Despite opposition, Internet gambling grows into billion-dollar industry

Tom Verdin

Sunday, Feb. 27, 2000 | 10:43 a.m.

LOS ANGELES - Playing slot machines at the nearby Indian casino for Beverly Richard was always more about the fun than the money.

Then, two years ago, the Cranston, R.I., got hooked. She discovered she didn't have to drive the 40 minutes to the Foxwoods Resort Casino in neighboring Connecticut.

The slots were just a click of the mouse away on her home computer. And so was her credit card limit. By the time she realized she had a serious problem in December, she was $13,000 in debt.

"It was too convenient," she said. "I don't have to leave home. I don't even have to get dressed. I don't have the time to think about the fact that I'm going to throw my money away when all I have to do is walk into the other room and turn the computer on."

Now recovering from addiction and debts, Richard, 53, is just one of millions of people who have ventured onto gambling's new frontier - where slots, roulette, blackjack and craps are available over the Internet.

The trend has caught the attention of those who worry about its potential to produce a new generation of addicts and its accessibility to minors. It also has caught the attention of lawmakers.

Federal law prohibits the use of the Internet for sports betting, according to the U.S. Department of Justice.

A bill that passed the Senate last year also would make it illegal to play casino-style games online. A companion bill is pending in the House and is the subject of a subcommittee hearing on March 9.

But analysts say law enforcement agencies will have their hands full trying to implement the Prohibition-style ban if it becomes law. Like other Internet crimes, analysts say online gambling will be difficult to track. Compounding the enforcement problems is that the cyber casinos accessible to U.S. players are headquartered offshore, from the Caribbean to Australia to Europe.

"You're not talking about going out in the woods and finding a moonshine operation," said Fred Faust, managing editor of Rolling Good Times, a St. Louis-based online magazine covering Internet gambling. "Thousands and thousands of people have personal computers in their home. How are you going to know what they're doing?"

The efforts to stifle Internet gambling come as the industry is booming worldwide, mushrooming from 15 online casinos in 1996 to more than 700 today, according to industry research.

Revenue to the roughly 200 companies that operate those sites is estimated to reach nearly $1.5 billion this year and $3 billion by 2002, said Sebastian Sinclair, an analyst who performs market research for the online gambling industry. By comparison, revenue to the nation's 450 commercial casinos was $20 billion in 1998 and $7.2 billion at the 160 Indian casinos, according to the American Gaming Association.

Online gambling advocates oppose prohibition. Regulation, they say, would provide a measure of protection for U.S. players who will find a way to gamble despite any future ban.

"They're thrown into a situation where they have to choose among people who are breaking the law," said Albert J. Angel, cofounder of the Interactive Gaming Council, an online gambling trade organization. "If you essentially criminalize something that ought to be ordinary commercial activity, you're going to tilt the deck against consumers."

The 4 million Americans who are expected to gamble online this year account for about 50 percent of the industry's revenues, analysts said.

With the number of Asian and European bettors rising, however, some Internet casino operators say they aren't overly concerned about the effects of a U.S. ban.

"This whole Internet gaming is just exploding," said Giancarlo Bettini, 49, chief executive officer of Global-Player.com, based in St. John's, Antigua. "If you see where the Internet goes, where is the end?"

Internet gambling is legal in about 50 countries, including Australia, Sweden, Denmark and a smattering of Caribbean islets. On Antigua, operators can get started by paying a $100,000 license fee.

Regulating online gambling would require changing federal law that prohibits casino-style games in most states, said Sen. Jon Kyl, an Arizona Republican and sponsor of the Senate version of the Internet Gambling Prohibition Act.

He said his intention was to maintain the status quo.

"The idea is not to legalize the activity but to ensure that we can enforce all the state laws to prohibit it," he said, adding that Internet gambling would be "very difficult if not impossible to regulate."

Just as it would be complicated for authorities to oversee legalized Internet gambling, it will be equally problematic trying to enforce a ban, said U.S. Rep. Bobby Scott, the ranking member of the House Judiciary subcommittee, which will conduct the hearing on the House version.

For that reason, the legislation is useless as is, he said.

The ban would be enforced by identifying online casinos and requiring Internet service providers to pull those sites, theoretically preventing access for gamblers. But Scott and industry observers say the casinos can circumvent the system by having gamblers dial directly into their systems without going through a service provider.

Penalties that include fines starting at $20,000 and prison sentences for operators also are toothless because the companies are located outside the United States, said Scott, D-Va. He said the only way to stop Internet gambling is to target the players, which the bill avoids.

"There's no way of enforcing it," Scott said. "All you've passed essentially is a resolution saying you don't like the idea."

The U.S. Department of Justice also has objected to Kyl's bill on the grounds that parts of it would be inconsistent with federal gambling laws. Justice officials say one provision would expand horse-race betting by allowing it on the Internet.

The greatest objection, however, comes from the players.

Michele Jansen of Jacksonville, Fla., is sympathetic to Richard and others who gamble their way into debt. She also acknowledges that some online casinos are potential rip-offs for players.

But that's no reason for the government to legislate what people do on their home computers, said the 33-year-old registered nurse, who gambles online once or twice a week.

Even if banned, however, Internet gambling has grown so much in recent years that no amount of legislation will stop it, she said.

"The casinos will find a way around it," she said, "because you're talking big money."