10 October 2006


    October 9th, 2006

    AMERICANS STILL FREE TO GAMBLE ONLINE – Congress passes a ban that targets payment mechanisms, but fails to protect the players.

    Rick Smith, Executive Director, executive.director@igcouncil.org | Phone: 1-604-732-3833
    Keith Furlong, Deputy Director, keith@cataniaconsulting.com | Mobile: 1-732-687-0880

    9 October 2006 – After a decade of false starts, anti-gambling forces in the U.S. Congress have finally succeeded in passing a specific ban on Internet gambling. Literally in the dark of night, without debate and far from public scrutiny, Republican leaders in Congress added an Internet gambling prohibition bill to completely unrelated, but important, legislation on port security. Without even reading the tacked-on provisions, legislators passed the entire measure before adjourning Saturday, Sept. 30, for their election recess.

    But it is important to note, the Interactive Gaming Council says, that individual American players are still free to gamble online. The prohibition bill does not make it a crime for the individual participant. The focus of the bill is on the financial transaction – the transmission of money from the player to the operator of the gambling site.

    American players, who are believed to account for half of all online gambling activity, can continue to play without fear of federal prosecution. However, some of their favorite sites may no longer accept their wagers, as many of the publicly traded online gambling companies announced that they would stop taking American bets following the recent action of Congress.

    “This bill doesn’t do anything to protect American consumers who choose to enjoy Internet poker and other games,” said Keith Furlong, deputy director of the IGC. “But the immediate effect is to drive the industry further underground. Gambling sites will devise new methods for getting money from / to a market where players have shown a resilient demand for this type of entertainment. The sad thing is, however, that many of the largest and most responsible companies, some of whom are major public companies listed on the London Stock Exchange, are being forced to stop providing real-money games.

    “This will prove to be a classic case of unintended consequences. In the guise of protecting vulnerable Americans – minors who want to gamble and adults who can’t control their gambling – Congress has actually heightened the risk to these groups. It has driven away the operators who followed the most socially responsible practices. It has also increased the possibility of online gambling being used for money laundering, because it has outlawed the most easily tracked methods of payment.”

    “With few exceptions, U.S. states have demonstrated over many years that they can successfully regulate the bricks-and-mortar gambling industry,” added Rick Smith, executive director of the IGC. “That industry employs thousands of people and generates millions of dollars in tax revenue. The same principles could have been followed in the Internet gambling industry. With licensing and rigorous regulation of online gambling sites, rather than futile attempts at prohibition, governments can ensure that games are fair, operators are honest and solvent and vulnerable players are protected. And the governments could have reaped millions in taxes.”

    The IGC recognizes that the Internet provides unique challenges to the regulation of any activity, including simple retail transactions. But Congress demonstrated no interest in even studying such issues. In fact it specifically rejected attempts to include provisions to study the possibility of regulation. Political motives, including presidential aspirations, clearly drove its rush to pass a prohibition bill, as its members left Washington to hit the campaign trail.

    “This was a sneaky election ploy,” Furlong said. “It’s no coincidence that a ban on Internet gambling is part of the ‘family values’ platform of the extreme right, which wants to distract voters from real problems, such as the war in Iraq, and at the same time impose its moral agenda on Americans, depriving them of their freedom of choice.”

    The prohibition bill, the Unlawful Internet Gambling Enforcement Act of 2006, was criticized in an Oct. 4 editorial by the Seattle Post-Intelligencer. The newspaper quoted from a statement by Rep. Jim Leach, the Iowa Republican who was the bill’s main sponsor: “Gambling from your bedroom or living room or dormitory is not a socially useful activity.” As the editorial concluded, it’s an ominous development when the government dictates which activities in our homes or dormitories are “socially useful.”

    Senate Majority Leader Bill Frist of Tennessee, who led the weekend maneuver to pass the ban, said, “Gambling is a serious addiction that undermines the family, dashes dreams and frays the fabric of society.”

    But these moral crusaders showed their true political colors by exempting Internet wagering on horse races and lotteries from their bill. In many states, people are free to gamble online as much as they want on U.S. horse races and state lotteries. In fact, in a research report in March, an investment bank stated: “The U.S. horseracing industry now generates over 15% of its revenue from online wagers.” The horse racing lobby is simply too powerful for Congress to oppose.

    “What a contrast between the U.S., which after all went through a notoriously unsuccessful attempt to ban alcohol, and Britain, which is methodically preparing to license and regulate online gambling, starting next year,” Smith said.

    About the IGC

    Formed in 1996, the IGC is the leading trade association for the international interactive gambling industry with its membership operating or supplying services to most of the reputable interactive sites on the World Wide Web. Based in Vancouver, Canada, the IGC champions fair and honest interactive gambling environments. To help parents protect their children, IGC members are encouraged to participate in the self-labeling system of the Internet Content Rating Association. The IGC has developed a Code of Conduct for members, and a program called Helping Hand to assist problem gamblers.


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