Net betting: 1 step forward, 2 back

Aug 7, 2001 5:56 AM

Amidst high-tech talk of global positioning systems and thumbprint-reading mice, Nevada is inching toward Internet gaming. But a federal court conviction shows just how far away cyber casinos may be.

Two days of local hearings fueled more interest in online betting last week as experts discussed Net wagering ”” a $3 billion business worldwide that remains illegal in this country. Nevada, with passage of an interactive casino law this year, is looking to push that legal envelope.

“I came away with the fact that the cost of technology may be less than expected,’’ Gaming Control Board member Scott Scherer told GamingToday.

Technology is crucial if Nevada casinos expect to go online, experts say. To verify that players are of legal age, computers would be equipped with devices that positively identify thumbprints. To assure that players are betting from jurisdictions that permit gambling, GPS devices similar to those found in cars would be issued.

Once the stuff of sci-fi novels, such computer gadgetry is increasingly common ”” and affordable. Vendors say a thumbprint-reading mouse, for example, sells for about $50.

“It’s going to happen,’’ Tony Cabot said of online casinos. “It’s just a matter of time.’’

Emboldened by potential cyber profits, MGM Mirage has applied for an online license from the United Kingdom, where Net-based gaming is well under way. Park Place Entertainment is said to be following suit.

But Nevada regulators say companies must tread carefully. “This is something that is monitored. We have agents who try to place wagers at these (foreign) sites and sometimes they succeed,’’ Scherer said. “If (companies) step out of line, we have traditionally taken a dim view of that.’’

Park Place CEO Tom Gallagher has cautioned that he sees “significant downsides” to Internet gaming. And most industry observers agree it is manufacturers and vendors ”” not casinos ”” who are pushing hardest to open online opportunities.

For now, state officials say they are in no rush. Their next step will be to form subcommittees to explore the multiple and complex technical and legal issues. There are also plans to hire a Washington, D.C. law firm to furnish advice and strategy relating to federal laws covering credit and interstate commerce.

Sighs one industry observer: “It’s a can of worms.’’

Online betting took a hit last week when a federal appeals court upheld the conviction of a San Francisco man who operated a sports betting site on the Internet. The 2nd Circuit Court of Appeals ruled that Jay Cohen had engaged in illegal gambling.

Cohen, 34, contended that he did not break the law because his business was based in Antigua, where betting is legal. They also argued that New York, where many of the customers lived, allows certain types of wagering, such as off-track betting.

But the court rejected the arguments, saying betting was clearly illegal in New York, where Cohen operated.

Cohen was sentenced a year ago to one year and nine months in prison. The conviction came in the first use of the U.S. Wire Wager Act to shut down an Internet gambling operation.

Mark M. Baker, a lawyer for Cohen, said he would appeal. “There are about 800 web sites out there right now doing exactly the same thing as the World Sports Exchange and it doesn’t look like any of them are being criminally prosecuted,’’ Baker told the Associated Press.

Cabot, with the law firm of Lionel Sawyer & Collins, added that Cohen’s conviction doesn’t hurt casinos. “That was for sports betting, which is specifically prohibited by the wire act,’’ he explained. “There hasn’t even been a prosecution involving casino betting.’’

Cabot also downplayed critics’ concerns that cyberbetting would not be 100 percent secure. “No process is 100 percent, but billions of dollars in transactions are done online every year. Obviously, the banks and everyone else have determined that it’s an acceptable risk,’’ he told GamingToday.

Meantime, Bob Faiss, also with Lionel Sawyer, notes that Nevada’s Internet initiative is playing to a “world audience.’’