The casino establishment wants to ban
Internet gambling. Congress wants to ban Internet gambling. The national Gambling Impact
Study Commission wants to ban Internet gambling. But it's impossible to keep netizens from
frequenting virtual casinos--a fact even Janet Reno's Department of Justice concedes.
Still, an odd coalition of anti-gambling activists and entrenched casino interests may get
Washington to impose prohibition--and as a result, open the door to government control of
by D. Dowd Muska
very day, Nevadans gamble at some new and rather unique casinos. And each time
they do, theyre committing a crime.
Under Nevada law it is illegal for residents to access the Internet to gamble beyond the
states borders. In 1997, legislators made it a misdemeanor for citizens to visit
virtual casinos which are not licensed by the state. When the necessary regulations are
finally adopted by the Gaming Control Board, Nevadans will be able to e-mail picks to
sports book operations within the state and not break the law. But since July 1997,
playing blackjack at a virtual casino whose hardware is located in Belize has made Nevada
residents eligible for a date with a district attorney.
Its not often that Nevada blazes a legislative trail, but that may be the case when
it comes to online betting. Arizona Senator John Kyl and Nevada Senator Richard Bryan are
once again cheerleading the Internet Gambling Prohibition Act (IGPA), legislation they
first sponsored in 1997. When the IGPA was drafted, it seemed as though nothing would stop
Congress from imposing a federal ban on Net gambling. But thanks in part to the
legislative logjam produced by the impeachment proceedings, the IGPA fell flat in the
105th Congress. This year itor similar legislationhas a better chance for
success, particularly if the report due this month by the National Gambling Impact Study
Commission (NGISC) endorses a nationwide ban on online betting. But casino lobbyists,
paternalist posturing and Kay Cole James notwithstanding, the near-universal agreement
that personal computers should not be de facto gambling halls is starting to crack.
Foreign governments are starting to legalize, regulate and tax online betting. The
industry is mounting a campaign to improve its image. And civil libertarians are making
the most persuasive case against prohibition: that banning virtual casinos invites an
all-out assault on the right to privacy in cyberspace.
Gambling first hit the Net in 1995. While most early sites were crudemany
didnt even allow gamblers to bet real moneyimprovements in technology helped
create a sizable market in just a few years. Researcher Allison Flatts 1998 analysis
of Internet betting for the NGISC found that "remarkable advancements in Internet
security and speed made gambling on the Internet more viable and, as a result, the
industry has flourished."
(a) Whoever being engaged in the business of betting
or wagering knowingly uses a wire communication facility for the transmission in
interstate or foreign commerce of bets or wagers or information assisting in the placing
of bets or wagers on any sporting event or contest, or for the transmission of a wire
communication which entitles the recipient to receive money or credit as a result of bets
or wagers, or for information assisting in the placing of bets or wagers, shall be fined
under this title or imprisoned not more than two years, or both.
In January a consultant from Christian/Cummings estimated that last year virtual casinos
raked in about $650 million, half of which involved betting on sports. By 2002 online
gambling revenues could top $10 billion, and Smith Barney analyst Jason Ader has predicted
that if every American had access to virtual casinos, revenues could grow to $100 billion.
With computers in half of the nations households nowand over 200 sites
offering anything a gamblers heart desiresAders scenario could soon
Of course, all this betting is taking place within a legal no mans land. American
courts have yet to sort out the matter of online gamblings legality. To many virtual
casino foes, wagering over the Internet is clearly illegal under a number of federal
statutes, most notably the Wire Communications Act of 1962. They believe the act18
U.S.C. § 1084leaves no room for ambiguity:
The online gambling industry interprets the Wire Act somewhat differently. Since the
language does not specifically include Internet communications, online gamers argue,
theres enough murkiness to give them some wiggle room. They also point to the
increasing use of satellite Internet accessno wires, no violation of the Wire Act.
Just to be safe, American virtual-casino entrepreneurs have set up their businesses
overseas. The Caribbean is home to most sites, and since their operators dont face
extrication to the states, it is domestic customers who risk running afoul of overzealous
prosecutors. In other words, rolling some virtual dice carries with it the chance that you
might wander into the crosshairs of an attorney general in search of a camera crew.
