Prohibition vs. Regulation Debated As U.S. Bettors Use Foreign Sites

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In May 2007, Rep. Shelley Berkley (D-Nev.) introduced legislation that would authorize the National Research Council to study the effects of legalizing Internet gambling.

"Let us at a very minimum study it," Berkley said in an interview. "Do we have the software to keep people under the age of 21 from gambling? Do we have a way to identify problem gamblers? I think we'll find the answers are yes."

Horses Exempt

Congress remains deeply divided over Internet gambling. Conservative lawmakers, backed by religious and family-values groups, have repeatedly introduced bills to ban or criminalize online betting, arguing that it feeds the addiction. The National Football League also has spent millions lobbying to block Internet gambling.

"Virtual betting parlors have attempted to avoid the application of the United States law by locating themselves offshore and out of jurisdictional reach," said Rep. Robert W. Goodlatte (R-Va.), sponsor of several bills to outlaw online gambling. "These offshore, fly-by-night Internet gambling operators are unlicensed, untaxed, un-regulatable and are sucking billions of dollars out of the United States."

In summer 2000, Goodlatte came close to achieving a ban. A companion measure had cleared the Senate, and the House was poised to pass his bill. But lobbying and legislative maneuvers by Jack Abramoff, some of which became part of the federal corruption case against the Republican superlobbyist, left the legislation a handful of votes short.

Goodlatte is on record as saying he would ban all gambling "if I could . . . but it wouldn't pass the Congress." Yet the lawmaker himself illustrates the contradictions in federal policy. As the former chairman and now ranking Republican on the House Agriculture Committee, Goodlatte has played a role in helping the horse-racing industry keep its exemption allowing Internet bets. In the past eight years, he has received more than $20,000 in campaign contributions from the horse-racing industry, records show.

The Interstate Horseracing Act, first passed in 1978 and amended in 2000, includes a provision that allows betting parlors to cover bets on tracks in other states. The industry interprets that language to include Internet bets, and several large firms now accept millions in wagers annually. The Justice Department contends that those bets are illegal but has not prosecuted any of the sites.

Goodlatte said he "mediated" between the Justice Department and the horse-racing industry to come up with language about horse racing in the 2006 gambling bill that affected Neteller. He said the wording "simply maintains the status quo in the dispute." In other words: a stalemate that apparently leaves a loophole for online horse-racing bets.

Recently, Beshear moved to protect Kentucky's lucrative horse-racing industry from the effects of offshore Internet bets by seeking to block 141 online gambling sites from serving customers in Kentucky. State officials estimate that Kentuckians bet approximately $170 million online each year.

"Governor Beshear's main focus is to protect the industries already licensed and legal in Kentucky," said Jennifer Brislin, spokeswoman for the Kentucky justice department.

Rep. Barney Frank (D-Mass.), the sponsor of a bill to legalize online gambling, said that even today, "you can't get a straight answer if horse racing is illegal. It's total hypocrisy and mishmash." He calls the ban on Internet betting "an outrageous interference in Americans' personal freedoms."

Jailed in Vegas

At the Justice Department, officials insist there is no confusion. They maintain that all online betting is against the law, including horse racing. "Internet gambling poses an unacceptable risk due to the potential for gambling by minors and compulsive gambling," Catherine L. Hanaway, the U.S. attorney for the Eastern District of Missouri, testified last year before the House Judiciary Committee. Officials also cite the potential for fraud, money laundering and organized crime.