Interesting Article from Money Magazine. I couldn't post the link
so I am copying the article for anyone interested.
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Despite attempts at prohibition, cybercasinos may be inevitable
In fact, some analysts think its only a matter of time before the big names go online
by Michael Brush
Weekend, April 18-19 1998
Given the disdain in cyberspace for things as prosaic as national borders, Net surfers have a way of wreaking havoc with local rules and customs. It's no different when it comes to gambling, where a battle has been shaping up among lawmakers over what to do about cybercasinos.
Under federal law, it is illegal to use phone lines for gambling. In the real world, however, that is a hard law to enforce. Cybercasinos are often based in foreign countries whose governments at best turn a shoulder to such businesses.
This means that once again, police and lawmakers find themselves grappling with that slippery quality of the Web -- described by early enthusiasts as the state of "being everywhere and nowhere" at the same time.
The challenge has not stopped American authorities from trying. In early March, the U.S. Attorneys office in New York launched a public hunt for suspects it says managed Caribbean and South American cybercasinos out of a Wall Street office.
"The Internet is not an electronic sanctuary for illegal betting," noted U.S. Attorney General Janet Reno in announcing the crackdown. "If a state outlaws soliciting or accepting bets, you can't evade those requirements by going on-line. You can't hide on-line and you can't hide off-shore."
Lawmakers, meanwhile, are busy trying to bolster that policy. In Washington, Sen. Jon Kyl, R-Arizona, and Rep. Bob Goodlatte, R-Virginia, are both pushing legislation that would specifically outlaw the use of cybercasinos by gamblers. A group of Pennsylvania legislators is trying to do the same.
Will their efforts ever pay off? Some policy analysts don't think so. They say that, given the nature of the Internet, such attempts will prove fruitless.
"The Web to some degree is an uncontrollable animal," says Suzanne Harvey a political analyst in Washington D.C. for Prudential Securities. "So there is no point in trying to outlaw Internet gaming, because it won't work. There will be Internet gaming. There is nothing anyone can do about it. The best you can do is regulate it."
Indeed, the more important challenge for lawmakers, she thinks, is to come up with ways to protect virtual gamblers from real-life fraud. She thinks the industry, much of which opposes the legitimization of cybercasinos, ought to come around and lobby instead for good oversight.
"It is in the industry's best interest to make sure that any gaming that takes place is in a secure, regulated environment. If you've got a hot dogger out there defrauding people, it taints the whole idea of gaming."
Assuming she is right -- and cybercasinos are inevitable -- what will that mean for the companies now operating legitimate casinos? Will they be damaged by cybercasinos? And if you own gaming stocks now, should you sell them off because of this threat?
Harvey thinks not. She says gaming companies are in the fortunate position of having it both ways. The big casinos, especially those in popular resort areas like Las Vegas, will be untouched, she says. "Simply put, Las Vegas has become a vacation spot in and of itself. There's little chance people will stop going to Las Vegas simply because they can bet on the Internet."
Gaming companies that operate in smaller towns and out-of-the-way locations may be a bit more vulnerable. But even these casinos offer locals the opportunity to socialize and take in some other kinds of entertainment -- things cybercasinos aren't able to match.
It's also a safe bet that instead of losing revenue to competition from Web sites, the casino companies will wind up making lots of money from running cybercasinos, if they ever become legitimate. Prudential thinks cybercasinos have the potential for explosive growth.
"We expect the large gaming companies would have Web sites up within 24 hours, making hefty profits, given their name recognition," says Harvey. "They would almost certainly jump right into this new market and probably realize substantial profits from it."
But don't wager on Washington clearing the way for that to happen soon. The National Gambling Impact Study Commission, formed by Congress to look into social and economic impacts of gambling, won't finish its report until around the end of this year. And you can bet Washington will take its good time in considering any legislation after that.
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Posted all of the author information to make sure proper journalistic
credit is given for the article.
Kevin |
