Net gambling lawsuit back in court

Cynthia Haines admits that she bet the large stake and lost it to more than 50 cybercasinos, which she accessed from her home in California--a state where those types of wagers are illegal.

But after her credit issuer, Providian National Bank, took her to court over unpaid bills, Haines filed a countersuit against the bank and Visa and MasterCard, as first reported by CNET News.com.

As early as today, the state Superior Court in Marin County, California, could set a trial date for the case. If the judge ultimately finds in favor of Haines, the outcome carries wide implications for the burgeoning Net gambling sector.

Online gambling has been a contentious issue in the United States, where some want to ban it, while others say it should be regulated as it is in parts of Australia. The federal Wire Act clearly prohibits sending wagers over phone lines, but each state is placing different odds on the legality of online gambling. New York and Missouri have gone after online wager houses based outside their territories, while others have yet to step into these murky legal waters.

Although Haines's lawyers said she doesn't admit to breaking the law, their argument is this: Credit card companies are engaging in unfair business practices and aiding and abetting a crime by giving online wager houses merchant accounts to process bets for customers who live where the activity is outlawed.

Not only could Haines be excused from her debt, but the lawsuit seeks a permanent injunction to prohibit credit card firms from serving Net gambling houses. Credit firms typically get a 2- to 5-percent cut from purchases made using their cards.

"Visa and MasterCard know that their credit cards are being used for illegal online gambling, are making money off of it, and have done nothing to stop it," said Ira Rothken, Haines's lead attorney.

His rationale is that "they can't sue someone else for an unlawful act if they also committed unlawful act."

MasterCard declined to comment, and a Visa spokesperson wasn't immediately available.

But in January, Judge William McGivern rejected the firms' motion to dismiss the case, stating that: "If the court were to dismiss this action?it would deprive the public a means of addressing alleged violations of the law and fundamental policy."

In about a month, sources say Sen. Jon Kyl (R-Arizona) will revive his Internet Gambling Prohibition Act, which aims to eliminate most online gambling by hitting Net users with a $500 fine and three months in prison each time they rolled the dice online. Cybercasino operators would face up to $20,000 in fines and up to four years in prison.

However, some legal experts say Net gambling will thrive despite the Haines case and U.S. lawmakers' attempts to eliminate it.

"Her case does hit a real pressure point with credit card companies. If she wins, the boys at CyberCash are going to be very happy, because people will just migrate from credit cards to using 'e-cash,' which is untraceable," said Philip McGuigan, an attorney at Gordon & Glickson who specializes in Net gambling.

"But is this case going to stop Internet gambling? No," he added. "Nothing will."

In Haines's case, the court may simply find that she has to bear the brunt for her bills, McGuigan noted.

Her attorney would rather see Visa, MasterCard, and Providian National Bank eat the debt.

"My client has some responsibility," Rothken said. "But this case is about Visa and MasterCard encouraging illegal activity in California and profiting from it."