Jon Kyl dislikes gambling. A lot. According to him, it "erodes values of hard
work, sacrifice, and personal responsibility." Thus, the thought of millions of
computer users ruining their lives by pouring their money down a cyber-hole has Kyl
fuming. In 1997 he drafted the Internet Gambling Prohibition Act, an update of the Wire
Act which will leave no ambiguity about whether online betting is a federal crime.
Naturally, Nevadas congressional delegationwith Bryan at the helmis on
We Cant Do
Getting government to target your competitors is a time-honored tradition in the Silver
State, but plenty of national politicians whose jobs dont depend on keeping casino
executives happy have jumped aboard the IGPA bandwagon. Its little wonderthe
pro-Nanny State majority in Congress has already demonstrated its desire to control the
Internet by passing two laws designed to curb online smut. (The first was swatted down by
the Supreme Court and the second was overturned by a U.S. District Court in February.
Apparently the constitutionality of Net regulation doesnt appear on
legislators radar screens.)
In 1997, it appeared that banning virtual casinos would be a milk run for Kyl, Bryan and
the IGPAs many other boosters on the Hill. With the online wagering business
booming, it was easy to citeor concoctmorality plays about the Internet
gambling monster. Representative Bob Goodlatte of Virginia offered this prototypical sound
bite: "Imagine coming home from work one day, only to find that your children have
borrowed the family credit card, logged onto the home computer and lost this
months mortgage payment in a game of cyber-roulette."
"Bringing gaming directly into peoples homes, as we are beginning to see
through the Internet, is so full of potential problems, and so far beyond the ability of
any state to regulate, that it needs to be prohibited on a national level," Bryan
said in a press release. "I simply have no confidence that gaming on the Internet can
be regulated now, or any time in the future."
Bryan press secretary Karen Kirchgasser pooh-poohed the charge that her boss supported the
IGPA out of obedience to his masters in Sin City: "Its not an issue of
competition. Its a regulatory issue. On the Internet, you cant regulate."
That beliefstressed over and over againis the sacred tenet of Net gambling
opponents. They emphasize that virtual casinos are, in NGISC member and former Nevada
Gaming Control Board Chairman Bill Bibles words, "a suckers bet."
The regulation-isnt-possible refrain is so crucial to the credibility of the
prohibition cause that IGPA backers make a habit of ignoring opponents of their bill. In
the summer of 1997 Kyl, who chairs the Judiciary Committees Subcommittee on
Technology, Terrorism, and Government Information, held a hearing on the IGPA. Bryan
testified, as did five other witnesses who toed the prohibition line. Virtual-casino
representatives, civil liberties activists and Internet technology experts werent
invited to speak.
Over the next 12 months, the IGPA was changed to accommodate a skittish horse racing
industrythe tracks plan to develop in-home betting software in the near
futureand then, last July, the Senate voted 90-10 to criminalize Internet gambling.
A House version of the IGPA appeared headed for passage as well, but then came Monica. Ken
Starrs impeachment referral hit Capitol Hill like a legislative neutron bomb,
effectively killing all other bills for the remainder of the congressional session. Kyl
and Bryan had to start all over again. And on March 23, the Internet Gambling Prohibition
Act of 1999 was introducedon the same day Kyl held another subcommittee hearing
comprised of another one-sided panel of witnesses.
Anything About It
Opposing the IGPA are a diverse group of activists and organizations armed with ample
intellectual muscle and solid reasoning. But the most compelling argument against
prohibition is quite simple: It just wont work. Politicians weak (or
nonexistent) understanding of the Internet is behind much of their misguided belief that
online gambling can be banned. The Internet is global and highly decentralized. That means
enforcing a ban will be all but impossible. As Wisconsin Assistant Attorney
Generaland prohibition supporterAlan Kesner told the NGISC, "the very
qualities that make the Internet the powerful force that it is today are those which go
directly against the ability to regulate and effectively control what happens on the
[The Internet] was designed specifically to
circumvent blockages by sending multiple copies of electronic data in multiple packets via
multiple routes. Given the world wide webs infrastructure, the mere declaration of
an activity as "illegal" will have little impact on the ability of consumers to
access web sites offering such activity unless it is enforced in conjunction with broad
law enforcement powers such as search warrants, sting operations, roving wiretaps, and
other tactics that raise questions of privacy.
