction. During my sentencing hearing I made a vowel.
▶ 0:53:06Dr. Levant: The bell was if I could get well -- the vow was if I could get well I would dedicate whatever my future looked like to helping prevent, prevent being the operative word, other people, particularly young men, from suffering a similar fate.
▶ 0:53:25Dr. Levant: After four or five years of treatment that led me to the university in philadelphia where I earned a masters in counseling and after graduating began treating people with gambling addiction. I wasn't doing anything on the prevention side. I earned a doctorate in public policy. My research is about how to introduce prevention. I want to introduce three issues and look forward to a more robust conversation. Our prediction markets gambling?
▶ 0:53:57Dr. Levant: Most certainly yes when it comes to sports contracts. Two simple reasons why. First, in meets the basic definition of gambling defined as betting or staking something of value with consciousness of risk and hope of gain on the outcome, a game, contest, or uncertain event whose event may be determined by chance. That is gambling. That is what production market to do. To the end-user come the american public, there's no discernible difference. They are gambling.
▶ 0:54:28Dr. Levant: Most importantly, the prediction market companies themselves have acknowledged it is gambling. I want to move forward to integrity. I offer to this committee a broader definition of integrity. Integrity isn't just, can the american people trust the result of the cubs-cardinals game. Each of us have to make that decision for ourselves because sports have sold their integrity to the gambling industry. There is a much broader issue.
▶ 0:54:58Dr. Levant: How the sports leagues, including the ncaa, the owners, the players, have partnered for enormous financial gain in the billions with the gambling industry and prediction markets to sell their real-time data to the gambling industry to create something called micro-betting and its close cousin same game parlays and prop bets.
▶ 0:55:23Dr. Levant: This is what is crushing people and families, particularly young men. It is called micro-betting and I'm here to talk to you about it. I am also here to issue a warning. The senate doesn't do something, if congress does it do something, our friends at the nfl in the last three months have announced in partnership with their partners a company called genius sports, the launch of the new product called vet vision which they described as
▶ 0:55:54Dr. Levant: "an immersive intelligent interactive tool to convert traditional fans into high engagement in-play bettors which are significantly more profitable for genius and our sports book partners." they have their eyes on us and our children to convert into in-game micro bettors. I look forward to speaking in detail about it.
▶ 0:56:18Chair Blackburn: I don't think anyone would have made a bet that we would have five witnesses who stuck to five minutes. I congratulate you all. You are recognized, chairman cruz.
▶ 0:56:30Chair Cruz: That that may have been on the prediction markets. Good morning. Americans love sports. Nearly 70% of americans, 200 32 million people consider themselves sports fans. I'm certainly one of them. I am a sports fan for the same reason everyone else is. Sports showcase human talent, and grit, and drive.
▶ 0:57:00Chair Cruz: They put us on the edge of our seats as we wait and hope for the thrill of the next big play. The come from behind win. From high school football, which is a religion in the great state of texas, the college basketball, to the professional leagues, sports unite us at a time it seems everything else divides us. Today, many sports fans are also sports bettors.
▶ 0:57:29Chair Cruz: 39 states and the district of columbia have legalized some form of sports betting. My home state of texas has not. Even in those states were sports betting is legal, everyone agrees that it carries risks and serious risks. It should be regulated and it should be done, if at all, in moderation. This hearing is not about rolling back legalized gambling in states that have chosen to offer it.
▶ 0:57:59Chair Cruz: There are two different questions at this hearing. First, in a world were sports betting exists, how do we preserve the integrity and authenticity of the sports that we love? Second, our prediction markets operating within the law or are they defying the law and improperly and -- improperly infringing on state law?
▶ 0:58:29Chair Cruz: Integrity is the foundation of sports. We want athletes competing on merit. But the opportunity to make money can tempt gamblers and sometimes even athletes themselves to guarantee a sure bet. Consider a few recent cases. Nba players and coaches are accused of manipulating performance and providing insider information to win bets.
▶ 0:58:56Chair Cruz: Two, major league baseball pict -- pitchers rigged their own pitches for money. Mls abandoned two players for intentionally getting yellow cards to win bets. And matches have been canceled and contracts terminated because of suspected match-fixing. These incidents sow doubt in the minds of fans.
▶ 0:59:25Chair Cruz: It's not uncommon for fans of scrolling twitter on sunday afternoon in the fall to see posts speculating that a controversial call by an official was related to gambling. That is why sports leagues and casinos and regulators have to work together to identify, investigate, and root out manipulation.
▶ 0:59:49Chair Cruz: Fans need to be assured that game rigging is rare and that anyone caught doing it will be punished harshly, if not banned forever from the game. They are also grappling with a newcomer to the sports integrity matrix. Prediction markets like polymarket and kalshi.
▶ 1:00:10Chair Cruz: Prediction markets started offering "event contracts on sporting events." for all intents and purposes they are sports bets. There are real and serious questions about the legal propriety. At minimum any prediction market that offers event contracts on sports should be expected to join serious efforts to detect and prevent the rigging sports.
▶ 1:00:42Chair Cruz: We must also acknowledge the existence of unregulated, offshore sports books that have existed for decades. That issue may well be one for law enforcement. Treasury or the state department to solve. Today's hearing is designed to focus on the use of tools in the regulated market to catch and prevent game manipulation.
▶ 1:01:11Chair Cruz: My hope is today's discussion will showcase the work already underway to protect the integrity of sports and at the same time identify where we can and should do more. I look forward to hearing from our witnesses.
▶ 1:01:24Chair Blackburn: Thank you, Mr. chairman. We will begin our round of questioning. Ms. thomas, I want to come to you. When we speak about sports integrity's, our states have been on the front line when it comes to protecting fairplay and also protecting consumers from harm. You talked about this in your opening.
▶ 1:01:49Chair Blackburn: I know tennessee has taken a technology first approach. In dealing with this. I want you to talk a little about tennessee's approach and how you have handled or will handle potential instances when it comes to match-fixing and questionable bets.
▶ 1:02:12Ms. Thomas: Thank you for the question. Yes, we are a technology forward agency and recognize that we need to move at the speed of business and not always at the speed of government to keep up with our industry and mitigate all risks that we can.
▶ 1:02:30Ms. Thomas: I have described what our rules require, but I want to emphasize that our standard of what our sports books and vendors can use is one of commercial and technological reasonableness which evolves and improves over time. That gives our sports books flexibility to run their operations and use vendors they believe is best suited for their needs or develop technology in-house.
▶ 1:02:58Ms. Thomas: We also internally in our agency use technology to monitor what is going on with all our sports books. We ingest data from our sports books, our vendors related to compliance issues, related to any kind of technological changes, any changes to any of their operating systems comes to our office. And we also ingest data from players that gives us insight in the issues they are seeing.
▶ 1:03:28Chair Blackburn: You are taking vendor data and player data?
▶ 1:03:32Ms. Thomas: And sports book data. Yes, ma'am. And then we are able to use that data to look at patterns of what might be happening with compliance areas. With integrity issues that may be a way that we identify integrity issues, but we also have back-office access to all our sports books platforms so we can see real time account level data.
▶ 1:04:02Ms. Thomas: We can also see their integrity providers, like ic360 and ibia. We can see their platforms and what is being reported in real time and how others are responding.
▶ 1:04:18Ms. Thomas: We also have platform access to geolocation data so we can see geolocation pings when deposits are made, when odd movements happen, or differences in geographical locations in wagers that are taking place.
▶ 1:04:39Ms. Thomas: That allows us to have a lot of data at our fingertips to analyze when there is suspected activity of match-fixing or otherwise that we can package and send to sports governing bodies, law enforcement, and investigate. And we have done that. I want to get my numbers straight.
