|Originally Aired: October 16, 2006
President Bush Signs Law Banning Internet Gambling
|President Bush's signing of the Unlawful Internet Gambling Enforcement Act bans the use of credit cards, checks, and electronic transfers to place bets on gambling websites on the internet. Analysts discuss the implication of the recent law.|
RAY SUAREZ: An estimated 8 million Americans made wagers
online last year while playing poker, Blackjack, or betting on their favorite
sports team, from the comfort of their homes and dorm rooms.
It was as simple as point and click: Log on to a gambling
site; most are based outside the U.S. You would then set up an
account, using a third-party company to manage the funds. Add credit card
information and, within minutes, the gambling begins, at a virtual poker table
in real time, spending and losing and sometimes winning real money.
The pastime may be over for many gamblers, since the
president signed the Unlawful Internet Gambling Enforcement Act on Friday, a
piece of legislation Congress quietly attached to a bill on port security.
The act prohibits Americans from using electronic funds
transfers, credit cards, and checks in placing bets with gambling sites
worldwide. The bill holds banks and credit companies responsible for
enforcement of the law.
Several foreign online gambling businesses gave up their U.S. operations
after the bill passed. Estimates put the value of the American online gaming
market around $12 billion in 2005.
Online betting remains open
RAY SUAREZ: Some analysis now on the impact of these changes, from two
people familiar with the industry. Keith Whyte is the executive director of the
National Council on Problem Gambling. And Lawrence Walters is an attorney who
represents a number of online gambling companies.
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
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
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
Cutting off the flow of money
RAY SUAREZ: What about the restrictions on banks and credit
card companies? Does it make it more difficult to have chips on your end of the
table, whether you're playing roulette or Blackjack or poker?
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
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
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?
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
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?
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
Putting a 'box' on online betting
RAY SUAREZ: Keith Whyte, is part of the problem the fact
that the Web is the World Wide Web and, when you're doing things there, you're
not in any particular place? I mean, if you put money in an e-wallet so you can
gamble on a site that's in the Caribbean island of Antigua,
where is the money? Where does it exist?
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.
Prohibition or treatment?
RAY SUAREZ: Well, you come from an organization on problem
gambling, studying problem gambling. Does this new set of hurdles at least make
it harder for addicted gamblers to satisfy their compulsion, their desire for
KEITH WHYTE: We certainly think the law does no harm. You
know, it's not going to enable to make Internet gambling easier.
But, really, if you're going to try and help somebody with a
gambling problem, as many of the backers of this legislation say, making it
harder for them is not the solution. It's really -- this is a health issue, and
we need funds for prevention education.
It's notable that there's not a single cent appropriated in
this bill for prevention, for education, for treatment, or for research. So
it's a way of trying to address a very serious health problem on the cheap,
quite frankly. And I don't know how this bill would really help someone with a
RAY SUAREZ: Lawrence
Walters, very quickly before we go, you've both been talking about how this
won't block a lot of people who really want to gamble. Yet, as soon as the bill
passed, a lot of businesses pulled up stakes in the United States. Why did they do that
WALTERS: Well, and that's a very interesting point. And to your most recent
point, the bill, I think, will do some harm for problem gamblers, because the
large companies that were in the space before, the publicly listed entities
that respect American law and have chosen to get out of the field, donated
large sums to the problem gambling effort.
And now those industry players are going to be replaced with
smaller, less regulated players and providers that don't donate those kinds of
funds, don't have the money to do so. And, you know, prohibition has never
worked to address any kind of compulsion or addiction. And it isn't going to
work here; in fact, it's going to reduce the amount of money that's available
for problem gambling programs. So it's a crying shame.
RAY SUAREZ: Lawrence
Walters, I'm going to have to stop it there. Thanks a lot for joining us,
KEITH WHYTE: Thank you.
WALTERS: My pleasure.