Internet gamers urge regulation of online betting

John Wilen

Friday, March 27, 1998 | 9:56 a.m.

When is the last time you heard of an industry asking for government regulation?

That's exactly what Internet gambling companies urged Thursday at the International Gaming Business Exposition in Las Vegas.

"We believe regulation is needed to legitimize the market and grow the market," said Tom Meredith, whose Roswell, Ga., company, Internet Gaming, builds computer and closed-circuit television networks for gaming companies.

Internet gambling is here and it is not going away, the experts said. If the government doesn't want U.S. citizens being swindled by off-shore gaming companies, and if it wants to collect taxes on the money that's being bet anyway, it should get realistic and embrace the industry with regulation, they argued.

"Internet gaming is here, it's here to stay, and it ain't going away," Meredith said.

Legalization would bring legitimate players like established casinos, with their existing regulatory structure, into the market, decreasing the incidents of fraud and scams, Meredith said.

Tony Fontaine, vice president of Alliance Gaming Corp., which does business as slot machine manufacturer Bally Applied Technologies, said regulation is needed in part to clarify existing laws.

"It's an absolute mess out there," Fontaine said.

Current laws and proposed laws seek to apply traditional legal mechanisms to a non-traditional industry -- the Internet, he said. As a result, U.S. citizens are being prosecuted instead of the offshore gambling companies that actually run the games, Fontaine said.

"The laws just aren't working," he said.

Three weeks ago, federal prosecutors in New York announced indictments against 14 American managers of off-shore companies set up to accept bets over the Internet. One of the managers, Kerry Rogers of Las Vegas, said his sites have yet to accept a single bet.

Prosecutors Thursday announced charges against seven more people who own, manage or work for Carribean-based Internet gambling companies.

The charges were made under the Federal Wire Act, a 1961 law that prohibits the transmission of gambling information over interstate telephone lines. The disposition of the charges is far from clear, as there is a fair amount of disagreement over whether the Federal Wire Act applies to Internet gaming. Prosecutors claim it does; those involved in Internet gaming claim it does not.

A bill sponsored by Sen. Jon Kyl, R-Ariz., would extend the act to cover Internet gaming.

Despite these governmental attempts to prohibit Internet gaming, online gambling is not likely to go away any time soon, the industry representatives said.

Online gaming is already legal in many other nations, and on certain Indian reservations. Internet gaming companies generated revenues of $300 million on $8.6 billion wagered last year, according to gaming industry analysts Christiansen/ Cummings Associates.

It's just a matter of time before the amount of money flowing to foreign Internet gambling companies grows so large that U.S. gaming interests begin to pressure the government for legalization, Fontaine said. Their argument will be simple: continued prohibition constitutes a trade barrier that causes financial hardship, he said.

"That's going to force U.S. regulatory acceptance," Fontaine said.

John Cargnello, president of Technical Systems Testing North America Inc., a Vancouver, B.C.-based subsidiary of Australian company Technical Systems Testing, urged a regulatory approach based on Australia's Internet gaming laws.

In 1995, Australian Regulators and gaming companies "got together and they looked at the Internet ... and they said we need to look at those issues," Cargnello said.

The conference resulted in a national regulatory model that applies existing regulations governing gaming to Internet gaming. For instance, Internet gaming companies must submit to the same sorts of testing and monitoring as real-world casinos.

Under a similar structure in the United States, the representatives argued, gamblers would be far more prone to place their wagers with established, regulated casinos than with off-shore companies subject to little control.