In March Interactive Gaming Council (IGC) Chair Sue Schneider submitted a written
statementIGPA opponents werent invited to testify, rememberwhich argued
that if the federal government declared war on virtual casinos, the cost to
Americans freedoms would be high:
Why would such draconian tactics be needed? Because as long as virtual casinos keep
their hardware beyond U.S. jurisdictions, law enforcement officials have only one way to
give prohibition teeth: by monitoring Americans private Internet accounts. Unless
some omnipotent force magically gives the federal government the resources and authority
to enforce its Internet gambling ban in other countries, Americans will be able to gamble
on the Web with relative ease. Keeping them from doing so will require far more resources
than the federal government can currently muster. "With the advent of strong
encryption software," reads an IGC fact sheet, "those who wish to place bets can
do so without the threat of anyone (including most government agencies) intercepting and
decoding their messages."
Regulate Us, Please
Some federal officials recognize the enforceability problem. Not surprisingly,
theyre the one who will be in charge of carrying out the IGPAs unrealistic
The Department of Justice doesnt take a stand against government coercion very
often, so when it does its worth noticing. While the department did indict 14
virtual casino operatorsincluding Las Vegan Kerry Rogersin March of 1998, it
has consistently objected to a Net gambling ban.
In 1996, the National Association of Attorneys General lobbied the federal government to
clamp down on Internet bettingand if necessary, cuff computer operators while they
sit at their PCs. The DOJ rebuked the AGs scheme. "The department does not
agree that federal law should be amended so broadly as to cover the first-time bettor who
loses $5, particularly when Internet gaming is expected to mushroom and federal resources
are shrinking," wrote John C. Keeney, an official with the departments criminal
"International Internet gambling? We cant do anything about it,"
Department of Justice spokesman John Russell admitted last year. "Thats the
If the nature of the Net means online gambling cant be stopped, is it inevitable
that offshore sites will rip off bettors and teach Americas little ones the joys of
credit card fraud? Not exactly. Contrary to the claims of prohibitionists, governments can
and do regulate virtual casinosand a fair amount of self-regulation is already in
No Free Drinks
Theres a reason why IGPA supporters use "regulation isnt possible"
as their mantra. Bryan and other gambling puppets need virtual casinos to be
unregulatable. If there are ways to ensure that online games of chance are just as
"fair" as the ones found in Nevada, the Silver States got trouble. When
Las Vegas casino executives have nightmares about Internet gambling, they probably feature
someone like 31-year-old Floridian Kurn Wheeler. He used to come to Sin City every few
months to gamble. He doesnt anymorean Antigua-based virtual casino is his
destination now. "Its great. I dont have to leave the house,"
Wheeler told the Washington Post. "Its very private. There are no distractions,
no dirty looks from the casino people if you win."
But Kyl and other gambling foes need virtual casinos to be unregulatable too. Few casino
critics call for the shutting down of casinos across the nation. They recognize
Nevadas right to exist, so to speaknot to mention the many other jurisdictions
where gambling is now legal. And if Americans can someday dial into regulated virtual
casinos they way they can travel to a state or a country with regulated physical casinos,
gambling itself will get a boost in legitimacy. If anti-casino puritans can sell the
notion that regulation simply isnt possible in cyberspace, it will help their
crusade against Americas fastest-growing vice.
So both sides of the powerfulif mismatchedanti-Internet gambling alliance have
a vested interest in silencing those with solid proposals for regulating virtual casinos.
And theyre not above appropriating of their opponents premises. On the rare
occasion when ban proponents respond to criticism, they claim that if prohibition
wont work, then regulation wont either. "Such an argument," the Cato
Institutes Tom W. Bell told the NGISC last year, "fundamentally misunderstand a
basic principle of governance, however: Regulations can succeed even where prohibition
fails if they offer benefits that exceed their burdens. That is why people do not
illegally shoot craps in Las Vegas alleys."
Its a fact Silver State casino barons would rather keep hidden, but Nevada
doesnt have a monopoly on effective gambling regulations. Many foreign nations have
strong regulatory programsand its these countries which are starting to
legalize virtual casinos. Gyneth McAllister, a gambling regulator in Antigua, denies that
her nations regulations arent sound: "We treat everybody just the same.
If Jesus came down here, wed still screen him to death."
