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Resistance Underway Against Bill to Ban Online Gambling

Arizona Republican Sen. Jon Kyl is planning to go yet another round in his decade-long fight against Internet gambling, but critics say the industry is far too lucrative and elusive to be corralled by Congress now.

"Seven times the United States tried to ban online betting and each time it failed," said Marc Lesnick, an online gaming industry veteran who runs StartCasino.com, an informational site for prospective online casino operators and founder of Alternative Solutions for Reliable Online Commerce.

"The industry is so lucrative," Lesnick said. "Any attempt by the U.S. government (to stop it) at this point would be too late."

But a spokesman in Kyl's office said that the senator plans to introduce legislation this summer similar to previous bills he has offered prohibiting online betting. Details on the bill were not available but prior attempts attempted to shut down electronic funds transfers for online gaming.

Word of Kyl's latest attempt has representatives from the different gaming interests — including horse racing, tribal casinos, poker and sports — girding for another fight.

The chance of Kyl succeeding has increased because Republicans now control both the Congress and the White House, said Tony Cabot, a Las Vegas attorney, whose clients include horseracing interests. He said online and off-track betting has accounted for $3 billion a year in revenues and is credited with the only growth in the horseracing industry today.

The Congressional Horse Caucus recently sent a letter to the Arizona congressman's office to argue against including Internet wagering on horse races in any future legislation. They say that off-track betting, including Internet and simulcast wagers, are "the lifeblood of the industry" and are protected by the Interstate Horseracing Act, a point of contention with the Department of Justice.

The letter, dated May 31 and signed by Reps. John Sweeney, R-N.Y., and Ben Chandler, D-Ky., urges Kyl to skip over horse racing.

"Every recent version of Internet gambling legislation has contained clarification that its enforcement mechanism does not apply to account wagers on horseracing conducted pursuant to the IHA. ... We believe that such clarifications are obvious steps to implement what has clearly been congressional intent for several years, and we strongly urge you to include such provisions in your bill," they wrote.

According to Lesnick, all forms of gambling in the United States, particularly in Las Vegas, have "seen an explosion in the last 20 years" from traditional bricks and mortar casinos to online betting.

"Anybody in the United States would be blind not to notice it," he said.

Internet betting in particular has grown exceptionally fast, say industry analysts with more than 2,000 gambling Web sites estimated to be operating, compared to 26 Web sites when Kyl first introduced legislation that would ban them in 1995.

Lesnick said much of the wealth is concentrated in about 200 "strong online casinos," the top tier of which cater to today's growing popular trends in gambling, including poker, which is experiencing a resurgence of sorts on college campuses across the country. PartyPoker.com transacted 2 billion wagers last year, Lesnick said.

What's more is the money made through this growth, an estimated $7.5 billion in 2004, compared with $4 billion four years ago, said Lesnick, who noted that the tide has not slowed as a result of prosecutions under federal anti-gaming laws and federal pressure on both major credit card companies to stop transacting bets and online media to stop accepting ads from gaming Web sites.

"This industry has shown a level of resilience that I've never seen before," said Lesnick.

But some Republican lawmakers said they believe they have a moral obligation to pursue the ban as online gaming provides minors with easy access and poses additional pitfalls for the approximately 7 million problem gamblers in the country today.

"The negative consequences of online gambling can be as detrimental to the families and communities of addictive gamblers as if a bricks and mortar casino was built right next door," Rep. Bob Goodlatte, R-Va., who has introduced in the House a series of failed measures to stop Internet gambling, said in a statement to FOXNews.com.

"Go into any home with a computer, [online gambling] can reach every home in the nation," said Guy Clark, chairman of the National Coalition Against Legalized Gambling, which supports Kyl's efforts. "If you have a kid in the house, or a sibling or whomever, who has a problem with gambling, it makes quite a difference."

The National Council on Problem Gambling reports no noticeable increase in its constituency since the advent of online gambling a decade ago, but the organization is aware that online gaming has increased in the severity of problem gambling, as Internet wagers are
so much more accessible, said NCPG executive director Keith Whyte.

"It allows [gamblers] to lose more money, faster," said Whyte, adding that NCPG takes no official position on criminalizing gambling activities.

Over the years, some congressional proposals have tried to extend the federal Wire Act, which prohibits betting from one state to another over phone lines connected to the Internet.

While the Wire Act has been used to prosecute some online sports betting operations, including one high-profile case of a New York corporation running its bets on servers in the Caribbean island of Antigua, experts dispute its actual reach into online gaming.

In addition, companies have moved their entire operations off-shore to gaming-friendly places like Antigua, the United Kingdom or more than 45 other countries that now allow such gambling enterprises. That has made it harder for American law enforcement to shut them down.

Recent efforts to hobble the industry have centered around cutting off the ability of Americans to place online bets by trying to restrict credit card companies and other financial institutions from allowing transactions. While VISA and Master Card have voluntarily stayed out of the gambling business, online payment processors like Neteller have sprung up in their absence to make millions. They would be most affected by such a ban, say experts.

Attorney Cabot said such a ban "might slow the industry down," but "ultimately, they will not be successful" as payment processors will move offshore with the online gaming sites and serious betters will invest in offshore bank accounts to pay for their activities.

"There will always be people who are motivated to get around the prohibition," he said.

Experts say Kyl's bills and other attempts to ban online gaming have largely failed because lawmakers are squeamish about restricting Internet activity, particularly e-commerce, and different gaming interests demanding exemptions or the ultimate defeat of the bills weighed too heavily against them.

"It is one of the only profitable industries online," said Cabot.

Goodlatte disagrees, saying that states that already outlaw offline gambling should be respected, and that the market does not trump these values.

"I think we can all agree that it would be very bad public policy to allow offline activity deemed criminal by states to be freely committed online and to go unpunished simply because we are reluctant to apply our laws to the Internet," he said.