Offshore casino craze

U.S. fights expansive world of E-betting

By MICHAEL BURNHAM and LEONADIS McKINNEY ~ Medill News Service - 9-4-03

WASHINGTON

ambling in the borderless world of cyberspace is much like playing cards in the old West. Every island on the modern map seems to operate an online casino, much like every railroad stop in Nevada once had a card table.

The comparison doesn’t end there: Not only is cyberspace borderless, it’s seemingly lawless.

States are finding ways to regulate gambling effectively in traditional brick-and-mortar casinos, leaving the job of policing Internet gambling to Washington. Yet even the federal government concedes that shooting down all illegal E-gambling is virtually impossible.

Consider the quandary: States can set age limits to control who buys a lotto ticket in a gas station, who bets in a casino and who buys a pull-tab in a bar. Internet blackjack dealers, however, can deal cards in half of America’s homes.

“This is a casino in your kid’s bedroom, and it’s totally unregulated,” said U.S. Rep. Spencer Bachus, R-Ala., a leading opponent of Internet gambling. “If you introduce a child to gambling at 13 or 14, it’s addictive.”

Courts generally have agreed that the 1961 Wire Communications Act, which prohibited the use of interstate or international telecommunication wires to transmit bets, applies to the Internet, making online gambling illegal in this country.

To get around U.S. law, about 1,800 E-gambling web sites have cropped up offshore since the mid-1990s. Global revenues from Internet gambling are projected to reach $5 billion in 2003. About half of that will come from 5.3 million American E-gamblers, analysts estimate.

Online gambling is legal in more than 50 countries and jurisdictions. About 90 percent of the gambling on the Internet is operated from the Caribbean, Europe and along the Pacific rim.

As ineffective as some see U.S. law, offshore operators say they feel its reach.

The Caribbean island nation of Antigua and Barbuda has filed a grievance with the World Trade Organization about American laws that ban the transfer of funds to offshore gambling operations.

Internet gambling has played a huge role in Antigua and Barbuda’s economy since the 1990s, but the number of companies operating there has declined from approximately 100 to less than 40 in recent years, a drop that local officials attribute to stricter regulation by the United States.

On July 21, the trade organization announced that it would name a three-member panel to examine the issue and determine whether the United States was violating international trade accords by preventing gambling payments from going offshore.

“We didn’t look for this fight,” chief Antigua and Barbuda spokesman Ronald Sanders told reporters after the trade organization’s announcement, “but my government is very mindful of its responsibility to our people to maintain their jobs and to defend our small and vulnerable economy.”

Critics have besieged the U.S. government. Several of the more than 50 jurisdictions that have legalized Internet gambling - including Mexico, Canada, Taiwan, and the European Union - have announced their support for Antigua and Barbuda, and many experts argue that the government’s fight to rein in Internet gambling is doomed to fail.

“No country can prevent Internet gambling transactions from crossing its borders,” wrote Mark Balestra, the editor of Interactive Gaming News. “Period.”

Still, federal lawmakers continue to seek remedies to online gambling. The House has overwhelmingly passed a bill that requires credit card companies and banks to block all transactions for Internet gambling, including debit cards and other electronic means.

Bachus said he sponsored the bill as a way to starve Internet gambling, an activity he calls “organized crime.” Internet gambling has been particularly vulnerable to money laundering and other criminal activities, the Justice Department contends.

“I’m not crusading against gambling; this is a crusade against crime,” Bachus added. “The way to stop it is to cut off the money.”

The legislation comes four years after the National Gambling Impact Study Commission recommended that the federal government prohibit any E-gambling and encourage other nations to not harbor such businesses.

Following its August recess, the Senate could vote on a companion bill that would prohibit businesses from accepting credit card and other payment methods from Internet gamblers. Unlike the House bill, the Senate legislation would set criminal penalties for online gambling, as well as modify the federal criminal code to include satellite, microwave and other communications from fixed or mobile sources.

The Interactive Gaming Council, the world’s largest E-gaming trade association, calls Congress’ attempt to eliminate online gambling “misdirected.”

Instead, the Canada-based trade group is urging Congress to regulate Internet gambling with policies similar to Australia’s and the United Kingdom’s.

By 2005, the United Kingdom plans to license online casinos. The government will investigate operators’ backgrounds, and monitor gambling software to assure its fairness.

“From a player-protection standpoint, it’s going to be more effective,” council Chairwoman Sue Schneider said. “If there is a problem with a particular site, a player has some recourse.”

This series was reported and written by six students from the Medill School of Journalism at Northwestern University in Chicago, under the supervision of Jack Nelson, former Washington bureau chief for the Los Angeles Times, and Ellen Shearer, co- director of the Medill News Service.