IS INTERNET GAMING LEGAL?

It has long by claimed by the U.S. Attorney General that Internet gaming in the U.S. is illegal. There have been many states, specifically Minnesota under Attorney General Hubert Humphrey III, who have actively pursued purveyors of internet gaming, issuing warrants for those who have parent companies in the U.S. and attempting to bar Internet gambling site from operating in that state. A Missouri grand jury handed down indictments against a service based in Philadelphia, Interactive Gaming and Communications Inc. Its owner is appealing a Pennsylvania judges order allowing his extradition to Missouri.

We at Investor Data Exchange contacted the second largest law firm in Las Vegas to ask about setting up an internet gaming facility headquartered in Las Vegas, where gaming is legal, and only marketing to overseas countries where gaming was legal. We were told that if it had anything to do with Internet gaming they would not represent us. We decided that if you can't get an attorney to take your retainer fee, your case is probably pretty hopeless.

UPDATE: The companies providing Internet gaming contend that since the Internet is not easily regulated there was no way for anyone to stop them. This pretty weak argument was reiterated in an early 1998 Sports Illustrated articles where the magazine interviewed internet gaming companies.

By March 1998 everyone quoted in that article had been arrested. 21 persons in all, with more arrests expected. The U.S. Attorney General enforced a 1930's law, which made it illegal to place bets over a phone line. And the Internet works over phone lines. The government has also pressured phone companies to shut off service to the operations and urged Western Union not to transfer money to them, trying to make life difficult for the gambling sites.

The crack down has been the Internet gambling industry's biggest jolt. At a news conference M J White, the U.S. attorney in New York dismissed the industry's assertion that U.S. law doesn't cover offshore sites. "It's a federal crime to use the Internet to conduct betting operations. You can't hide on line and you can't hide offshore."

Enforcing the law could prove difficult. And the crackdown comes at a time when public attitudes, as wells as some government official attitudes, have become lax about gambling, with everything from gambling boats in New York to riverboat casinos in the Midwest, unchallenged legally. However, our feeling is that there is something fundamentally wrong with the attitude of, "It's okay to break the law, because they can't catch me." Sounds like something Jesse James might have said. While the issue is unresolved we feel it would be foolish to put money in the way of this very big grindstone.

There will be plenty of time to invest if the legal issues are resolved, because then a thousand companies will try to break into the market with gambling websites. And they'll all need your money.

UPDATE: In July 1998 the U.S. Senate voted 90-10 to support a broad BAN on Internet gambling and 'virtual casinos'. While laws already exist against using telephone lines against gaming, supporters think the new law, the Kyle bill, will help state prosecutors win court orders forcing Internet Service Providers to cut off offending websites. Critics say the law is a ploy to preserve established gaming interests such as existing physical casinos and state lotteries.

UPDATE: In August 1999, Justice Charles E Ramos of the New York Supreme Court ruled that the N.Y Attorney Generals office was within it's rights when it froze the assets of the World Interactive Gaming Corporation, based in Bohemia N.Y., even though the companies computers were based in Antigua. Apparently the Kyle bill stalled in the House of Representatives, but will be introduced the next session.

UPDATE: June 2000. One of our club member is putting together a software package to allow internet debit transactions, expected to be worth a billion or more in transaction fees every year. According to their research they expect heavy transaction from the porn industry. But they are not expecting transaction fees from the gaming industry to last long. The reason? Besides the Kyle bill making gaming illegal being reintroduced the next congressional session, another bill will be introduced, banning banks from financial transactions with any overseas entity that promotes gaming in the U.S. This would shut off the ability of those companies to accept credit, or debit, card transactions, which is necessary to place 'bets' on the websites within the U.S.