Lawmakers Take Another Look at Net Gambling

By Liza Porteus

WASHINGTON — Internet gambling has taken the betting world by storm, but efforts are underway on Capitol Hill to put an end to online gaming.

Lawmakers are crafting various measures that would make it illegal to use credit cards or electronic funds transfers to pay for gaming activities, and are hoping that banning revenue exchanges will cut the bloodlines to the Net gaming industry.

"There's a good chance it could go somewhere this year but it has the same problems it's had in the past, and that's that no one really wants to get rid of Internet gambling," said Dan Walsh, a Washington lobbyist for the Interactive Gaming Council (search).

"I don't think there are many members of Congress who get up in the morning and worry about an adult waking up and once a week betting $50 on a hand of blackjack," he added.

Those who oppose Internet gambling say it encourages minors to bet, increases the likelihood of credit-card fraud, contributes to addiction and poses jurisdictional snares. Some critics also say offshore gambling sites could be used for money laundering and could support terrorists or other criminals.

"The very nature of gambling, with its great potential for fraud and corruption, demand that it be regulated as it now is in all jurisdictions," Rep. Spencer Bachus (search), R-Ala., said in an e-mail to Foxnews.com. "Cyber gambling is the crack cocaine of gambling and will create a new generation of addicts unless we stop it."

Gaming supporters denounce these arguments and claim gamblers will find ways around the law. If properly regulated, they argue, the flourishing industry can become more transparent and the money trail can be more easily followed while providing states with much-needed revenue.

"I think it's very dangerous to start regulating and prohibiting activities on the Internet that are not, per say, illegal in the bricks and mortar world," said Jeff Modisett, a consultant and former attorney general of Indiana.

If a ban passes, "this would be the first time that Congress, outside of the area of pornography, has tried to regulate the Internet," said Dan Spiegel, a lawyer with Washington law firm Akin, Gump, Strauss, Hauer & Feld, which represents online gaming company Virtual Holdings (search).

One bill, sponsored by Rep. Jim Leach (search), R-Iowa, makes it illegal for Net gaming businesses to accept bank tools like credit cards and electronic funds transfers.

"Internet gambling serves no legitimate purpose in our society," Leach said in a statement. "It is a danger to family and society at large."

After the bill was approved by the House Financial Services Committee in March, the House Judiciary Committee this month removed provisions that would allow some forms of online gaming like state lotteries and horseracing. 

A sister bill to the Leach legislation sponsored by Sen. Jon Kyl, R-Ariz., is supposed to be voted on in the Senate Banking Committee sometime in June, and officials say they expect it to pass the committee.

The White House has indicated that President Bush would support the Kyl-Leach bill.

A bill sponsored by Bachus resembles the Leach bill and keeps the carve-outs. It also eliminates a provision of the Leach bill that requires U.S. officials to work with foreign governments to determine if offshore gambling sites are being used for money laundering.

The Bachus bill passed the House Financial Services Committee last week and is headed to the House floor.

Bachus said the bipartisan majority in which his bill passed is a "strong indicator of its probable success" in the House.

"However, 10 years of hindsight has taught me that in Congress, passage of legislation is never as easy as it sounds."

A third bill by Rep. John Conyers (search), D-Mich., would create a commission to study the legalities of online gaming and the issues surrounding it.

Washington's efforts to choke terrorists' money supplies could boost ban supporters' arguments that all possible money routes should be cut off, especially when the FBI says organized crime is operating through Internet gambling.

"Sort of in the postwar environment here and the continued efforts against terrorism, we have a very significant desire to see something happen on this," said House Financial Services spokesman Scott Duncan.

But gaming supporters say there's no solid evidence terrorists benefit from online gaming and taking away legitimate payment methods will make it harder to follow the criminal money trail.

Online gambling businesses have a transaction number that shows up on consumers' credit cards. Take away the cards and gamblers will have to find back-alley ways to place their bets, say supporters.

"All it's going to do is press online gaming into the backroom speakeasies of cyberspace, just like alcohol and prohibition," said Robin Weissman, who works with Spiegel.

The Justice Department estimates that by the end of 2003, there will be 1,800 gambling sites generating about $4.2 billion.