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Gambling With Our Freedom

November 18, 1996|TERRY SCHWADRON | Terry Schwadron is deputy managing editor of The Times and oversees, its Web site. He can be reached via e-mail at

There are two sure bets about gambling and the Internet, one obvious and one rather ominous:

1. There's plenty of money to be made, and the boomlet in gambling Web sites is about to break wide open.

2. Gambling is shaping up as the first substantial test of regulation of the Internet. Because of bet No. 1, forces are gathering to derail Web gambling.

Shortly after Congress reconvenes, Republican Sens. Jon Kyl of Arizona and Orrin Hatch of Utah will campaign to ban Internet gambling.

While the Communications Decency Act, an anti-obscenity measure passed early this year, might have been the first Net-censorship battleground, it was blocked by a federal appeals court. The anti-gambling move may end up being the usable tool for regulating a medium that the government cannot easily control.

What seems clear is that politicians behind the anti-gambling crusade do not even recognize that they're engaged in a precedent-setting campaign to limit the Net.

Over the last 18 months, perhaps a dozen or more betting sites have been launched. They look inviting, they are interactive, they are casinos in your home.

Despite U.S. and state laws barring interstate use of "wires" to transmit betting information, the most elaborate of these sites have set up offshore, operating out of Antigua, Belize, Ecuador and other nations. The wire statutes were adopted to stop interstate sports betting, but opponents of Internet gambling say they apply here as well.

Representing some of the best of the breed are: World Wide Casinos Inc. of Santa Ana but operating from Antigua (; Internet Gaming Technologies Inc. of San Diego but operating as CasinoWorld from Ecuador (; and Internet Casinos operating from the Caribbean (

Each asks the player to open a local bank account within the resident country. After filling out the usual registration forms, the viewer is ushered into a virtual lounge festooned with pirate garb or turn-of-the-(last)-century decoration. All one has to do is pick the game.

Blackjack was a snap. Clicking on the hand I was dealt told the far-off machine to hit me with a new card. It came up instantly. I stood pat, and beat the house. Once. There are plenty of warnings that the odds favor the casino even more than they do in Vegas.

Cashing out is no problem. Once an account is set up, the Bank of Antigua honors an ATM or Visa card. House rules differ from site to site, including restrictions on how often one can play or the age of players.

(In fact, there is debate about exactly what constitutes "gambling." Then there are sites like Riddler (, Virtual Vegas ( and Prizelinks ( in which the play is for points or for prizes, not for cash, like a sweepstakes mailing. Play a game of chance and one wins points toward prizes.)

The problem is that many believe these offshore casinos are clearly violating U.S. and state laws--and in some cases are outright scams.

Minnesota Atty. Gen. Hubert H. "Skip" Humphrey III has sued Granite Gate Resorts of Las Vegas, owner of WagerNet (, which operates from Belize, arguing that the casino breaks state consumer fraud statutes. The state says it determines what games are legal for Minnesotans and that for this site to advertise that Minnesotans can legally bet online is fraudulent.

In addition, the state notes that casino operator Kerry Rogers was convicted of bank fraud charges. The lawsuit is pending, but the site is only a click away, operating for points at the moment, not cash.

Humphrey argues that setting rules for Internet gambling is not regulation, it's merely bringing law enforcement to an undisciplined medium. "Crime is crime in any medium," said his spokesman.

Sen. Kyl, a conservative, explains that gambling is morally bad, that social ills always follow gambling and that he wants to see it eliminated altogether, Net or not. Gambling is not a freedom of expression, he said, and government intervention should not be seen as interfering with the widespread Net attitudes that there should be no regulation. His approach would be to punish both the casino and individual bettors.

Frank Fahrenkopf, the former Republican National Committee chairman who now heads the American Gaming Assn. in Washington, represents hotel casinos and gambling equipment manufacturers. He opposes Internet gambling, not as competition, he said, but because there are no checks on the casinos.

"Gambling has grown to a $44.3-billion business in this country precisely because there is tough regulation and law enforcement that has allowed public confidence to grow that games will be run honestly and there will be payouts," Fahrenkopf said. "There are no guarantees with these Web sites."

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