The passage of an Internet gambling bill jolted investors and wiped out billions of dollars in market value from the industry Monday as several firms said they would stop taking bets from U.S. residents if President Bush signs the measure into law.
Many gamblers, however, were not fazed, saying they would continue to bet online even with tighter restrictions. And experts say privately held companies will find a way to take their wagers.
“They’re going to be in for a big battle because the offshore sports books and poker sites that are not publicly traded are not caving in,” said Ken Weitzner, founder of Eye on Gambling, which tracks the online gambling industry.
Congress sent shock waves through the multibillion-dollar online gambling industry after passing a bill Saturday that prohibits U.S. banks and credit-card companies from processing transactions for gambling websites.
Bush is expected to sign the bill into law within days, making it the first federal legislation to specifically target online gambling.
Companies that saw their shares plummet Monday included PartyGaming, operator of the world’s largest poker website, PartyPoker.com.
The Gibraltar-based company said Monday that the new legislation “will make it practically impossible to provide U.S. residents with access to its real-money poker and other real-money gaming sites.”
PartyGaming, whose share price fell 58 percent, said it will stop taking bets from U.S. residents indefinitely if Bush signs the measure. Online casino company 888 Holdings also said it would suspend U.S. wagers.
London-based BetOnSports .com stopped accepting bets from U.S. gamblers after its chief executive was arrested this summer and charged with racketeering and fraud.
Following through
Experts say the law would
be tough to enforce, and online gamblers are already devising ways around it.
Lawmakers hailed the passage of the Unlawful Internet Gambling Enforcement Act of 2006 as a breakthrough in the government’s fight against online gambling. The $12 billion industry has proliferated in the U.S. despite the country’s long-standing stance that the activity is illegal.
There are as many as 2,300 gambling websites, and the industry generates about half its revenue from U.S. residents, officials say.
“It is extraordinary how many American families have been touched by large losses from Internet gambling,” said Rep. Jim Leach, R-Iowa, who helped draft the legislation.
“If Congress had not acted,” he added, “gamblers would soon be able to place bets not just from home computers but from their cellphones while they drive home from work or their BlackBerries as they wait in line at the movies.”
The legislation calls for fines and potential prison time for those involved in processing credit-card payments and wire transfers for online gambling. Bettors wouldn’t be penalized.
Some experts say it will be difficult for the U.S. to enforce the law.
Gambling operators “usually mask where the transaction takes place between the gambler and the sports book,” said online gambling expert Weitzner. “In other words, if you wire money to a sports book, it’s not going to say World Sports Exchange. It might say John Smith, Wells Fargo Bank.”
Further, while the new legislation would require banks and credit-card companies to monitor credit- and debit-card transactions, it wouldn’t require banks to track check payments.
“There are 40 billion checks processed every year,” said Laura Fisher, a spokeswoman for the American Bankers Association. “To track those payments, it would mean (having a) staff manually checking each check. That would be very difficult, if not impossible.”
On Monday, gamblers discussed how to get around the new law, which included setting up bank accounts in Canada.
Holyoke resident Greg Ward, who said he bets on sports and plays various casino games online, said there are too many sites available to keep him from gambling on the Internet.
“They’ve got a bigger problem with drugs and the other crimes in the world,” Ward said Monday while placing pari-mutuel bets at Red & Jerry’s off-track betting parlor south of Denver. “They should leave (online gambling) alone.”
Parker resident David Ermish said the government is making a mistake by trying to crack down on Internet gambling.
“They should regulate and tax it,” said Ermish, who said he places sports bets online.
If anything, the new law may curb the number of gambling companies that are publicly traded and regulated overseas, said gambling expert I. Nelson Rose, a professor at Whittier School of Law in California.
It may “eliminate the largest and licensed sites from taking bets from the U.S. so Americans will be left with the more dangerous and less reputable sites,” Rose said.
Staff writer Andy Vuong can be reached at 303-954-1209 or avuong@denverpost.com.
