You Won't Stop Internet Gambling Say Experts

Published: Wednesday, October 25, 2006 Online-Casinos.com

YOU WON'T STOP INTERNET GAMBLING SAY EXPERTS

US activities may have been scary, but in practical terms will they be effective?


Gaining massive international coverage this week is an Associated Press article titled "Experts: Ban won't stop Web gambling" which questions whether the Unlawful Internet Gambling Enforcement Act recently signed into law can be effective in stopping US residents from playing at online casinos or poker rooms, or betting on sports.

Gambling law guru at Whittier Law School, Professor I. Nelson Rose told AP: " "It has put a terrible scare into people. But it won't by any means wipe out Internet gambling." He added that the new law seeks to ban most online gambling financial transactions in the USA and criminalises funds transfers.

The AP piece reports that the law has wiped out billions of dollars in shareholder value, as U.S. lawmakers initially trumpeted they had found a way to halt bets coming from America.

"But serious questions remain about whether the legislation can be effective in stopping U.S. residents from playing poker or betting on sports," it continues. "The Unlawful Internet Gambling Enforcement Act goes after the money, not the millions of players, which would be nearly impossible to enforce. It will essentially try to choke off the way Americans fund their gambling habits, hoping to prevent the transfer of dollars to the popular Internet sites."

Industry experts say there are an estimated 2 000 Internet sites that take bets for sports and poker. American players have fueled Internet gambling, supplying $6 billion of the $12 billion in revenues generated annually.

"The time has been one of rapid growth," said Sebastian Sinclair, president of Christiansen Capital Advisors, a gambling consultant. "This industry was well on its way to becoming mainstream in a great part of the world. Capital was tripping over itself to fund these companies." The new law gives the U.S. Treasury and Federal Reserve, along with the Attorney General, 270 days to establish policies and procedures.

"The regulations are clearly going to prevent banks from doing electronic fund transfers to gambling sites, but that is no big deal," Rose said.

Clamping down on the banks won't serve as a panacea, Rose said. In some cases, banks simply move the money to payment processors, known as e-wallets. Non-U.S. payment processors then transfer the money to the Internet gambling sites.

The U.S. government has no authority over processors outside its jurisdiction that are operating legally.

Anthony Cabot, a well-known gambling lawyer in Las Vegas, thinks language used in the bill provides a loophole for the payment processors and the U.S. banks that want to be free to do business with them.

"Unless you have some fairly Draconian measures ... the likelihood of stopping payment to them is small," Cabot said.

The new legislation has already had a dramatic effect. It creates new criminal penalties, which have rattled investors and executives - although Rose said it doesn't expand the act, and there's no indication the Justice Department is about to embark on a huge campaign to enforce the law.

The AP article summarises the financial impact on listed companies which the UIGEA and DoJ arrests immediately preceding the legislation has had.

IGN's Sue Schneider is quoted as saying: "There are privately owned operators that will continue to take play as long as they have payment processors that will work with them. I think the big question is whether the volume remains the same. But I don't think any of this means there will be less people playing on the Internet."

Experts told AP that while the new law has forced the public companies out of U.S. market, it has left poker players and bettors gravitating toward private companies. Both PokerStars and FullTilt have already seen traffic on their Web sites surge, taking advantage of any short-term gain now that some of the competition has been sidelined. On its Web site recently, FullTilt boasted: "We're Here to Stay!" and offered bonuses to sign up.

This isn't the first time the industry has faced a serious setback, reports the author of the AP article. In 2001, Visa and MasterCard and other merchant banks stopped allowing money to be sent to Internet gambling sites. Like then, Sinclair thinks Internet gambling will recover again. It's simply too lucrative.

"There will be a big hit to the industry," Sinclair said. "A big hit. But it's not going to be long term, it's transitory until somebody finds a solution to whatever roadblocks are put in their way. There's too much money for it to go away."