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The Honolulu Advertiser

Posted on: Tuesday, May 3, 2005

Gambling online is a real gamble

By Kim Komando

Imagine this: You visit a Web site, download a program and register with the site. A few minutes later, you're sitting at a virtual poker table, happily playing Texas Hold 'Em.

You're playing with real money. You've paid for virtual betting chips via an escrow service. And, if you're lucky enough to win, your account will be credited with money.

What's wrong with this picture? It's illegal, according to the Department of Justice.

Thousands of gambling Web sites operate offshore, conveniently beyond the grasp of U.S. regulation.

Online casinos have been around for about a decade, and the recent rise in the popularity of poker has spurred their growth. According to Keith Furlong, deputy director of Interactive Gaming Council, an industry trade organization, online casinos will attract about $10 billion this year. Americans make up 60 percent to 65 percent of their business, he says.

Some states have passed laws prohibiting online gambling, but no federal laws specifically address it. Instead, the federal government relies primarily on the Wire Wager Act to prosecute online casino operators.

Under the act, business owners who accept bets via a "wire communication facility" face fines and imprisonment. The act was intended to curb the use of the telephone to accept bets.

Opponents are quick to note that the act was written in 1961 — long before the Internet. They question whether the law applies to online gambling.

However, the Justice Department is adamant that online gambling is illegal. And in 2000, it successfully prosecuted American Jay Cohen, part owner of the World Sports Exchange in Antigua.

Since 2002, the Justice Department has pressured media companies to pull ads for online gambling. Clear Channel, the nation's largest radio company, stopped airing ads for online casinos that year and other mainstream media companies have followed suit.

Banks also have come under pressure from the Justice Department. Many decline credit-card transactions from online casinos. Other payment options also are becoming scarce. PayPal stopped processing payments for gambling in 2002.

Recently, the World Trade Organization ruled that the United States can regulate online gambling to protect public morals. However, the ruling says U.S. laws must be clarified.

The ruling followed a suit by Antigua and Barbuda, claiming U.S. restrictions amounted to unfair trade practices. The economy of the Caribbean nation relies heavily on Internet gambling. The nation points out that the United States allows gambling within its borders. And, in the case of state lotteries, the gambling is sometimes government-sponsored.

The Caribbean country views the WTO ruling as a victory. It sees two options for the United States. The first is that the United States must ban all gambling. The second would be to grant offshore companies access to the market. The Justice Department did not return calls for comment.

Many U.S. Web users continue to visit these sites in record numbers. The federal government does not prosecute the gambling sites' customers, but some state governments do.

The WTO hopes to reach a final resolution about the dispute between the United States and Antigua and Barbuda later this year. Meanwhile, Americans may well be breaking U.S. laws when playing poker online.