US commission to recommend ban on Net gambling

A U.S. government commission is set to raise the stakes in the high-profile battle over Internet gambling. On Friday, the nine-member National Gambling Impact Study Commission will recommend a complete ban of online wagering, and laws that wipe out credit card debts for American gamblers.

After two years of research, the commission will release its final recommendations to President Clinton at a press conference this Friday in Washington, D.C. The panel -- chaired by Kay Coles James, the dean of Robertson School of Government -- was created on Aug. 3, 1996, and assigned to conduct a "comprehensive legal and factual study of the social and economic impacts of gambling" in the United States.

As part of its broad-ranging study, the panel's report will make two key recommendations to the president, Congress and the Department of Justice: "The Federal Government should prohibit Internet gambling within the United States." Laws should be passed that "state that any credit card debts incurred while gambling on the Internet are unrecoverable."

"Since it crosses state lines, it is difficult for states to adequately monitor and regulate such gambling," the report says. Enforcement problems have long been cited by those who support online gambling. Rather than banning the conduct altogether, supporters have urged that lawmakers attempt to regulate the industry. "A lot of policy makers are just not that familiar with the Internet," says Sue Schneider, chairwoman of the Interactive Gaming Council. "The whole simplistic idea of pulling the plug on Internet gaming sites appealed to them, I suppose."

Though Schneider says she recognises the difficulty of regulating the Internet, she feels an aggressive licensing authority could adequately protect American consumers. "You can regulate the gaming products and make sure that they are licensable, that the games are fair, that the people behind them are good, that the companies are solvent enough to be able to pay the players," she says. "That's really a much more workable approach."

It would, perhaps, prove difficult for a United States licensing board to monitor the practices of Internet casinos, many of which are headquartered overseas, in countries like Australia and the Dominican Republic. Legal questions of jurisdiction and limited resources could prevent American authorities from enforcing a regulatory scheme.

Even with an outright ban on Internet gambling, it may be difficult to prevent offshore casinos from taking bets from American citizens. If foreign casinos conclude that prosecution is unlikely, there may be little reason to foreclose such a profitable market.

But the commission seems to have anticipated such serious enforcement concerns. Rather than recommend the aggressive prosecution of offshore gambling sites, the panel has focused on a different target: the money being wagered. "The Commission recommends ... the passage of legislation prohibiting wire transfers to known Internet gambling sites, or the banks who represent them," the report says. "Furthermore, the Commission recommends the passage of legislation stating that any credit card debts incurred while gambling on the Internet are unrecoverable."

By targeting the money suppliers, the Commission apparently hopes to eliminate any incentive they may have to facilitate online betting. If a credit card company cannot collect the money lost by an American gambler, there may be no reason to extend credit for gambling at all.

San Francisco attorney Ira Rothken says the Commission's enforcement tactic makes perfect sense. "If you block the conduit of money from persons located in the U.S., that is the most effective law enforcement mechanism for reducing illegal online gambling," he says. "If Visa can no longer collect on the debts, they're going to put a stop to the use of Visa credit cards for Internet gambling as a whole.

Rothken currently represents Cynthia Haines, a California woman who lost more than $70,000 while gambling online. Haines disputes her obligation to repay the money, and has accused Visa and MasterCard of aiding in an illegal transaction.

He sees the commission's recommendations as a vindication of his client's position. The panel, he says, is urging the government to "tell Visa to stop it." Visa did not return calls, but has previously said that providing credit to California gamblers does not violate any existing laws.

And despite Rothken's assessments, Sue Schneider is less optimistic about the Commission's odds for success. "You get into jurisdictional issues that are pretty thorny," she says. "If you have Visa, their Caribbean division, for example, they are working with legal businesses there. It's just the other end of the transaction, here where the player is, where there is some question as to whether or not it's legal."

Perhaps acknowledging the point about the border-less nature of online gaming, the president's commission also recommends that the United States indulge in some international networking. "The Federal government should take steps to encourage or enable foreign governments not to harbour Internet gambling organisations that prey on U.S. citizens," the report says. The commission seems willing to take on the daunting task of shutting down the Internet gambling economy, both here and abroad.

But for those who support online gambling, like Dianne Meyer, Publisher of Rolling Good Times, a popular gaming news site, no government action will ever cause the online gambling industry to fold. "If the U.S. wants to lag behind, then it will embarrass itself by having an unregulated industry that they're going to drive underground," she says. "You would think they had learned something by going through Prohibition with alcohol."