Gambling is virtual; money is real

Updated: Jul 31 2006, 05:30am hrs
Can the United States handcuff online wagering Glen Walker, a professional sports bettor in North Carolina who places up to 70 bets a week of $2,000 to $5,000 each during football season, does not think so. "They're not going to stop the offshore sports books," Walker said. A crackdown will "just force it back to the black market."

Last week, one such wagering site,, a publicly traded company in Britain, became the focal point of an American crackdown on offshore casinos, where gamblers anywhere in the world can use the highly profitable sites to place wagers on sporting events. They can also play casino games like blackjack and poker from their personal computers.

Federal agents arrested the British chief executive of BetOnSports, David Carruthers, who was in the United States on a flight layover. He is in custody in Fort Worth, Texas; the betting site has temporarily suspended operations to satisfy a temporary restraining order that prohibits the company from taking bets from U.S. residents. Carruthers is awaiting a hearing on his detention.

In Washington, the House overwhelmingly approved legislation recently that would clamp down on Internet casinos in part by restricting the ability of American financial institutions to process wagers.

The legislative-prosecutorial one-two punch appears to be the most concerted effort yet by the federal government to undermine Internet gambling in an era of well-organised, publicly owned offshore casinos. For the first time, Washington has succeeded in temporarily shutting down a publicly owned site and its effort has gained the attention of the operators, whose share prices plummeted last week.

Still, few experts expect the crackdown to do anything more than dent the industry. Sebastian Sinclair, an analyst with Christiansen Capital Advisors, which tracks online gambling trends, said offshore gambling could be "curtailed but it cannot be stopped."

Other experts see the recent moves as little more than an elaborate cat-and-mouse game serving only to benefit Las Vegas and Atlantic City casinos, along with Indian gambling operations, rather than seriously protecting Americans from falling prey to excessive gambling.

Some 8 million Americans like Walker wager $6 billion annually through the Internet, many making bets on their favourite sports team or the NCAA basketball pool. About half of all online wagers come from the United States.

Critics say that online gambling is the equivalent of putting a slot machine in every home, providing an easy chance to lose money with a few mouse clicks, all without the social controls at a bricks-and-mortar casino.

Walker disagrees. "We're not doing anything immoral or illegal," he insisted. "I just don't see that I'm harming anyone."

While prosecutors argue that Internet casinos violate the law, there is no federal prohibition against actually placing a bet. So how much success the federal push can have "is a very profound question," said Rep. Jim Leach, R-Iowa, the co-author of the legislation, who says the gambling is detrimental to families and the economy.

But even he concedes that Washington's best efforts will lead only "to a reduction but not necessarily to an ending" of online gambling.

The question of further curbing Internet gambling has been a perennial issue in Congress in recent years. But people involved with the legislation say the reason for its success, at least in the House, is mainly explained by lawmakers wanting to distance themselves from the corruption scandal involving the convicted lobbyist Jack Abramoff and his association with Indian casinos. Abramoff had lobbied vigorously against versions of the bill in the past. Still, some politicians in the House came out strongly against the bill, including Rep. Barney Frank, D-Mass., who called it "cultural authoritarianism."

Industry executives and analysts say similar bills have failed in the Senate, and many feel that it is unlikely to gain traction there. Analysts from Dresdner Kleinwort in London call the measure inconsistent and unenforceable.

Nevertheless, executives, lawyers and analysts say that Washington, depending on the resources it is willing to commit, can at least make life more miserable for the offshore casinos. They say the effort resembles attempts to restrict the sex and drug trades, an endless pursuit in which users and suppliers constantly develop new ways to skirt law enforcement.

Offshore casinos "are going to continue to thumb their noses at the Department of Justice," Sinclair said. "The operators will say, 'I'm sitting here in Costa Rica drinking a mai tai. What are you going to do"'

And, he said, if the government succeeds in shutting some sites, others will pop up.This is not the first time that the American government has taken on Internet gambling. In 2001, a federal court sentenced Jay Cohen, the operator of an Internet sports book in Costa Rica, to 21 months in prison for taking bets from Americans.

But there is a new intensity to this latest crackdown, particularly with the simultaneous attacks from Congress and law enforcement. Legislators and prosecutors said their efforts were not coordinated, but industry analysts view it as a powerful combination.