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Online gambling takes a big hit
By Lou Christopher
achris25@mscd.edu

Photo by Jason Small • jsmall4@mscd.edu Funding for online gambling sites has become harder to accomplish after Congress passed the Unlawful Internet Gambling Enforcement Act on Oct. 13, 2006. There are ways around the system, however, as online gambling continues in America.

Online poker gambling took a major hit from the U.S. government when arrests and subpoenas were made by the Department of Justice in connection with the funding of offshore gambling sites.

On Jan. 15, the United States arrested Stephen Lawrence and John Lefebvre, two founders of the popular Internet payment services company Neteller. The company’s merchant base accounted for more than 80 percent of worldwide gaming merchants, according to Neteller’s 2005 annual report, with a net profit of $91.5 million.

The two have been charged with conspiring to transfer funds with the intent to promote illegal gambling and, if convicted, face a maximum sentence of 20 years imprisonment, according to a Justice Department news release.

“A significant portion of (Internet gambling) is the illegal handling of Americans’ bets with offshore gaming companies, which amounts to a colossal criminal enterprise masquerading as legitimate business,” the assistant director-in-charge of the New York office of the FBI, Mark Mershon, said in the Justice Department news release.

“The FBI is adamant about shutting off the flow of illegal cash,” Mershon said.

According to Neteller, aside from substantial stock holdings, neither Lawrence nor Lefebvre hold positions with the company any longer, though both held senior management positions in the past.

Sixteen banks in London involved with online poker sites were subpoenaed to turn over information concerning the gambling sites. Most gambling sites are traded on the London Stock Exchange and are backed by London-based banks.

The U.S. District Court for the Southern District of New York issued both the arrests and the subpoenas. The prosecution is part of the Department of Justice’s effort to combat unlawful Internet gambling through, among other things, the implementation of the federal anti-money-laundering statutes, according to the department’s news release.

The Department of Justice’s efforts come months after the Unlawful Internet Gambling Enforcement Act was passed by Congress, and some think for naught.

“Legislation aimed at prohibiting you from funding your online poker accounts passed the U.S. House this summer, then was quietly slipped into a port security bill, literally in the dark of night, which was signed into law on Oct. 13,” said Michael Bolcerek, president of the Poker Players Alliance, in a letter sent to the poker community about the act.

Bolcerek argues that because poker is a skill-intensive game, it should not be categorized in the same way as sports betting. He has been lobbying in Washington, D.C., to make sure legislators know the difference and that regulation, not prohibition, is the answer.

“It is my opinion that online poker will remain relatively un-phased by the recent government crackdown,” said Shawn Green, a poker analyst for Card Player Magazine.

“Neteller indeed should have been a big hit to the industry, but it appears to have not taken much of a toll at all, given the recent attendance numbers at the sites.”

Online gambling sites still accept deposits and have many ways for Americans to transfer their money to their site of choice. EPassporte is a payment processing and funds transfer service that creates a virtual Visa card that customers use to put money into their online gambling accounts. The gambling sites will also take money from normal Visa, Mastercard and Western Union, and some will even allow customers to mail them a check. EPassporte can also be used to withdraw money from the sites.