Online sites not
ready to accept ban

Oct 17, 2006 5:52 AM

With little fanfare, President Bush last Friday signed into law a ban on online wagering, which sent some Internet gaming operators for cover while others vowed it would be business as usual.

"Today is a dark day for the great American game of poker," said Michael Bolcerek, president of the Poker Players Alliance, a grassroots advocacy organization of more than 110,000 poker enthusiasts. "Twenty-three million Americans who play the game online will effectively be denied the ability to enjoy this popular form of entertainment, even in the privacy of their own homes."

Despite the doomsday warning, some of the biggest online poker sites as well as off-shore sports books have decided to remain plugged into U.S. players, at least until the legislation’s impact could be assessed.

The legislation — which makes it illegal to transmit funds via credit cards and other means for the purpose of Internet gambling — contains specific exemptions for Internet wagers on horse racing, state lotteries and fantasy sports.

Some of the online gaming operators to announce their early withdrawal from the lucrative American market include Britain’s Leisure & Gaming, Sportingbet, 888 and poker giant PartyGaming, which operates the world’s largest online poker site, PartyPoker.

Also, payment processor FireOne joined the list of companies fleeing the United States market, although Britain-based Neteller announced it would continue to process money transfers from the U.S.

Of the operators electing to remain plugged in, PokerStars, the world’s second-biggest Internet poker firm, said that the U.S. ban on online gaming would not apply to poker, as it is a game of skill, and its business would continue as usual.

"These provisions do not alter the U.S. legal situation with respect to online poker," privately-owned PokerStars said in a statement. "Our business continues as before, open to players worldwide including the U.S. You may play on our site as you did prior to the act."

PokerStars is registered in Costa Rica and processes payments through subsidiaries in the Isle of Man and Cyprus.

Despite the possible loss of online gaming choices, many industry experts say that the U.S. can’t shut down online gambling completely. "Trying to stop Internet gambling is akin to trying to hold a wave on the sand and stop the ocean from sending any more," said Alan Feldman, spokesman for Las Vegas-based casino giant MGM Mirage.

Unlike the online gambling companies whose shares took a hit, the vast majority of online wagering sites are not run by public companies. Frank Fahrenkopf, president of the American Gaming Association, the industry’s Washington-based trade and lobbying group, says there are somewhere between 2,500 and 3,000 offshore Internet sites taking wagers from Americans, and only 100 of them are run by public corporations listed on European exchanges.

Many of these online gambling sites don’t deal directly with U.S. consumers, but instead work through online intermediaries like Neteller, which transfers money from bank accounts to online businesses for a fee.

For example, when a U.S. gambler sets up an account, the money is first sent to Neteller, which in turn deals with the gambling site. Even if the new law cracks down on some existing intermediaries, others may surface, raising questions about how well the law can be enforced.

Fahrenkopf said there may be a temporary halt in online gambling activity but he adds that "new companies will pop up. The money will find its way there." The U.S. trade group says regulating Internet gambling may be "a more viable option" than a complete ban.

Most gamblers, however, are skeptical that the measure would stop them. Brad Sachse, a 21-year-old senior at the University of Northern Colorado in Greeley, Colo., says he plans to keep playing online poker by using third-party payment sites like Neteller. "I am pretty sure you can get around it," says Sachse, who says he makes between $5,000 to $10,000 a month through sites like Pokerstars.com. "I do this for a living so this definitely affects my life a lot."

Others said they plan to keep playing, albeit more cautiously. Worried that the site might shut down before she collected on all her winnings, Avani Doshi, a 23-year-old who works at a large bank in New York City, says she has started cashing out immediately when she bets on NFL and college football games on Bodog.com. "It is a pain not to be able to leave more money in the account, but it is better than seeing that it is gone," says Doshi.