September 22, 1999

In a Legal Gray Area, Blackjack Is a Click Away

By DIRK JOHNSON

HICAGO -- Kevin Lacey, a 41-year-old architect, was no gambler. He had never even been to Las Vegas, Nev. But when he saw a magazine advertisement about playing blackjack on the Internet, he was intrigued.

	Marty Katz for The New York Times
	Kevin Lacey, whose on-line wagering left him $60,000 in debt, in the Compulsive Gambling Center's counseling room in Baltimore.

Just for fun, he found the Web site, keyed in his credit card, played a few hands and won a couple of dollars. That was three years ago. Now Lacey is more than $60,000 in debt.

"I've maxed out seven credit cards," said Lacey, who recently entered a gambling addiction program. "I've got to get this monster under control."

Hundreds of "cybercasinos" have come online since 1995, giving almost anyone with a computer and a credit card the chance to gamble. Americans last year wagered an estimated $1 billion online in a form that thrives in a legal twilight zone as advances in technology have outpaced the law.

Introduction • A Feeding Frenzy for Consumers Forum • Join a Discussion on E-Commerce Marketing Strategies • Digital Dressing Rooms • Converting E-Mail Spam • Direct Marketers Find Their Ground • To Sell Globally or Sell Haughtily? • Straining to Build Customer Service • What Sex Sites Teach Home Shopping • Present at the Creation • Quick Purchase. Slow Delivery. • Living for a Week Online Time Is Money • Fast and Faster Connections • Speed It Up, Webmaster! • Drugstores in Digital Scramble Entrepreneurship • Goliath.com Still Winning • An Early Success in Germany • A Perky Do-It-Yourself Site • A Beginner Learns • On Campus: Crescendo in E-Major Auctions • Four Tales From an Hour of Ebay • There Are 30 Seconds Left... • A World of Auction Choices Leisure • A Food Site for Every Appetite • Blackjack Is a Click Away • Many Limited Travel Sites Caveat Emptor • Take My Name Please! • An Online Credit Check • Auction Scams and Identity Thefts Business to Business • Web Retailers Need Shelf Space • A Supplier Goes Digital • IBM Moves to Web Business The Law • Can Defendants Cry 'E-Sanctuary' • Blackjack in a Legal Gray Area • A Simpler Web Sales Tax Algorithms • Just What Does Doubleclick Do? • Telling You What You Like • Shuffling Data Cards Who's Buying • Target for Retailers: Teen-Agers •  Tough and Impatient Consumers • The Price of Being Off-Line Personal Favorites • Adam Clayton Powell 3d • Diane Von Furstenberg • Carter Brey • Amar Goel • Glenn Lowry • Jim McDermott • Judy McGrath • Naomi Nari Nam • Steven Pinker

These cybercasinos are based offshore, many of them in Caribbean Islands, because gambling in the United States requires specific legal permission. online casinos blur those legal boundaries.

Is it illegal for a woman in Ohio, for instance, to place a bet with a cybercasino in Antigua? Does the betting occur in Ohio or in Antigua?

Senator Jon Kyl, Republican of Arizona, has introduced a bill that would prohibit online gambling by giving judges the power to shut down Internet providers who give Web sites to cybercasinos.

The Senate approved the measure last year 90 to 9, but it did not come to a vote in the House of Representatives before Congress adjourned. The bill is expected to come to the Senate floor again this fall.

Kyl, the chairman of the Senate Judiciary Committee's subcommittee on technology, said he thought that Internet gambling already violated the law against sports betting, which, although permitted in Las Vegas, was banned under the Federal Wire Act of 1961. But the law does not address nonsports betting. And the 1961 measure could eventually be irrelevant if satellite transmission or radio waves replace telephone lines.

For now, some states have taken separate approaches, none of them altogether effective. Some states, like Illinois and Louisiana, have banned Internet gambling. Minnesota is studying whether online wagering could be regulated and licensed. Missouri, meanwhile, has taken court action against online gambling providers.

Jay Nixon, the Attorney General of Missouri, has filed a Federal suit in Kansas City against the Coeur D'Alene Indian tribe in Idaho, contending that the tribe's lottery and bingo Web site violates Missouri's consumer laws, which prohibit the sale of illegal goods or services. The tribe, meanwhile, contends that the wagering is legal because it is based in a sovereign American Indian nation, where wagering is permitted.

Missouri also filed suit against a Pennsylvania man for running an Internet gambling site.

The man pleaded guilty to a misdemeanor charge last year and was fined $27,000.

But prosecutions of Internet gambling remain more rare than a poker hand of four aces. Sue Schneider, who publishes an online magazine on computer gambling, Interactive Gaming News, said it would be impossible to stop people from wagering over the Internet. She said that more than 500 sites offered gambling.

Instead, she said, states and the Federal Government should regulate the industry. Australia, she noted, has recently started to license online casinos. "You could regulate them just like you regulate any land-based gambling operation," Ms. Schneider said.

Dianne Meyer, the publisher of Rolling Good Times online, another Internet magazine that reports about online gambling, said a prohibition would drive the industry underground. That would leave consumers with no protection, she said. "This is an unregulated industry that desperately needs to be regulated," she said.

But online gambling has relatively few defenders. In June, the National Gambling Impact Study Commission, created by Congress, called for a ban on Internet gambling. Most professional sports leagues, as well as the National Collegiate Athletic Association, have called for the prohibition of online wagering. The Las Vegas casino industry has called for a ban as well.

Frank Fahrenkopf, the president of the American Gaming Association, which represents the casino industry, said he scoffed at the notion that his group's opposition to online gambling was rooted in a fear of competition. He said the industry's chief concern was that Internet gambling would tarnish all operators of casinos.

Even those who support the ban, however, acknowledge that enforcement could be difficult. And the Internet providers have chafed at being forced to act as a sheriff expected to keep outlaws out of a virtual Dodge City.

Acknowledging those concerns, the Kyl measure would relieve Internet providers of the responsibility to block online casinos in two instances: if it was technologically impossible to block access or if it was prohibitively burdensome to do so.

While operators tend to be mysterious, surveys have gathered some information about users. online gamblers tend to be white men ages 20 to 40, often wagering on sports, said Kevin O'Neill, a spokesman for the Council on Compulsive Gambling of New Jersey.

Sports betting is popular on the Internet, he said, "because everybody knows the outcome of a game -- you can't cheat on that."

THE LAW • Can Defendants Cry `E-Sanctuary' and Escape the Courts? (September 22, 1999) • Coming Soon to a Web Site Near You: A Simpler Sales Tax (September 22, 1999)

online casinos typically set up accounts with customers that debit a credit card. Losses are charged to the card, while winnings are tallied as a credit.

Until now, it has been relatively easy for online casinos to open for business. Nearly two dozen of them are based in Antigua, where a license can be bought for $100,000 or less, and there are no taxes.

Experts on gambling say online wagering removes most of the social barriers that inhibit gambling. There is no travel. And it can be done in private at home, so no one else has to know about it.

Lacey, the architect who lost $60,000 to Internet gambling, said he started wagering on his computer as a way to forget off-line frustrations. "I found it as a means of escaping life's problems," he said. "I was in a bad marriage. And I had the early stages of Parkinson's."

The gambling problem, he said, is a much fiercer foe than his health problem.

"The Parkinson's, I can control that with medication," he said. "That gambling, that's a harder thing to control."