Gray area

Gray area

Legality of online gambling remains big question mark

The first reaction is amused bewilderment as the sports-talk host breaks from the morning gabfest to pitch an offshore sports book. Hey, I’m thinking this huckster is either: a) dumber than dirt; b) doesn’t give a flip about pushing an illegal activity; c) is desperate for extra cash; or d) all of the above.

Bet the house on d, we say.

Now is our sports talker — who’s not alone in making the on-air gambling pitch — right to say you can hop on your computer and bet legally? Is it cool to get down a bet this football bowl season? Well, you might want to hedge your bets before wiring the Christmas bonus to a Costa Rican-based sports book, because nobody really knows.

Some officials say it’s against the law to wager over the Internet or telephone. Others say the illegal part is the gambling operation itself, if it’s set up on U.S. soil — which is why Web sites operate offshore in places such as the Caribbean, Latin America and Australia. And still others say it’s not worth debating because the government has larger fish to fry, plus gambling cases are unpopular to prosecute and often ignored unless it’s serious, illegal, mob-type stuff.

Sports Betting Revenue
(Bets placed from the U.S.)
Sport Internet Gambling [Est.] Nevada Sports Books
Pro football $248 million $27 million
College football $207m $23m
Pro basketball $196m $21m
College basketball $165m $17m
Pro baseball $145m $14m
Pro hockey $52m $6m
Other $21m $2m
Total Revenue $1 billion $110m
Source: Christiansen Capital Advisors, LLC

“In terms of legislation that has gone through either state or federal houses that has told players specifically you can’t do it, there really isn’t anything on the books,” offered Sue Schneider, publisher of Interactive Gaming News. “So this industry is a lawyer’s dream, because there is no clarity on the law.”

OK, so we have a gray area the size of Nevada as to the legality of online casinos and sports books, not to mention their ability to advertise on stations across the radio dial. As best we can tell, no one has been charged with a crime for betting with one of the services. Then again, as Congress debates putting teeth in the law, the Department of Justice has flexed its muscle this football season in going after media outlets that brazenly advertise online sports books and casinos.

After a grand jury investigation into the industry’s advertising practices this fall, subpoenas were sent to some prominent as well as out-of-the-way media outlets informing them that by running ads for gambling sites they risked being held liable for aiding an illegal activity. The New York-based “Howard Stern Show” promptly yanked Internet gambling ads, and a handful of smaller radio stations followed suit.

Is this glitch destined to doom the industry? Probably not.

This is a boom business. Back in 1997, when I spent a few days checking out the Internet gambling sites on the island of Antigua, it was estimated to be a $200 million a year industry. Now I’m told revenues top $1 billion annually, or about 10 times the amount the glitzy Nevada sports books make.

Antigua remains a player, but 75 governments around the world license Internet gambling. Today there are more than 1,800 online gambling sites.

So what happens from here? Ultimately, U.S. lawmakers figure to have three options: regulate, ban or continue to ignore. If they opt to regulate, bet on the name-brand gambling interests in Las Vegas leaping into the fray and lending some legitimacy to Internet gambling.

Sen. Jon Kyl (R-Ariz.) remains the leading anti-gambling voice in Washington. His latest bill (S-627) passed the Banking Committee last summer, and a full Senate vote is expected early in the 2004 session. The companion legislation (HR-2143) has passed the full House of Representatives, so the legal wrangling is headed for an end one way or the other.

If the bill becomes law, it would essentially hit Internet gambling by choking off the money supply — making it illegal to write a check or use a credit card or any other form of payment in gambling online. Provisions in the bill would have bank regulators use their enforcement powers to go after the banks to stop payments from going to the cyber casinos.

So, getting back to our fearless sports talker, is online gambling legal this bowl season? Can’t say for sure, but it may never again be so easy.

Mike Fish is a senior writer for SI.com.