Growing Number of States Say 'No Dice' to Gambling on Internet

Gambling, one of the fastest-growing businesses in the United States, is moving into a new venue with the potential of reaching millions of people - the Internet.

By one estimate, there are some 30 gambling locations in cyberspace today - twice the number operating in January. By year's end, their number is expected to double again, and by 2000 worldwide casino gambling online could reach $8.6 billion, according to one estimate.

The use of cyberspace by casinos, Indian tribes, and lotteries is drawing the concern of antigambling advocates and state and foreign governments. Some are concerned about the proliferation of gambling - and all the social problems related to it, including wagering by children - on an unregulated medium. But others worry that the wagering in cyberspace will compete with their own legalized gambling operations, siphoning off valuable tax revenues.

The question is: how - or even should - online gambling be regulated?

Two court suits in Missouri could help define some of the parameters. In the past month, Missouri, which is partly worried about Internet competition for its riverboat casinos and lottery, has:

* Persuaded a state court to fine a Pennsylvania online gaming company for doing business within its borders.

* Sued an Idaho Indian tribe operating a lottery over the Internet. Next week, a state court will hear the case.

Washington is also taking a keen interest in the issue. Sen. Jon Kyl (R) of Arizona plans to hold hearings soon about updating federal law to cover Internet gambling. It's a sticky issue, because cyberspace operates differently than does the real world.

When a New Yorker travels to Las Vegas to gamble, it's easy to tell where the betting takes place. But by using his home computer to open an account with an online casino in, say, Idaho, it's not clear where the gambling is occurring. Which state's gambling laws apply? Who taxes the revenue?

Three decades ago, Congress addressed interstate telephone betting by making it illegal. Should the federal government do the same with online gambling? Or, as New York is considering, should it legalize and regulate the practice?

"It's a real gray area," says Sue Schneider, editor of Rolling Good Times Online, a St. Louis-based electronics magazine that covers the online gambling industry. "There isn't a state in the United States that has legislated that it is legal or illegal."

Jay Nixon, the Missouri attorney general who brought the suits here, disagrees. "Gambling is a highly regulated industry" in Missouri, he says, including background checks and loss limits. But "all of these protections are not there on the Internet." As things stand now, the online casinos allow a 10-year-old with his father's MasterCard to gamble, he says. This lack of controls makes online gambling illegal in Missouri, he argues.

IN May, Mr. Nixon persuaded a Missouri judge to impose a permanent injunction against Interactive Gaming & Communications Corp. for offering casino gambling to Missouri residents. The Blue Bell, Pa., company, which did not appear at the hearing, was ordered to refuse all applications from Missourians and return money received from them.

Nixon's next online gambling target is an Internet lottery operation sponsored by the Coeur d'Alene Indian tribe in Idaho. For nearly a decade, federal law has allowed gambling on Indian reservations, which are considered sovereign nations. The tribe argues that the online betting is taking place in Idaho, where its computers are located, not in the state where the bettors are logging in.

In 1995, Wisconsin stopped the Coeur d'Alene tribe from offering a telephone lottery there. But it hasn't yet taken action against the Internet version.

Whatever the states decide, enforcement will be difficult. All it takes to gamble online is to open an account with a credit card. The age and the location of the gambler are nearly impossible to determine.

Then there are jurisdictional issues. Can one state's laws, governing the gambler, supercede the laws of the state where the casino is located? US officials will also find it difficult to regulate the growing number of online casinos overseas.

Other countries are struggling with the same problem. Several European countries, which operate national lotteries, are pressuring Liechtenstein to close its online lottery. Australia and Canada are looking at legalizing and regulating the industry.

That's what the small but emerging online gambling industry wants - regulations that will legitimize its operations and insulate it from lawsuits, Ms. Schneider says. But cyberspace "is a place where the technology has outpaced the ability to deal with it. You have a new medium that's borderless, and it's going to take new ways of dealing with it if people are concerned about it."

But just because laws are difficult to enforce doesn't mean they shouldn't be written, says Nixon.