▶ 1:04:58Ms. Thomas: As of may 14, we had investigated 25 potential integrity cases where suspicious wagering activity occurred in tennessee that could have indicated the use of inside information. A few of these cases are currently pending but 17 of the matters were closed and referred to sports governing bodies and law enforcement, including 13 to the fbi.
▶ 1:05:24Ms. Thomas: Where an integrity matter is not criminally inferred, it is because we identified it was just somebody had a good day. Thank you.
▶ 1:05:32Chair Blackburn: Mr. miller, do your members advertise to youth?
▶ 1:05:37Mr. Miller: We do not.
▶ 1:05:39Chair Blackburn: Do you advertise on social media platforms?
▶ 1:05:43Mr. Miller: We have members that advertise on social media platforms, yes.
▶ 1:05:48Chair Blackburn: You consider that not advertising to youth? They don't build their algorithms and they don't open them. Mr. mchenry, do you, do your members advertise to youth?
▶ 1:06:01Hon. Mchenry: No.
▶ 1:06:03Chair Blackburn: Do you advertise on social media platforms?
▶ 1:06:07Hon. Mchenry: Yes, and we welcome additional tools. We want to enhance tools --
▶ 1:06:15Chair Blackburn: Why are they on those platforms?
▶ 1:06:19Hon. Mchenry: Because they are very popular.
▶ 1:06:22Chair Blackburn: With kids. The average 11-year-old. I want to talk about the prediction market approach to regulation and consumer protection. Let's go to a linkedin post that the kalshi ceo wrote about the company taking a regulatory first approach. His term to accelerate growth.
▶ 1:06:49Chair Blackburn: I agree innovators need light touch rules and prediction markets are a great place for innovation. We realize that. I think it's important that we take action to make certain these marketplaces are going to be safe.
▶ 1:07:06Chair Blackburn: Talk for a moment about how your association is approaching consumer protections and what you are going to do to be certain you are not on these platforms where children are the primary user of these platforms.
▶ 1:07:25Hon. Mchenry: Yes, thank you for your leadership in protecting our kids online. As a parent I share your goals very much. Our coalition members adhere to best practices on advertising with a complete ban of anyone under 18 from touching the products. We understand there is a conversation about the age requirements for prediction markets and we welcome that conversation. To be clear, these financial products, like securities, are available to 18 and older.
▶ 1:07:56Hon. Mchenry: 97 percent of the users on prediction markets are over 21 and the average age is 33. The goal is to get customers that will be repeat customers interested in participating but not targeting kids. Every enhanced tool that we can take, member companies can take to ensure that under 18 don't even see our advertising online is a very important mark that we take and undertake, but we lack fully the tools necessary to block that.
▶ 1:08:25Hon. Mchenry: Our member companies will take enhanced surveillance of those they think maybe may be using their parent or someone else's phone. We take extra effort that they don't have that access and we follow the best tools that are available to make sure that we know if anyone has any touch points the leagues or the folks that we view as insiders. They are banned from using our products. A full ban. They can't even trade.
▶ 1:08:55Hon. Mchenry: That is an undertaking that's different from the rest of the ecosystem.
▶ 1:08:58Chair Blackburn: Thank you. Dr. levant, I can tell you want to respond to that, but as a courtesy to my colleagues I will come back to you for that response. Senator hickenlooper, you are recognized.
▶ 1:09:11Sen. Hickenlooper: Thank you madam chair. Thank you for coming. Dr. levant, I particularly think that your life experience is relevant and real. Mr. mchenry, thank you for your service. You bring a reputation from the house. I think you need to be very careful of how you are using that.
▶ 1:09:34Sen. Hickenlooper: I think prediction markets, largely, advertise themselves as financially life-changing tools for average people that can allow users to earn money through their prediction accuracy. One example that I can give you, kalshi partnered with a young woman on tiktok, a partnership, who said that she struggled to pay her rent. By placing bets on kalshi she was able to win enough to cover her rent for two years.
▶ 1:10:05Sen. Hickenlooper: I know that you are welcoming conversations, but you think that that's responsible to hold that up as a model for people who are having trouble making their rent? They should go on prediction markets because they will be better at predicting what is clearly a random occurrence?
▶ 1:10:20Hon. Mchenry: These contracts are not fully random.
▶ 1:10:24Sen. Hickenlooper: If they are not fully random, if there is no inside information they are largely random.
▶ 1:10:32Hon. Mchenry: The predictive capacity and the case that you raise I am unaware of.
▶ 1:10:37Sen. Hickenlooper: Now you are aware of it. This isn't a case of some random person. This is a business partnership with the people who are paying your consulting fee.
▶ 1:10:48Hon. Mchenry: I will attempt to answer your question, which is these are two-cited markets established by peer to peer --
▶ 1:10:58Sen. Hickenlooper: I get that. I'm talking about the incentive that advertising plays in these types of markets. Let's move on. I look at the age issue is every bit as important as encouraging people who are struggling to make ends meet. I think it is specifically dangerous for minors to get into sports betting and prediction markets. That's why almost all the states say 21, not 18.
▶ 1:11:27Sen. Hickenlooper: Prediction markets let users as young as 18 bet on sports but also market their products to younger, more vulnerable audiences who are in many cases adept at getting around the platform precautions. There have been reports that kalshi has been using young social media influencers, as young as 15, to promote its platform to young consumers. Is that true?
▶ 1:11:49Hon. Mchenry: Not to my awareness.
▶ 1:11:52Sen. Hickenlooper: And you wouldn't sanction that, a 15-year-old influencers saying this is why prediction markets are useful and valuable, an investment, a risk of their money?
▶ 1:12:05Hon. Mchenry: I wouldn't condone anyone using tiktok, but that's a separate matter.
▶ 1:12:10Sen. Hickenlooper: Does kalshi have age restrictions on the influencers that it works with, that it hires, to influence the market or the audience that it markets too?
▶ 1:12:23Hon. Mchenry: There one of the companies for the prediction markets. I can direct you to them --
▶ 1:12:29Sen. Hickenlooper: I'm talking about kalshi. I don't want to go through the rigmarole. Why isn't kalshi in front in picking out these issues saying we will deal with this and this is how, 1, 2, three. We shouldn't have to go through hearings. Every day they can stall they can make more money. I get that, but that means if you want to be the responsible supporter you need to help them get in front of this.
▶ 1:12:57Hon. Mchenry: They are and our members are. These are onshore regulated by the cftc, and they comply with federal law and the regulations. They have complied with all of the court cases.
▶ 1:13:10Sen. Hickenlooper: The cftc is inexperienced without any real regulations. They are easily manipulatable. The cftc allows prediction markets to launch new contracts one business day after filing them without any cftc review at all.
▶ 1:13:33Hon. Mchenry: They review the contracts. As they do for the rest of the commodities market place. The cftc has regulatory authority to remove contracts or unwind contracts after the fact is they view them as manipulated or there is fraudulent activity. The cftc is the cop on the beat with the capacity to oversee this market, just as they've done with the broader commodities marketplace that has been around and well-versed for years.
▶ 1:14:00Sen. Hickenlooper: There is literally no one
▶ 1:14:09Sen. Hickenlooper: You are the first person to tell me that the cftc is up to standards. Regulating gambling benefits from the revenues they collect on taxes from gaming. Colorado collected $45 million last year. It is in the billions if you look at all of states and tribes.
▶ 1:14:33Sen. Hickenlooper: If prediction markets continue paying no taxes, is it going to reduce the resources available in colorado for water projects and outdoor recreation. Are those resources available to states like colorado will be diminished?
