Bruno Paniccia wandered into a legal “Twilight Zone” in April when, at the recommendation of a friend, he sent $500 to an Internet sportsbook operating from the Caribbean and started winning big.
But the 25-year-old insurance claims evaluator from Chatsworth, Calif., received a rude awakening after he built his bankroll to more than $5,000 during an unprecedented hot streak: His “cyberbookie” refused to pay him, saying it could not meet its obligations because the FBI had raided the U.S. offices of its parent company and frozen its bank accounts.
“Legally, I didn’t feel like I was doing anything wrong,” a dismayed Paniccia said. “To my understanding, it was not illegal to bet over the Internet as long as [it was] with an offshore. I mean, I listen to sports radio and all you hear is just ads about, ‘Call this number and you can have an offshore betting [account] and it’s completely legal.’ ”
His was a painful introduction to the strange and chancy world of Internet gambling, which exists because there are no laws specifically prohibiting it.
Despite its fledgling status, Internet gambling is generating increasing concern among legislators, regulators and gambling opponents, who see grave consequences arising from games of chance invading the home.
Sharp rise in wagering Web sites
The growing concern has coincided with a sharp rise in the number of online sportsbooks, casinos and lotteries, from only a dozen or so at the beginning of 1997 to about 100 a year later — a number that is bound to continue to climb in the months ahead. They range from bare-bones sportsbooks listing wagering propositions to elaborate mock casinos featuring everything from virtual cocktail waitresses to calypso bands.
Fueling the fears of opponents of Internet gambling is the ease with which an account can be opened — within minutes of making a deposit with a credit card, a user can be playing virtual versions of a variety of casino games, including blackjack, roulette, video poker and craps, or betting on almost any sporting event. Losing wagers are deducted from the user’s account and winning wagers added. A player who goes bust can quickly replenish an account and start all over again.
Like the battles being played out over pornography on the Internet and the availability of such sensitive information as bomb-making manuals, the battle over Internet wagering will ultimately be decided in the courts.
But first — while a congressional gambling commission conducts a two-year study that will include a hard look at online wagering and Congress and state legislatures consider laws to make it illegal — the war is being waged in the court of public opinion.
On one side are civil libertarians, who argue that it is unconstitutional to legislate against an online activity conducted in the privacy of one’s home, and entrepreneurs eager to get in on the ground floor of an industry that some analysts say could generate as much as $10 billion a year within a decade.
Opposing them are those who want to stop Internet gambling in its tracks. This group includes the gambling industry, which sees its $550 billion a year business threatened; certain members of Congress; the National Association of Attorneys General; and organizations like the National Coalition Against Legalized Gambling (NCALG) and Gamblers Anonymous, who worry that Internet wagering could exacerbate teen-age and problem gambling.
To some, it's a disease
“As a form of entertainment it’s a disease to 5 percent of the population that will entertain themselves into bankruptcy,” said Tom Grey, director of NCALG. “So obviously, (with) entry into a home ... the more available and accessible you make gambling, the more you compound the problem.”
The central question — whether Internet gambling is legal, illegal or exists in a legal nether world where no rules apply — is as gray as lawyers can make it.
Section 1084 of the federal Wire Communications Act, which bans the use of telephones to accept wagers on sporting events, was designed to allow federal law enforcement officials to prosecute bookies. But the law predates the popularization of the Internet by several decades, and does not specifically address legal questions arising from the use of the personal computer to make wagers.
There are other problems interpreting the act as well: It only prohibits anyone engaged in “the business of betting” from using a “wire communications facility,” which puts the casual bettor outside the scope of the law. It also exempts the transmission of wagering data on horse racing and does not make clear whether “contest” as defined by the act includes other, non-sports, games.
Other federal statutes that could conceivably be applied to Internet gambling include the Amateur and Professional Sports Protection Act, which prohibits the spread of sports betting outside Nevada and Oregon, which runs a lottery based on the results of professional football games, as well as various racketeering statutes. But none of these laws specifically deals with the Internet, and the Justice Department has taken the position that the laws must be rewritten before action can be taken against Internet gambling operations.
States challenge site operators
Some states, notably Missouri, Minnesota and Wisconsin, have interpreted their anti-gambling statutes — as well as consumer-protection and anti-fraud laws — as prohibiting Internet play. Attorneys General Jay Nixon of Missouri, Hubert Humphrey III of Minnesota and James Doyle of Wisconsin have vowed to aggressively pursue companies that bring gambling to their states and have individually sued a handful of Internet casino operators and an online lottery run by the Coeur d’Alene Indian tribe of Idaho.
“This kind of activity is clearly illegal, and we’re not going to put up with it in our state,” Nixon said. “Extradition is clearly an option.”
Some states also are targeting bettors. Pending legislation in several states, including California and Connecticut, would make it a crime to use the Internet to participate in forms of gambling that are otherwise illegal in the states.