New Law Cripples Internet Gambling

Gambling, along with pornography, was one of the earliest businesses on the Internet, and one of the few profitable ones. The first Internet gambling site appeared in 1995, according to the American Gaming Association, the trade group of big casinos. Over the past decade, online gambling has caught fire, especially among men in their 20s, and crossed into the mainstream to include poker and fantasy sports leagues.

Nevertheless, online gambling has been a legally gray area, equally populated by legitimate, publicly traded overseas corporations and fly-by-night predators who, like music pirates, can shut down and move their computer servers overnight to stay ahead of the law.

In the United States, the Justice Department and federal courts are unable to agree on whether Internet gambling is illegal. The Justice Department maintains that the 1961 Wire Act, written to prohibit betting transactions via telephone, applies to the Internet. Courts have disagreed, saying that betting on sports teams over the Internet is illegal, but wagering on casino games, such as poker, is not. And though the Justice Department thinks that off-track and online wagering on horse races is illegal, it has never prosecuted a case.

Internet gamblers typically set up accounts at offshore businesses, and place and settle bets using credit cards and checks that are converted in electronic currency, much as eBay users buy and sell items using the PayPal system.

Instead of targeting specific games, such as criminalizing blackjack but not fantasy sports leagues, the new law seeks to block the financial transactions that fuel them.

The Poker Players Alliance, a lobbying group that opposes the new law, said it would ask Congress to exempt poker from the statute. The group considers poker a game of skill, not chance.