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A congressional push last year stopped many Americans from playing the games online, but the law may be changed
Tom Somach, Special to The San Francisco Chronicle
Monday, July 2, 2007
A bill before Congress that would legalize Internet gambling in the United States has American companies poised on the sidelines, waiting to capitalize on a potentially humongous new market.
The bill, the Internet Gambling Regulation and Enforcement Act, was introduced by Rep. Barney Frank, D-Mass., in April. Congressional hearings on the feasibility of the bill were held in early June.
The bill seeks to reverse the Unlawful Internet Gambling Enforcement Act, which Congress passed last year and which bans Internet gambling in the United States by prohibiting American banks and credit card companies from processing payments to and from online gambling sites.
The stakes in this political showdown are huge. Frank's bill would set up a framework for the government to legalize, license, regulate and tax Internet gambling. The bill would also set up safeguards to prevent underage and compulsive gambling, as well as money laundering and fraud.
After trying for almost 10 years to pass anti-Internet-gambling legislation, the Republican-controlled Congress passed its law in October by tacking it onto a bill concerning port security, arguing that terrorists launder money via online gambling sites. Few members of Congress wanted to vote against beefing up port security right before an election and the legislation passed easily.
Now, with Democrats in control of Congress, Frank wants to repeal that law and legalize online gambling. Frank calls last year's bill "one of the stupidest things I ever saw."
"I want to get it undone," Frank said. "If an adult in this country, with his or her own money, wants to engage in an activity that harms no one, how dare we prohibit it? Adults are entitled to do with their own money what they want."
Under the bill that prohibits Internet gambling, banks and credit card companies have become Internet pseudo-cops, forced to determine which e-transactions involve online gambling and then blocking them. Frank is chairman of the House Financial Services Committee, which oversees the activities of banks and credit card companies, who have made it clear they don't want to be the Net's gambling police.
Those banks and credit card companies have made numerous campaign contributions to Frank over the course of his 14 terms in Congress. If Internet gambling is legalized, not only will banks and credit card companies no longer have to block online gambling transactions, they'll be able to process them and profit from them.
Under the proposal, American companies for the first time could legally set up Internet casinos, run them from the United States and accept U.S. customers. Corporations that currently run land-based casinos in Las Vegas and elsewhere will likely be among the first to jump into the new industry, casino officials said, but they won't be the only ones.
"We would do so as quickly as we could," said MGM Mirage Senior Vice President Alan Feldman. "We would have it up and running within a year. And I have to believe that just about everyone will get involved at some level. All the major players."
The major players in gambling?
"Yes," he said. "But not just them. All the major entertainment companies will get involved, too. Sony, Apple, Universal, Columbia, Time Warner. It just seems logical that at some point they would find their way into the industry."
Even a company as family-oriented as Disney could get involved in opening an Internet casino, Feldman said. "I know Disney has certain beliefs about its core brand structure that could prevent it," he said. "But they could always create a sub-brand, as they do with their movie company Touchstone Pictures (which produces R-rated movies)."
MGM Mirage owns and operates about a dozen major Las Vegas casinos, including MGM Grand, Mirage, Monte Carlo, Bellagio, Mandalay Bay, Luxor and Treasure Island. MGM Mirage previously operated an Internet casino from the Isle of Man in the British Isles, from 2001 to 2003, that was open to people in every country but the United States. The casino failed, Feldman said, because of that ban.
"About 70 percent of the global online wagering market is from the U.S.," he said. "So we were competing, with only 30 percent of the market. It wasn't enough to be profitable." But with the U.S. market, under Frank's proposal, it would be profitable, he predicted.
If the bill passes, MGM Mirage will operate its Internet casino from Nevada, Feldman said. "That's the point (of the bill)," he said. "For the home state to get the tax benefits."
The Las Vegas Sands Corp., which owns the Venetian casino in Las Vegas, as well as other entities, announced plans last year to open an Internet casino in 2007 that would operate from the Channel Islands and service the United Kingdom only. It hasn't opened yet.
But now, with the potential new law, the company's attentions are turning toward the more lucrative U.S. market.
An Internet casino run from the United States that Americans could patronize is definitely something the company would be interested in, should it become legal, according to Sands spokesman Ron Reese. "We see it as another opportunity to grow our business," he said.
Representatives from other major casino corporations made similar statements about Internet gambling, but didn't want to be quoted or identified, for fear of losing a competitive edge.
Not everyone is as excited about the prospects of legal Internet gambling.
Already, longtime Internet gambling opponent Sen. Jon Kyl, R-Ariz., who was a co-sponsor of the 2006 bill that banned gambling, has spoken out against Frank's bill.
"Online poker is currently the most addictive form of gambling activity among American youth," Kyl said. "Online poker players are more likely to exhibit problem gambling symptoms than other types of gamblers, and over half of young people who gamble on the Internet displays signs of problem gambling.
"There is an attempt by Congressman Barney Frank to remove the online gambling enforcement mechanisms provided by (the current law). I oppose efforts to remove tools that our state and federal authorities have long sought."
