Officials debate Internet gaming

Wednesday, Feb. 13, 2002 | 11:28 a.m.

Leaf through any of the popular magazines directed at casino players and you'll find ads -- dozens of them -- promoting Internet casinos.

They invite players to gamble on a variety of games, just like in a Las Vegas casino, and some feature come-ons that credit more money to wager if a player guarantees a $100 stake with a credit card through a third-party money transfer company. Never mind that Internet gambling is illegal in the United States where most of the magazines are distributed.

Ads like those, as well as e-mail invitations and even television spots broadcast during "Monday Night Football" rankle Scott Scherer, a member of the state Gaming Control Board and a participant in a panel on the effect of interactive gaming on the traditional industry at the American Gaming Summit Tuesday.

Even though Internet gambling is illegal, "these people have blatantly ignored it," Scherer said. Some ads, he said, have suggested that their Internet casinos are overseen by Nevada regulators.

Scherer said from Nevada's perspective, the state has gone about as far as it can to bring the issue to the forefront of public debate. The state's lawmakers have enacted legislation directing gaming regulators to draft rules governing Internet gambling, while lawmakers on the federal level prepare to debate bills directed at blocking Internet gambling by banning the use of credit cards, electronic transfers and checks at Internet casinos.

Most experts say two Internet gambling ban proposals, introduced by Reps. Bob Goodlatte, R-Va., and James Leach, R-Iowa, have little chance of passage.

In the meantime, Control Board members plan to meet with U.S. Department of Justice officials before taking the next step of exploring the regulation of an Intranet system that would house online casinos that could be accessed by computer users within a regulated jurisdiction, such as Nevada.

While the Internet gambling issue is in a holding pattern in the United States, casino companies in other parts of the world are moving forward -- which may give them an advantage over Nevada companies waiting on the sidelines, other panelists said.

"By the time the regulatory issues play themselves out, some companies will have already set up offshore," said Joseph Erickson, a partner with Accenture, a management consulting organization.

Because Internet gambling has a proven business model for profitability, many companies are anxious to move forward -- and probably would establish roots outside the United States while lawmakers debate.

Another panelist suggested that most of the technological issues associated with Internet gambling have been solved or are close to being solved and it's now a matter of establishing public policy.

"Can Nevada afford not to have a position?" asked Povl Dalsgaad of Conax, a Norwegian company that has developed payment systems for Internet and digital broadcast networks.

Dalsgaad said the banking industry needed a push to develop Internet banking, but now, most major banks have some form of secured online transactions.

How credit cards are used to place a wager is a key concern of lawmakers. Some U.S. banks are prohibiting their customers from using credit cards at online casinos. Scherer said the reason for that is that banks have been unable to collect debts from what amounts to payment for an illegal activity.

Banks initiated their policies after a California legal battle involving a woman who sued her credit card company for funding her Internet gambling losses. The case, involving a woman who lost more than $70,000 to an Internet casino, ended with an out-of-court settlement in 1999.

Nevada casino companies aren't the only American businesses with a stake in the Internet gambling issue. Panelist David Solomont, president and director of Grand Virtual Inc., a Cambridge, Mass., software producer for Internet casino sites, said the issue is being watched by broadband companies and content providers that produce for interactive television networks, cable and wireless communications devices.

Several major companies are poised to develop content that could feature gambling elements.

"I don't see companies like Disney or (America Online) getting involved with gambling (on their media)," Solomont said. "But there are a number of companies out there (with the means)."

Companies mentioned as potential players include Sony and Microsoft.

Some casino industry experts, however, say they doubt large content companies would make a bid to enter the gaming market and compete with established casino companies because of licensing issues they would face in states that regulate gambling.

However, panelists said they wouldn't be surprised to see strategic partnerships develop between established casino companies, content producers and broadband companies, especially if Internet gambling takes flight.