Congress Bans Internet Gaming ... Or Does It?

Vegas Oddsmakers Say Bill is Full of Holes

By Truman Lewis
ConsumerAffairs.com

October 5, 2006

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President Bush is expected to sign an anti-gambling measure that quietly slipped through Congress as part of a port-security bill. In Las Vegas, casino operators said the measure would be good for their business.

The legislation does not criminalize the placing of bets by consumers.

Rather than outlawing online gambling, the bill prohibits banks and credit card companies from making payments to online gaming websites. The Justice Department will have to come up with a list of prohibited sites.

Since most online gambling sites are based overseas, they're beyond the reach of U.S. prosecutors. By shutting down the flow of online payments, Republican sponsors of the measure hope to starve out Internet gaming.

However, it's unclear just what is covered by the bill. Internet sports betting is plainly outlawed but what about online poker and other popular games? No one is quite sure.

Most U.S. banks and credit card companies had already stopped transferring funds to gaming sites, fearing they could be charged with aiding and abetting illegal activities. But they opposed legislation making them criminally liable, saying they often don't have the ability to tell which sites are gambling sites.

The Senate action took big gaming companies by surprise. They had thought the measure was dead for this year. Hardest hit were London-based gamers, who get most of their business from the U.S.

Senate Majority Leader Bill Frist (R-Tenn.) slipped the provision inhad it slipped into a port security bill that passed the House and Senate early Saturday. President Bush plans to sign the measure, a White House spokeswoman said.

Vegas Applauds

In Nevada, gaming interests said the Senate action "opens up huge opportunities" by knocking out the offshore interests.

The measure exempts state-licensed casinos, which could run games within their states if state law allowed and could also could link up with other states or even foreign jurisdictions where such gambling isn't prohibited.

Republicans were eager to find an issue that would sound good to religious conservatives, said attorney Tony Cabot, founding editor of the Internet Gambling Report and coeditor of the Gaming Law Review, in an Associated Press interview.

"In order to get this bill passed, they sold their souls. They gave so many exceptions that it's now a wide-open area," he said.

Cabot noted the bill exempts horse racing, state lotteries and fantasy sports.

Several states prohibit Internet gambling, but that could change quickly under the new measure, Cabot said.

Under the measure, the U.S. Treasury Department and Federal Reserve Board will have nine months to develop a system that prohibits payments from U.S. bank and credit card account holders to online gambling sites.

A "coding-and-blocking" system will be created through a collaboration between the government and the banks and credit card companies.

"The way they built (the new law), it gives us a chance to work with the regulators in a constructive way to come up with a system," Greg Mesack, director of government relations for industry trade group America's Community Bankers, told Reuters.

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