High Stakes Showdown: Internet Gambling Debate Rages on Capitol Hill

D'Amato, an avid poker player who held weekly games in the Senate, sometimes while waiting for bills to come to the floor, said peer-to-peer gambling, as opposed to sports betting, does not violate any existing federal laws prohibiting forms of wagering. For example, he said, the Interstate Wire Act of 1961 is expressly aimed at outlawing bets on sporting events.

Sports betting operations and online poker sites have been able to operate in offshore locales such as Costa Rica or the Isle of Man, a U.K. territory. The latter is home to PokerStars.net, which, according to Forbes magazine, earns an estimated $500 million in profits annually. Also among the most popular online poker sites are Full Tilt, Absolute Poker and Doyle's Room. Fuelled by the explosion in popularity of Texas Hold 'Em and televised events such as the "World Series of Poker," online poker has become a booming industry over the past decade.

By some estimates anywhere from 3 million to 15 million Americans play poker online for money

The new law about take effect June 1 should effectively cripple the online poker industry by making it exceedingly difficult for individuals to use their credit cards to participate in these games, Rep. Bachus said.

But PPA director John Pappas insisted that the official June 1 compliance date, known in some circles of the online poker world as "D-Day," will have little impact on the industry, regardless of whether online poker gets the exemption the PPA is seeking.

That's because many financial institutions have already begun to block online poker transactions before the law formally takes effect, in turn prompting many players to get credit cards from overseas. In other words, gaming enthusiasts have already figured out how to game the restrictions.

Moreover, the new law doesn't specifically ban banks from transacting with online poker sites; rather, it merely requires the banks to take proper steps to make sure that they do not facilitate any illegal gambling transactions.

"There is what amounts to a safe harbor already embedded in the law, so that any bank that does want to transact with an online poker business simply needs a reasoned legal opinion that it their client is not involved in restricted transactions," Pappas said.

Legal Gray Area

And since the Wire Act, which predated the Internet era, doesn't expressly ban online poker, creating what legally amounts to a whole lot of grey areas, such opinions will not be hard to find.

Professor I. Nelson Rose, who runs a consulting business and website called GamblingandTheLaw.com, said he has already issued several such opinions on behalf of financial institutions seeking such safe harbor clarifications. Rose said he thinks the UIGEA is a silly waste of the government's time and resources.

"Online gaming will continue to flourish long after this new law takes effect," he said. "All it really does is create a new due-diligence standard and establishes safe harbors, so if anything it will encourage more online gambling operations." Proper regulation is the key to preventing fraud and abuse, not outright prohibition, Rose said.

Several forms of online gambling are currently legal in the U.S., including state lotteries and Native American tribal activities, which are governed by the Indian Gaming Regulatory Act. Two dozen or so states allow for "advanced deposit wagering" for online betting on horse races as well as dog races and jai alai, according to Rose.

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