MIKE WENDLAND: Oddsmakers watching vote on Web gaming

June 4, 2004

BY MIKE WENDLAND
FREE PRESS COLUMNIST

Forget porn. The hottest action online these days is gambling, with an estimated 1,800 Web casinos and gaming sites offering the promise of easy money -- and all the action of Las Vegas or Churchill Downs -- right from a personal computer.

With Congress about to vote on a federal law that would halt the practice, more sites keep going online, trying to lure new customers with things like discounts, bonus bucks, easy credit card betting and even free satellite TV systems. The latest draw is this weekend's Belmont Stakes, with online sites offering wagers on whether Funny Cide will take the Triple Crown.

It's all part of one of the Net's thorniest and most lucrative issues, involving racetracks and brick-and-mortar casinos that also want in on the Internet action, lobbyists, gambling critics, religious groups and online gaming fans who routinely break the law to place their bets.

In Michigan, as in most states, it is illegal to place a bet through an online site.

The U.S. Department of Justice says it has "great concern" about online gambling, arguing that minors are doing it, that organized crime has a hand in it and that unregulated overseas sites are stacking the odds in the favor of the house.

But the warnings don't stop many people.

An estimated 1 million Americans place bets online daily, enough to make Internet gambling an estimated $6-billion annual industry by the end of the year, according to the Interactive Gaming Council, a trade group of some 70 online gambling businesses. The Pew Internet and American Life Project estimates that 4.5 million Americans have tried it -- nearly 5 percent of the online population.

Residents of 12 states -- including California, Ohio, Kentucky and New York, the site of Saturday's Belmont -- can legally bet on horse races online through TVG (www.tvgnetwork.com), a service owned by Gemstar-TV Guide International Inc. that has an exclusive contract with the National Thoroughbred Racing Association.

A 41-year-old federal law bars gambling businesses that use telephones or any "wire communication facility" to wager across state lines. The Justice Department interprets that to include the Internet, though officials concede case law hasn't been firmly established. That's why the FBI and Justice Department are pushing for a new law specifically outlawing Net gambling.

Because the betting is done privately, on personal computers in homes, college dorms and office cubicles, it is difficult for states to prosecute.

Michigan Attorney General Mike Cox says it's hard to make a case against an online gambler, and even harder to charge the online casino operators -- who invariably are based overseas.

"They operate just beyond the reach of most law enforcement while comfortably watching the cash roll in," said Cox. "It's going to take a more concerted effort by state and federal officials, along with greater resources, if we are effectively going to crack down on these sites."

Still, some states are trying. In Tallahassee, Fla., Adrian McPherson, the 20-year-old former starting quarterback of the Florida State Seminoles, is scheduled to go on trial today, charged with betting on sporting events -- including his own team's games -- through SBG Global, a Costa Rica-based online casino.

The trial, slated for live coverage on Court TV, is focusing new attention on foreign-owned casinos -- typically based in the Caribbean, South America or the Far East -- that flout U.S. laws.

SBG Global makes clear that it isn't concerned about those laws, assuring its customers that it is foreign-owned "and as such does not report any client information to any governmental agencies."

The company has refused to provide any information to Florida officials prosecuting McPherson.

With so much money on the virtual tables, big U.S. gambling interests are also hungrily eyeing online gambling. Some are already testing the waters. The MGM Mirage Corp., which runs the MGM Grand casino in Detroit, runs an online casino from the Isle of Man in the Irish Sea offering Vegas-style games like blackjack, craps, roulette, slot machines and video poker.

The site rejects credit cards issued to people in the United States and other jurisdictions where online gambling is illegal, but serves as a test site for the company that could quickly be expanded if -- as many expect -- online gambling is eventually made legal.

Gambling sites typically require a minimum deposit of $100, which most allow to be charged to a credit card. Visa, MasterCard and American Express generally refuse to process gambling transactions, but many online casinos get around that by billing the charges under different classifications. Industry estimates are that about 50 percent of credit card gambling charges are rejected by the credit card companies.

Congress has been wrestling with online gambling for years.

Rep. John Conyers, D-Detroit, the ranking member of the House Judiciary Committee, says a federal law prohibiting online gambling will make the U.S. like "totalitarian regimes who limit their citizens' access to the Internet."