I-Gaming: Illegal And Thriving

Lesley Stahl Reports On Online Gaming, Illegal Yet Thriving

(CBS) 
To test that theory, 60 Minutes gave Alex Hartman, the 16-year-old son of this story’s producer, his dad’s MasterCard.

According to Nigel Payne, whose company owns paradisepoker.com, Alex isn’t likely to be able to gain access to or place bets on any of his sites, despite having his dad’s credit card. “That 16-year-old has got to give me four or five pieces of information about him relative to his bank account, his personal details, where he lives and other things. So I can be 99 percent comfortable that this 16-year-old doesn’t even get through my front door.”

And it appears that he’s right. As Alex attempted to register with Paradise Poker, something made the computer suspicious about him. Warnings kept popping up – “You must be 18 or older” – and then he was rejected.

But then Alex did what most kids would: he tried another site, and another. On the third try, without any questions about his age, he was approved. In five minutes, Alex was playing roulette.

Just ten minutes later, he was $100 in the hole.

Payne agrees that the pool of potential underage gamblers is bigger than for traditional casinos. “Without doubt. Which is why we have to be 20 times better. But it’s also why we HAVE to be regulated.”

Payne argues that if the U.S. legalized Internet gaming, all of the problems associated with gambling could be controlled better.

Addiction to gambling, says Payne, is a huge problem both online and at traditional casinos. And he says online gambling may be better equipped to deal with the issue, since players can be tracked electronically.

“Imagine you’re an addicted gambler, ok? You try to reload your account too quickly because you’re playing too quickly. Stop. I’ve got a closed loop of data. I can actually track what you’re doing,” says Payne.

Sen. Kyl is skeptical. “So some outfit in Aruba decides that somebody is gambling too much on their Web site. What are they going to do? Knock on somebody’s door and say, ‘You know, we think you’re gambling a little too much on our line here, you probably ought to knock it off.’ That’s not going to happen.”

The senator doesn’t think legalizing or regulating the industry will make a difference. “Most of this is done in foreign countries. So even if we try to create some kind of standards, it’s not to say that it’s going to be enforced by a foreign government.”

In other words, says Kyl, anybody can put up a site.

But Payne says that ina regulated environment, disreputable companies or gambling websites won’t last long, as “consumers vote with their feet.”

“Trust is an immense factor. If you say to an American consumer, ‘This site is trusted and licensed and this one isn’t,’ I promise you within 12 months the problems you’re referring to will have disappeared or significantly reduced, because customers will have voted with their feet.”

Sixty-four countries already license online casinos, and they’re not just a bunch of banana republics.

“The United Kingdom has passed laws to enact Internet gambling. The United Kingdom expressly allows United Kingdom operators to take bets from American citizens,” says Payne.

The British have legalized online gambling, even though they know our government considers it illegal. Britain has become the new center of online gaming and several companies, including Payne’s, are traded on the London Stock Exchange and pay British taxes.

“We’ve calculated that were America to have regulated the industry in 2004, the American states would have earned $1.2 billion in tax,” says Payne.

He says if the U.S. regulated the industry, he would pay the taxes owed in America by his British company. “And we have volunteered to pay it because this is an industry that has to be regulated.”

MGM/Mirage’s Lanni believes online gaming will be regulated, and legalized.

When? Lanni says he is not sure. “I think it’s when an enlightened president with an enlightened attorney general says, ‘It’s legal in all these states, we tax it, we regulate it. Let’s do it, and let’s do it for the Internet.’”

Payne doesn’t think people will ever stop gambling.

“Do you think the Internet’s suddenly going to go away? So what are we going to do in ten years time, when this industry is ten times bigger than it is today?” ask Payne. “I often say to people, ‘Please give me one solid plausible argument why you shouldn’t regulate it.’”

And Payne rejects the argument that it is bad for you. “If you regulate it, you control it. If you regulate it, you set limits. Is that bad, when the comparator is ‘Ah, just let them do what they want.’ Is that really bad? I don’t think it is.”