I HOPE NONE OF YOU FROM GOTPICKS FAMILY LIVE IN THE STATE OF WASHINGTON...

Internet gambling may be illegal but it's not going away

By Gary Rotstein

Legalization may be easier than enforcing ban

Millions of Americans do it regularly, even though the Justice Department says they're supporting an illegal enterprise.

Major corporations are looking at ways to make a profit from it, even though Congress is eyeing tougher restrictions.

The subject is Internet wagering, a $12 billion a year industry in which politics, morals, profits, individual rights and world trade issues merge and sometimes collide head-on.

This week or next, the U.S. House of Representatives is likely to vote on legislation aimed at countering Americans' ability to place sports bets, play poker and otherwise risk money in games of chance on their computers. Similar proposals have passed one or the other chamber of Congress over the past decade, but never both.

Meanwhile, the American Gaming Association is urging Congress to study the online gambling issue to see if technology has provided a trustworthy way to legalize, regulate and tax online wagering, as Britain is in the process of doing. Industry giants such as MGM Mirage and Harrah's Entertainment Inc. see online players as perhaps their best new opportunity for revenue growth.

For now, government prosecutors hold that this newest form of gambling is illegal within the United States, with or without new legislation, though they're mostly helpless to stop it.

Despite its illegality, an estimated 4 million to 7 million Americans are Internet gamblers, with poker driving the latest surge. The state of Washington made wagers over the Internet a felony starting June 7, but officials there have indicated they will not be enforcing the law aggressively.

A gambling association survey has shown the online participants are younger, more affluent and better educated than their counterparts who enter actual buildings containing card tables, roulette wheels and slot machines.

Flouting of the government prohibition on Internet wagering and confusion over what's permitted are "typical of what happens when society changes faster than the law changes, both because of technology and changing social acceptability," observed I. Nelson Rose, a Whittier College law professor who tracks the gambling industry. He noted the 1961 Wire Act used by federal authorities to deem Internet gambling illegal was passed before the computer age, before any state had a lottery and before casinos had expanded beyond Nevada.

Hoping to add clarity

Industry analysts believe rapid growth of Internet wagering will continue, regardless of U.S. policy, because of growing participation in Europe, Asia and elsewhere. Nonetheless, a pair of bills cleared separate House committees last month aimed at keeping American citizens from taking part, even though they may already make up more than half of the world's Internet gamblers.

"Offshore online gambling Web sites are cash cows, and the greed that propels these companies leads them to solicit bettors in the United States, despite the fact that the Department of Justice already believes this activity is illegal," U.S. Rep. Bob Goodlatte, R-Va., said after his Internet ban passed the Judiciary Committee on May 25.

Mr. Goodlatte's measure would expand the 1961 Wire Act, which focused on outlawing sports bookmaking by phone or telegraph. The other bill, sponsored by Rep. Jim Leach, R-Iowa, prohibits credit card companies and banks from processing payments by U.S. customers to gambling sites. Major credit card firms have instituted their own policies to block such payments.

Supporters of the legislative crackdown have criticized Internet gambling for its potential use by minors, and easy access by compulsive gamblers who can use it 24 hours a day without leaving home.

Critics also have spoken of potential problems from widespread use of an unregulated industry, in which organized crime or other money-launderers might become involved, and they are seeking to give authorities more tools to stop it.

"There's a big distinction between someone entering a casino, where you can verify their age and they have recourse to American law if they feel cheated, and being able to gamble from your bedroom with a laptop at an offshore site, whose standards of operation you don't know," said Gregory Wierzynski, a spokesman for Mr. Leach.

He said congressional aides were attempting to combine the two bills, as a single piece of legislation would have a better chance of passage by the House this month and by the Senate in the fall. Both conservative Republicans and liberal Democrats have supported the bills.

Even some gambling proponents back the measures, saying they would add clarity to a muddled legal picture and help the government go after any unscrupulous operators. But casino industry leaders also want the legal Internet gambling door open.

They know it's too soon to put legalization up for a vote of Congress, but believe a yearlong study could show it's possible to control who gains access to Internet wagering sites, and from what computer locations. With such controls, advocates say, it makes sense to allow some Internet gambling in states where card and casino games are legal in person. They concede there's no room to legalize sports betting, which has been off limits everywhere outside of Nevada by federal law.

The American Gaming Association persuaded U.S. Rep. Jon Porter, R-Nev., to introduce a recent measure attempting to establish a nonpartisan government study.

"We don't think if the bills pass, they're going to have much of an impact on Internet gambling" because operators are likely to find a way to continue serving customers who want it, said Frank J. Fahrenkopf Jr., president of the American Gaming Association. "If, in the end, what we're concerned about is protecting U.S. citizens, protecting minors, protecting pathological gamblers, wouldn't it be better to try to license, regulate and tax it here, rather than allow these unregulated offshore sites to continue?"

Big players approve

Spokesmen for the international operators have supported U.S. legalization. While Mr. Fahrenkopf said some of his members had mixed feelings about the Internet business, the two biggest U.S. casino operators, MGM Mirage and Harrah's Entertainment, figure they have more to gain than lose if they extend their reach beyond bricks-and-mortar buildings. They have brand names and budgets to market their sites easily, more so than the 2,500 or more non-U.S. Web sites estimated to be operating.

Harrah's operates the World Series of Poker, which has grown in prominence as a result of heavy television coverage of big poker games. Spokeswoman Jan Jones said the company would benefit if able to compete with operators such as PartyPoker.com, which touts itself as dealing more than 10 million hands a day in 185 countries.

MGM Mirage operated an interactive Web site from the Isle of Man in the Irish Sea in 2001-03, attempting to show it could bar play by users who were underage or based in places that did not permit Internet gambling, including the United States. The company feels it proved that but, nonetheless, shut down the site, which was not financially viable without participation by American gamblers, company spokesman Alan Feldman said.

Many of the sites are based in Costa Rica and the Caribbean, where governments provide varying degrees of regulation and taxation or licensing fees. The United Kingdom, where sports bookmaking has long been legal at shops, decided last year to legalize Internet wagering, and major companies in the Internet industry are posted on the London stock exchange. Analysts say more Internet firms are expected to base themselves in England, as they believe it will inspire more confidence from players.

At the same time, the World Trade Organization has received complaints that the United States is unfairly barring online international gambling firms at the same time it allows bets by computer on horse racing and state lotteries, which Congress is not planning to curtail. The government of Antigua has called it a free-trade violation, but the WTO has issued a mixed ruling on the complaint making no dent in official U.S. policy.

Whatever elected officials do on Internet gambling this year, it's clear the issue will not go away. Christiansen Capital Advisors, a gambling consulting firm, estimates the volume of Internet gambling has been doubling every two years in this century and could double again by 2010.

"This industry is not in its infancy, but it's maybe just at the toddler stage," company Vice President Sebastian Sinclair said. "Irrespective of what's happening in Washington, the rest of the world is moving in a different direction."

Courtesy of: Post-Gazette.com