Arrest Tests Legality Of Online Gaming Rules

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July 19, 2006 (5:51 PM EDT)

By W. David Gardner , TechWeb Technology News

While the U.S. government's attempted crackdown on the multibillion-dollar online gaming industry has resulted in the arrest of one industry kingpin this week, a leading expert in online gambling said the crackdown not only won't work, but it likely isn't even legal.

And, almost on cue, a new online poker site " Absolute Poker's AP Lady -- was launched Wednesday from Costa Rica aimed largely at an audience of U.S. women.

"It's just wrong," said former New Jersey gaming regulator Frank Catania of the U.S. Department of Justice's campaign to stop U.S. citizens from gambling online. "We're becoming the gambling police for the entire world and it just won't work." Catania, a former assistant attorney general and director of the New Jersey Division of Gaming Enforcement, believes online gaming can't be effectively stopped because there are so many sites, at least 70 of them according to a recent count.

The latest online gaming brouhaha flared up earlier this week when federal law enforcement authorities arrested chief executive of BetOnSports David Carruthers in Dallas as he was changing planes. He was traveling from his office in the U.K. to Costa Rica where his online gambling business is based. Carruthers and a few other BetonSports employees are scheduled to attend a detention hearing Friday in St. Louis.

The arrests caused BetOnSports, one of the largest online gaming operations, to be shut down while its officers decide what action, if any, to take.

U.S. prosecutors cited the Federal Wire Act of 1961 in their arrest of Carruthers. The DOJ is using the act to go after operators of Internet sports books and casinos. However, Catania and others maintain that the 1961 legislation regulates only gambling over telephone and telegraph -- not the Internet. In addition, he has maintained that the 1961 federal law applies only to sports wagering and casino-style betting. Catania favors regulating the online gaming industry in a way that he says would protect U.S. citizens. For instance, U.S.-based gaming sites could be required to register with the government.

While the online gambling universe squabbles over the older legislation, some current lawmakers are hailing the arrest of Carruthers and the indictments leveled against BetOnSports.

"We're very pleased that the Justice Department is taking action here with the laws they have available," Rep. Robert Goodlatte, R-Vir., told Reuters. "We join with them in trying to make it clear that the law covers all forms of gambling." Anti-online gambling legislation has been approved in the House, and Sen. Jon Kyl, R-Ariz, is attempting to push similar legislation.

Meanwhile, Absolute Poker said in an announcement Wednesday that its poker site will help women who are interested in online poker.

"Poker is popular with women because it can be very social and it's also a thinking game," Lacey Jones, an Absolute Poker professional, wrote in the statement. The firm said a Harris Interactive poll found that 56 percent of men and 53 percent of women agreed that men are better poker players than women.