Net gambling called Pandora's box

Internet gambling was described as an "addictive" vice that will germinate fraud and money laundering if left untouched by federal regulators during a U.S. Senate hearing today on the Internet Gambling Prohibition Act.

Although gambling is traditionally overseen by states, Sen. Jon Kyl (R-Arizona) wants to federally outlaw the taking or placing of bets over the Net. For example, a "casual bettor" could get a $2,500 fine and six months in prison for violating the law. Operators could get a $20,000 fine and four years in prison for accepting just one wager.

"Gambling across state lines is illegal, but the advent of the Internet has created the opportunity to gamble in a manner that is not specifically covered by our laws," Kyl said in his opening statement today before the Senate Judiciary's technology subcommittee hearing on the bill.

"The bill's most important provision permits federal, state, and local law enforcement officials to request, or by court order to require, both the telephone company and Internet service provider to 'pull the plug' on any Internet gambling business among their customers," he added.

Due to the jurisdictional uncertainty, giving U.S. surfers access to cybercasinos has been a crapshoot for most businesses eager to foster online gambling's potential. Some attorneys general have gone after companies outside of their borders claiming that the Net was equivalent to a car and driving illegal activity into their states. In one case, a virtual casino operator who is based overseas was arrested for violating a court order stating he couldn't take online bets from Missouri residents.

Supporters of Kyl's effort included the National Association for Attorneys General, the National Football League, the National Coalition Against Legalized Gambling, and Sen. Richard Bryan (D-Nevada), whose state laws have fueled the growth of brick-and-mortar casinos.

But not all in Washington today were in favor of federal restrictions on Net wagering. The Interactive Services Association's 35-member Interactive Gaming Council was not permitted to testify but submitted a written statement to the Senate subcommittee instead. Stating there are more than 30 Net sites that accept live cash wagers, a number it predicts will double by January, the IGC's message was clear: Online gambling is unavoidable.

"It is fueled by the growing popularity of both the Internet and gambling as a form of entertainment," according to the statement by Sue Schneider, editor of Rolling Good Times Online and chairwoman of the Interactive Gaming Council. "Consumer deception exists in any emerging industry; our challenge is to identify and curtail consumer abuses early. It is our premise that staunch regulation, not unenforceable prohibition, is the most effective means of protecting players."

Agreeing with President Clinton's recent stance to let companies self-regulate e-commerce, Schneider proposed letting the industry set international guidelines for fair practices. "These standards will include but not be limited to such concerns as background checks; prize payment bonding; random testing of casino games; cash reporting practices that prohibit money laundering; licensing requirements; procedures that prohibit underage gambling; and identification of problem gamblers and tax reporting practices as required by law."

Still, most who were allowed to testify today insisted that virtual roulette, blackjack, and the like should still be banned.

"The odds can be easily manipulated and there is no guarantee that fair payouts will occur," testified Wisconsin attorney general James Doyle. "To make matters worse, when you experience problems at a gambling Web site, it will be hard to find your bookie in cyberspace."