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Experts: Financial Anti-Terrorism Act Won't Hinder Internet Gambling

LAS VEGAS, Nevada – Oct. 12, 2001 --The House Financial Services Committee on Thursday passed the Financial Anti-Terrorism Act, a bill containing language designed to quash Internet gambling.

But even if it makes it through Congress and is signed into law, the bill won't hinder Nevada's efforts to legalize Internet casinos in the least, observers say.

The bill states that "no person engaged in the business of betting or wagering may knowingly accept, in connection with the participation of another person in unlawful Internet gambling," such financial instruments as checks, credit cards or electronic fund transfers. The bill is designed to crack down on money laundering efforts by terrorist organizations.

Rep. James Leach, R-Iowa, called the effort against Internet gambling critical in the battle against terrorism.

"Internet gambling (poses) the greatest potential for money laundering that exists in the world," Leach said.

Following the vote, Leach said he was "very cautiously optimistic" the Congress would pass the bill with the Internet gambling clause intact.

Proponents of Internet gambling blasted Leach's efforts to link money laundering and terrorism with Internet casinos.

"People don't want to be confused with facts again," said Sue Schneider, chair of the Interactive Gaming Council, a Internet gaming trade organization. "Everything (in an Internet casino) is electronic, everything is trackable. This is just a situation where it looks like they're using this as a method of trying to get an antigaming bill through. It's pretty offensive, when you think about it."

But Tony Cabot, a Las Vegas attorney and expert on Internet gambling, said it will make little difference for Nevada even if that language becomes law.

The key word, Cabot said, is "unlawful." The presence of that word, he said, would open the door for Nevada to move forward with legalization. Internet gambling is not currently legal in Nevada, though state gaming regulators have been authorized to legalize and regulate Internet casinos in the state at their discretion.

The antiterrorism bill defines "unlawful Internet gambling" as the acceptance of a bet from anywhere "where such bet or wager is unlawful under any applicable federal or state law ... ."

"As a practical matter, if Nevada went forward and authorized (Internet) casinos, they would never take a bet from a state where it was unlawful," Cabot said. "So this would not change anyone's plans to go forward with Internet gambling."

In fact, Cabot believes the bill could bolster Nevada's efforts.

"It helps clarify the fact that the federal government is not interested in lawful gambling on the Internet," Cabot said. "There's a recognition of state's rights."

Moreover, the bill specifically excludes financial institutions from the groups defined as being involved in the "business of betting or wagering."

"They (banks and credit card issuers) do not appear to be facing any liability under this law, provided they're not operating (an Internet casino)," Cabot said. "Unless the credit card companies decide to participate out of a desire to be good-spirited, or because of potential civil liability, I'm not sure what this will accomplish."

Even if credit card companies did face direct liability, it wouldn't be difficult to get around the prohibition, said deedee Molnick, chief executive of i2 Corp., a Las Vegas company that controls patents that cover the use of live games in online casinos.

"It just takes a minute to get a credit card or debit card anywhere in the world," Molnick said. "Once they do that, they don't have any means of following that money trail. Look how difficult it was for them to freeze (Osama) bin Laden's accounts. It took the World Trade Center for them to do that. You can see how much more difficult it would be for them to do it just for gambling on the Internet.

Like Cabot, Molnick agrees the bill would probably do little to stop Internet gambling in Nevada. But she still believes it could be damaging to the image of the casino industry as a whole.

"When you talk about Internet gambling and terrorism, that's pretty serious business," Molnick said. "We (gambling companies) are all in the same industry ... it puts that light on all of us."

But the American Gaming Association won't get involved; Frank Fahrenkopf, chief executive of the American Gaming Association, said his group did not take a stand on the legislation and was not lobbying either way on it. The AGA is still formally against Internet gambling.

Though the bill passed out of the Financial Services Committee by a 62-1 margin, the Internet gambling language faces a tough road ahead in becoming law. Trying to push through anti-Internet gambling legislation on a bill combatting terrorism could prove politically unpopular, many observers say.

"A lot of people will be saying, 'This doesn't have anything to do with terrorism, put it back on the domestic agenda,"' Cabot said. "The only thing that's being considered right now is all these terrorism issues. What this could be perceived as is a back-handed way to get domestic policy unrelated to terrorism (made into law), under the guise that terrorists are somehow involved with Internet casinos."

The Senate version of similar financial antiterrorism legislation does not contain Internet gambling language. At some point, a conference committee panel of House and Senate members would have to meet to hammer out a compromise bill, and they could decide to strip the language out of the final bill. White House officials have said they do not want the anti-Internet gambling language attached to the final bill.

"They (White House officials) want a clean bill," Fahrenkopf said. "So who knows what will happen in conference committee."

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