▶ 1:14:58Mr. Miller: We have seen a tsunami created by the prediction markets in an unregulated manner. There is not one person who was around during 2010 who believed we were enabling the federal department of gambling. Yes, they are absolutely not competent to handle this and two they are absolutely hurting drives and states.
▶ 1:15:22Sen. Hickenlooper: I yield.
▶ 1:15:32Sen. Curtis: Thank you. It is a delight to see you again and really enjoyed serving with you. If I am honest even a couple of months ago I would not be able to tell you what a prediction market was. What is a prediction market in one sentence?
▶ 1:15:54Hon. Mchenry: It is an open exchangeregulation called a swa. Folks who have a contract, some say yes. Some say no and they determine what is the ratio on the contract, the likelihood of something happening.
▶ 1:16:14Sen. Curtis: What is happening when an event contract is purchased for the people on the ground who do not understand.
▶ 1:16:23Hon. Mchenry: The easiest thing for me to understand is the political setting. John going to win the election. After the election the contractor certified based off of information on whether or not that happens and people are paid out based on the ratio on that final contract.
▶ 1:16:47Sen. Curtis: If I were hearing that in utah, I'm going to put down money and I have the chance of either making more money or losing money. Is that accurate?
▶ 1:16:58Hon. Mchenry: Yes and it is an uncertain outcome just like whether or not you will have a crop that comes in this fall or not based off of whether an -- weather and events along the way.
▶ 1:17:10Sen. Curtis: These folks back home will say to me tell me how that is not gambling. It seems to me every definition of gambling.
▶ 1:17:22Hon. Mchenry: I understand how that is viewed. When futures came to fruition over 100 years ago, it was viewed much the same, that this is an uncertain outcome on whether or not your crop will come in in the fall and you can hedge against it in the marketplace about an uncertain event that is driven largely by acts of god, mother nature and yields.
▶ 1:17:48Sen. Curtis: I want to interrupt you because of time. What you are saying is important but we have limited time. My father was an insurance agent and taught me that you buy insurance for things you cannot afford to pay for.
▶ 1:18:03Sen. Curtis: It feels like we have moved from the former buying crop insurance because he cannot afford if he is wiped out versus betting for an income or a loss on that and my fundamental question is how is that any different than a sports wager?
▶ 1:18:21Hon. Mchenry: It is based off of the business model. The business models are fundamentally different from a sports book. The sports book the house sets the line and when the consumer loses, they profit. For an exchange like this, exchange is based off of two individuals that benefit and they pay a fee, a flat fee for that engagement. Business models are very different.
▶ 1:18:47Sen. Curtis: I don't want to cut you off but you know the drill. We are so limited time. You have not had much chance to weigh in on the speakers thoughts. >> it is difficult to know where to start but let me take the most recent comment. Poker and horseracing have the same business model. Sports futures comebacks -- contracts are gambling.
▶ 1:19:19Sen. Curtis: The house has to win every time and the public loses. The other part I want to address is, I would have used tsunami but I will use avalanche of unregulated advertising on social media. Over the last year I have spoken in six schools at four states. It is not a scientific survey but I asked students at each of these schools how many of you know what kalshi is.
▶ 1:19:53Sen. Curtis: 95% of the hands go up. I ask how many of you know what a same game parlay is.
▶ 1:19:58Sen. Curtis: I'm going to do the same thing because we have source for of time -- we are so short of time. Let's just put that aside for a minute. Why do we regulate gambling because we all agree to gambling in this room. Why do we regulate it?
▶ 1:20:20Hon. Mchenry: Elected officials have determined society's interest and put measures around it.
▶ 1:20:29Sen. Curtis: We know you will agree. >> it is a known addictive products just like heroin. That is why we regulate it.
▶ 1:20:39Sen. Curtis: This is what I want to point out the state of utah and hawaii. We made a conscious decision because of these impacts to not allow gambling of any kind. It will surprise you to know from that perspective I see this very differently than a lot of my other colleagues. You can see why I take a close interest whenever platforms begins offering something that feels like gambling, talks like gambling, smelled like gambling.
▶ 1:21:09Sen. Curtis: Senator schiff and I introduced a bill called the prediction markets, the act to stop the cftc regulated exchange from offering sports betting and casino style contracts. For me it is about preserving the states rights and protecting the ability to do that. I wish I had more time. Just a question for Mr. miller. I would like to build on that. States and tribes have spent decades establishing their own approaches to gaming.
▶ 1:21:41Sen. Curtis: Some allow it under strict regulation. Others choose not to allow it at all. These decisions protect values and significant economic interests. Help me understand this. Products that closely resemble sports betting can be offered nationwide under a federal regulatory framework. What does that mean for states and tribes to enforce the choices?
▶ 1:22:02Chair Blackburn: If I can intervene, the gentleman is one minute and a half over. Thank you. Senator baldwin.
▶ 1:22:14Sen. Baldwin: Thank you. I will go along those same lines. Come auditors -- commodities futures trading commission prevents trades, agreements, contracts or swaps that relate to gaming. The rule exists to protect consumers from fraud and preserve the integrity of sport competitions.
▶ 1:22:37Sen. Baldwin: I understand that the trump administration under the trump administration the commission does not intend to regulate or review prediction market platforms that all for sports betting. Yet wisconsin tribes offer these exact same services under multiple state and federal regulations. Mr.
▶ 1:23:01Sen. Baldwin: Miller can you walk close through the types of review and regulation that tribal gaming operations offering sports betting must go through in wisconsin?
▶ 1:23:10Mr. Miller: Yes, thank you for the question. Tribal nations are recognized by ogra but importantly they negotiate with the state government as a sovereign entity to work on terms and ensuring that they abide by all of the same protocols that are important from a regulatory perspective and that is why that
▶ 1:23:40Mr. Miller: One prediction markets have come to wisconsin, the attorney general there has acted and we applaud that and the other 40 attorney generals. It is unfortunate the cftc has chosen to sue the state of wisconsin because of that and really harm tribal sovereignty and the states right to determine what sort of gambling exists in the state of wisconsin.
▶ 1:24:06Sen. Baldwin: How does this regulatory framework compared to production market platforms offering identical services?
▶ 1:24:15Mr. Miller: We are one of the most highly regulated industries in the country. Everything from internal controls, licensing, auditing and being actively overseen by the state and tribal governments, it stands in contrast with other prediction markets that are now entering into really every state including those that senator curtis mentioned in the state of
▶ 1:24:45Mr. Miller: Utah and hawaii who have chosen not to have gaming, tribal or commercial.
▶ 1:24:49Sen. Baldwin: Mr. mchenry, are your numbers willing to undergo review and regulation by state and federal regulators which is comparable to what Mr. miller just described for tribal gaming operations?
▶ 1:25:03Hon. Mchenry: They are fundamentally different products and different business models.
▶ 1:25:09Sen. Baldwin: The answer would be no?
▶ 1:25:12Hon. Mchenry: If I would finish, they are willing and do submit to state reviews just like everybody else regulated by the cftc. Just like every other federal financial product. That is similar for everything from rain futures to an event contract on who will win the next governors race. Everything in between is related the same.
▶ 1:25:41Hon. Mchenry: And taxes are paid at the federal and state level as a result of those contracts as well.
▶ 1:25:46Sen. Baldwin: So the answer is no?
▶ 1:25:49Hon. Mchenry: They are federally regulated so -- and our federalism system and according to third circuit ruling, these are cftc regulated products under the commodities exchange act.
