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LAWYERS AND TECHNOLOGY
Senate Bans Most 'Net Gambling; Many Bet on Poor
Enforcement
By Wendy R. Leibowitz
The National Law Journal (p. B06)
Monday, August 10, 1998
IT'S BEEN A HOT summer for gamblers--and not just in Las Vegas and Atlantic City,
where the betting is always heated, or in Connecticut, whose multimillion-dollar
Powerball lottery recently drew crowds across state lines. No, the hottest betting
action is on the Internet, where gambling is virtually unregulated. The Web offers
sophisticated sports-betting sites, online lotteries, bingo, keno and virtual casinos.
The Justice Department estimates that approximately $600 million is spent gambling
online.
If left unchecked, says Sen. Jon Kyl, R-Ariz., 'Net gambling revenues could reach $10
billion over the next few years. "The senator is very concerned with the social cost of
gambling," says a spokesman for Senator Kyl. "And Internet gambling removes
barriers. You don't have to go to Las Vegas. There is no stigma, no cost. When you
log on from your living room, there is no way to know whether you'll be paid or not, or
whether you're a child or an adult."
Senator Kyl is a sponsor of the Internet Gambling Prohibition Act of 1997, S. 474,
which would extend the federal criminal code to prohibit almost all Internet gambling.
On July 23, the bill passed the Senate by a vote of 90-10.
"The bill will probably pass," says Anthony N. Cabot, a partner at Lionel, Sawyer &
Collins in Las Vegas who has written a book on Internet gambling. "For the first time in
history, it will be illegal for a casual bettor to place a bet." The sole exception is for
fantasy or "rotisserie" sports leagues.
The legislation, whose companion bill in the House, H.R. 2380, is set for committee
mark-up in early August, is attracting wide support, notes Mr. Cabot, including unusual
bedfellows. In addition to the religious right, supporters include pro-gambling states,
such as Nevada and New Jersey, because they believe that only regulated gambling
can protect the fairness and integrity of the games.
Similarly, Ralph Nader supports the 'Net gambling-ban bill because of the Internet's
lack of consumer protection. Today, 'Net gambling is "a license to steal," says Mr.
Cabot. Sports leagues back the bill because of their position that any gambling
tarnishes the games and may affect the outcome, or appear to affect the outcome, of a
match.
A Little Law, but Not Too Much
Everyone agrees that federal prohibitions on sports gambling and fraud must be
extended to the Web. Says Mr. Cabot, "Clearly there needs to be accountability in
every industry, to prevent people from being ripped off."
The question is whether the current bill goes too far by banning all gambling, including
that which is legal in many states, such as Lotto and bingo. The latter is even legal in
many churches.
"This legislation is something we have to worry about; it represents an expansion of
federal authority" in an area long regulated by the states, says Tom W. Bell, director of
telecommunications studies at the libertarian Cato Institute.
Mr. Bell says the states' position is hypocritical. Turning to the feds for legislation,
states claim to be advocates for consumers, but they are also seeking to ward off
competition, says Mr. Bell. "States are in the gambling business," he notes, through
state lotteries. "They don't just license gambling--states are in the business. And they
don't want competition from the Internet."
Mr. Bell and others feel that the ban, however well intentioned, will be unenforceable.
"We will see a short-term crackdown, then a slow legalization," he says. "It will be like
the history of gambling in this country, but it will happen quicker because it's on the
Internet."
And the "world" in "World Wide Web" makes enforcement problematic. Aided by
U.S. companies, the Caribbean nation of Dominica will soon launch a Web casino, and
Thailand may follow. Australia is preparing to introduce its first Internet gambling laws
to protect its licensed companies' existing monopolies.
If American Internet service providers, such as America Online, are ordered to shut
down sites that are illegal under the U.S. 'Net gambling ban, the sites may simply move
and be shut down again. "It'll be a cat-and-mouse game," says Mr. Cabot. "If you tell
Americans they can't be involved in an activity...a lot of money leaves the country. But
if you don't enforce the law, it will affect people's view of the law."
Ultimately, gambling on the Internet is an international issue, says Mr. Cabot: "You
need the full cooperation of the international community." A recently formed Interactive
Gaming Council hopes to create model regulations, and possibly an international
regulatory agency, to make it easier for companies to operate in more than one
country.
But there are many nations in the United States as well. Native Americans, who sought
but failed to obtain an exemption to the 'Net gambling ban, wish to protect the revenue
they reap from gambling. In January, a Missouri state circuit judge prohibited Idaho's
Coeur d'Alene Indian tribe from offering online gambling in Missouri.
But click on (www.uslottery.com), and it is still operational. Furthermore, it claims to
be entirely legal: "The U.S. Lottery is authorized under the federal Indian Gaming
Regulatory Act of 1988 and a Compact between the Coeur d'Alene Tribe and the
State of Idaho in December 1992," says the home page. It continues, "When you log
on to our system from wherever you are in the world, you are conducting a transaction
on the reservation....When you click the mouse in the privacy of your home, you are
simply instructing our server in Idaho to conduct the transaction." Let the betting begin.
Correction
The column, "Intranet Questions Arise" [NLJ, July 20] should have stated that Sabrina
Pacifici, Sidley & Austin's director of library and research services, built the firm's
intranet with professional law librarians Jeff Bosh and Wenling Tseng.
Hyperlinks
Testimony offered to the National Gambling Impact Study Commission is at
(www.ngisc.gov/meetings/ written2.html).
A California woman who lost $70,000 gambling online is suing her credit card
companies, which reaped a percentage from each illegal transaction. See
(www.news.com/News/Item/Textonly/0,25,24561,00.html?st.ne.ni.pfv).
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