Place your virtual bets. by the year 2000, according to conservative estimates, online gambling will be an $8-$10 billion business. About 20 sites already offer live, online betting on casino games, sporting events, and lotteries. This is big business, and it’s only going to get bigger. Craig Fields, the former head of the government agency that developed the Internet, now sits on the board of Alliance Gaming, a publicly traded Las Vegas gambling equipment manufacturer and developer of online gambling applications. “I think [online gambling] is going to be received as an entirely new form of entertainment,” he told the New York Times in 1995. “The prospects are not modest.”
It makes sense. Gambling is a perfect online fit. Buying a lottery ticket online, for example, will be roughly the same as going into a liquor store to buy one, except you won’t have to step over the winos. Video poker should also prove popular on the World Wide Web; it’s already one of the most lucrative games at a majority of the country’s Indian and high-stakes casinos. You like it because you’re shy about playing at the tables. Or you like it because you grew up with Nintendo’s Super Mario Brothers and Sega’s Sonic the Hedgehog. How much different will it be to play it at home?
A few impediments do exist, though. For instance, how do you know a fix isn’t in? What guarantees do you have that the virtual blackjack deck was shuffled fairly? How do you know the virtual dice aren’t virtually shaved? And even if the games are honest, how do you know you’ll see your winnings?
Because the legal status of Internet gambling in the United States isn’t clear yet, heavily regulated corporate gambling houses such as Hilton Hotels and Harrah’s haven’t dared enter the fray. If they are caught committing even one illegal act, they risk losing their licenses permanently. So the online field is populated by start-ups—unknown, unregulated, unfettered, and usually offshore. To become a virtual casino operator, all it takes is a room with a closet big enough to hold a server, a router, and a T-1 line.
Where operators set up shop is another question. Gambling laws, largely under the purview of the states, vary across the country. But thanks to the Web, bettors may simply take online trips out of state to avoid local prohibitions and lay down the wager of their choice.
At the federal level, the 1961 Federal Wire Statute may or may not apply to Internet gambling. The law prohibits the transmission of bets, wagers, or information assisting in the placing of bets or wagers, according to Anthony Cabot, a lawyer and adjunct professor at the University of Nevada’s Las Vegas International Gaming Institute. Basically designed to prosecute bookies who use the phone to take bets, the statute does not directly concern the Web, although federal regulators may try to apply it to prevent gambling transactions made via modem. To get around these vague federal restrictions, most site operators settle offshore—in Antigua, the Bahamas, Aruba—where gambling is legal and local governments even give them tax breaks. And it is practically impossible to prosecute people acting legally overseas, even if their activities violate American law. That’s the nature of the Net. “We built it to be Russian-proof,” Fields told the New York Times, “but it turned out to be regulator-proof.”
Some legislators think the solution is to frighten away bettors and intimidate operators. Sen. Jon Kyl, a Republican from Arizona, has introduced a bill that would make most Internet gambling illegal. Moreover, it would target the gambler as well as the operator. And it would let police demand—without a court order—that Internet service providers regulated by the Federal Communications Commission shut off service to sites presumed to offer gambling.
Kyl’s attack on gambling as a vice is full of family-values buzzwords, but he’s got a point: The easier it is to gamble, the more people who will have a gambling problem. Kevin O’Neill, deputy director of the Council on Compulsive Gambling of New Jersey, says that a statewide study concluded that compulsive or problem gamblers make up about 5 percent of the adult population that gambles—but 12 percent of the juvenile population that gambles.
“Compulsive gambling is already called the hidden addiction,” O’Neill says, adding that Internet gambling will only increase the number of secret addicts. “If you’re talking about someone sitting in his house and he can gamble, we’ll never see anyone.”
Sue Schneider, managing editor of Rolling Good Times Online, a Web magazine for gamblers, agrees. As the chair of the Interactive Gaming Council, she is working with the industry to develop a code of conduct for online gambling operators: Sites would voluntarily open their systems to inspection, limit access to minors, and institute rules to control compulsive gambling.
On another front, state attorneys general are looking for ways to limit Internet gambling. In Minnesota, for example, Attorney General Hubert Humphrey III is using laws against deceptive advertising to obtain jurisdiction over out-of-state Internet gambling sites and prevent providers from targeting Minnesota citizens.
The Kyl bill, in its zeal to ban all Internet wagers, may also limit American Indians’ online gambling operations, which are currently exempt from most federal regulations. The Coeur d’Alene Nation is preparing to test the extent of its sovereignty by setting up a nationwide Internet lottery.
Few observers give the Kyl bill much chance of enactment, however. And even if Congress were to pass it, the offshore genie is already out of the bottle.
In five years, when it’s in full swing, Internet gambling will not look entirely like Las Vegas or Atlantic City. Serious bettors will probably gravitate to sites offering odds on everything from horse races to presidential elections. (These are the safest ways to bet because everyone knows the outcome of the event—the casino can’t fudge the results.) The video generation, by contrast, will congregate at multiplayer gambling sites, which are sure to be designed like theme parks, such as Attila’s World or Caesar’s World. And so-called boutique sites will cater to specific segments of the population—from French speakers to gay people to other groups.
If our state and federal governments regulate these sites, casino giants such as Hilton and Harrah’s will leap in with their big bucks and their brand-name recognition—and consumers will trust them.
Even if the Kyl bill does succeed in limiting Internet gambling in the United States, offshore Web sites will continue to thrive in the rest of the world. So any U.S. citizen equipped with a computer and a modem will have access to online betting. The question is whether its effect will bear more resemblance to that of crack or of Coca-Cola.