▶ 1:26:04Sen. Baldwin: But you would not be willing to undergo the type of regulation by regulators that is comparable to tribal --
▶ 1:26:11Hon. Mchenry: Our member companies have enhanced surveillance greater than any casino and rated in any sports book in the country. We do more market surveillance. We ban users on a proactive basis rather than a reactive basis.
▶ 1:26:29Hon. Mchenry: And we have a different business model that says no matter what happens with the contract, there is a small fee for the exchange and the sports book is incentivized as opposed to a sports book that is incentivize, they profit off of losers, not winners.
▶ 1:26:44Sen. Baldwin: Mr. miller, a retort?
▶ 1:26:47Mr. Miller: Yes. At the end of the day there are conversations about what these entities are doing. At the end of the day they are running sports books on a national level without any of the regulatory constraints and frameworks that have been created in tennessee or any of the other states that have chosen to legalize sports betting or any other gaming.
▶ 1:27:07Sen. Baldwin: Thank you.
▶ 1:27:10Chair Blackburn: Senator schatz.
▶ 1:27:13Sen. Schatz: Thank you to all of you for being here. In your work as an integrity monitor, are there some categories more likely to threaten the integrity of the sport than others? >> I certainly would categorize a couple of different types of markets as more vulnerable or more susceptible to manipulation.
▶ 1:27:39Sen. Schatz: Generally speaking player props, micro betting, certain circumstances in which an individual might have more impact.
▶ 1:27:49Sen. Schatz: The micro prop thing is insidious because it can be manipulated by a player or anyone else or an injury proposition bed or something like that and the bigger you get , the harder it is to fix, not impossible but even a player brought like someone gets six rebounds this evening, it is a little harder than he shoots the ball or does not shoot.
▶ 1:28:20Sen. Schatz: The more micro you get, the more insidious it is from an integrity standpoint but also it also taps into the addictive manic problem we are seeing.
▶ 1:28:40Dr. Sadin: Generally speaking, that is accurate. I am still a strong component of wrapping regulation around those markets.
▶ 1:28:49Sen. Schatz: Let's go to the offshore question. Mr. miller, can you speak to the problem of offshore sports books and how they impact the integrity of sports in the united states. I know the answer to this question is basically they don't work with people like you but go ahead.
▶ 1:29:04Mr. Miller: Thank you for the question, senator. It has been a challenge. I have been in this job 7.5 years. I have sent letters to every head of the fbi and department of justice asking for this to be prioritized because it is very important. It is very easy for people for people of age and under age to access the offshore illegal marketplace.
▶ 1:29:30Mr. Miller: There is obviously an important role for law enforcement at the federal label -- federal level, folks who have the ability to put pressure on these countries who house and facilitate illegal sports betting operations and for us here, it is $700 billion of money that goes out of the pockets of americans into offshore illegal betting operations without any of the consumer protections.
▶ 1:30:01Sen. Schatz: We think we have a legislative pathway here. It does not solve every problem as it relates to the challenges that individuals and society is facing with gambling. But if you empower the ftc to go after the payment processors, then they would have a perfect right to go say you may not work with these offshore shops if they are not complying with federal law having to do with micro prop bets.
▶ 1:30:32Sen. Schatz: Dr. levant, thank you for your personal story. I was staring at my phone as one does. As soon as you started talking, I applaud your journey and your life's mission.
▶ 1:30:44Dr. Levant: Thank you.
▶ 1:30:46Sen. Schatz: I want to keep talking about micro prop bets. A study found that sports betters who bet on micro events, that of that cohort 78% met the criteria for gambling that might cause significant harm to their lives. Tell me why micro prop bets are different.
▶ 1:31:03Dr. Levant: They are fundamentally different, inherently dangerous and defectively designed gambling products. The human brain is not built to absorb an addictive product every 10 seconds or less. The bigger problem is the business model. It involves the league selling their data for billions of dollars. It involves technology and a.I. Companies, sports books and prediction markets. They all want a piece of the poly.
▶ 1:31:33Dr. Levant: The only way to keep that pie going is to get the american public grand blanc more often -- gambling more often on more addictive products. That is a quote I just read to you, that is the business model. This is where congress has two conmen. This is not what the american public wanted. We loved our sports.
▶ 1:31:56Dr. Levant: Sports have become the equivalent of a nonstop slot machine because of these deals and the only way to protect the public is at the federal level with minimum federal safety standards.
▶ 1:32:06Sen. Schatz: Thank you. We will talk to republicans and democrats on this committee about legislative proposals. It is not going to solve every problem but I think this particular problem is especially a cute and needs to be dealt with immediately.
▶ 1:32:20Chair Blackburn: Senator cruz.
▶ 1:32:24Sen. Cruz: Thank you madam chair. Prop bets are at the center of recent game rigging allegations. For instance, betters wagered that kerry was a year would underperform during an nba game. When he took himself out of the game early, allegedly to help the betters cash in. Other gamblers wagered that two cleveland indians pictures with throw balls instead of strikes.
▶ 1:32:52Sen. Cruz: After the pictures allegedly tipped off gamblers. Similar incidents have occurred in other professional weeks. Mr. miller, two questions. First, are there certain prop bets that sports books should not offer because of the integrity risks that they pose?
▶ 1:33:09Mr. Miller: Thank you for the question. I would answer that question by saying that one, the regulated markets in the individual states have made determinations with regard to prop bets. We have seen a movement to limit or eliminate prop bets in the state and believe that in those states they are the best determined to make those determinations around which props should or should not be allowed.
▶ 1:33:37Sen. Cruz: Second question. Do you agree that if a league goes to a sports book and says that a bit creates an integrity risks, the sports book should not offer the bet?
▶ 1:33:50Mr. Miller: I agree with that.
▶ 1:33:52Sen. Cruz: Congressman mchenry, in a recent advisory the cftc suggested predictor markets should consider the input of a sports league before offering event contracts on the events. If a sports league tells a addiction market not to offer certain contracts such as those that resemble prop bets, for the production market honor that request?
▶ 1:34:15Hon. Mchenry: Yes, and they have.
▶ 1:34:17Sen. Cruz: Over the past five years several athletes have been caught manipulating their performance or giving insider information to sports gamblers. Independent integrity monitors often play a leading role in detecting this activity. When suspicion betting -- suspicious betting occurs, monitors quickly report information among sports books and leagues.
▶ 1:34:45Sen. Cruz: You found and lead one of these integrity monitors. Can you provide an example of how the current system has identified and caught game a minute relation?
▶ 1:34:55Dr. Sadin: Thank you for the question. I can share a couple of different examples. In the first circumstance our work identified what we call inverse line movement across correlated markets. What that means is first-half full game spreads, you expect them to move in tandem with one another. We identified a circumstance in which they were moving materially in opposite directions.
▶ 1:35:25Dr. Sadin: We surfaced that circumstance to our broad sports book operator network and very promptly received feedback from 10 to 12 different regulated sports book operators who said we are also seeing pretty significant movement and potentially suspicious activity across those markets.
▶ 1:35:45Dr. Sadin: Our system automatically parses all of the feedback and be consolidated into a report that we give to the appropriate regulators and sports governing body and back to the impacted sports book operators. That is a circumstance in which we identify something but there are hundreds, perhaps thousands of circumstances in which operators identify directly to us a circumstance that they have highlighted and we disseminate that across the ecosystem.
▶ 1:36:09Sen. Cruz: Have any suggestions for improving the system to make it easier to catch manipulation?
▶ 1:36:16Dr. Sadin: I would refer back to my written statement which is anything that would further collaboration, engagement and transparency across the stakeholders that operate in this space. From then to integrity monitoring perspective, I would probably urge platforms to widen the parameters in which they deemed suspicious activity may have taken place for reporting purposes.
