The U.S. Congress is expected to ban Internet gambling this year, but experts cannot agree on whether the new law will be effective.
Supporters of the proposed Internet Gambling Prohibition Act, named the Kyl bill after primary sponsor U.S. Sen. Jon Kyl (R-Ariz.), say the new law can effectively shut down Internet gambling in the United States because the industry is relatively small.
They warn, however, that if Congress doesn't act soon, the opportunity will be lost.
"The potential is staggering," said Bernie Horn, director of political affairs and spokesman for the National Coalition Against Legalized Gambling, about the growth of Internet gambling. "Gambling addicts need to go no farther than their living rooms to lose everything they have."
Revenue from Internet casinos and sports books is a fraction of gambling revenue worldwide. In 1998, all Internet gambling revenue was only 1.2 percent of the projected $54 billion collected by states and businesses running legal gambling in the United States alone.
Internet gambling, though, is the fastest-growing segment of the gaming industry. Internet revenue worldwide was an estimated $651 million in 1998, which was two times the revenue estimated for 1997, according to Sebastian Sinclair, a gaming analyst with Christiansen/Cummings Association Inc. in New York. He said he expects revenue to double again this year.
Banning Internet gambling by passing the Kyl bill may make Congress look noble, but it really solves nothing, lawyer John Crigler said.
"What looks like a clear legislative fix is no fix at all," said Crigler, a member of the telecommunications law firm Haley Bader and Potts in Arlington, Va. "It is the legislators dusting off their hands. They are saying, 'We've done our job, now we'll leave it to the courts.'"
Crigler said he knows people in the gambling industry who hope the Kyl bill passes so they can challenge it.
"This is a lawyer's dream," he said.
Sports betting is illegal in the United States everywhere except Nevada, though Oregon ties some of its lotteries to sporting events.
The federal Professional and Amateur Sports Protection Act prohibits other states, local governments or Indian tribes from legalizing sports betting, and the Interstate Wire Act of 1961 keeps the action in Nevada by making it illegal for casinos to take bets over the telephone from anywhere else in the United States.
The Wire Act could apply to sports betting on the Internet because it prohibits transmitting any gambling information over a wire for the "business of betting or wagering," but there it also exposes an expanse of hazy legal territory.
Federal law does not make it illegal to place a bet on a sporting event. Gambling laws have historically been left up to the states, and if a state law does not specifically prohibit sports betting, then the field could be wide open for Internet users.
"The goal of federal law to allow the states to decide how much gambling to allow is blown away," Horn said.
Prosecuting Internet bookmakers in the United States is tough because they operate legally in Antigua, the Dominican Republic, Australia or a number of other countries where they are licensed and bonded.
U.S. Attorney Mary Jo White, of New York's Southern District, made the first serious attempt in March when she had 21 people arrested for taking sports bets over telephone lines. Some people arrested operated Internet casinos in the Caribbean or Central America.
All defendants except Jay Cohen, owner of World Sports Exchange in Antigua, avoided prosecution by closing their businesses. Cohen is fighting the charges. He has been indicted and will become the test case for prosecuting Internet gambling businesses using the Wire Act, gambling law experts say.
Kyl is trying to strengthen the law with his bill, which makes "placing, receiving or otherwise making a bet or wager via the Internet or any other interactive computer service in any state" punishable with a fine three times the amount wagered or six months in jail.
One of the Kyl bill's biggest weapons against Internet gambling is that it makes the act of betting illegal.
Sinclair said the Kyl bill could become quite effective if the Justice Department starts arresting gamblers in sting operations.
"For the vast majority of people like you or I who gamble $10 or $20 occasionally, and I think that is a majority of gamblers, it is going to stop them," he said.
Crigler said he isn't so sure the technology exists to plug all the holes and find all the gamblers.
"It is one thing to say you will ban Internet gaming, another thing to do it, and yet another thing to actually enforce it," he said. "The Internet is porous."
Horn said the Internet gambling business is so small now that enforcing the Kyl bill should be easy.
"This is an underwhelming problem," he said. "We could shut these folks down in a few weeks."
Horn said that the United States has only about 200 Internet service providers and that the Internet has about the same number of online casinos and sports books. He said a couple of federal agents with computers could easily find all the Internet gambling sites, then contact Internet providers and ask them to block access to the sites.
Even if Internet casinos continue doing business in the United States, Horn said, they can be prosecuted.
He said anyone who questions the United States' authority to arrest someone overseas should talk with former Panamanian dictator Manuel Noriega. Noriega was arrested during the 1989 invasion of Panama and convicted in 1992 for drug trafficking and racketeering. He is in Miami serving a 40-year prison sentence.
"If you cause something to happen in the United States, you can be arrested," said Horn, who also is a lawyer.
Sue Schneider, spokeswoman for the Internet Gaming Council, said she opposes the Kyl bill because it is shortsighted. She said passing the Kyl bill will cost the United States millions of dollars.
"About 23 jurisdictions around the world, most notably several in Australia, are definitely saying the world is our market," she said. "There is a lot of interest around the world in sports betting. They are moving forward and taking clients around the world."
The Internet is the gambling industry's future, but not yet, according to Frank Fahrenkopf, president of the American Gaming Association, which represents land-based casinos in the United States. The association supports the Kyl bill because the Internet lacks the regulations needed to ensure that operators and games are fair.
"People have got to feel secure that it is a straight game," Fahrenkopf said. "They have to know that the taxes are being paid and the right people are running it. In our opinion, the only way to have legal gambling is to have strict regulation."
