Citibank OKs pact to block ‘Net gambling

Friday, June 14, 2002 | 11:12 a.m.

SUN STAFF AND WIRE REPORTS

ALBANY, N.Y. -- The nation's largest credit card issuer has agreed to block online gambling transactions using its credit cards, state Attorney General Eliot Spitzer said.

Spitzer said today that Citibank's agreement with him is expected to significantly reduce illegal, underage and potentially addictive Internet gambling. It affects all Internet gambling transactions, not just for New Yorkers, he said.

Citibank also agreed to pay $400,000 to nonprofit groups that counsel and help families hurt by gambling additions, the company said.

"Americans now waste $4 billion a year on this pernicious form of gambling," Spitzer said. "With this agreement, we will cut off an enormous line of credit that was a jackpot for illegal offshore casinos."

The agreement settles Spitzer's investigation, a spokeswoman said.

A prominent Internet gambling expert in Las Vegas downplayed the agreement, saying it would neither hurt the growing "gray market" of illegal Internet gambling -- largely based offshore -- nor the future potential of legitimate operations.

Most of the major banks have already stopped processing their credit cards for online gambling transactions, said Anthony Cabot, a gaming industry attorney for Lionel Sawyer & Collins in Las Vegas. Credit card companies began over a year ago to block such transactions since they were hit by lawsuits from online gamblers, he said.

Wells Fargo, Bank of America, MBNA and Chase Manhattan Bank are among the banks that have moved against Internet gambling.

"Citibank agreed to take these steps to help alleviate concerns raised by the attorney general about the impact that gambling on credit may have on New York residents," Citibank spokeswoman Maria Mendler said. "In addition, Internet gambling transactions have an increased potential for fraud loss, increased delinquency rates, and there is a greater potential that proceeds from such transactions may fund inappropriate activities."

She said the agreement applies to all credit card transactions in all states.

Urging credit card companies to block payments could backfire, Cabot said. Online gambling companies -- some of the most profitable and popular enterprises on the Internet -- will look to other online payment schemes to accept wagers. Such a system could take hold with other businesses on the Internet but would likely be created offshore, draining profits that otherwise could have come from American processors, he added.

Spitzer said Internet gambling businesses usually operate from outside the United States, beyond the enforcement power of states.

Citibank controls about 12 percent of the nation's credit card market.

Gambling could still be done through accounts funded by players, similar to Off-track Betting systems, a spokesman for Spitzer said.

Lawmakers in Washington have been trying to ban Internet gambling since 1996. The task gets more difficult each year as the industry grows and major companies -- and even states -- take steps to get in on the action.