By Andrew Beyer
Wednesday, March 4, 1998; Page C10

The horse racing industry is looking forward to a bright new era when in-home betting -- through the Internet, interactive television or telephone -- expands its market vastly. But an ominous cloud hovers over this grand vision of the future.

Rarely has a proposed piece of legislation caused the sport such consternation as the Internet Gambling Prohibition Act, popularly known as the Kyl bill after its primary sponsor, Sen. Jon Kyl (R.-Ariz.). The bill is "the most dangerous anti-racing legislation of this century," declared Stan Bergstein, executive vice president of the Harness Tracks of America. Such assessments may be overstated since the industry secured some changes in the language of the bill, but the Kyl measure will nevertheless force the racing industry to alter the way it conducts business.

Horse racing wasn't specifically targeted by the Internet Gambling Prohibition Act, which was aimed at on-line casino-type games and sports betting. Many offshore operators are using the Internet to take wagers that would be illegal on U.S. soil, and gambling opponents want to stop them. The principal U.S. gambling law, the Federal Wire Act, was passed in 1961 and is now hopelessly dated; it envisioned interstate gambling as a telephone call to a bookie across state lines. Kyl's bill updates this legislation and specifically bans gambling on the Internet.

Many critics say that this is a futile and hypocritical exercise in prohibition. In view of the freewheeling nature of the Internet, how do you stop a citizen from sitting at his computer and placing a bet with a gambling operation in Costa Rica? And isn't it a little late for government to be worried about gambling when most states have gone into the gambling business by running a lottery?

Opponents of Internet gambling frequently overstate its dangers. Rep. Bob Goodlatte (R.-Va.), the principal sponsor of the House version of the Kyl bill, suggested this scenario: "Imagine coming home from work one day, only to find that your children have 'borrowed' the family credit card, logged onto the home computer and lost this month's mortgage payment in a game of cyber-roulette."

The authors of the Internet Gambling Prohibition Act were thinking about cyber-roulette and the like -- but not horse racing -- when they began to craft this legislation. But racing was caught in its cross-hairs anyway. The version of the bill that emerged from the Senate Judiciary Committee prohibited wagering "through the Internet or through any other interactive computer service in any State." This rule would not only squash the racing industry's hopes for interactive betting. The language was so broad that it could be deemed to outlaw simulcasting (with tracks linked by an interstate computer network) or even the dissemination by computer of basic racing information.

The racing industry quickly mobilized to combat this threat. The new National Thoroughbred Racing Association appropriated funds to bolster the American Horse Council's lobbying efforts. Racing leaders met with Kyl to express their concerns. Although the senator might not have been sympathetic to the idea of bringing horse betting into the home, he did respect the argument that states have historically regulated the gambling activities within their borders. Mark Wilson, president of Hubbard Enterprises (which owns a track in Arizona), said, "Senator Kyl made a commitment that he did not want to hurt the racing industry, and he's been working in good faith."

As the racing business asked for attention to its needs, one of its practices came under scrutiny from legislators -- and state attorneys general as well. Several tracks and off-track betting operations are conducting telephone betting in a fashion whose legality under current law is uncertain at best. A racetrack in Pennsylvania will gladly open a telephone account from a customer in Arizona -- even though telephone betting is not legal in Arizona. Wilson admitted that he couldn't make and win an argument that this is clearly legal. "But," he said, "I have an easy time making an argument to Jon Kyl that this is okay if the state legislature says it is okay."

In the latest draft of the bill, some of the racing industry's concerns have been addressed, and Jay Hickey, president of the American Horse Council, said, "From our standpoint, the bill is now in much better shape." It allows intrastate gambling transactions -- as long as they are legal in a given state. It clearly permits the interstate transmission of racing information as well as simulcasting between tracks. But it bans interstate and international gambling on the Internet, as well as the interstate phone betting that has been unregulated till now.

To some members of the industry, these restrictions are not overly burdensome. ODS Entertainment, which plans to inaugurate a national horse-racing cable channel later this year, has always planned to operate home betting only in states where telephone wagering is explicitly legal. "You can't grow a business in a gray area of the law," said ODS vice president Tom Aronson. "You've got to clean up the law."

But plenty of others are offended by this government meddling and regulation. While most other businesses in America are prospering with the use of technology, horse racing is singled out and prevented from exploiting it. It is uncertain whether the Internet Gambling Prohibition Act will pass, because plenty of other interests besides racing have concerns about it -- from civil libertarians to Internet service providers. In any event, the racing industry will probably not be able to offer new forms of in-home betting as freely as it might like.