October 14, 2003 -- (WEB HOST INDUSTRY REVIEW) -- Online gambling in many parts of the world is just a click away for anybody with a credit card who wants to wager a bet.
In the United States, however, only the techno-savvy can find ways to place wagers online.
To date, legislative pressures have forced online casinos and their hosting providers offshore, and banks and credit card companies have been restricting payments for online gambling transactions by their customers. Now, Congress is close to enacting a law that would prohibit using credit cards, checks or electronic fund transfers for Internet gambling.
With wagers from U.S. citizens representing roughly 60 percent of the $4.2 billion global online gambling industry, the U.S. Department of Justice is pushing for congressional action to end illegal Internet gambling in the United States. The Senate Banking Committee in September will consider a bill already passed by the House of Representatives that proposes to do just that.
Creative gamblers have already figured out a way to beat the legislative effort by turning to a third-party means to transfer money to alternative banking accounts, known as e-commerce pocketbooks, from which winnings or losses can be posted.
"Do I think we are ever going to be able to stop all illegal Internet gambling? No, but I think we can make a serious dent in this activity. We can create an atmosphere in which people who engage in this form of illegal activity will have to keep looking over their shoulders, because we may be out there," says John G. Malcolm, Deputy Assistant Attorney General for the Criminal Division of the United States Department of Justice in Washington, D.C.
Even the mighty MGM Mirage (mgmmirage.com), one of the largest and most powerful casino conglomerates headquartered in Las Vegas, Nev., has tacitly acknowledged the Justice Department's victory against online gambling.
On June 30, MGM Mirage walked away from its own 20-month project to develop an offshore online casino on the Isle of Man. When the cyber casino closed its doors, the corporation took a $5 million loss, saying the operation wasn't worth pursuing due to the current congressional environment.
"It was a very intriguing space, and it was fascinating in some respects. It just became too complex, too highly political for us in the context of federal [attitudes]," says Bill Hornbuckle, President and Chief Operating Officer of MGM Mirage Online.
The unwelcome signs have been so ominous in the United States that three years ago, the seven-year-old Interactive Gaming Council (igcouncil.org), a non-profit trade organization, relocated from Missouri to Canada, where online gambling is legal. IGC members are operators of Internet gaming sites, software suppliers, e-commerce providers, financial-transaction processors, marketing and advertising companies, information providers and other companies related to the interactive gaming industry.
"The legal and political atmosphere in Canada is much friendlier to Internet gaming than the atmosphere in the U.S. Also, several developers of online gaming software, as well as other suppliers to the industry, are based in Canada," says Keith Furlong, the Council's deputy director.
"Proposals to ban Internet gaming as debated in recent sessions of Congress appear to be simple solutions to a complex dilemma... declare Internet gaming illegal, and forget about it. If the United States wants to provide protection for children, compulsive gamblers and the general public, the answer is regulation," Furlong says, adding that most states could well use the tax revenue regulation would provide.
If online gambling were regulated and taxed, there is no way to estimate the revenue the government would realize, but "the answer is probably mind-boggling," says attorney Lynne Levin Kaufman, a partner in the Casino Department of Cooper Levenson April Niedelman & Wagenheim, PA (gaminglawyers.com), in Atlantic City, N.J.
Regulation of the industry would require government monitoring, a complex technical issue that the government at this time is unwilling to undertake.
"The main concerns are the perceived inability to effectively regulate on-line gaming, as well as underage gambling issues. The morality issue cannot be underestimated, as on-line gaming is equated with bringing gaming into homes," Kaufman says.
Kaufman contends that with regulation, the government could keep its eye on gambling activity - if service providers and gambling sites agreed to it.
"Just as land-based casinos submit themselves to regulation, the ISPs and sites would have to submit to regulation as a privilege of being able to host a gambling site. Still, many would view the monitoring as unacceptable encroachment, and the concern would be that limited monitoring could be abused," she says.
The Department of Justice opposes gambling regulation, basing its views on a 1999 impact study, which Malcolm says found the industry "fraught with perils" - including the potential for fraud, money laundering, involvement of organized crime, and exacerbation of problems for pathological gamblers.
Even without new laws, it's already illegal for U.S. citizens to engage in or wager in offshore sports book or casino gambling, and anyone aiding or abetting that activity is liable for criminal charges, Malcolm says.
That interpretation of the law poses risk to a subset of the online gambling industry - the marketers.
Cindy Carley, founder and manager of the New York-based Gambling Portal Webmasters Association (gpwa.net), says it's her understanding that marketing for offshore casinos is not illegal, at least for the moment.
"We are only doing marketing. We have nothing to do with cash flow. We don't take the money in for gambling; all we do is marketing for the online casinos and that's it. As of this time, that's not illegal," Carley says.
The private association is comprised of 244 members from countries including the U.S., Canada, United Kingdom, Denmark, Thailand, South Africa, and South America. Together, they operate 900 portals promoting Internet gambling and are paid by offshore casinos either in commissions or for advertising.
Some of her U.S.-based members have become so concerned with increasing government intervention that they have relocated to other countries, and Carley says if Congress passes new legislation she will move to Canada.
The MGM Mirage considers the government's decision against regulation akin to "putting your head in the sand," says Hornbuckle.
The decision against regulation may hamper illegal betting, but won't resolve the issues the government cares most about. "Only effective regulation can do that," Hornbuckle says.
"At some point, God knows when, it will all unravel. From our company's perspective, in terms of keeping ourselves in the online gambling space, it was too long to wait. But if and when things change, we can and will come back to it, because of our core competency."