▶ 1:36:40Dr. Sadin: I think implementing a list of prohibited patrons on a proactive basis to ensure they are preventing transactions from individuals before it ever happened is crucial. Obviously from an educational standpoint, vanilla old training is not going to work. This is a new frontier. There are bad actors constantly innovating. We need to make sure that the curriculum is refreshed and constantly reinforced.
▶ 1:37:05Sen. Cruz: There is serious disagreement about whether the cftc can unilaterally allow prediction markets to all for sports event contracts pursuant to the commodity exchange act. Many simply see prediction markets as a workaround to stay gambling laws. The courts are split. Ultimately less congress asked the supreme court may have to decide the issue.
▶ 1:37:33Sen. Cruz: Congressman mchenry when congress debated dodd frank, some senators expressed concern that event contracts could become a vehicle for sports gambling. Isn't that in fact what has come to pass? The cftc argues that sports event contracts for the commodity exchange act's definition of a swap because sports outcomes have economic consequences. But what is the economic consequence of whether a pitcher will throw a ball or a strike?
▶ 1:38:01Hon. Mchenry: Getting a playoff game has a material impact on the economy around that stadium and that town. You can see economic impact on whether or not you get a playoff game in your town. Four the t-shirt manufacturer on the super bowl. There is economic activity for that.
▶ 1:38:20Hon. Mchenry: The debate around dodd frank, in my experience on the house side, we did not have any substantial discussion about the nature of swaps in my committee but in the ag committee there was a wide new definition for swaps and that authority was given to the cftc.
▶ 1:38:44Hon. Mchenry: Then the chair of the cftc gary gensler wrote the rules that encompass a wide array and definition of swaps.
▶ 1:38:51Sen. Cruz: What about an answer to the specific question about what is the economic consequence of whether a pitcher throws a ball or a strike?
▶ 1:38:57Hon. Mchenry: It is under the consumer to decide that under swaps definition. And it is for the courts and congress to decide whether or not they like that. Under the commodities and exchange act futures are banned. We don't have a serious debate about onions but at the time they did. We welcomed the input of congress and the rulemaking of the cftc on these definitions.
▶ 1:39:24Sen. Cantwell: Thank you Mr. chairman and thank you to senator blackburn and senator hickenlooper for doing the subcommittee and I think that last conversation is illuminating and I would like to follow-up. We had a financial collapse of our economy because we did not do the job of regulating derivatives and remember somebody on the senate floor actually saying we cannot regulate them. We don't know what they are. That is exactly where we had a conservative journalist who said the lack of clarity is fraught.
▶ 1:39:55Sen. Cantwell: If you cannot understand it, then yes, there is something behind the situation. I definitely want to say that fans must have confidence that games are being played fairly and honestly so I agree with the chairman on that. That is what makes competition great and that is why senator cruz and I are conducting bipartisan inquiry into how the league's, the sports books and stakeholders are protecting the integrity of sports and teams.
▶ 1:40:23Sen. Cantwell: I believe that this integrity crisis goes beyond how we monitor players and betting activity. I also want to ask why would a professional athlete making millions of dollars risk losing everything to place a bet? In many cases it is the same answer. Online betting platforms are highly addictive. Our witness was talking about that today. Whether you are a star athlete or struggling college student. When you are hooked, they are designed to keep them coming back for more.
▶ 1:40:52Sen. Cantwell: The conversation that we just had, Mr. miller, I am just trying to understand our former colleague here, congressman mchenry talked about the history but in 2010 congress amended the commodities exchange act in the wake of the financial crisis.
▶ 1:41:13Sen. Cantwell: Congress authorized the cftc to prohibit prediction markets from offering contracts that involve gaming and gaming activities and in 2011 they issued rule 40.11 which banned prediction markets from certain activities. Cftc prohibited sports betting for more than 15 years under this rule.
▶ 1:41:40Sen. Cantwell: All of a sudden starting in 2025 prediction markets began offering sports gambling contracts. My state wants to know why the indian gaming association, so we basically have lived by the rules in their state and lived by the rules of a regulated entity are now all of a sudden competing with somebody who is not a regulated entity that is basically offering the same product.
▶ 1:42:07Sen. Cantwell: In 2025 the indian gaming industry generated more than 680,000 jobs for rural americans and it has served as an economic livelihood. If the prediction markets are allowed to keep operating unchecked, does this pose a threat to tribal sovereignty and what can congress do to better protect indian gaming?
▶ 1:42:29Mr. Miller: Thank you, ranking member. Clearly we share the same view. As someone who was around during dodd frank and recognizing that this is a response to a financial crisis that was created by lax regulation or no regulation. It is hard to believe that anybody could pull from that the idea that we can create a national sports book run through the cftc.
▶ 1:42:57Mr. Miller: It is hard to even imagine that anybody can make the argument but here is why we are here today. In fact, there were federal statutes on the book when dodd frank was amended and created. Igra establish the framework for indian gaming which was struck down in 2018 and the wire act, federal statutes that should have been at least note that -- at least looked at and modified
▶ 1:43:28Mr. Miller: If the federal department of gambling was going to be created. Of course it was never intended to be that. In 2018 when the supreme court actually debated murphy versus ncaa, even then the supreme court did not understand or recognize that there was a backdoor opportunity for the sports betting industry through prediction markets back in 2018. Yes, there is real harm here.
▶ 1:43:57Mr. Miller: The chairman who is one of your constituents who runs the indian gaming association, we are very aligned on this. Indian country is scared. Gaming has been a transformational economic activity for some of the people who have been treated worse than almost anyone else in this country's history. Gaming has created economic vitality and an opportunity for them and that opportunity is very much at risk.
▶ 1:44:29Sen. Cantwell: I just looked it up because it did not look quite right before. He said "complexity is fraud. " if it is so complex and you cannot understand it, then complexity is the fraud. No one can answer the question why we have two competing businesses. We have indian gaming that is often sports betting and another entity offering sports betting and it is not regulated in the same way.
▶ 1:44:58Sen. Cantwell: We have to get the answers to that. Dr. levant, I know you have probably been asked this already but what we do about this larger issue. There was recent data that shows the troubling trends with youth and gambling that includes material increases in the number of 10th graders who are saying they have engaged in gaming across states. How does that online betting -- are people being targeted at this young age?
▶ 1:45:28Dr. Levant: People are being targeted relentlessly. This discussion of prediction markets has done something that others would have predicted impossible. As Mr. miller and I agree on initially, prediction markets take this and not only infringing upon the sovereign rights of tribal gaming, 18-year-olds and they are being told it is investment.
▶ 1:45:58Dr. Levant: I've had six clients in my recovery group who have relapsed because they were told this is an investment. I'm not gambling, I am making an investment. It is fundamentally wrong. Where I disagree with Mr. miller is there is a huge need for federal oversight because of what is happening with children and young adults and families with online sports gambling. But it is significantly worse now with prediction markets because they are acting under the color of federal laws targeting people as young as 18.
▶ 1:46:30Dr. Levant: They don't have to comply with self exclusion. They are just doing whatever they want to do and the harm is growing exponentially.
▶ 1:46:39Sen. Cantwell: I have gone over my time but I am asking him about the impact on youth and the chairwoman and I have worked diligently on a lot of legislation to protect young people online so we will add this to the list. Thank. -- thank you madam chair.
▶ 1:47:02Chair Blackburn: Senator rosen.
