Illegal Internet Gambling Thriving

More than $2 billion will be illegally wagered by Americans through offshore Internet gambling sites this year, according to testimony Tuesday morning before the U.S. Senate Banking Committee. The panel is considering legislation proposed by Sen. John Kyl (R.-Ariz.) to cut off American access to the sites by prohibiting U.S. banks, credit card companies and other Internet payment systems from making payments to gambling sites.

Although the Internet is flooded with ads promoting offshore casinos, it is, in fact, illegal for Americans to bet through the sites. Similarly, it is illegal for Americans to place sports wagers through Web sites. Despite the law, Americans, according to law enforcement authorities, are driving the growth of online gambling sites, which grew from about two dozen sites in 1995 to almost 2,000 locations in 2002.

Since the offshore gambling sites are beyond U.S. jurisdiction, Committee Chairman Richard Shelby (R.-Ala.), a co-sponsor of Kyl’s bill, said, “The only available means of effective interdiction is through the media by which the gambler and the casino interface, namely through the Internet service provider (ISP) or the payment system provider.”

Similar legislation drafted by Rep. James Leach (R.-Iowa) passed a House committee last week on a voice vote. In the 107th Congress, Leach managed to get the same bill passed in the House, but the Senate failed to take action on the legislation.

Even without Congressional action, Visa, MasterCard and PayPal now refuse to process betting transactions by their members.

“A federal law would ensure full industry-wide compliance with this common sense policy,” Connecticut Attorney General Richard Blumenthal told the committee. “Without American dollars flowing through our credit card and debit card facilities, Internet gambling companies will be stunted if not stifled.”

Connecticut, it should be noted, is home to two of the largest casinos in New England. The facilities, run by American Indian tribes, generate a windfall in state tax revenues.

While praising legislative efforts to combat online criminal conduct, Stewart A. Baker, general counsel for the U.S. Internet Service Providers Association, urged the committee to avoid “unintended consequences” that may hurt the economic growth of the Internet, including requiring ISPs to block customer access to gambling sites not residing on their networks and not under their control.

“Service providers are unable to block user access to websites on other service providers’ networks with any reliability,” Baker said. “Blocking efforts can be easily circumvented and will seriously disrupt legitimate e-commerce and speech.”

Baker also asked the panel to give ISPs immunity from liability for good faith efforts to comply with a take down notice and said any Internet gambling legislation should contain language that clearly states that no ISP has any duty or obligation to monitor its networks for illegal activity.”

“That would be like holding the telephone company liable for illegal activities that occur over the phone,” Baker said.

Much of Tuesday’s testimony, though, centered on the connection between young adults and Internet gambling. William S. Saum, director of agent, gambling and amateurism activities for the NCAA, told the committee a recent Nellie Mae study revealed that 90 percent of 20-year-olds have credit cards, with an average number of four cards per person and an average debt of $2,264.

“In fact, there may be no group in this country who has more readily available access to computers and the Internet than students. “The proliferation of Internet gambling is fueling the growth of illegal sports gambling on college campuses across the country.”

John G. Malcolm, deputy assistant attorney general for the Department of Justice, said online gambling “makes it far more difficult to prevent minors from gambling” since gambling Web sites can’t look at their customers to assess their age and request photo identification if necessary.

“Internet gambling businesses have no reliable way of confirming that the gamblers are not minors who have gained access to a credit card and are gambling on their website,” Malcolm said. “Although some companies are developing software to try to detect whether a player is old enough to gamble or whether that player is from a legal jurisdiction, such software has not been perfected and would, of course, be subject to the same types of flaws and vulnerabilities that could be exploited by hackers.”

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