Gamers contemplate legalized Internet gambling

Friday, May 21, 1999 | 4:09 a.m.

Australian media are quoting the head of the American Gaming Association as saying that if the Australia Internet gambling regulatory system works, it could be a model for future U.S. regulation.

Such remarks have observers wondering just how sincere the mainstream casino industry is in its opposition to Internet gambling.

" ... If, two or three years down the road, it proves that it can be regulated, that it can be properly policed and that revenue is generated for government, then I think you will see very quickly that sort of model being used in the U.S.," AGA President Frank Fahrenkopf was quoted as saying this month in The Age, a Sydney financial publication. Fahrenkopf was quoted while there for a gaming conference.

In Las Vegas last week for a Nevada Society of Certified Public Accountants conference, Fahrenkopf said the AGA continues to take a neutral position on legislation introduced by Sen. Jon Kyl, R-Ariz., that would clamp down on Internet gambling in the United States.

Kyl's bill -- the Internet Gaming Prohibition Act of 1999 -- is similar to legislation approved in a 90-10 vote by the Senate last year. The bill awaits action by the Senate Judiciary Committee after it was approved by a voice vote in the Senate Subcommittee on Technology, Terrorism and Government Information.

Prospects of passage are uncertain this year in the House. It was the House's failure to act last year that killed the bill.

Fahrenkopf said the AGA is noncommittal toward Kyl's bill because members are convinced the technology does not exist to adequately regulate who gambles via the Internet. The AGA, however, doesn't support unregulated Internet gambling as is now available to U.S. residents.

"Our position has been consistent from the very first time the legislation was introduced," Fahrenkopf said. "Until such time that the technology is available to safeguard the product, we cannot support Internet gaming."

Critics say the AGA's stance is a smoke screen designed to protect the interests of the big-name, land-based casinos.

"It's clear from his remarks that he is solidly on the fence," Sue Schneider, chairwoman of the Interactive Gaming Council, said. "His members are split over the issue, so what he says depends on the audience. He doesn't want to do anything to upset that apple cart."

If a regulatory framework was in place that would benefit the government through the collection of taxes, AGA members would be ready to climb aboard, Schneider said.

What is it that Australian regulators have found that seems to have eluded U.S. policymakers? Experts say Australia has no magical formula -- just a different attitude about the issue.

"Just how exactly do they regulate it?" asked David Post, co-founder of the Cyberspace Law Institute and a professor at the Temple University Law School. "I don't think anybody has suddenly solved that problem in Australia, there's no magic bullet."

Post said the online gaming industry is desperately seeking regulation, even with taxation, to gain credibility.

"It always seemed to me that it is in the interest of the online gaming industry to seek out a regulatory framework," Post said. "They're quite willing to pay for that with taxes because they are facing a colossal problem. They need to assure customers that everything is on the up and up. They want everybody to know that there's no cheating, a fair return on their bets and a means for the resolution of disputes. You won't see the industry explode until that happens."

Post even suggested that an experienced regulatory agency -- such as Nevada's Gaming Control Board, for example -- offer itself as a regulatory resource for the online gaming industry. The Nevada agency has credibility as one of the world's most respected gambling regulatory agencies, and the state could collect additional revenue as a contracted consultant, he said.

Anthony Cabot, a gaming attorney with expertise in online wagering, said Australia's bid to regulate the industry is a major breakthrough.

"It brings a new legitimacy to the industry," Cabot of Lionel Sawyer Collins in Las Vegas said. "It's the first time that a world leader has taken a position that Internet gambling should be legal and regulated."

Australia's bid to regulate online wagering not only is driven by tax revenues, but also by an attitude that gaming is more of an entertainment diversion than a vice. Fahrenkopf is convinced that if online gaming becomes acceptable, the brand-name companies will have a tremendous edge because of their experience with land-based casinos.

Cabot said consumer protection has always been a sticking point for the big-name casinos considering the online gaming issue.

"That's where the Australian experiment will be closely watched," Cabot said. "If they can keep it scandal-free, there may be a change in attitude worldwide."

Cabot also said technology is evolving so quickly that there may be some solutions to the gnarly issue of preventing underage gambling on the Internet.

"Is there a fool-proof way to prevent underage gaming?" Cabot said. "I don't know. Will there be something out there tomorrow? Maybe. It's something we're all watching."