Regulators continue talks on Internet gambling

Friday, April 19, 2002 | 10:56 a.m.

CARSON CITY -- An electronics expert told the state Gaming Commission Thursday there are pitfalls, including computer viruses and hackers, that could plague Nevada casinos that want to start up Internet gambling.

"It has a lot of problems," said Marc McDermott of the electronic section of the state Gaming Control Board.

Commission Chairman Peter Bernhard said after McDermott's presentation, there would be a discussion in May of what the commission wants to do. This is a "complex issue," Bernhard said, and he wants to see if there is any consensus among commissioners on the policy issues.

He said the commission is still waiting for an answer from the U.S. Department of Justice on whether its interpretation of the federal wires act prohibits Internet betting between the states. The Justice Department, under President Clinton, felt that Internet wagering was illegal under the federal law. The commission last month asked those in the Bush administration if it followed the same policy.

McDermott said there are many security issues to address.

For instance, he said "internal hackers hammered a site for $1.6 million" in England by tampering with the Blackjack computer program.

A "real weakness" in the Internet system is the internal controls in such things as accepting and administering new customer accounts, McDermott said.

He and fellow staff members got into offshore Internet wagering by telling "white lies" and supplying a company with bogus documentation.

And there is no way "to be certain where a person is at" when he or she is placing a bet. One of the prohibitions is that these interactive gambling systems would not operate in states where it is illegal. There are systems to find the estimated location of a bettor but there are ways to get around this, McDermott said.

He said an account was set up in Canada and the betting was done from Nevada. "It's difficult to track," he said.

It would be easier to control problem gamblers, McDermott said. These players could set up their spending and time limits. This would be self-imposed. But he said these players could also set up accounts at numerous casinos. To deal with this, a central clearing house could be created where the bets would be siphoned through.

Controls would be easier if the online betting was limited to Nevada, he said. There are ways state regulators can be sure the Internet gambling doesn't go out of state. But Bernhard said this would be difficult to control in casinos close to the borders of other states where non-residents might have access to the online gambling.

There are 69,000 known viruses and "quite a few known hackers," McDermott said. A system could handle the known viruses and hackers but it would be confronted with new viruses and those who are trying to manipulate the system.

"Maybe it would be hacker-proof for a month until the hackers figure it out," McDermott said.

The 2001 Legislature authorized Internet gambling, sought by some of the larger casinos. But the Gaming Commission must enact regulations.

There has been some suggestion that the system be tried out only in Nevada. But the purpose of the law was to open new areas to the casinos.

And nothing can be done until the federal government clarifies its stance and the commission enacts the regulations.