I-Gaming: Illegal And Thriving

Lesley Stahl Reports On Online Gaming, Illegal Yet Thriving

(CBS) 
He says if his company could offer Internet gambling, it could instantly double its $8 billion a year revenue. "If we could add our brand, and the credibility of the publicly-traded United States gaming company, this could be a vast business," Lanni says.

But MGM/Mirage is shut out, because the government says a law banning sports betting over the phone also bans all gambling on the Internet.

Obviously, it hasn’t stopped U.S. citizens from doing it, but it has stopped U.S. companies from offering it.

“The vast majority of wagers that are placed on the Internet now are done offshore and illegally. And I for one think that to enact laws that you can’t enforce makes no sense whatsoever,” says Lanni.

Lanni and MGM/Mirage set up their own offshore gambling Web site a few years ago, but to stay within the law, they only accepted bets from gamblers outside the U.S.

Lanni says the site didn’t make any money and was eventually shut down. He calls the U.S. government’s current position on online gaming odd: “There’s no doubt about it. There’s gaming in every state but two states in the United States. If it’s legal there, and it’s regulated and taxed and we’re comfortable with it there, why don’t we allow it also in the area of Internet where people – so much commerce is going through the Internet right now? It makes no sense.”

Even so, no one in Congress is pushing for legalization. In fact, Senator Jon Kyl, Republican of Arizona, is going the other way; he has a bill designed to really crack down on what he calls a “social pathology.”

“It’s so easy to do. It’s so easy for kids to do. It’s so addictive. And it has frequently been demonstrated that there’s a lot of graft and corruption in this,” says Sen. Kyl.

Kyl’s bill aims to choke off the money by prohibiting U.S. banks and credit card companies from handling any online gambling transactions.

The senator admits that his bill may not completely stop online gaming. "We may not be able to stop it all, but if we can stop the major part of it that’s coming from offshore, I think we will have done something very, very good," he says.

At a big convention of the international gambling industry in Las Vegas, there was an entire pavilion dedicated to Internet gaming. Many of the top executives attended, despite the fact that their business is illegal in the U.S.

So why doesn’t the FBI or justice department make arrests at the convention?

"The Justice Department says 'We have lots of other priorities,' and they’re right," says Steve Lipscomb, the founder and CEO of the "World Poker Tour" TV show, which helped fuel the craze for Internet gambling.

Those offshore companies are so brazen, they advertise. There are banners pulled by airplanes, ads in magazines, and commercials all over cable TV.
How can a cable network air an ad for an illegal activity? It’s all in the fine print.

One ad was not for paradisepoker.com, where you can gamble, but for paradisepoker.net, which they call an “educational” site.

“You can play for free on those sites and learn about how to play poker,” says Lipscomb.

The .net site can advertise because there is no money involved, so it is not considered gambling. But with their identical logos and brand names, the obvious goal is to draw people from the free.net site over to the real gambling.com site.

“They are certainly spending a lot of money to educate people about the game of poker,” says Lipscomb.

Many of those being educated are kids. And many of those kids then try to play for real.

Sen. Jon Kyl says that’s the biggest danger in online gambling. “Our kids have access to the Internet. They’re frequently not supervised. And you can run up a huge debt on your folks’ credit card very, very quickly.”