BY YARDENA ARAR
c.1995 Los Angeles Daily News
LOS ANGELES - Ladies and gentlemen, place your virtual bets. Gambling
has come to the Internet.
Despite questions over legal and security issues, at least one World
Wide Web site is taking wagers on sporting events and others are
preparing to offer casino-style play on line - for real money, at
least overseas.
``Gambling is going to be the killer (application) of the Internet,''
said David Herschman, president of Virtual Vegas Inc. and its Venice,
Calif.-based parent, Electromedia Productions.
Virtual Vegas' Web site ([3]http://www.virtualvegas.com ) offers
blackjack and other casino games. Only funny money is at stake,
however. Virtual Vegas expects to make money by selling companion
CD-ROMs that allow users to interact on the Web site in a Las
Vegas-like atmosphere.
A ``Virtual Vegas'' CD-ROM is already out, and a ``Miss Metaverse''
disc, which will allow users to create and exchange beauty pageant
contestants, is due for release this week. Next year's slate will
include ``Assault Poker,'' which will use 3-D technology in a game
that sounds like a cross between ``Doom'' and seven-card stud, and
``Net Casino,'' which will allow users to interact in a casinolike
environment.
Herschman is by no means ruling out real-money gambling on his site.
But the bucks will be bogus until regulatory issues are resolved.
``We don't want to spend a dime on legal fees,'' Herschman said.
However, Michael Simone, the president and CEO of Sports International
(USA) Ltd., insists there are no legal problems with the estimated $60
million in telephone and on-line sports wagers that the
Philadelphia-based holding company's 3-year-old offshore operation,
Sports International Ltd. of Antigua, expects to rack up by the end of
the year.
``If you talk to the Justice Department, they say that you may -
underline may - be breaking the law,'' Simone said. ``Our position is
that you are conducting business with a legitimately licensed foreign
entity. The laws on the books were meant to convict illegal bookmakers
in the United States.''
Whittier Law College Professor I. Nelson Rose, who writes a syndicated
column called ``Gambling and the Law,'' said the principal federal
barrier to on-line gambling is the Interstate Wire Act, which
prohibits ``anyone in the business of gambling to use a telephone line
which crosses a state or national boundary to transmit information
assisting in the placing of bets.''
Rose said the so-called ``anti-bookie'' law does not apply to the
bettor, only to the person accepting the bet. But federal authorities
maintain that the Interstate Wire Act does make gambling on the
Internet illegal, said Department of Justice spokesman John Russell.
``The laws are on the books,'' he said. ``They just haven't been
enforced in years.''
Russell added that at the request of the attorney general, the Justice
Department and the Department of the Interior are working on a study
dealing with on-line gambling, including games conducted over the
phone from Indian reservations.
Whether authorities consider its principal business legal or not,
Sports International is a publicly held company that reported earnings
of $236,000 last year on wagers totaling $48 million, of which the
company's take was $2.4 million.
To place a bet with SI's International Sports Book on the World Wide
Web ([4]http://www.intersphere.com/bet ), a user must open an account
by sending a minimum of $50 to the company's Antigua offices, along
with an application obtainable on line. Money orders are preferred;
checks are allowed, but will take 30 days to clear.
Winnings are paid by cashier's checks sent by mail. ``We had one guy
win $20,000 on the pennant race,'' Simone said.
Right now, the Internet operation permits bets only for a limited
number of events in the future, including next year's NBA
championships. Simone says his company is developing the capability
for a full slate of day-to-day sporting events.
To date, only a small portion of the bets placed with SI have come
from the ``couple of thousand'' customers who have created accounts on
the Web site since it opened six months ago. But Simone anticipates a
time when on-line bets will far surpass the telephone business.
``In order for us to be as big as the company wants to be, we couldn't
physically do it with live phone operators,'' Simone said. ``The only
way for us to do it is with computers.''
Another approach to on-line sports betting is envisioned by WagerNet,
a site to be operated by Global Gaming Services Ltd. of Belize, a
subsidiary of International Sports Match Exchange, a Cayman Islands
firm.
As with Sports International, WagerNet bettors will have to create
accounts by sending money - a minimum of $1,000 in this case - to the
operation's Caribbean address. But WagerNet will not make the odds;
rather, it will try to match up bettors, collecting a flat 2.5 percent
transaction fee from both parties.
``It is truly the players that will move the line and not the
bookmakers,'' said Kerry Rogers, a Las Vegas entrepreneur who created
WagerNet and has since sold it to International Sports Match Exchange.
His involvement is now limited to the technical side through
Digitainment Corp., a Web content creator.
WagerNet will use so-called ``smart cards'' - credit cardlike devices
with embedded computer chips - to track transactions and keep them
secure. Users will be charged $100 for a start-up kit that will
include software and a card reader that can be plugged into a serial
port.
So far, 4,000 people have expressed interest in WagerNet at a
promotional site operated by Digitainment
([5]http://www.vegas.com/wagernet ). Rogers hopes the site will be
open in time for the Super Bowl.
International Sports Match Exchange officials, meanwhile, urged
members of the North American Game Regulators Association meeting in
October in Hartford, Conn., to create a committee that would establish
standards and policies for the regulation of on-line gaming.
Other entrepreneurs also are gearing up for real-money gambling.
Warren Eugene of Toronto, the self-styled ``Bugsy Siegel of the
Internet,'' operates Internet Casinos ([6]http://www.casino.org ) out
of several Caribbean Islands.
Las Vegas-based World Wide Web Casinos Inc.
([7]http://www.netcasino.com ) will work with real casinos in
countries where gambling is legal to set up on-line operations as soon
as its 30-digit encryption technology is perfected.
``There's a worldwide market out there, exclusive of the U.S.,'' said
World Wide Web Casino's Peter Michaels.
But some observers question whether these operations ever will produce
big payoffs.
``I think it's a fantasy that's never going to happen,'' said Bruce
Turner, gaming-industry analyst for the New York brokerage Salomon
Brothers. Americans are willing to allow gambling only in highly
controlled situations that are impossible on the Internet, he said.
Lee Isgur, gaming and interactive entertainment analyst in the San
Francisco office of New York-based Jeffries & Co., said that until
regulatory issues are resolved, on-line gambling would not be a
legitimate business.
``Most of it's pretty flaky right now because basically it's
illegal,'' he said.
The major Las Vegas casinos have not looked into on-line franchises.
``We're just kind of watching to see what happens,'' said Howard
Stutz, assistant director of public relations for Bally's Las Vegas.
``We have to take our cue from what Nevada gaming regulators say.''
Anthony Curtis, publisher of the monthly Las Vegas Advisor newsletter,
says there are several reasons why on-line gaming will never rival the
real thing.
``I think people like the activity itself,'' Curtis said. ``They like
to have the cards in their hands, they like to handle the chips and
the money. They even like to hear the sound of coins dropping in the
trays.''
Curtis also wonders whether people who play games of chance will trust
on-line casinos, especially when they lose.
``Regardless of what they hear or what they're told, they're going to
think that somebody manipulated the results,'' he said. ``Sports
betting has a chance, but I don't think it's going to fly for casino
games where they can't see the event taking place in front of their
eyes.''
NYT-11-16-95 1006EST
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