Gamblers Play The Odds Online; Despite Calls To Outlaw It, Internet Gambling Takes Off
By Beth Berselli
Wheeler, 31, of St. Augustine, Fla., said he plays almost every day for two or three hours, his bets flying across the Internet to a computer in Antigua. It contains his account and those of thousands of other gambling enthusiasts, and with some nifty graphics, brings them together in a "virtual casino."
"It's great. I don't have to leave the house," said Wheeler, who used to visit Vegas every few months. "It's very private. There are no distractions, no dirty looks from the casino people if you win. I can just relax and concentrate on what I'm doing."
Despite a host of questions about legality and legitimacy, Internet gambling is taking off. It is probably a $200 million-a-year business now, analysts said, and is poised to become much bigger, likely topping a billion dollars by the turn of the century. Today, there are about three dozen sites on the World Wide Web where gamblers can bet real money on blackjack, craps and the Boston Celtics, among others. A year ago, barely a virtual bet had been placed.
Some sites are for real, paying winnings when winnings are due as legitimate casinos do in the real world. Others, some gamblers said, seem to be con operations. Either way, the growth has caught the attention of U.S. senators and state attorneys general, who are determined to beard this lion in its den. They portray online gambling as the latest cyber-bogeyman, citing a huge potential for fraud, abuse and addiction.
State prosecutors, notably in Missouri, have filed charges against a number of gambling operations, saying that if people in the state can risk their money through them, they violate state laws against gambling. And now, critics have banded together to introduce a bill in Congress to outlaw Internet gambling altogether.
A growing number of gamblers and site operators are voicing dismay, saying that Internet gambling is entirely legal and beyond the jurisdiction of the U.S. government. "If Minnesota can make the rules for the entire Internet, what's to stop China or Iraq or some other country?" asked Kerry Rodgers, the owner of Granite Gate Resorts Inc., a Las Vegas firm that tried to set up a gambling site but was stopped by a lawsuit.
Others said Congress should accept Internet gambling and regulate it. "Go ahead, take our tax money," said Jay Cohen, who operates a sports betting site, called World Sports Exchange, out of Antigua.
Gambling sites come in two general flavors: those that offer casino games such as blackjack, roulette and craps, and those that take bets on sporting events. The sports book sites outnumber the online casinos by about 2 to 1.
Here's how a typical site works: A first-time gambler must open an account, usually by providing a credit card number and sometimes a Social Security number. Many sites require that customers mail in a minimum deposit ahead of time, usually from $100 to $500. Bets can be placed for as little as $10.
Site operators have computers that run complex programs that are supposed to simulate the chance and skills of a particular game. After receiving bets from across the Internet, they conduct a game -- simulating the spin of a roulette wheel, say -- and then report back to the players whether they won or lost. The player is left largely to take on faith that the game was played honestly. Winnings are paid as checks sent by mail or credits to the credit card account. Losses are taken as debits on an account or credit card.
Analysts said the industry is nothing if not full of potential, providing a service that people often cannot obtain otherwise in their home states. Even if online entrepreneurs only capture 1 percent of last year's $550 billion national gambling habit -- that's more than three times the revenue of General Motors Corp. -- they will be doing exceptionally well.
Cohen believes in online wagering so much that he quit a high-paying job on the Pacific Stock Exchange and took a gamble of his own in the far-flung locale of Antigua.
The 29-year-old Cohen started World Sports Exchange last January. Today, the licensed sports book operation has about 400 customers. His site, and similar ones, aim to make money the same way bookies in the real world do: They set odds that they hope will give them an advantage and thus produce a profit.
Cohen said he is mystified at the hullabaloo over Internet gambling. "Why should this be any different than going to Vegas?" he asked. "If anything, we're more responsible. Vegas is all about sucking you in. . . . We don't pour drinks down people's throats, trying to impair their judgment."
He added that his site includes links to Gamblers Anonymous and is registered with such child-protection services as Net Nanny as a way to ensure that underage gamblers aren't betting.
Cohen said he was encouraged by a recent Supreme Court ruling overturning the Communications Decency Act, a law that provided for criminal penalties for people who make "indecent" material available to minors online. Cohen said the ruling was a signal that government should keep its "hands off the Internet." Still, he and his peers aren't expecting the government to roll out the red carpet anytime soon.
