Online betting sites wary of G2E

No one would confuse today's popular gambling Web sites with Bugsy Siegel's Flamingo.

But the American government's decision to crack down on Internet gambling will be felt this week in Las Vegas when the head honchos of the land-based gambling industry gather for the annual Global Gaming Expo trade show and convention.

At least five Internet companies have pulled out of the Las Vegas show, and industry experts say recent arrests of Web-gambling executives make online gaming operators leery of coming to the United States.

"I think that trend started this summer when the executives started to be arrested and incarcerated," said Sue Schneider, publisher of Interactive Gaming News.

David Carruthers, former CEO of BetOnSports, one of the largest Internet gambling companies in the world, was arrested in July by American authorities in Dallas as he was traveling to Costa Rica, where the company has an office.

Carruthers, 48, later pleaded not guilty to mail and wire fraud and racketeering charges. Several other company officials were also arrested and BetOnSports was banned from accepting business from within the United States.

BetonSports reached an agreement with the Justice Department last week, agreeing to end all operations in the United States. BetonSports, Carruthers and 10 other company officials still face charges related to illegal gambling.

Schneider's company, River City Group of St. Charles, Mo., organizes Web gambling trade shows in Canada, Europe and Asia.

"If we did things in the U.S. we probably wouldn't have a big turnout," she said.

Justice Department spokesperson Jaclyn Lesh said people who operate online gambling sites that take bets from the United States could be exposed to prosecution.

"I would say, obviously, the Justice Department does view online gambling as illegal," Lesh said. "If you are operating illegally you are doing so at your own risk."

Officials at the American Gaming Association, one of the partners that organizes G2E, said 15 online companies signed onto the event, but only 10 plan to attend. The online companies that do attend the event that runs through Thursday at the Las Vegas Convention Center will locate in what organizers call the iGaming Business Pavillion.

The online cancellations represent just a fraction of the more than 750 companies participating in G2E.

But Frank Fahrenkopf, president and CEO of the American Gaming Association, said the government crackdown on Internet gambling, including a bill signed by President Bush in October that bars banks and financial companies from handling Americans' online gaming transactions, represents a "Puritan spirit" in American politics.

"There is a hard-core 15 percent who are opposed to all forms of gambling on moral grounds," Fahrenkopf said. "There is still a Puritan spirit that runs through the United States."

One Web operator said he's not coming to the convention because he's more likely to find new business in Europe than the United States.

"We have a European focus and we are not going to G2E because we believe that not many of our potential customers will go there," Pontus Lindwall, founder of Net Entertainment, a Stockholm-based Internet gaming software firm, said via e-mail.

A spokesman for MGM Mirage, one of the few established land-based gambling companies to dabble in Internet betting, said government regulations aimed at preventing Americans from gambling online made operating on the Web too cumbersome to continue.

The company operated an offshore site from 2001 to 2003. It used a registration process that blocked access from the United States.

But the security also slowed access for other bettors from other countries. The hoops made it easier for potential gamblers to use competitors' sites.

"The things you had to go through ... became so cumbersome we weren't getting any business," said Gordon Absher, an MGM Mirage spokesman.

But Absher said he thinks American companies such as MGM could benefit if the regulatory climate in the United States changes.

"From a player's perspective, the opportunity to participate in a site that would have the MGM Mirage brand would be an attractive thing," he said.