Feds bet against online gambling

| September 10, 1998

By JOHN MASTERSON

Feel like gambling a couple of bucks on video poker? Or maybe wagering on few hands of cards? That's perfectly legal in our fine state-just make sure you don't do it online.

In July, the U.S. Senate passed the Internet Gambling Prohibition Act in a landslide which would extend the 1961 ban on the use of telephone wires for gambling purposes to cover the Internet, including fiber-optic data network and satellite transmissions. An amendment put forth by Native American interests claiming that reservation gambling should be exempt from the new restrictions was rejected. (Exemptions were made, however, for state run lotteries and pari-mutuel betting, such as gambling on horses or dogs.)

So be careful! Your casual entertainment at www.virtualvegas.com or www.starluck.com could cost you more than your gambling losses. The Internet Gambling Prohibition Act sets up fines of up to three times your wagers or winnings (whichever are greater) in addition to up to three months in federal prison.

Like the overturned Communications Decency Act, which aimed to treat all Internet users as if they were 9 years old, the Gambling Prohibition Act outlaws online behavior that is legal-and regulated-face to face. The U.S. Department of Justice meanwhile criticized the pending legislation when the bill was first drafted, stating "the department does not agree that federal law should be amended so broadly as to cover the first-time bettor who loses $5."

Montana's Attorney General, Joe Mazurek, has expressed support for the legislation, while Wilbur Rehmann, administrative officer with the gambling division of the Montana Department of Justice, sees it all as a consumer protection issue.

"How do you know that [the website at which you place your bet] has any payouts at all?" Rehmann asks.

Still, it's worth noting that the lobbyists chiefly responsible for rallying this bill along were paid by legal gambling interests, who saw half a trillion dollars in betting revenue in 1997. Barry A. Shier, the president of the Golden Nugget Casino in Nevada, even told a group of industry big shots last year, "The Internet scares me to death... We have 30 million PCs in U.S. homes-and that means you have the potential for 30 million slot machines. Casinos will be redundant."

State authorities across the nation, themselves comfortable with the revenue stream afforded by local regulation and taxation of lotteries and other sanctioned gaming, were the other chief proponents of the bill. Throw in the Christian Coalition, and you've got an eclectic, powerful mix. So politically, this bill will likely enjoy significant support.

Says Tom Bell of the Cato Institute: "Few left-wing activists will raise First Amendment objections on behalf of Internet gambling. And conservatives, while nominally in favor of free markets, make notable exceptions for activities like gambling that smack too much of the pursuit of happiness."

Back in the Big Sky Country, Rehmann argues that "online gambling in Montana is simply illegal under our state constitution"-a point reiterated by the Attorney General's office. According to his line of reasoning, only those outfits recognized and sanctioned by the state are allowed; however, Rehmann also says that law enforcement in Montana has neither the resources nor the inclination to chase down online bettors.

Asked if it sounded just a little bit hypocritical that the state may be prohibiting behavior in the privacy of one's home that is legal in a bar, Rehmann responds that if people want to gamble-with 17,000 video gaming machines statewide-there are plenty of legal, regulated ways to do so in Montana.

Rehmann notes that not only is there no regulation whatsoever on some offshore gambling sites, but also that it's difficult to know with whom you're dealing. For example, even if a site claims to have the legal blessing of the island nation of Antigua, there's no real way for the average consumer to know if the site is actually in California-or Poland for that matter.

As such, Rehmann says, this is an entirely appropriate issue for the feds to get into, given their oversight of interstate commerce and international treaties.

Whether the best solution to protect consumers is to ban online wagers altogether remains to be seen. In the meantime, at least one consumer is fighting back creatively.

After wagering close to $70,000 online from her desktop computer in California, Cynthia Haines is countersuing her credit card companies for unfair business practices. She claims that she should not have to pay her bills (spread across a dozen cards) since gambling is illegal in the state and online wagering is illegal in the United States. Credit card companies, the suit claims, should not be allowed to profit from illegal transactions.

The companies in question have issued a predictable response: "To the extent that the consumer incurs a debt, they should bear the responsibility of paying it back."

Haines' lawsuit may seem a bit wacko, but the Internet gambling companies are enjoying a small slice of the big gambling pie. Having earned more than $300 million last year, they have good reason to be nervous. If the Haines lawsuit is successful, virtual casino operators say, the Internet gambling industry could collapse.

The Internet Gambling Prohibition Act still has to pass the House of Representatives, and then get the nod from President Clinton. If it does pass, the bill will likely face appeals on constitutional grounds. So stay tuned. As one pro-net-gambling site says, "This is only the 4th round of a 9-round fight."


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