If Caribbean nations dont inspire confidence, how about Australia? Thats where
American Wagering, Inc. recently set up shop. The Las Vegas Sun reported that the
Vegas-based sports book company was "the first big, established Nevada gaming company
to offer the controversial Internet gambling product."
"Australia brings the regulations and credibility to sports wagering on the Internet
that assures our customers of our integrity and financial strength," said AWI Chief
Executive Victor Salerno.
Although their arguments are falling on deaf ears in Washington, the online gambling
industry is clamoring for the U.S. to wake up to the opportunity Australia and other
nations have seized. But in the meantime, Internet gamers are taking steps to ensure their
sites integrity. For example, contrary to the horror stories told by many
politicians, virtual casinos are indeed concerned with the ages of their customers. Since
online gamblers use credit cards to bet, many operations demand a Social Security number,
in order to check it against a credit reporting database. Other sites require applicants
to fax birth certificates, driver licenses or other forms of identification before an
account can be opened.
"Regardless of the type of identity checks used," reports the IGC, "most
sites require the posting of a significant amount (often a $1,000 minimum) in a wagering
account to begin. Such large up-front deposits function not only to screen out minors, but
to eliminate those who are less capable of sustaining losses from the betting pool as
As the IGCs Schneider noted in her March statement to Congress, "Because
operators pay a price for charge-backs when stolen credit cards are used by children, they
have every incentive to screen out minors and verify the identities of their
As for age-of-majority customers, virtual casino executives enjoy needling those who
claim point-and-click gambling is more irresponsible than a visit to the Strip. Jay Cohen,
who runs World Sports Exchange in Antigua, scoffs at the claim that Nevada casinos have
players best interest in mind: "If anything, were more responsible. Vegas
is all about sucking you in.
We dont pour drinks down peoples throats,
trying to impair their judgment."
The Internet highlights how businesses and
individuals can regulate themselves. Because information travels so quickly, fraudulent
organizations can be rapidly ferreted out and broken down.
This is what regulators
must learn: Internet users can protect themselves. They control what they read, who they
communicate with, what services they use, and what they buy. With this freedom comes the
opportunity to make responsible, informed decisions. While bad decisions will be made,
this is the fault of the individual, not the medium.
The Netizenship prevalent throughout cyberspace can help keep virtual casinos honest as
well. Center for Freedom in Technology Director Justin Matlick made note of this in the
Las Vegas Review-Journal last year:
The IGC, civil libertarians and other foes of a ban on Internet gambling have made some
progress in advancing this pro-freedom perspective. Kyls reworked version of the
IGPA does not target casual bettors, and it requires law enforcement, not Internet service
providers, to prowl the Web for gambling sites.
But prohibition is still the goal, and when the NGISC issues its report this month,
Internet gambling opponents are likely to get more ammunition. Many in government seem
unable or unwilling to realize that the Information Age cant be rolled back, and
that means online gambling and many other controversial uses of the Internet are here to
stayWashington, D.C. be damned.
The self-preservation instinct has many in the Silver State terrified of Internet betting,
but perhaps their fear is unwarranted. In time virtual casinos might significantly weaken
the foundation of Nevadas economic prosperity. Yet one could also argue that if
Congress attained enlightenment and allowed gambling corporations to digitize themselves,
online players would flock to brand-name sites. (Whats likelier to draw more
interest, circuscircus.com or theslotshack.com? And just think of the tax revenue that
would flow into Carson City.)
The Electronic Freedom Foundations John Perry Barlow once offered this assessment of
Washingtons meddling in cyberspace: "We have government by the clueless, over a
place theyve never been, using means they dont possess."
Thats an apt description of the policy debate over Internet gambling. The IGPA is
one of the best examples of how much the Internet frustrates technocrats in Washington
(not to mention professional politicians with powerful casino clients).
"Lawmakers and prohibitionists can neither effectively stop Internet gambling nor
justify their attempts to do so," writes Bell. Whatever Congress does, worldwide Net
gambling will continue to surge, giving Americans ample opportunities to wager over the
Web. Widespread consumer demand makes the proliferation of virtual casinos a certainty.
The only uncertainty about Net betting is how willing Washington is to chip away at
Americans freedom in a fruitless attempt to stop it. NJ
Contributing Editor D. Dowd Muska wrote about
sin taxes in May's Nevada Journal. He can be contacted at email@example.com.