INTERNET GAMING ISSUES
November 6, 2001
By: Beverly Biddle - Associate Editor

The Focus of On Line Betting is Finance
Internet gambling opponents in the U.S. Congress are still attempting to restrict the industry’s growth by barring the use of financial instruments to fund player accounts. Although, such controls are, at this time, only a proposal, operators are already being squeezed by credit card companies.

Many of the major credit card issuing banks have disallowed their customers’ Internet gambling transactions. Since credit card regulations prohibit consumers from using their cards to gamble, e-cash companies were set up as intermediaries. Now these companies are being required to code Internet gambling transactions; therefore triggering declines in the industry’s growth.

Visa and MasterCard are making special efforts to ensure that gaming transactions are coded and red flaged. So where does all this leave the online gaming and credit card processing companies?

The industry is facing the darkest times they have had to face to date as they are having to use alternative payment methods such as NETeller, ClearPay, PayPal and FirePay, which are acceptable, but are not as easy to use by the customers.

This credit card situation has discouraged many U.S. players, and operators are turning their efforts to attracting players outside the U.S. where issuing banks do not exercise such control over the choices of cardholders in how they use their money.

Lawmakers In Action
June and July proved to be an extraordinary period in the history of Internet gambling regulation as we saw the culmination of considerable work by legislators, regulators and their advisers, and the governments ranging from small island nations to the state of Nevada to Australia and Great Britain struggle to come to grips with gambling in cyberspace.

On June 14, Republican Gov. Kenny Guinn of Nevada signed a bill to permit interactive gambling; thus setting the stage for a lengthy process that could result in the licensing of Internet casinos in the world’s most important gaming venue. This Legislation also signaled an about-face on the part of the Nevada gaming establishment toward online gambling.

Nevada Moves Forward
The major U.S. casino firms had long been cool to Internet gaming. But it was their lobbying weight, led by industry giant MGM Mirage, that helped move the bill through the Nevada Legislature. The bill authorizes them to develop regulations for Internet gambling and license Nevada hotel-casinos to offer it, but only if the regulators find that it can be "operated in compliance with all applicable laws" and can be effectively regulated.

Brian Sandoval, then the chairman of the Nevada Gaming Commission, told legislators last spring it could easily take 18 to 24 months after passage of the bill before any licenses for online casinos were issued.

U.S. Roadblocks
While Nevada regulators get up to speed on the technical issues, the possibility of a federal roadblock looms. In June, Sandoval had said one of his first moves would be to seek a meeting with the U.S. Department of Justice to determine the Bush administration's stance on the legality of online casino gaming. But he later changed course, saying he and his colleagues would commission extensive legal research before meeting with the feds.

A new federal law could stop Nevada in its tracks, however. As of early last month, neither Sen. Jon Kyl, R-Ariz., nor Rep. Robert Goodlatte, R-Va., had reintroduced their Internet Gambling Prohibition Act. But bills have been introduced by Reps. James Leach, R-Iowa, and John LaFalce, D-N.Y., that would ban the use of credit cards and other instruments of U.S. financial institutions for such purposes.

Setback in Australia
In Australia, the industry suffered a defeat in June that may be more symbolic than significant. Australia had been a leader in legalizing and regulating the industry, Now its new federal law can only be seen as a setback.

Under pressure from Prime Minister John Howard's Liberals, who face a national election late this year and are eager to show concern about problem gambling, the Australian Parliament passed the Interactive Gambling Bill 2001. This law prohibits Internet casinos based in Australia from taking bets from Australians.

One amendment is called the "good neighbor policy." It would authorize the Australian government to block Australian sites from accepting bets from residents of another country, if that country so requests and also has laws banning Internet gambling.

Another amendment seeks to impede online casinos based outside Australia by declaring that obligations incurred by Australians at such sites, such as credit card debts, are not collectible in Australia.

The government has six months from the date of the bill's passage to develop the regulations required to implement the bill. Some of the amendments may prove unworkable. If the good neighbor policy is found not practical to implement, Australia is in the position of saying it's OK for Australian companies to offer Internet gambling to foreigners, but not to its own residents. As the first First World country to legalize Internet gambling, and to do so with the strongest player protection measures in the world, Australia, with its new law, has taken a giant step backward for the cause of regulated online gaming.

Big Boost in Britain,
The online industry got a big boost in July when the Gambling Review Body, a group commissioned by the government of Great Britain, released its long-awaited Budd Report. Named after the panel's chairman, Sir Alan Budd, it recommended easing Britain's 33-year-old gaming law and regulations on a wide variety of fronts, from the location of casinos to their hours and advertising and inclusion of slot machines.

"Of all the gaming jurisdictions in the world, the one most respected would be the Gaming Board for Great Britain, as far as ensuring suitability, solvency, integrity of gaming," said Joseph M. Kelly, professor of business law at Buffalo State College and co-editor of Gaming Law Review. "No regulatory body is as respected as that of Great Britain. It's much stricter than either New Jersey or Nevada, much stricter."