President Bush Signs Law Banning Internet Gambling

And, Lawrence Walters, if you boot up today, and you go to your Internet browser, and seek out a gambling site because you want to play a few hands, what's different today from last week?

LAWRENCE WALTERS, Internet Gambling Law Attorney: You know, from the average bettor's perspective, there's not going to be much different, other than the fact that some of the larger and better known sites may no longer be accepting bets from U.S. citizens.

But your intro piece indicated that Americans are now going to be prohibited from betting online. That's not really the case: The bill has no impact on the individual player's activity.

The bill is centered on restricting certain financial transactions, requiring that banks identify and block transactions going through their servers and their systems, and requiring that the actual sites, the Internet gambling sites, stop and block these transactions. A lot of those are overseas, so the efficiency of that law is going to be in question.

But as far as the bettor, they can pop on the Internet and they can get on one of many different online sports betting or casino sites and still find a way to get the money to the right people to place the bet.

RAY SUAREZ: So one of the chief Senate proponents of this bill, the majority leader, Bill Frist, when he said, "For me as majority leader, the bottom line is simple: Internet gambling is illegal," he wasn't right?

LAWRENCE WALTERS: Not at that time, certainly. The Wire Act, which is the law that's most commonly identified as the law prohibiting Internet gambling, only restricted the operation of a sports betting Web site, arguably. It didn't have any impact on online casino games or online poker, which are, frankly, the most popular now on the Internet. It was restricted only to sports betting.

A few states have prohibited Internet gambling. And the federal government seems to take kind of a broad-brush approach and proclaim that all Internet gambling was illegal, when, in fact, the law had only been made applicable to sports betting.

Now that this new act has been passed, the situation is even more confused, because the law here seems to refer back to existing law; whatever was prohibited before is prohibited now. Plus, it restricts certain financial transactions. So this is one that the courts, I think, are going to have a field day with, and we won't really know what it does until some court takes it apart and tries to interpret it.

RAY SUAREZ: Keith Whyte, do you agree with Lawrence Walters that, for gamblers or prospective gamblers going online today, the field really hasn't changed very much, they aren't doing anything that's illegal?

KEITH WHYTE, National Council on Problem Gambling: I think, for casual gamblers, this bill does create some more barriers. But for both addicted gamblers and those that are really serious about it, they'll find a way, as Lawrence said.

I think the best way to sum up this bill is that it makes illegal what is illegal and it legalizes what is legal. So, in other words, this bill has a carve-out for any type of Internet gambling that is regulated by a state. It contains a specific carve-out for the racing industry to continue to offer online gambling.

So, really, the prohibition of this bill -- it's illegal to gamble on the Internet in states where it illegal to gamble on the Internet. And in states where it is legal or that might want to legalize it, it's perfectly allowable.

KEITH WHYTE: Absolutely, because, you know, the bill is interesting, in that it doesn't make gambling on the Internet illegal. It makes funding your wager on the Internet illegal. So the transaction is -- the financial transaction is what is criminalized here, not necessarily the state of play.

But I assume, and as Lawrence says, that people will find a way to develop offshore accounts. If this was just gambling or even just gambling pornography, that would be one thing. But, in essence, this bill is saying to Americans: You can buy anything you want on the Internet, except gambling, and it's calling on the banks to try and enforce that.

Now, segregating out a gambling transaction from a non-gambling transaction, especially if that transaction has gone through a third party Web site, somebody overseas, I think is going to be very difficult.

RAY SUAREZ: Lawrence Walters, what's an e-wallet?

LAWRENCE WALTERS: And that's what your guest was referring to. The e-wallets are essentially an electronic placeholder for money to be used on the Internet, something like Neteller will operate by setting up an account that you can put money in, electronic money, and then use that money for a variety of services or products to be used by any other merchant that accepts that money.

So what I can do is I can set up one of these accounts. I can fund it. And then I can use that money to gamble online.

Now, what this legislation does is it says, "Well, Neteller and you e-wallets, you have to somehow identify what this money is going to be used for once the consumer puts the money in the e-wallet."

I don't know how they're going to possibly do that, because I can make the decision a split second before I transfer the funds to an Internet Web site. And there's no way that an e-wallet provider is going to know what I'm going to do with that money ahead of time. It's going to fairly difficult.

RAY SUAREZ: So this law doesn't make it illegal for a credit card company or a bank cashing a check to put money in an e-wallet, this placeholder for money?

LAWRENCE WALTERS: Well, only if the service provider knows that the purpose of the funds is going to be Internet gambling, and that's going to be fairly difficult to show.

KEITH WHYTE: Yes, it further raises the question that we think about gambling in these 18th-century terms, these 18th-century boxes, that not only is, you know, gambling legal in one state and not another, but the different forms are legal in different states. And we've placed a premium on that: You know, casinos are legal in Nevada, but not in Utah.

The Internet makes a mockery of these distinctions in law. It makes a mockery of the way we try and keep gambling in these boxes and think about them in these comfortable terms. The Internet has allowed us to do gambling anywhere, any time, on any forum. And, frankly, our 18th-century views and laws of gambling are really going to need to catch up with the 21st-century ways of communication.

So, yes, to your point, it's very hard to determine legally or policy matter where your gamble is taking place, if it takes place in the United States, if it takes place on a server in Bermuda, or if it takes place in Antigua, and whose law should apply.