Curbs on Web Gambling Supported Casinos and Indian Tribes Attempt To Keep Options Open in Congress
 

By SHAILAGH MURRAY
Staff Reporter of THE WALL STREET JOURNAL

WASHINGTON -- Congress is finally moving to curb Internet gambling, after taking several stabs at it in recent
years. But tensions among mainstream gambling factions still makes final legislation a longshot.

Web casinos have become a multibillion-dollar industry, numbering about 1,800 sites today, compared with a handful when politicians started griping about online wagering.

Urged on by a variety of gambling foes -- religious groups, college-sports organizations, conservative activists and the like -- along with brick-and-glitz casinos that fear their business is being siphoned off, both houses of Congress took some action against the virtual parlors earlier this summer. The House passed a bill in June that would bar electronic payments used for online gambling; a month later, the Senate Banking Committee unanimously backed a similar measure.

"This has progressed further than we expected," says Cynthia Abrams, an antigambling advocate for the United Methodist Church.

The problem is that some powerful backers of the bills are trying to hedge their bets: Casinos currently pushing for curbs may want to launch Internet businesses of their own in the future, and are wary of any legislation that could curtail their growth or give rivals an edge. The different interests are favored by different chambers of Congress. Las Vegas-style casinos, along with state lotteries and charities, claim the Senate measure gives an unfair advantage to gambling on Indian reservations. Meanwhile, tribes gripe that the House version would help everyone else expand online, at their expense.

None of the players are powerful enough to ram their preferred measure into law, but all do have the political muscle to thwart their opponents and stall the process. Sen. Jon Kyl, one of the first lawmakers to target Internet gambling, says Congress's goal is to ensure that no form of legal gambling "is going to be worse off than it is today." But some of the factions, says the Arizona Republican, are betting they can use the bill "to gain an advantage."

Although Internet gambling sites are mostly based outside the U.S., in part to avoid U.S. prosecutors, an estimated 40% of online gamblers are American. People can buy lottery tickets via the Internet, bet on sports events and play casino games such as blackjack and poker. None of the sites' operators must abide by the strict state laws that govern casinos, horse tracks, lotteries or even church bingo games. Conservative groups complain that Web sites target underage youths and chronic gamblers. Law-enforcement officials allege the sites are havens for money laundering.

The American Gaming Association, which represents Las Vegas-style commercial casinos, says it opposes Internet gambling because it doesn't believe the technology exists to make regulation effective. One of its members, the casino group MGM Grand, set up an experimental Web site based in the Isle of Man, off the coast of Britain, that dealt with the critics' complaints. It didn't take bets from U.S. citizens and used controls to weed out underage and chronic gamblers. The restrictions were so tight that the site had few customers. It folded in June, after operating for less than a year.

Internet casinos say they want to be recognized as a legitimate industry and have set up the Interactive Gaming Council, in Vancouver, British Columbia, to promote common interests along with "practices that enhance consumer confidence." But many sites remain difficult to trace and nearly impossible to shut down. The most that U.S. lawmakers hope to do is restrict how players pay for their wagers, which would make online betting more difficult and discourage wagering by the kids and addicts that Congress most wants to protect.

Major credit-card companies already refuse to process Internet bets. That blocks about two-thirds of transactions, the gambling industry estimates, and has slowed the sector's growth. Pending House and Senate bills would ban banks from facilitating all types of electronic transactions to gambling sites, including credit-card payments and wire transfers.

But legal gambling interests don't want prohibition; they want the chance to expand online if regulators eventually allow it. The House bill exempts "any lawful transaction with a business licensed or authorized by the state." In other words, if a state decides to make Internet gambling legal, the federal restrictions wouldn't apply within its borders. But the House bill makes no allowance for Indian gambling, which is governed by federal law -- leaving the tribes locked out of cyberspace.

With casinos in 29 states, Indian gambling has many supporters in the House. But Republican leaders responded more to pressure from a broad coalition of lawmakers trying to protect the interests of corporate-run casinos along with horse- and dog-racing tracks. Native American affairs typically are handled by the Resources Committee; the gambling bill moved through the Financial Services Committee, where the tribes have fewer allies.

"States are free to do whatever they want under the House bill, and Indian tribes were completely ignored," says John Harte, general counsel for the National Indian Gaming Association. So the tribes countered with their own plan in the Senate.

Mr. Harte made sure Senate Banking Committee members saw a legal opinion by the Justice Department that said the House bill could conflict with the Interstate Wire Act of 1960, which bars betting across state lines. The tribes also have a friend in Sen. Tim Johnson of South Dakota, a senior Banking Committee Democrat, whose narrow re-election last year was attributed to strong Native American turnout.

Sure enough, the Senate bill turned out to be more Indian-friendly. It eliminates the state exemption, but includes a provision that would permit limited intertribal betting, such as by allowing reservations to link bingo games electronically to offer bigger jackpots. People couldn't play from their home computers; they would have to show up at an Indian-run casino.

Mr. Johnson calls the Senate bill "a reasonable compromise" that would preserve reservation-based casinos as physical, rather than virtual, destinations. "There's going to be a backlash," he predicts, if Indian gambling starts to resemble an online betting empire, rather than serving as a local economic-development tool.

Corporate-run casinos are as angry with the Senate bill as Indian interests are with the House version. Las Vegas forces tried and failed to delay the Senate Banking Committee vote, held just before Congress left for its August recess. When the Senate reconvenes after Labor Day, casino lobbyists will try to get a state exemption added. They are counting on help from Democratic panel member Jon Corzine, a senator who represents New Jersey and its Atlantic City casinos. "He is engaged," says spokesman Darius Goore, who says Mr. Corzine may offer an amendment when the bill reaches the Senate floor.
 

As for antigambling advocates, they say they don't care which version passes. "Naturally we want a strong bill, but we've supported weaker ones because we're realistic," says Ms. Abrams of the United Methodist Church.

Attacking the online industry's payment system "sends a signal to the offshore sites that we're serious, and tells everyone else that this is a problem and not an opportunity."

Write to Shailagh Murray at shailagh.murray@wsj.com
Updated August 22, 2003

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