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Online Wagering Violates Laws, U.S. Says

11 October 2005

WASHINGTON, DC -- It is illegal for an American company to operate an Internet poker site in the United States, according to the U.S. Department of Justice. There is no prohibition, however, against wagering on the sites, said Las Vegas attorney

Tony Cabot, who has followed Internet gaming law since its inception.

That's why online poker sites -- that is, the company's servers -- originate in places such as the Caribbean, Costa Rica, the Isle of Man, Gibraltar, or just outside Montreal in Canada. The sites operate under the guidelines and gaming regulations of the particular jurisdiction, where age limits for placing legal wagers are as low as 18.

As long as the corporate headquarters are not on U.S. soil, it is not illegal to accept wagers from Americans, Cabot said.

The federal government believes online wagering violates anti-gambling laws, including the Wire Act of 1961, which covers wagering across state lines. Cabot said no states, even those with strict gaming laws, have regulations covering Internet wagering.

Nevada's chief gaming regulator, Dennis Neilander, chairman of the State Gaming Control Board, said he wished Congress would spell out the provisions of the Wire Act as they pertain to online betting to clear up many of the confusing interpretations.

"To me it's not a question of what they would do. I would just like to see some clarification of the Wire Act as it's applied to Internet gaming, and not just poker," Neilander said.

Cabot and other gaming industry observers don't believe the government is going to do anything in the immediate future to stop online wagering.

Last month, a bill in the U.S. Senate written by Arizona Republican John Kyl sought to stop banks and credit card companies from processing transactions from online gaming sites, which could have precluded Americans from wagering online. The bill was quickly killed in the Senate.

"I think Congress has other things to worry about other than online gaming," Cabot said. "The growth is going to cause some of these American casino companies to take notice, and that might change things." Deutsche Bank, through its European gaming leisure research team, has published a 133-page global perspective on the online gaming industry.

New York-based Deutsche Bank gaming analyst Marc Falcone said the Wire Act, which he dubbed "a gray area of American law," is taking profits away from U.S-based gaming companies and putting the money in the hands of European businesses.

"An Internet search engine recently announced that 'poker' was the most commonly searched for word on its site after Pamela Anderson and Britney Spears," Falcone said. "Need we say more about the popularity and potential of online gaming?"

The report believes it may be too late for the United States to clamp down on the Internet gaming industry. Some U.S.-based gaming businesses, seeing the boom in Internet poker, are looking to jump into the market even if it means not taking wagers from gamblers in the United States.

This summer, Reno-based slot machine maker International Game Technology spent $90 million to buy WagerWorks, an Internet gaming provider that sells content to online gaming sites based in the British isles. Gaming analysts said the transaction will help IGT prosper if the laws on U.S. participation in online gaming change.

A similar thought process was behind the development of an online poker site by the World Poker Tour, whose weekly show on the Travel Channel is one of several cable television programs credited with poker's booming popularity. Steve Lipscomb, founder and president of World Poker Tour, said that even though the site excludes U.S. players -- who represent 70 percent to 80 percent of the online poker market -- he wasn't too concerned.

"Basically, television has exploded online poker," Lipscomb said. "We've built a powerful brand, and our show is in 116 territories across the globe.

So, while things linger in the United States, we can build a base internationally. Once something changes in the United States, all we have to do is just flip a switch and we're ready to go."

Online Wagering Violates Laws, U.S. Says is republished from