Betting on IT

Former Attorney General Robert Kennedy probably didn’t expect his mid-20th-century war on crime to trigger an international trade war in the 21st century — but it has. Spawned by Kennedy’s war on crime, the 1961 Interstate Wire Act, which outlaws betting over interstate phone lines, is now being used to battle online gambling even from sites hosted outside the United States. Much to the consternation of countries seeking to develop their online gambling industries, U.S. authorities recently jailed Jay Cohen, cofounder of Antigua’s World Sports Exchange (wsex.com), one of the largest online sports books in the world.

More restrictions are moving through the U.S. Congress. Republican Sen. Jon Kyl of Arizona, who has called online casinos the "crack cocaine of gambling," and fellow Republican Rep. Jim Leach of Iowa have authored an Unlawful Internet Gambling Funding Prohibition Act that would deputize financial institutions to serve as Internet police, requiring credit giants like VISA and Mastercard to monitor credit card transactions and stop online bets.

But Kyl and Leach’s legislation is unlikely to stop online gambling, now valued at some $5 billion per year, because technology is far ahead of Congress. Businesses like FirePay (firepay.com) let anyone with an e-mail account send and receive online cash payments, and PrePaidATM (www.prepaidatm.com) provides instant cash transfers. Punters — and probably money launderers — are being pushed from credit card transactions, which can be regulated, to these less traceable options.

Still, new U.S. laws could damage the economies of gambling nations. Antigua and Barbuda, home to just 68,000 people, has already lost 64 Internet casinos worth 3,000 jobs and $6.4 million in licensing revenue. Antigua recently asked the World Trade Organization (WTO) to weigh in on this controversial arena of Web politics, citing the United States’ "failure to meet its [General Agreement on Tariffs and Services] commitments," according to Ronald Saunders, Antigua’s high commissioner to London.

Antigua is placing a sizable wager at the WTO table. The outcome is likely to reshape the Internet gambling business and its roughly 2,200 online casinos and may help determine whether or not the WTO has enough teeth to overturn U.S. domestic legislation. In fact, U.S. moves toward prohibition seem likely to open a new front in the trans-Atlantic trade wars: The United Kingdom is preparing to become an online wagering center by year’s end, joining 66 other nations, including 26 in Europe, that currently license Internet wagering. The smart money is on Internet gambling becoming the beef and bananas of the 21st century.