Last weekend's political moves to criminalize online gambling financial
transactions continued to generate news and views going into Thursday.
Associated Press carried the opinions of respected gambling law expert
Tony Cabot, who prefaced his comments with the observation that advocates
of the measure wanted it passed so badly that they "sold their
souls" in agreeing to numerous "carve-outs" that will
generally help rather than hinder the gambling industry.
A good deal...
Cabot, who is founding editor of the Internet Gambling Report and
co-editor of the Gaming Law Review, said in an interview that the
bill, long sought by congressional conservatives opposed to online
gambling, "opens up huge opportunities" for the industry.
The measure had appeared dead, he opined but Senate Majority Leader
Bill Frist, R-Tenn., had it slipped into a port security bill H.R.
4954 that passed the House and Senate in the early hours of Saturday
as Congressmen were looking to recess for the electioneering season.
Republican lawmakers behind the measure were eager to find issues
that would please conservatives in advance of the Nov. 7 elections,
Cabot said, "In order to get this bill passed, they sold their
souls. They gave so many exceptions that it's now a wide-open area."
Cabot agreed that the act may hurt MGM Mirage and Harrah's Entertainment,
which host the world's largest poker tournaments and rely heavily
on entrants who play in tournaments hosted by online gambling sites.
Cabot said the measure exempts state-licensed casinos, which could
conduct online poker or casino-style wagering within their states
once authorized to do so - and also could link up with other states
or even foreign jurisdictions where such gambling was acceptable.
"The [land] casino lobbyists in Washington, D.C., thought
this was a pretty good deal. It's actually better than that,"
Cabot said. "It really opens up the field. It knocks out
the offshore companies, and leaves the legal licensees open to take
their positions."
The bill also exempts the horse race industry, state lotteries and
fantasy sports betting, Cabot said, adding, "This clearly
opens up a lot of doors. For fantasy sports, they have to be ecstatic
because this completely takes any taint of illegality away from them,
and gives them an opportunity to grow maybe three-, four-, five-fold."
Cabot said an obvious benefit for casinos would be online links between
their progressive slot machines in one state with similar devices
in other states. When casino activity is coupled with online betting
on such devices, he said jackpots could swell to hundreds of millions
of dollars and rival major multi state lotteries.
Several states, including Nevada, prohibit Internet gambling, and
such ventures may take years to develop. But Cabot said the new law
"is the seed for this to happen."
Some gambling foes have said the 1961 Wire Act, which prohibits making
bets on sporting events over the phone, should be applied to Internet
betting. Cabot said the Justice Department has contended that the
act does apply to non sports betting, but that argument has been successfully
challenged in federal court.
No problem for Canada
In an article carried by The Star in Montreal Michael Linton, a Toronto
lawyer and expert on online gaming, said the new U.S. law will have
little effect in Canada in terms of financial restrictions.
"My first reaction is that this law won't have a significant
effect, if at all," Linton said. "Canada is
still not part of the U.S. A lot of what we clear doesn't necessarily
go through the Republic Bank of New York."
Bill Rutsey, president of the Canadian Gaming Association, thinks
the new law might only affect Canadian bettors if gaming companies
based in Europe or the Caribbean view the U.S. and Canada as one bloc.
"To the extent that these companies will not be making
games available to U.S. residents, they will probably do the same
for Canadians, just because it's easier," Rutsey said.
Rutsey estimates that Canadians spend between $600 million and $1
billion a year on gambling websites.
Most of those sites are based outside of Canada, but many of them
- both foreign and Canadian - are licensed from a server farm on a
First Nations reserve near Montreal in the province of Quebec.
Linton says the computer complex belongs to a group of Kahnawake Mohawks
who run the operation protected by section 35 of the Canada Constitution
Act, which exempts them from federal laws that infringe on First Nations
traditions. A broad interpretation of that law allows a group of people
on the reserve to grant gaming licenses and rent computer space to
online gambling sites from around the world, Linton said.
The problem, Rutsey said, is that among the roughly 3 000 online gambling
sites currently running, only about 200 are publicly traded. With
many of those sites already announcing they will stop doing business
with Americans and concentrate on Asian markets once the new U.S.
law becomes official, Rutsey fears Canadian gamers will resort to
gambling on underground web sites with less than impeccable credentials.
"(Publicly traded companies) cannot risk arrest and prosecution
in the U.S., so they're going to stay within the law,"
Rutsey said. "(The new law) has turned Internet gamers
over to the most unsavory element on the net - people who are willing
to risk prosecution."
Worst thing since the era of alcohol Prohibition - but halting
Internet gambling is not possible
Gambling legal expert Lawrence Walters told the St. Petersburg Times
that an estimated 8 million Americans who wager over the Internet
are now debating whether they can still play in the wake of new federal
legislation making it difficult to fund online gambling accounts.
"The closest thing we've ever seen to this kind of widespread
federal prohibition is Prohibition on alcohol," Walters,
an Orlando-area partner with the law firm of Weston, Garrou, DeWitt
and Walters, said of the congressional legislation passed last weekend.
"But here, we have a worldwide industry that has developed.
It's become a part of our culture and part of the global economy,
and overnight the United States has criminalized this ongoing economic
force."
Walters examined what effect the legislation will have on the $12-billion-a-year
industry.
He said that for the individual gambler sitting behind a computer,
it may not mean much, and no one will be going to prison under this
new law. But the operators of the gambling sites and the banking institutions
and financial institutions that service the industry will face difficulties.
"The industry has received this law, and interpreted it
as an all-out ban on any further offering of Internet gambling to
U.S. citizens, and all the major [public] companies are now taking
steps to stop any further service to online bettors in the United
States," he said.
Should gamblers start taking their money out of online sites?
Walters is reported as saying: "If I were gambling man,
which I'm not, I'd take my money and run. There's no telling what's
going to happen to the deposits." In his opinion, most
of the major players are likely to pull out of the U.S. market, and
the face of Internet gambling will change dramatically for the American
player.
Asked whether the new law could be effective, Walters said that Internet
gambling is here to stay. "The U.S. government can pass
laws until it is blue in the face and it's not going to stop the individual
bettor from finding a way to place a bet online. For a little while,
it's going to be tougher for the U.S. player to find a way to gamble
online, but it's not going to be impossible," he said.
Walters made the point that the industry has been clamoring for regulation
for years. "They don't want to operate as outlaws; they
don't want to operate on the sidelines; they don't want to be marginalized,"
he said. "They want to operate as an embraced industry.
They want to pay taxes. ... I would think that the industry would
fight hard for some sort of regulation. But I can't imagine that this
presidential administration will do a 180 and seek to embrace the
online gambling industry."
Department of Justice spokesperson Paula Creighan said the Canadian
government has no plans to change the current laws, which prohibit
all forms of Internet gambling except for lotteries in Canadian provinces
that allow online ticket sales, bettors who have telephone accounts
at horse racing tracks and private bets between individuals.