A Safe Bet

 
 
By eweek  |  Posted 2001-06-25
 
 
 

Internet gambling isnt just for obsessive shut-ins and dubious offshore casinos anymore. Its gaining enough momentum and legitimacy to become a key e-commerce sector in the near future.

Leading American land-based casinos got tired of watching huge amounts of revenue go to hole-in-the-wall online gaming companies in the Caribbean. As recently as last year, the American Gaming Association staunchly supported an Internet gambling prohibition bill sponsored by Sen. Jon Kyl, R-Ariz. Though the bill didnt pass, the entrenched gaming lobby hoped it would afford some protection from cyber competition.

Net gaming sites overseas are booming, and some of the smarter American casino executives have begun to see the opportunity in the estimated $3 billion spent annually at such establishments. There are presently about 1,800 Internet gambling parlors.

The Nevada legislatures landmark bill to allow regulated Internet games for state residents, which was signed into law this month, represents a potential watershed for Net gaming in the U.S.

Under current federal law, placing sports bets over state lines via telephone is illegal. The Wire Act, written in 1961, makes no mention of Internet gaming, and there has been widespread uncertainty about whether it could be used to outlaw online casinos. Most Internet casinos, preferring not to take the risk, have set up shop overseas.

American gamblers havent been too worried about the legality of their activities. Half the bets placed at foreign online casinos are U.S. citizens. American land-based casinos are losing market share in a rapidly expanding online universe. Behind the scenes, theyve been lobbying regulators to give them a chance to enter the market.

That puts AGA President Frank Fahrenkopf in an uncomfortable bind. Some of his members want to jump into Net gaming, while others still think they can fend off the inevitable. Fahrenkopf has long maintained that until Net gaming is satisfactorily regulated, the AGA wont support it. But the Nevada bill offers comprehensive oversight and regulation, and at an international gaming conference in Toronto earlier this month he grudgingly admitted Nevada may be on the right track.

With the powerful American gaming lobby slowly coming around, the smart money is on U.S.-based Net gambling to take off soon. And it will be a boon not just for Harrahs and MGM Grand, but for banks, software vendors and network access companies that will form the critical infrastructure to make it go.

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