10 October 2006

By RICK ALM – Columnist

In the closing moments before it adjourned for its biennial reckoning with voters, Congress hastily outlawed financial transactions that facilitate Internet gambling.

The Unlawful Internet Gambling Enforcement Act of 2006 makes criminals of companies — not players — who electronically move money for the purposes of online sports betting: wagering on dog races, poker and other casino-style games.

But Congress issued get-out-of-jail-free cards to those who assist certain intrastate lottery games, interstate horse racing, fantasy sports and even some interstate tribal reservation casino games.

Gambling law expert I. Nelson Rose quickly declared the 27-page bill rife with inconsistencies, conflicting language and even a few lines that he said are simply “indecipherable.”

The California law professor also notes the obvious, that offshore based payment processors such as Neteller “are beyond regular U.S. regulatory control.”

But Rose suggests a chilling scenario in which domestic Internet service providers and even search engines such as Google could be “grabbed” and prosecuted for aiding and abetting the forms of gambling Congress does not approve of.

Sooner or later a judge somewhere is going to toss this legislation into the dustbin on the basis that gambling is gambling, so why discriminate against some forms of it?

Until then, its congressional backers are hailing the new law as a shield against online gambling addiction.

True, some online gambling operators are backpedaling out of the U.S. market. But many of them are among the industry’s publicly traded and most ethical operators — including PartyPoker, which is traded on the London Stock Exchange and, according to one Web source, controls close to 50 percent of the online poker market.

For U.S. players, at least, the retreat means the Internet gambling marketplace soon could be what it was just a few years ago — a crowded and dangerous place where anonymous and unaccountable cyber pirates lie in wait for the foolhardy.

Meanwhile, the World Trade Organization is expected to also look askance at Congress’ handiwork.

The tiny twin-island nation of Antigua and Barbuda hauled the United States before the international tribunal a few years ago and last year prevailed in its claim that the U.S. legally embraces online interstate gambling on horse racing but prohibits offshore cyber bookies, poker rooms and others from selling their gambling wares to U.S. bettors.

The matter is before a WTO compliance panel, and a ruling is expected next year.

The U.S. is running out of appellate places to hide from a very embarrassing public spanking by the WTO. Antigua’s Texas-based attorney was smirking last week.

“While the adoption of this new bill perhaps marks a low point in fair trade for developing countries such as Antigua and Barbuda, it is certainly going to make our case at the WTO even easier than it already was,” said Mark Mendel.

An estimated 3,000 online casinos rake in $12 billion a year worldwide — half of it from U.S. players. An unknowable percentage are being fleeced daily by unscrupulous operators who don’t pay up or who run crooked games.

Congress must quit daydreaming that sand castle laws can hold back the global tsunami of online gambling.

Legalize it. Regulate it. And tax it to death.


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