Experts: Ban Won't Stop Online Gambling

David Carruthers, the former chief executive of online gambling company BetOnSports leaves the federal courthouse in St. Louis followed by his attorney Scott Rosenblum in this, Aug. 16, 2006, file photo. Carruthers faces 22 counts of fraud and racketeering charges and remains under house arrest in the St. Louis area. (AP Photo/James A. Finley, file) (James A. Finley - AP)

"The regulations are clearly going to prevent banks from doing electronic fund transfers to gambling sites, but that is no big deal," Rose said.

Clamping down on the banks won't serve as a panacea, Rose said. In some cases, banks simply move the money to payment processors, known as e-wallets. Non-U.S. payment processors such as the widely used Neteller then transfer the money to the Internet gambling sites.

The U.S. government has no authority over processors like Neteller that are operating legally.

Anthony Cabot, a well-known gambling lawyer in Las Vegas, thinks language used in the bill provides a loophole for the payment processors and the U.S. banks that want to be free to do business with them.

"Unless you have some fairly Draconian measures ... the likelihood of stopping payment to them is small," Cabot said.

Much damage has already been done to the offshore sports betting industry without the looming regulations.

British BetOnSports PLC folded after its chief executive was arrested in July by U.S. authorities. David Carruthers faces 22 counts of fraud and racketeering charges and remains under house arrest in the St. Louis area.

London-based Sportingbet's chairman was detained last month in New York on a state fugitive warrant charging him with illegal online gambling. He was eventually freed.

Both arrests sounded serious alarm bells for those running sports wagering sites that take American bets.

The new legislation has already had a dramatic effect. It supposedly clarifies the 1961 Wire Act, explicitly outlawing Internet gambling, including online poker.

It creates new criminal penalties, which have rattled investors and executives _ although Rose said it doesn't expand the act, and there's no indication the Justice Department is about to launch a huge campaign to enforce the law.

Still, the biggest publicly traded names in Internet gambling on the London Stock Exchange and AIM, the exchange's global market for growing companies, could not afford to flout American law. When news broke earlier this month that Congress has passed the bill, Internet gambling companies traded on those exchanges lost a combined $7 billion in market capitalization.