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June 1, 1998

Online Casino Unfazed by Proposed U.S. Ban
By LISA NAPOLIBio
The delays in the debut of the new GalaxiWorld casino aren't typical of the construction problems faced by its brick-and-mortar counterparts. GalaxiWorld is hoping to be an online haven for gamblers, but technical bugs prevented the electronic casino from opening on its intended April 30 launch date.

Glitches in computer programs aren't the only problem facing the proprietors of this and other virtual gambling palaces. GalaxiWorld is entering the market at a critical time for online gambling, a growing -- and controversial -- industry which reportedly generated $600 million in wagers last year. Legislation is looming on Capitol Hill to ban online gambling outright in the United States, with the Internet Gambling Prohibition Act, a bill by Republican Senator Jon Kyl, headed for the Senate floor.
“Prohibition has never been successful in the United States.”

Larry Weltman, chief executive, Gaming Lottery Corporation

GalaxiWorld is prepared for such a ban, and already plans to block its virtual doors to United States players -- a practice many gambling operators have adopted to avoid legal problems. Ironically, representatives of GalaxiWorld said they're trying to look at the Kyl bill as something that's actually good for business.

"We believe that's our business opportunity," said Larry Weltman, chief executive of the Gaming Lottery Corporation, the company that started GalaxiWorld. "If the United States laws allowed gambling in the United States it would mean the Bally's of the world could participate. This way, we can participate with very little strong competition."

That's not to say Weltman wouldn't want to attract U.S. dollars.

"We don't agree with prohibition. If you regulate, you'll have more control," he said. "Prohibition has never been successful in the United States."

But even with the uncertainty about U.S. participation, Weltman was so confident about the future of the market that in 1996 he changed the course of his business. The Gaming Lottery Corporation, a publicly traded company based in St. Kitt's, in the British Virgin Islands, started in 1988 as a supplier to the gambling industry, making such things as paper for lottery tickets.

Two years ago, Weltman said, the company saw the potential of the Internet, took a digital fork in the road and divested itself of its core business. The company has spent $20 million dollars to develop what it considers a state-of-the-art gambling palace -- a fraction of the cost of a real-world casino.

Analysts who follow the gambling industry said that while entering the market is a gamble in itself, they've seen the business grow.

"There certainly still is a business without the United States. But you can't just take it off the cuff -- it is half the population of the Internet users in the world at this time. It's a severe detriment to your business," said Sebastian Sinclair, an analyst with Christiansen/Cummings Associates who has followed the gambling market since 1993.

Sinclair called the world-wide interest in online gambling "huge," particularly as the convergence of technologies allows users to surf the Web using their television. He points to the growth of non-virtual gambling to illustrate a potential scenario for U.S. acceptance.

"I expect it to play out the way gambling did in this country after the turn of the century, which was widespread prohibition like in the 1900's, then the parimutuel business in the 1940's, and then, 1964, when New Hampshire authorized the first lottery," he said. "I expect it to play out the same way on the Internet, but within a compressed time frame."

Sinclair and online gambling advocate Sue Schneider, editor of Rolling Good Times Online and founder of the advocacy group Interactive Gaming Council, point to Australia's decision to regulate the industry rather than to outlaw it.
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"It's the same concern -- that you're dealing with something that's borderless and multi-jurisdictional," said Schneider. "How do you deal with that on a global basis? Our non-U.S. readers say the word 'arrogant' comes to mind, like the domain name issue."

Schneider said the Kyl bill would be difficult to enforce, sentiments echoed by Internet service providers like America Online, which is also fighting the bill.

"We're not involved from a gambling perspective, we're looking at it as an Internet bill," said Bill Berrington, the director of law and global public policy for AOL. Policing and blocking electronic gambling would be a major "burden" for the service, he said.

Kyl bill or no, Weltman is readying for business and hoping to collect a piece of an industry he said is growing at a "phenomenal" rate.

But right now, he has other, more technical concerns.

"It would be nice if we had no glitches," he said. "We would like to be live."

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Lisa Napoli at napoli@nytimes.com welcomes your comments and suggestions.
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