That's because of people like Sen. Jon Kyl (R-Ariz.), who introduced a bill that would update a 1960s federal law called the Interstate Wire Act so that it specifically prohibits Internet gambling. The law now makes it illegal to use a telephone to assist betting across state lines. Kyl's bill would update the act so that operators of online gambling sites would be punished with fines of up to $20,000 and prison terms of up to four years, and individual bettors would face $2,500 fines and six-month prison terms.
"Virtual casinos make it easier for those with gambling addictions to sink deeper into debt and despair because all they have to do is sit down and log on," said Kyl, chairman of the Senate Judiciary Committee's subcommittee on technology, terrorism and government information.
Supporting Kyl are a host of state attorneys general. Their national association has enthusiastically endorsed the legislation, and attorneys general such as Jay Nixon of Missouri and Hubert H. Humphrey III of Minnesota are using the courts to wage their own wars against these supposed cyber-criminals.
"If gambling in general is a dumb bet, then gambling on the Internet is a very dumb bet," Wisconsin Attorney General James Doyle, who heads the National Association of Attorneys General, told the subcommittee last month. "The odds can be easily manipulated, and there is no guarantee that fair payouts will occur. To make matters worse, when you experience problems at a gambling Web site, it will be hard to find your bookie in cyberspace."
In 1995, Humphrey took his first swing against online gambling when he sued Granite Gate Resorts after it advertised that it would offer online gambling from the Central American country of Belize. The case, which is now before a state appeals court, alleges consumer fraud, not violations of Minnesota's gambling laws.
Rodgers of Granite Gate Resorts said the lawsuit is nothing more than a publicity stunt on the part of the attorneys general. "It's just hypocrisy," he said. "These people propose to be concerned about gambling, but you don't see any of them willing to give up the $400 billion or so in lottery revenues."
The central legal issue with online gambling is: Just where does the bet take place? In Minnesota, where the bettor is, or in Antigua, where the online service is? If someone can fly to the Caribbean and place a bet, why should a virtual visit be any different?
In attorney general Nixon's opinion, the law is clear: Internet gambling is not legal in the state of Missouri, no matter where the online bookies are based.
In June, a grand jury agreed with him and returned a criminal indictment against Interactive Gaming & Communications Corp. and its president, Michael Simone. The Blue Bell, Pa., firm -- which is the parent company of Sports International sports book and Global Casino, both of Grenada -- was charged with a felony for setting up a gambling device. Last spring, Nixon's office set up a sting operation that caught Global Casino accepting bets from Missourians. Jeffrey Erb, an IGC spokesman, says that the company's Grenadian gambling operations are perfectly legal. He pointed out that the company is publicly traded on the OTC Bulletin Board. "We've nothing to hide," he said.
Caribbean officials say their region doesn't deserve its reputation as a place where anything goes; they regulate. "We treat everybody just the same. If Jesus came down here, we'd still screen him to death," said Gyneth McAllister, who deals with licensing of Internet gambling companies in Antigua and estimates that the government will collect about $3 million from them in the next few years. She said the services are regulated by Antigua's government to ensure their honesty.
Nevertheless, some customers have reported problems. Bruno Paniccia, a 25-year-old insurance claims evaluator from Southern California, said he learned the hard way that these companies may not be entirely on the up and up. Last April, at the advice of a friend, Paniccia sent $500 to the Sports International sportsbook operated by IGC. His almost daily wagers on various baseball games met with great success; within three weeks, his winnings had grown to more than $1,000. Not wanting to push his luck, he asked the company to send him his winnings.
No dice, Paniccia says he found out. Four months later, after numerous conversations with IGC employees, Paniccia still hasn't gotten his check. "I'd say there's about a fifty-fifty chance that I'll ever see any of my money back," he said.
According to spokesman Erb, the delay was caused by a temporary glitch with the bank the service used. The company has since switched to a system that provides customers with offshore debit card accounts, allowing for easy deposits and withdrawals. Paniccia will be paid any day now, Erb said.
With government intervention looming, some in the gambling industry say they are trying to head it off by regulating themselves. Such groups as the Interactive Gaming Council in Silver Spring are developing standards of practice and codes of ethics. They say this approach is vastly preferable to a ban.
"You'll need the KGB to enforce something like Kyl's bill," Rodgers of Granite Gate said. And ultimately, he contended, such laws would create a less-than-welcoming environment for citizens. "People are going to end up living in fear that Senator Kyl's storm troopers will invade your house, take your computer and fine you thousands of dollars -- all because you bet $100 on whether Mike Tyson would bite the ears off of Evander Holyfield."
© Copyright 1998 The Washington Post Company