▶ 1:47:05Sen. Rosen: Thank you, madam chair and thank you to the witnesses. I am concerned about bending the rules. A rose by any other name still smells as sweet. If it >> like a duck and looks like a duck, it is probably a duck. Licensed sports books are required by state laws to implement responsible gaming programs which include deposit limits, cooling-off periods, mandatory disclosures.
▶ 1:47:33Sen. Rosen: Under the cftc no equivalents applied to production markets. Dr. levant, I have a lot of questions so if you would be brief. You are working with people's sports betting problems. Is there a fundamental different between a sports bet versus a contract and what is the risk by allowing prediction markets to circumvent meaningful mandatory consumer protections?
▶ 1:48:00Dr. Levant: There is no discernible difference. People are using it as another form of gambling. You are absolutely right, senator. It circumvents all the rules including rules designed to keep people safe at the state level. >> I appreciate that. I'm going to talk again about circumventing the rules.
▶ 1:48:25Dr. Levant: Most of the country has only had legalized sports betting only 10 years ago. Nevada has a history with regulated sports betting, legalizing it nearly 100 years ago. Nevada was a pioneer and now some of the most comprehensive state rules to promote safe sports betting have occurred in my state of nevada.
▶ 1:48:48Dr. Levant: Federal action on sports betting is often pushed underground and outside of the legitimate regulated markets there for any federal action must recognize the strong pre-existing state and tribal gaming regulatory regimes that insure all sports betting no matter what you call it, what it is branded as and it is covered under current state and tribal law. Miss thomas, the next few questions are for you.
▶ 1:49:18Dr. Levant: I'm going to ask you to answer and then I have three questions so we will try to be as brief as we can. What does full compliance with sports betting laws today look like in practice and more specifically what guard rails and compliance measures from licensing, background checks to ongoing geolocation requirements, age verification, are part of your state regulatory regime?
▶ 1:49:41Ms. Thomas: Thank you. First of all you have to be over 21 to wager. You have to have, sports book must enforce exclusionary measures for those who choose to gamble and our office oversees the exclusion list to make sure that information is communicated. Credit card deposits are prohibited. Extension of credit is prohibited.
▶ 1:50:09Ms. Thomas: We review all markets before they are offered and leagues and teams can request that those are not allowed.
▶ 1:50:16Sen. Rosen: Really comprehensive. Just a simple yes or no. Do you believe prediction markets are not currently required to comply with any of the state guardrails you described?
▶ 1:50:29Ms. Thomas: That is correct.
▶ 1:50:31Sen. Rosen: I will ask a similar question going forward. What is required of legal sports betting companies to comply with anti-money laundering rules, responsible gaming safeguards, cyber security and integrity monitoring?
▶ 1:50:47Ms. Thomas: It is extensive all of those things are required. But federal reporting by the sports books for anti-money laundering and state reporting for anti-money laundering and unusual and suspicious activity.
▶ 1:50:59Sen. Rosen: You are watching is to prevent criminal activity and other cyber incidents. Yes or no again. Prediction markets are not currently required to comply with any of these safeguards as we just described, anti-money laundering, responsible gaming safeguards, cyber security and integrity monitoring.
▶ 1:51:17Ms. Thomas: No, not to my knowledge.
▶ 1:51:19Sen. Rosen: Thank you. I will ask a similar question. How do operators coordinate with state and tribal gaming regulators or sports leagues? You have touched on this. Law enforcement and integrity monitoring firms to identify suspicious activity and protect consumers?
▶ 1:51:37Ms. Thomas: We are in constant contact with all stakeholders, leagues, integrity monitors, partners in other states including nevada. We are very close with all of our partners and we have to be in constant communication so we can share important information.
▶ 1:51:53Sen. Rosen: You are very diligent. Yes or no again. Prediction markets are not currently required to comply with any of these safeguards. Is that correct?
▶ 1:52:03Ms. Thomas: Yes, correct to the best of my knowledge.
▶ 1:52:06Sen. Rosen: Thank you. Mr. miller, we talked about senator cantwell touched on gaps in compliance in tribal communities and for state and tribal. Products that are functioning identical to sports betting are allowed to operate completely outside of state and tribal laws and regulations. What protections, oversight mechanisms and accountability structures do you believe they can circumvent and would you say this is a fair playing field?
▶ 1:52:37Mr. Miller: I think -- thanks for the question. I certainly do not believe it is a fair playing field. We believe that getting a gaming license whether it is in the body or any other state of the privilege.
▶ 1:52:53Mr. Miller: It requires significant due diligence, the regulations around the licensee and what they apply for and then how they behave. We are all as licensees we are held to account by 8400 regulators in the states and tribes all over this country.
▶ 1:53:20Mr. Miller: That itself shows that the system is iterative and continuing to get better. But the notion that prediction markets and the 500 people who work at the cftc, the 500 people is less than the number of regulators in the state of pennsylvania. Somehow or another they can manage and facilitate a nationwide sports betting network is laughable.
▶ 1:53:47Sen. Rosen: So you would agree that -- you just ask for a fair and level playing field.
▶ 1:53:54Mr. Miller: That's correct.
▶ 1:53:56Sen. Rosen: I am going to ask you about ongoing litigation. My time is up. Do you want me to keep going? I know he was coming. As soon as senator lujan gets here, we will defer to him.
▶ 1:54:09Chair Blackburn: If the gentlelady will pause for a moment. Senator hickenlooper and I each have some additional questions but I think senator rochester is planning to return and senator lujan is planning to return and senator klobuchar. Ok. We will continue.
▶ 1:54:35Sen. Rosen: Thank you madam chair. I appreciate it. I knew he was on the way. I appreciate your consideration. Mr. miller, nevada is among many states that have been pulled in the costly litigation with production markets to defend its right to regulate gaming within its borders. We want to regulate gaming within the state of nevada.
▶ 1:54:59Sen. Rosen: What does the nationwide litigation landscape look like and how long might it take for these questions to be resolved if it is left of the courts and in your view what are the risks if congress does not step in to reaffirm that states are the primary regulators when it comes to gaming and if congress never intended the cftc to regulate camping nationwide?
▶ 1:55:18Mr. Miller: Thank you for the question. I clearly agree with you. It was never congress's intent to create a federal department of camping through the cftc. The fact that we have federalism in this country, that states have the rights of self-determination and tribal nations similarly, this is how we have created a system that works in america.
▶ 1:55:45Mr. Miller: 8400 regulators working everyday to make sure there is integrity in the matches, that the consumers are protected and that the state and tribe benefits from this. As it relates to litigation, we are in line of the 12 circuits. And 41 state attorneys general have written the cftc saying knock it off. It is not your purview.
▶ 1:56:09Mr. Miller: And these are attorneys general who span the spectrum from the furthest left to the furthest right all agreeing that the states have the right to do this. And they are spending extraordinary amounts of money on litigation against kalshi and the prediction markets and now against the cftc who has inserted themselves as a party using taxpayer dollars to assert their control and dominance in a world that they quite frankly have no business being in.
▶ 1:56:36Sen. Rosen: My last and final question to follow up on this. Cftc's current approach prediction markets certify their own contracts for training. It is like the wolf guarding the hen house. They decide whether a new product complies with the law. They don't have to get another audit and the cftc has 90 days to review. Can you name any other federal or state regulator that allows the entities it regulates to approve their own products in this way?
▶ 1:57:07Mr. Miller: I would love to say the short answer is no. The short answer is no, but I have tried to find another agency at the local, state or federal level that allows participants that are regulated entities to self certify.
▶ 1:57:24Sen. Rosen: Always give yourself the benefit of the doubt, I guess. Thank you.
