Net Gambling

Net gambling poses questions for regulators

By Fredreka Schouten, Gannett News Service

WASHINGTON - Despite legal questions, the race to expand Internet gambling is picking up speed.

And critics charge a bill now in Congress aimed at banning cyberspace betting is so riddled with loopholes, that it will do little to stop online wagering.

More than 700 gambling sites, offering everything from virtual poker to betting on college football games, exist on the Web. Analysts predict online bettors will lose $3 billion a year by 2002.

For many years it was the exclusive province of the Caribbean and Central America, but a growing number of governments now authorize cyber gambling. And U.S. companies, eager to capitalize, are cautiously proposing their own plans to allow online gambling. For instance, Virt game.com, a firm in San Diego, hopes to launch a computerized sports bookmaking operation with Las Vegas-based Coast Resorts.

The company hopes to win regulatory approval arguing that it is a computer network and not an online system. It also would restrict play to Nevada residents and require gamblers to establish accounts in person at a casino to guard against betting by minors.

Virgin Records founder Richard Branson has teamed with Microsoft in a bid to take over Britain's national lottery and sell tickets in stores, over the Internet and through mobile phones.

"Fifty countries have authorized Internet gambling, and they are not all banana republics anymore," says Sebastian Sinclair, vice president of Christiansen Capital Advisors, a New York firm that analyzes the gambling industry. "When you talk about Virgin and Microsoft getting in, this becomes hard to ignore."

Nevada law bans online wagering. But regulators have decided they cannot ignore the Internet. "Internet gambling is here to stay," says Brian Sandoval, chairman of the Nevada Gaming Commission, which held a workshop last week on the issue. "And we should understand it."

Federal law is murky. The 1961 Wire Act makes it illegal to use phone lines for sports bets, but it's silent on other forms of gambling. And new technology, such as satellite transmissions and radio waves, could replace phone lines.

Just last month, prosecutors in New York used the 39-year-old federal law to win a conviction against Jay Cohen, a U.S. resident who offers sports betting from an Antigua-based Web site.

But despite that first-ever conviction in an Internet gambling case, opponents of online betting say federal law should be updated to keep pace with new technology.

Experts, however, argue that the bill in Congress will do little to curb online betting. The legislation would make it illegal to take bets online but doesn't list penalties for individual gamblers. And because most online gambling operators work outside the USA, they are beyond the reach of U.S. law enforcement. In addition, the Senate and House bills carve out exemptions for horse racing, dog racing and jai alai. The House bill also exempts American Indian tribes with conditions. The Senate version opens the door to online lottery sales.

Still, the bill's proponents say the legislation is needed, partly to protect U.S. consumers.

Alan Kesner, a Wisconsin assistant attorney general, says that without a law, many Americans mistakenly assume online gambling is a safe enterprise endorsed by their government. "We don't want to give consumers a false sense of security," he says.