US On-Line Gaming Ban Getting Closer

by Mike Godfrey, Tax-News.com, New York

14 March 2002

The US House of Congress Judiciary subcommittee on crime has voted unanimously in favour of an update of the Wire Act of 1961, which bans interstate wagering, and which was used to convict Jay Cohen, who had been operating an on-line casino out of Antigua. The amendment would make it clear that the law applies to the Internet and other modern communications (read wireless) as well as telephone lines.

"This legislation is badly needed because there are a great many offshore sites that are sucking billions of dollars from American households," said Rep. Bob Goodlatte, the Virginia Republican who sponsored the bill.

The measure would allow law enforcement agents to take down US sites found in violation, or stop credit-card payments to sites operating outside of the country, posing a major threat to hundreds or even thousands of sports-book operators in Costa Rica, Antigua and other offshore jurisdictions. Like Prohibition, though, enforcement could be tough, requiring invasion of personal privacy on a scale that may outweigh any supposed moral gains for the state and its citizens.

The amendments to the bill would allow federal agents to obtain a court order requiring credit-card companies and other payment services to cut off transactions with the sites if the gambling sites could not be shut down directly. Online gambling sites took in an estimated $2.2 billion in revenues in 2000, and could collect $6.4 billion by 2003, according to one study reported by Reuters.

Casinos in the U.S. have been looking for ways to better incorporate online gaming into their operations, particularly following the events of Sept. 11, which caused travel to places such as Las Vegas to decline. Nevada has passed a law that could allow existing bricks-and-mortar casinos to set up online operations.

A ban on online gaming would affect more than just the gambling sites themselves; companies like West Greenwich, R.I.-based GTECH Holdings Corp. (NYSE:GTK) might also be impacted. GTECH supplies or operates lotteries for about 80 customers in 36 countries (it operates nearly three-quarters of all US lotteries), according to Hoovers.

GTECH's Dreamport unit offers gaming systems for entertainment markets, and its GameScape unit provides gaming consulting services. GTECH's Europrint/IGI operation offers interactive and promotional games, while the company's UWin! division supplies Internet wagering systems.

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