At last report, nearly 200 Internet sites offered some form of gambling. Figures are hard to come by, but gambling authorities put the market at $600 million in annual revenue nationwide. That's a mere drop in the bucket that holds the estimated $500 billion Americans wager annually on horse racing, bingo games and state lotteries, plus the $26.4 billion bet in regulated casinos.
But Internet gambling is expected to grow, taking in an estimated $3.5 billion by 2001. The Interactive Gaming Council, a group of interactive-gambling companies, is predicting even bigger growth, expecting business to reach $10 billion by 2000.
States, which have controlled the right to legalize and regulate gambling, face a fast-growing form of wagering that's totally unregulated and uncontrolled. Their response has been to outlaw online gambling, pointing out that unregulated wagering on the Internet could make it easier for minors to gamble, and increase consumer fraud and encourage money laundering.
"Internet gambling can't be regulated," said Alan Kesner, assistant attorney general of Wisconsin. "With Internet gambling, there are no assurances for the customers."
Since Internet gambling is untaxed, it could also siphon off revenues from some gambling-friendly states if bettors abandon regulated games and flock to the Internet. However, Kesner said Wisconsin's ban had nothing to do with taxes. "Some people have tried to frame the issue around taxes, but that's not the problem," he said.
Some states, including Minnesota, Missouri, Wisconsin and New York, have shut down online gambling parlors within their borders. In response, operators of interactive casinos have moved offshore, mostly to Caribbean islands such as Antigua and Dominica, where online gambling is legal.
In a show of just how seriously they are taking this, states are backing congressional legislation that prohibits online gambling. The Internet Gambling Protection Act, sponsored by Sen. Jon Kyl, R-Ariz. extends the federal government's current ban on interstate gambling on sports "by phone or wire" to include new forms of electronic transmission of bets, including computers and the Internet. The bill would, however, allow states to use the Internet for lotteries and for off-track betting on horse or dog races.
"Internet gambling exacerbates the problems associated with gambling and poses a particular threat to children," Kyl said after the Senate endorsed the bill 90-10 on July 23. Dr. Howard Schaeffer of the Harvard Center for Addictive Studies said online gambling poses a particular threat to the young: "Virtual casinos are the hard-core crack cocaine of gambling," he said.
Any child with a family computer that has Internet access can wager with a parent's credit card and, "with a click of the mouse, bet the house," Kyl added. He said that college youth are especially at risk, "with organized-crime-sponsored gambling available on virtually every college campus, combined with greater access to computers and the Internet."
Ineffectual Ban
But Internet advocates, libertarians and even some prosecutors question the practicality of banning anything that exists on the Internet, let alone gambling. Some point out that Internet technology renders gambling bans ineffectual. With its open architecture, the Internet is hard to box off from certain groups. If Kyl's bill becomes law, the Department of Justice will have to figure out how to enforce it. One suggested tactic calls for Internet service providers (ISPs) and telephone companies to block access to all gambling sites, in effect, turning ISPs into Internet police.
Tom Bell, director of telecommunications and technology studies at the Cato Institute, noted that there's a powerful demand for Internet gambling in America. Speaking before the National Gambling Impact Study Commission in May 1997, Bell testified that Americans love to gamble and have shown support for the emerging Internet gambling industry. "Because the Internet offers bettors instant access to overseas gambling sites and relative safety from prosecution, online gambling will grow regardless of what prohibitionists want."
Prosecutors and the FBI have also made it clear they don't plan to bust grannies who play virtual slot machines, and they question the practicality of indicting operators of online casinos, most of whom are based legally in other countries.
A few operators of online gambling centers have challenged states' jurisdiction of the Internet in courts. Lawsuits have been filed in Wisconsin and Minnesota. Others, such as the Island Sports Book and Casino, have set up legal operations on the island of Dominica and are accepting bets from U.S. residents. None of the investors in Island Sports are U.S. citizens and are not subject to the U.S. legal actions that have plagued other online casinos. What impact Kyl's bill would have on such operations remains to be seen.
But Wisconsin's Kesner argues that while a ban might not be a practical way to stop Internet gambling, it's an important first step. "A federal law banning Internet gambling makes an important policy statement," he said. "The next step is to protect the people of the United States."
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