U.S. outlaws Internet gambling

WASHINGTON — Placing bets over the Internet was effectively criminalized by the federal government Friday, as lawmakers work to eliminate an activity pursued by up to 23 million Americans who wagered an estimated $6 billion last year.

Attached to a port-security bill signed by President Bush on Friday was the Unlawful Internet Gambling Enforcement Act, which prohibits online gamblers from using credit cards, checks and electronic-fund transfers to place and settle bets.

The law leaves enforcement up to banks and other U.S. financial institutions, some of which fought the legislation.

The bill's sponsor, Rep. Robert Goodlatte, R-Va., said he opposes all gambling, citing its "ill effects on society," but particularly Internet gambling, which led him to draft the legislation. Senate Majority Leader Bill Frist, R-Tenn., attached Goodlatte's bill to the port-security bill to ensure its passage and Bush's signature.

While proponents decried the effects of gambling on society, opponents pointed to the popularity of Internet gambling and compared the new law to the Prohibition amendment of 1919, which led to the rise of illegal speakeasies and organized crime.

The new law is potentially crippling to a worldwide industry whose biggest customer has been the United States. Several online wagering businesses already have pulled out of the United States and some have collapsed, including publicly traded companies in Britain, where online betting is legal and regulated.

In the United States, the Justice Department and federal courts are unable to agree on whether Internet gambling is illegal.

The Justice Department maintains that the 1961 Wire Act, written to prohibit betting transactions via telephone, applies to the Internet.

Courts have disagreed, saying betting on sports teams over the Internet is illegal, but wagering on casino games, such as poker, is not. And though the Justice Department thinks off-track and online wagering on horse races is illegal, it has never prosecuted a case.

Internet gamblers typically set up accounts at offshore businesses, and place and settle bets using credit cards and checks that are converted in electronic currency, much as eBay users buy and sell items using PayPal.

Instead of targeting specific games, the new law seeks to block the financial transactions that fuel them.

The new law is shaking up the worldwide Internet gambling industry, with some comparing it to Congress banning the sale of Toyotas, BMWs and all other foreign vehicles in this country. Britain's Sportingbet, for example, said 62 percent of winning bets on its site came from the United States.

A major offshore e-currency company, FirePay of Britain, said it no longer will accept payments from U.S. customers. Sportingbet sold its U.S. online operations to an Antiguan company Friday for $1, five weeks after former company chairman Peter Dicks was arrested in New York when Customs officials found he was wanted in Louisiana on charges of illegal online gambling.

New York Gov. George Pataki, a Republican, refused to extradite Dicks to Louisiana and a federal judge cleared his return to England.

BetOnSports said Friday it would pull out of the United States and repay balances to customers here.