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March 29, 2001
The Issues: For Internet Wagers, Shifting Legal and Financial Ground
By MATT RICHTEL
THE ease with which Internet users can wager online masks the tumult behind the scenes in the nascent world of Internet gambling. One thing, for now, is certain: federal law makes it illegal to operate an online casino — hence the boom in Caribbean-based sites. But on many fronts, the legal, political and financial issues are in flux.
The Law
A few states have made it illegal to place a bet over the Internet. Most, while not explicitly prohibiting Internet gambling, have laws that could be interpreted as doing so, said Anthony N. Cabot, a partner in Lionel Sawyer & Collins in Las Vegas and a gambling law expert. But he said that to his knowledge, no one had been prosecuted under a state law for placing a wager online.
The federal law is less clear. It does prohibit telephone-based interstate gambling operations, a ban generally construed as including those run over the Internet, but it does not explicitly say their customers are breaking the law. There is general agreement among legal experts that they are not. The Justice Department says it has decided for now to defer to state laws on the question.
The Industry
Some of the established casino operators in Las Vegas and elsewhere have sharply altered their positions on Internet gambling. Not long ago, they argued that it should be illegal. More recently, some have begun to embrace it, saying that its emergence is inevitable and that they do not want to lose business to it.
For example, MGM Mirage has undertaken a three-pronged approach. It is seeking assurances from states where it has casino licenses that they will not object to its operating Internet casinos. It is developing software that can ensure that online bettors are adults living where gambling is legal. And it has been opening Web sites where players can play for fun (not money), giving the company a brand- name toehold in the emerging market.
J. Terrence Lanni, the chairman and chief executive of MGM Mirage, acknowledged that his company's position was a "180-degree change" from what it was two years ago. "Our view now is Internet gambling will eventually be legal anywhere in the world," he said.
The Banks
For practical reasons, if not legal ones, several major banks that issue credit cards will not allow their cards to be used for online gambling. According to the River City Group, a publishing and consulting firm that tracks the online gambling industry, Bank of America, Providian, Bank One, Citibank and Wells Fargo are among the banks with such restrictions.
One reason for the banks' action, Mr. Cabot said, is their worry that cardholders may successfully refuse to pay their gambling charges because the collection of such debts cannot be enforced by law in most states. As a result, said Sue E. Schneider, chief executive of the River City Group, Internet casino operators are increasingly unable to get approval for customers to charge bets on credit cards.
The Issues: For Internet Wagers, Shifting Legal and Financial Ground
By MATT RICHTEL
THE ease with which Internet users can wager online masks the tumult behind the scenes in the nascent world of Internet gambling. One thing, for now, is certain: federal law makes it illegal to operate an online casino — hence the boom in Caribbean-based sites. But on many fronts, the legal, political and financial issues are in flux.
The Law
A few states have made it illegal to place a bet over the Internet. Most, while not explicitly prohibiting Internet gambling, have laws that could be interpreted as doing so, said Anthony N. Cabot, a partner in Lionel Sawyer & Collins in Las Vegas and a gambling law expert. But he said that to his knowledge, no one had been prosecuted under a state law for placing a wager online.
The federal law is less clear. It does prohibit telephone-based interstate gambling operations, a ban generally construed as including those run over the Internet, but it does not explicitly say their customers are breaking the law. There is general agreement among legal experts that they are not. The Justice Department says it has decided for now to defer to state laws on the question.
The Industry
Some of the established casino operators in Las Vegas and elsewhere have sharply altered their positions on Internet gambling. Not long ago, they argued that it should be illegal. More recently, some have begun to embrace it, saying that its emergence is inevitable and that they do not want to lose business to it.
For example, MGM Mirage has undertaken a three-pronged approach. It is seeking assurances from states where it has casino licenses that they will not object to its operating Internet casinos. It is developing software that can ensure that online bettors are adults living where gambling is legal. And it has been opening Web sites where players can play for fun (not money), giving the company a brand- name toehold in the emerging market.
J. Terrence Lanni, the chairman and chief executive of MGM Mirage, acknowledged that his company's position was a "180-degree change" from what it was two years ago. "Our view now is Internet gambling will eventually be legal anywhere in the world," he said.
The Banks
For practical reasons, if not legal ones, several major banks that issue credit cards will not allow their cards to be used for online gambling. According to the River City Group, a publishing and consulting firm that tracks the online gambling industry, Bank of America, Providian, Bank One, Citibank and Wells Fargo are among the banks with such restrictions.
One reason for the banks' action, Mr. Cabot said, is their worry that cardholders may successfully refuse to pay their gambling charges because the collection of such debts cannot be enforced by law in most states. As a result, said Sue E. Schneider, chief executive of the River City Group, Internet casino operators are increasingly unable to get approval for customers to charge bets on credit cards.