▶ 1:57:30Chair Blackburn: Senator lujan, you are recognized. >> thank you. Mr. miller, last week 40 mexico tribes sued kalshi alleging the company's offerings violated the federal indian gaming regulatory act. There are other lawsuits out there.
▶ 1:58:02Chair Blackburn: My question is yes or no has congress provided gaming rights?
▶ 1:58:07Mr. Miller: They have.
▶ 1:58:09Sen. Lujan: Is it your belief that some of these sports betting and other productive models are in violation of state and federal gaming laws by operating on tribal land?
▶ 1:58:20Mr. Miller: I believe that is true.
▶ 1:58:23Sen. Lujan: As their agreement on the panel that congress needs to do something? Mr. miller?
▶ 1:58:29Mr. Miller: My view is congress needs to reaffirm the rights of states and tribes.
▶ 1:58:34Sen. Rosen: Miss thomas?
▶ 1:58:37Ms. Thomas: I agree with Mr. miller.
▶ 1:58:41Sen. Lujan: Dr. sadin?
▶ 1:58:44Dr. Sadin: Five perspective is anyone who is offering markets in sports should engage in some type of control to make sure the integrity of the sports is preserved.
▶ 1:58:57Hon. Mchenry: I believe we have to see the cftc rulemaking and we welcome the conversation with congress. As for now the courts in the third circuit has given prediction markets the capacity to offer these contracts.
▶ 1:59:11Sen. Lujan: Are these supposed to be advertised to kids?
▶ 1:59:14Hon. Mchenry: No, the members of our correlation do not. Number one there is a solid ban at 18. Congress can debates the appropriate commodities for whatever it is in society. We would like to be engaged in that conversation if congress wants to do that. But for prediction markets, they comply with market surveillance and know your customer requirements.
▶ 1:59:41Hon. Mchenry: All of our members maintain an active ban list from leagues to ban folks are insiders as designated by the people they work with or work around and we maintain that by using technology like surveillance techniques like geolocation and in particular when it comes to tribal issues, it is very important that anyone who is engaged with tribes respect their treaty rights that have
▶ 2:00:12Hon. Mchenry: Been long-standing in this country and have been and should be affirmed by the courts in congress -- and congress.
▶ 2:00:18Sen. Lujan: I appreciate your thorough response. Mr. chairman, it is always good to see you. Dr. levant?
▶ 2:00:25Dr. Levant: Congress must certainly step in with prediction markets but congress needs to go further. This is where I come back to my disagreement with Mr. miller. It is ironic that the aga is asking congress for help with prediction markets but at this time tell me you don't have a role with sports betting. There need to be federal standards enacted to govern sports betting which would also recognize the sovereignty of states to go further if they like.
▶ 2:00:57Dr. Levant: This is too big, involving too many entities. There is no way to prevent harm without congress stepping in and creating a minimum federal safety standard.
▶ 2:01:08Sen. Lujan: I agree with that. Madam chair, I know this hearing is on the subject of sports betting integrity in america. There is one thing that I wanted to race today because it is sports betting proximate. Maybe there are folks in this room who liked to collect training cards -- trading cards, baseball cards, pokemon cards.
▶ 2:01:38Sen. Lujan: There are even cards of members of the house of representatives. Has anyone in this room heard of why not.com -- whatnot.com? I can see a few hands. This company is being sued right now over illegal lottery and gambling. What they do is you buy into this website and they draw your name and they let kids start doing this with credit cards.
▶ 2:02:10Sen. Lujan: People have gone into debt. I just certainly hope that when we choose to clampdown on protecting kids, that we do it in all of these spaces. This is ridiculous that people are getting addicted to this kind of nonsense. Kids are getting their parents in debt and driving up credit cards. I hope these people get put out of business with the kind of nonsense they are doing to prey on the most vulnerable people in america.
▶ 2:02:35Sen. Lujan: I don't want to distract from this important hearing but that of chair, I know this is of interest where we talked about kids. I hope we can dig in, ask the experts to look at this and really don't forget about people like this who are also praying on kids as well. Thank you for the time and everyone who is here today, really appreciate it.
▶ 2:02:54Chair Blackburn: You have raised an important point. What we do have to realize is there are laws and there are rules in the physical space over certain activities that in the virtual space there are no laws or rules. As I have many times said, product safety design exists in every single industrial sector in this country except in the virtual space.
▶ 2:03:27Chair Blackburn: Buy a car, there are safety standards. They don't tell you how to drive the car. But they tell you that the car is safe to drive. And what we are seeing is growth in these industries where the standards have not been put in place and the industries have taken off on their own and then regulation is being discussed on the backside. Dr.
▶ 2:03:53Chair Blackburn: Levant, I said I would come back to you on this issue of advertising to children. Mr. miller says they don't. Congressman mchenry says they don't.
▶ 2:04:11Chair Blackburn: But we know the dirty truth of a lot of this is they are on these websites that are targeting children and are trying to build databases of children. The number of eyeballs, in the amount of time they capture them, the amount of time they are online, that is going to give them a richer data that is worth more money.
▶ 2:04:45Chair Blackburn: The issue of where children engage with these activities is a part. Senator lujan just mentioned it. Senator cantwell just mentioned it. Senator curtis is looking at this issue.
▶ 2:05:01Chair Blackburn: And that presence of gaming or prediction markets on those websites and tried to pull those children into that and algorithmically being pulled further, you have spoken to that and the issue of addiction. When it comes to advertising to children, what has your research has shown you?
▶ 2:05:27Dr. Levant: I am going to call them gambling companies inclusive of prediction markets. When they say we don't advertise the children, they are speaking about advertising on primetime tv, network television. That is not where kids are getting their entertainment. Children are getting their entertainment online, on their phones, on instagram, tiktok and a variety of platforms.
▶ 2:05:55Dr. Levant: That advertising is completely unregulated and it is inundated. Social media is inundated with various levels of gambling advertising. One of the most sinister is something the industry calls affiliates. People they pay to talk about their platforms, to post about their platforms. The pop-up ads are relentless and they are completely unregulated. States cannot address that.
▶ 2:06:22Dr. Levant: Congress has to address that because when these companies go on social media, they are going to as night follows day and day follows night, they are going to pull in the eyes of children and young adults. When the algorithms have been triggered, it will continue without any safeguards.
▶ 2:06:43Dr. Levant: So what we are talking about is delivery of advertising of a known addictive product the children long before their risk reward system has fully formed. That does not happen to you until you are 25 or 26. So by its very definition what they are doing is endangering children for their benefit. It certainly does not benefit the kids. That is problematic.
▶ 2:07:08Chair Blackburn: Dr. sadin, what do you see in your research about the advertising? How are you seeing these kids engaged?
▶ 2:07:18Dr. Sadin: Thank you for the question. I don't have a tremendous amount of visibility into the demographic types that are engaging in this type of product. Our central goal for us is regardless of who you are, where you are, you are insured to be protected on these platforms with respect to the integrity of sports.
▶ 2:07:41Dr. Sadin: So if you are a participant, prohibited participant, you have access to inside information, you have the ability to exert undue influence and you are being tracked and proactively permission to ensure you are not transacting in markets.
▶ 2:07:56Chair Blackburn: I also want to ask you a little bit. We talked a little bit about this yesterday, fairplay and the match fixing that is going on. I wonder what your take is and how destructive you think what you have seen in debt is to the broader sports and to the micro-targeting that is going on.
▶ 2:08:26Dr. Levant: Generally speaking individuals who are closest to the level of play, the sport themselves are the ones who are most vulnerable, the ones who are at most risk. Whether that be collegiate stakeholders, student athletes, administrators, trainers, coaches, equipment managers, etc. They are the ones who are the most vulnerable to bad actor harm and threats and approaches.
