Online Gambling Shutdown

It’s officially no dice for online gambling in the United States now. President Bush signed the Security and Accountability For Every (SAFE) Port Act of 2006 into law on Friday, October 13, 2006. The basic purpose of this law is to bolster security at US ports to prevent terrorists from smuggling in nuclear weapons. However, it also contains an unrelated provision that severely restricts online gambling. The Unlawful Internet Gambling Enforcement Act makes transactions from banks or similar institutions to online gambling sites illegal.
Just a few hours earlier, gaming firm Sportingbet sold most of its US business for the nominal sum of one dollar to avoid accusations of profiting from illegal business. Other foreign-based casinos are closing their clients’ U.S. accounts so if you have a casino account with one, don’t be surprised to get an email regretfully informing you that your account is being closed.

I don’t suppose I would think this was the height of hypocrisy if the reasons being given for doing this didn’t include statements indicating moral concern about underage gambling and gambling addictions. Get real. We’ve got State lotteries up the kazoo over here, and the list of states with land casinos continues to grow. Therefore, gambling is okay as long as you are playing the lottery, gambling in a U.S. land-based casino, or going to a racetrack.

Online gambling requires you to deposit money with a casino in another country. If you win anything, then the casino must transfer money back to you. Credit cards have long been rejecting these types of transfers, but third party sites such as Neteller and Firepay accept deposits and winnings. Paypal used to, however, when eBay bought Paypal, it stopped accepting these types of transfers. Neteller’s stock fell 60% when news of the measure was made public this past September.

No major U.S. companies were able to set up internet gambling sites because of the 1961 Wire Act, which prohibited telephone transmissions to bet across state lines. However, many American entrepreneurs were still raking in a bundle by setting up gambling advice websites and becoming affiliates of online gaming sites. These sites received a share of all lost wagers from each account they signed up that could be as much as 35% for the life of the account.

During the birth of the online gambling industry, concerns over underage gambling were certainly valid. Restrictions were then put into place that made it much harder for minors to participate. In an October 2006 article in The Baptist Press, Sen. Bill Frist (R-Tenn) claims: “Rigorous state enforcement means that brick and mortar casinos make a good faith effort to keep minors away from gambling. The same isn’t so for online casinos: A website can’t tell whether someone is 13 or 35.” That really is not true. Online casinos required picture IDs and bank account information, which is really more than a land casino will require. Thinking fake ID? Yes, an enterprising minor who really wants to gamble may be able to obtain a fake picture ID, and guess what? That will get said minor into a land casino too. I’ve seen people in Atlantic City casinos who didn’t even look 18 let alone 21.

So the real reason seems to be legislators don’t want gambling revenue going overseas. That’s something I can understand and I might even be able to get behind it, if the government would come out and say we’re banning online gambling transfers because Americans are spending 6 billion dollars a year overseas and we think that sucks.

This really should have been a separate bill, but somehow Senator Bill Frist managed to get it attached to the SAFE bill with exceptions for horse racing and state run lotteries. What’s even more amazing about Frist’s bogus moral stance is it’s no secret that Frist accepted campaign contributions from Harrah’s Entertainment!

This past September, two key figures in British gambling firms were actually arrested in the United States. Louisiana was one of eight U.S. states that already had outlawed online gambling, and they had sworn out an arrest warrant for Peter Dick, former chairman of Sportingbet PLC. When Dicks arrived in the U.S. at Kennedy International Airport on September 6, somehow this warrant came up and he was detained. N.Y. Governor Pataki refused to extradite Dicks to Louisiana and he was released. Dicks quit Sportingbet after that.

The other businessman was BetOnSports PLC Chief Executive Officer David Carruthers, who was arrested on federal charges in July at a Dallas airport. These charges stemmed from the 1961 Wire Act. Whether this witchhunt will continue remains to be seen. There is a provision for a 270-day period to develop enforcement measures.

Analysts indicate that the online gambling industry is now moving in two directions. London-based companies are dumping their US bases and making plans to expand their European and Australian markets. Private offshore companies are exploring every available depositing option with their existing payment processors in an effort to salvage their U.S. business.

It is also being predicted by some that the U.S. will reverse its stance at some point when better ways to regulate and tax the industry are developed.