Neteller resolution may affect online gambling industry

SAN FRANCISCO -- Payday has finally come for hundreds of thousands of U.S. customers whose money has been tied up for months in a beleaguered Internet money-transfer service popular among gamblers.

Under a deal reached with the U.S. Attorney's office in Manhattan last month, Neteller has begun to allow consumers access to their accounts following a months-long federal investigation.

So far, $70 million has been withdrawn.

The resolution of the longstanding case — watched closely in the gaming industry — could have far-reaching implications for consumers and law-enforcement officials trying to muzzle online gambling, which is illegal.

For U.S. customers, it's been a frenzied period for cashing out. Many, including Mark Kundinger, withdrew money — in his case, $4,900 — the first day. "When I got my money back, it felt as if I had won the jackpot in a weird way," says Kundinger, 32, of California.

Some 250,000 accounts with positive balances had been frozen since January, when Neteller halted operations in the USA after authorities arrested its Canadian founders, charging them with handling billions of dollars in illegal gambling proceeds. About two-thirds of Neteller's business came from the USA.

The company still does business in 160 countries. It's considering re-entering the U.S. market in non-gaming areas, Neteller spokesman Andrew Gilchrist says. During the federal probe of Neteller, FBI agent Neil Donovan said, funds were held in court as potential evidence.

The investigation is a big part of a nationwide crackdown against online gambling. A law signed by President Bush in October bans the use of credit cards, checks and electronic fund transfers for Internet gaming. Still, U.S. residents place more than half of all bets to major offshore casinos in an estimated $16.3 billion industry. However, most online gaming sites are based offshore, outside the reach of American law enforcement.