• BusinessWeek, Tuesday, October 3, 2006 11:30 AM

Congress has passed legislation that would make it illegal for credit-card companies and other payment providers to process online gambling transactions. Is the game up for online gambling? Supporters and opponents expect President Bush to sign the bill into law in the next several weeks, citing "family values" in the process. While other news outlets focus on what is undoubtedly bad news for the $12 billion online gambling industry (half of that revenue comes from American gamers), there are loopholes.

The American Gaming Association, for example, doesn't believe the law outlaws betting on online casino-style games like blackjack and poker; rather, the bill bars financial institutions from processing "illegal" bets, like sports betting, which is explicitly mentioned in the act. AGA President Frank Fahrenkopf says the organization doesn't believe the act eliminates U.S.-based casinos from opening online sites, either.

"This bill did not make anything legal or illegal," says Fahrenkopf. "What it did was affect the mechanism by which Internet gambling takes place. ... and there is some question as to whether or not that will be effective." In fact, a new bill before Congress aims to study whether online gambling sites run by U.S. companies could be effectively regulated. It will likely be considered next year. However, the Justice Department has claimed that all online gambling violates the Wire Act--yet it has only prosecuted cases involving sports betting. The most recent high-profile arrests include BETonSports CEO David Carruthers and Sportingbet's former chairman Peter Dicks.

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