So-called "gaming" Web sites in the U.S., which are already legal, aren't considered "gambling" sites because they only offer casino games that can be played for free, and thus pose no financial risk to players. Such sites appear to be in key position to enter the legal Internet gambling business in the United States, should it open up, because they've already got the Internet infrastructure in place and it wouldn't take much effort to transform, for example, a play-for-free online poker site into a play-for-pay online poker site.
One such Web site is Triple Jack (www.triplejack.com), which operates from Coral Springs, Fla., and offers free online poker, with cash and other prizes awarded to winners. The site, in operation since 2005, makes money by carrying ads, and claims to have more than 100,000 registered players. Adding real-money poker would likely exponentially increase profits.
"The U.S. government is losing out on a lot of (tax) money by not allowing Internet gambling," said David Finkelstein, chief executive officer of Triple Jack. "European countries realize this and allow it."
If the legislation passes, it won't just be the federal tax coffers and the potential Internet casino operators that stand to benefit. Advertising agencies whose clients include online gambling firms, as well as media that carry online gambling advertising, also stand to profit.
Robert Blagman is the co-owner of Media Options Inc., a Los Angeles ad agency whose clients include some of the big hitters in the real-money online poker business: foreign-owned companies Party Poker (www.partypoker.com), Full Tilt Poker (www.fulltiltpoker.com), River Belle Poker (www.riverbellepoker.com) and 888 Poker (www.888.com).
Before the anti-online-gambling legislation passed, all four companies advertised heavily in the United States, especially on television, and Blagman's company made heady commissions.
The new law "was a disaster for us," Blagman said. "All our online poker clients immediately stopped advertising in the U.S.," costing his agency more than $1 million in commissions.
Last month's hearings before Frank's House Financial Services Committee focused on the feasibility of effectively using new technologies to regulate Internet gambling and prevent abuse by underage and problem gamblers. After the hearings ended, Frank gave no timetable as to when he expects the full House of Representatives, as well as the Senate, to vote on the bill.
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Net gambling history
1995 -- First Internet casino opens. Blackjack, roulette, craps and other casino games can be played for fun, but not real money.
1996 -- First Internet casino that can be played for real money, InterCasino, opens. Thousands more such virtual casinos will open in coming years.
1997 -- Three San Francisco residents and former Pacific Exchange employees, Jay Cohen, Steve Schillinger and Haden Ware, move to Antigua and start Web site called World Sports Exchange, an Internet sports book that accepts online wagers on sporting events. It's among the first.
1998 -- Country and western singer Kenny Rogers, who had the hit song "The Gambler," becomes first celebrity to open his own Internet casino. It's based in Curacao. Fellow celebs including Rodney Dangerfield, Larry Holmes and Bubba Smith soon follow suit.
1998 -- The U.S. Justice Department issues felony arrest warrants for Cohen, Schillinger, Ware and 18 other Americans for their roles in the illegal operation of a half dozen different Internet casinos and sports books around the world. Feds say the accused violated the Federal Wire Act, which prohibits wagering over phone lines, which the Internet uses.
1998 -- Cohen and 13 others who were charged turn themselves in to federal authorities in the U.S. All but Cohen have charges dismissed or have plea bargains and receive fines. Cohen declines a plea bargain offering no jail time, choosing to go to trial. He hires attorney Ben Brafman, who previously defended Salvatore "Sammy the Bull" Gravano. Schillinger, Ware and five others who were charged remain fugitives.
2000 -- After a jury trial in federal court in New York, Cohen is convicted of seven felony counts of Internet bookmaking and related offenses, and sentenced to 21 months in federal prison. He appeals the verdict.
2000 -- Rogers becomes first celebrity to close his Internet casino. He cites the unclear legal status of the operation.
2001 -- The U.S. Court of Appeals upholds Cohen's conviction.
2002 -- Cohen begins serving his sentence at a federal prison in, ironically, Las Vegas. He becomes the only person in U.S. history to go to jail for Internet gambling.
2003 -- Chris Moneymaker, a Memphis accountant, wins the World Series of Poker in Las Vegas after qualifying by winning an online poker tournament. The Internet poker boom begins.
2004 -- Cohen is released from prison after serving 17 months.
2006 -- Congress passes the Unlawful Internet Gambling Enforcement Act, which bans U.S. banks and credit card companies from transferring monies to and from Internet gambling sites, making it difficult for Americans to fund online gambling.
2007 -- The Poker Players Alliance, a San Francisco lobby group, hires former Sen. Al D'Amato, a noted poker player, to help get the law changed so it doesn't affect online poker. The alliance says poker is a game of skill, not luck, and therefore isn't gambling.
2007 -- Rep. Barney Frank introduces bill called Internet Gambling Regulation and Enforcement Act, which would legalize Internet gambling in the U.S. The bill is yet to be voted on.
This article appeared on page C - 1 of the San Francisco Chronicle |
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发表于 2007-7-3 00:39
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