▶ 2:08:55Dr. Levant: I think getting them educated to make sure that they know how to deal with those types of threats and vulnerabilities is essential.
▶ 2:09:02Chair Blackburn: Congressman mchenry, I think there has been a lot of discussion around the cftc as the sole regulator but we know there are lawsuits. I think it is he has an active lawsuit right now. I believe that our state regulators and state attorneys general have a role to play in protecting consumers.
▶ 2:09:36Chair Blackburn: You paid it toward only the -- you pivot toward only the cftc. How are your members engaging? The protection does lie with the states. When would they not engage with the states to make certain that consumers are protected?
▶ 2:10:00Dr. Sadin: They adhere to higher standards than the average state standard. In the states of legalized gambling there are one dozen that that did not ban to children. At the state level it is not perfect as well. You have 35 states that allow sports books.
▶ 2:10:20Dr. Sadin: What we have with the cftc is a requirement for know your customer, anti-money laundering, market surveillance, approving contracts before they go to market. Then before 24 hours they can unwind those projects if they think there is fraudulent activity. They have the ability to ban certain contracts.
▶ 2:10:43Dr. Sadin: Cftc engages with data sharing on products like 360 that are members use to ensure that they police insider trading and fraudulent activity. We have very high standards for the members that are part of our coalition. To say that there is no federal standard in this realm is not true. In the general realm you are describing, you are absolutely right. It is a very complicated space.
▶ 2:11:11Dr. Sadin: But for these regulated prediction markets, they are using new technology to access a very old type of exchange of the swamps market that has been around for 100 years and has been regulated at the state level and then at the federal level.
▶ 2:11:28Dr. Sadin: This is a time honored saying with new contracts offered, with a new piece of technology and with that we have struggles with how it develops and the rulemaking regime that is ongoing at the cftc is very important to get right so we do have the best consumer protection available possible.
▶ 2:11:47Chair Blackburn: Thank you. Senator hickenlooper.
▶ 2:11:51Sen. Hickenlooper: Thank you. I have a couple of questions. 35 states prohibit gamblers from borrowing money to make wagers. These rules exist to protect consumers so they don't end up trapped in a cycle of debt and dealing with their addiction and paying off loans.
▶ 2:12:13Sen. Hickenlooper: Kalshi recently asked the cftc for approval to offer consumers these risky loans so they can place bets using money they don't have. We sent a letter to the cftc urging them to reject the application from kalshi. Based on your experience working with people affected by problem gambling, is it dangerous for consumers to borrow money to bet on friction markets?
▶ 2:12:39Hon. Mchenry: It is extremely dangerous. No one should be borrowing money to begin with period. In addition to that I will tell you who does borrow money to gamble. Addicts borrow money to gamble. People prone to addiction borrow money to gamble.
▶ 2:12:56Sen. Hickenlooper: Thank you. I agree with that. Let me also ask you since I have you on the mic, comeback programs often referred to as vip retention or win back generally are used to reactivate lapsed accounts by flagging accounts for aggressive reenrollment often highlighting their previous big wins with the same addictive juice that for
▶ 2:13:30Sen. Hickenlooper: Some people is irresistible. Players who have proactively blocked themselves from the app, these tactics are highly controversial. In some cases they are illegal.
▶ 2:13:47Sen. Hickenlooper: Self exclusion should be in my understanding irreversible and it should last six months when someone makes? That decision? . Should they be protected from this type of advertising?
▶ 2:14:06Dr. Levant: Self exclusion is a state-by-state matter. I will share two events. One that just happened this week. A client had gone on one-year self exclusion. It took this person a while to go on a one year self exclusion. At 40 seconds past the hour of the exact one year this client received in the mail that was offering them a welcome back opportunity and a welcome back bonus.
▶ 2:14:34Dr. Levant: When I looked at the fine print on the offer it was tailored to their player number that they had before. I am happy to make this available to the committee. I brought a copy of an email that a client of mine received. They were not on self exclusion but they had been a very active gambler and for six weeks they did not make a bed.
▶ 2:14:56Dr. Levant: They were in treatment and they did not make a bit but six weeks later they received in the mail from what is labeled a draft kings have yet to and it starts with I have some exciting news for you. Your account has caught her eye and we are thrilled to extend an invitation.
▶ 2:15:16Dr. Levant: That is as predatory as it gets and if this were an active -- another addictive product like alcohol or tobacco, we would shut it down instantly if they were exhibiting that type of predatory behavior. In gambling, they call it vip programs. Yet another reason congress needs to set a minimum safety standard to stop this from happening because it is ruining lives and ruining families.
▶ 2:15:47Sen. Hickenlooper: Goal should be that the industry reaches out to establish those standards.
▶ 2:15:54Dr. Levant: Yes but as I pointed out earlier, Mr. miller on their website they specifically state that the federal involvement in sports gambling is I believe the words are a nonstarter. When an industry demonstrates an unwillingness to regulate itself and as an addictive product, most respectfully that is where congress has to step in. We have seen this with tobacco. We have an opportunity to get in front of this.
▶ 2:16:23Sen. Hickenlooper: I will not speak for the chair but I think this hearing qualifies as a starter. Miss thomas, thank you for all of your work on this. Many states like tennessee have created regulations on gambling advertisements to ensure that consumers are protected. Can you please outline and we were talking about some of these, again Dr.
▶ 2:16:47Sen. Hickenlooper: Levant referred to this as predatory advertising. Can you explain the advertising guard rails and positive impact they have had on consumers?
▶ 2:16:57Ms. Thomas: I believe that the issue he was speaking to goes to not only advertising but a responsible gaming problem. In our state we require operators to provide a written responsible gaming plan, training outline, the mechanics by which they oversee that and data about and how many they have
▶ 2:17:34Ms. Thomas: >> part of their plans, and I can tell you that every operator has in there that they will not market to anybody who was ever on an exclusion list so that is a very positive thing. Otherwise, by statute, we advertise to minors. There was disclosure about 18 hundred gambler and one 800 reset which are gambling help lines and individuals can call those and be directed to assistance with intimacy.
▶ 2:18:02Ms. Thomas: I also would like to touch on the fact that we spoke about a lot of predatory behavior targeting really young 10th graders, I think the chairman said. I see so much of that with the legal sports books and our office has spent so much time and effort targeting those and especially working with google and apple to get any illegal apps off the store so they can't target minors. >> thank you.
▶ 2:18:32Ms. Thomas: I yelled back a tear but I feel like all five of you are willing and engaged to fix some of these glittering problems and look forward to working with the chair to provide us a sense of urgency. These are real people's lives being negatively impacted right now. >> I think all about -- I thank our witnesses. You have been an excellent panel.
▶ 2:19:01Ms. Thomas: This does allow us to start to build where we should move in regulation and also looking at the division between what should be federal and what should be state and preserving those states rights in order to move forward with this.
▶ 2:19:18Ms. Thomas: I will have to say, chairman kruse is no longer here but talked about how big the football friday nights are in texas but I would like to point out, for the record, that texas finally gave in and joined the sec which is the greatest football conference.
▶ 2:19:43Ms. Thomas: So they finally saw the light and they were able to join with the sec. I do want to remind you all that members of the panel are going to have until may 27 to submit questions. I will remind you that you need to respond to those within seven business days so that will give you until the close of business on june 10 to submit your responses to the questions for the record.
▶ 2:20:12Ms. Thomas: You have done a superb job in helping us establish this baseline. We are grateful for your time. At this time, hearing adjourned.