Internet gambling said to be ‘rapidly growing social problem’

Laurence Arnold

Wednesday, March 19, 2003 | 9:45 a.m.

WASHINGTON -- On the eve of college sports most-wagered-on event, the National Collegiate Athletic Association urged senators Tuesday to pass legislation aimed at shutting down off-shore virtual casinos.

The legislation, sponsored by Sen. Jon Kyl, R-Ariz., would prohibit the use of credit cards, checks and electronic fund transfers to pay for online bets. The House Financial Services Committee approved similar legislation last week.

Kyl told the Senate Banking Committee that since he first introduced a bill to prohibit Internet gambling in 1995, the number of off-shore online casinos has grown from two dozen to nearly 2,000 with wagers of upwards of $5 billion.

Sen. Richard Shelby, R-Ala., said Internet wagering appeals to underage and compulsive gambling, circumvents state laws on gambling and is "a logical medium for laundering money."

"I believe there must be a federal response to this rapidly growing social problem," said Shelby, the committee chairman.

The testimony comes as a bipartisan group of lawmakers introduced legislation last week that would create a commission to explore legalized Internet gambling in states interested in licensing, overseeing and collecting taxes from the growing industry.

Bill Saum, the NCAA's top gambling watchdog, said Internet gambling is especially alluring to college students.

"Young people, especially athletes, have characteristics that put them at risk, such as being risk-takers, being very aggressive" and believing they can do no wrong, he said.

Saum said the NCAA basketball tournament rivals the Super Bowl in terms of the amount of money wagered.

An NCAA study also found that 5 percent of college athletes said they had wagered on games they were involved in and .3 percent said they had tried to change the outcome of a game they had bet on. However, Saum said he believes that is not a problem in the NCAA tournament because of the prestige and competition.

Frank Catania, supporting the regulation idea on behalf of the Interactive Gaming Council, told the Senate committee that there is no effective way to stop Internet gambling.

He said Internet gamblers would find other ways to fund their betting, such as anonymous use of virtual "e-cash," if credit cards become unusable.

"The application of gambling to the Internet has created a market force that cannot be stopped without pulling the plug on the entire World Wide Web," said Catania, a former director of the New Jersey Division of Gaming Enforcement.

Richard Fischer, an attorney who advises financial services companies, said most major credit card issuers already block transactions they know involve Internet gambling, to avoid litigation and customer disputes. But he said blocking transactions is not easy.

The current legal status of Internet gambling in the United States is hazy. Some site operators have been prosecuted under the 1961 Wire Communications Act, which was written to cover sports betting via telephone.

John Malcolm, deputy assistant attorney general for the Justice Department's criminal division, said Internet casinos are a cash-intensive enterprise and their off-shore nature leaves them difficult to monitor, making them attractive targets for organized crime.

However, he said the department has some concerns about Kyl's bill and the House legislation that it wants to work out with the sponsors.