Gambling online becoming
a tougher bet to make
Before you go surfing around on
the Web to ante up for some online gambling, be aware that using
your credit card could very well cost you more than what you could
loose. Some credit card companies have put the kibosh on cyber-casino
transactions, not to mention taking a piece of the pot on transactions
they do allow.
At least two of the country's major issuers
are refusing customers who want to set up gambling accounts via
the Internet. And their competitors, if not blocking accounts, are
taking notes on what goes on between e-bettors and digital dealers.
This despite the fact that banks make substantial
profits on gambling-related credit card activities, including high
interest rates on the cash advances used to open accounts and extra
charges for chips, lottery tickets and the like.
Banks bailing despite profits
Still, gambling online is such a legal hot potato that some banks
are shedding the risks altogether, even though the profit potential
is preposterously high.
"We do not authorize charges from Internet gaming
establishments," says Marc Loewenthal, senior vice president of
San Francisco-based Providian
Financial Corp., which has 13 million card carriers. "That's
not behavior we want to encourage. The bigger issue is whether this
is responsible use of a credit card."
Bank is also busting up bingo games. Rather than ride along
on dubious legalities, the Atlanta- and North Carolina-based Visa
card issuer decided to quit granting customers credit lines for
games of chance. The bank mailed notices last year to about 5.5
million card customers.
"The laws vary so widely from state to state
that it's difficult to determine what is legal," says bank spokesman
Jay Reed. "It is much simpler to decline the online gaming transactions."
Playing it cool
MasterCard and Visa, the franchise companies that set the rules
for lenders who dispense their cards, are trying to cover their
backsides with warnings to consumers, banks and playing parlors,
although their logos are seen at hundreds of licensed Internet casinos
around the world.
MasterCard requires gambling sites to tell prospective
bettors to determine whether the activity is legal in their jurisdiction,
and to keep a record of where customers are located. The company
wants issuers to be notified of electronic wagering transactions
and says they will be coded for identification. Visa is warning
consumers that just because they see the Visa symbol blinking at
the lottery in Liechtenstein doesn't mean it's legal for the bettors
to participate from a PC in California.
Visa and MasterCard did not respond to questions
about the implications of these Adviseries for consumers.
Customers who get burned by seedy offshore
casinos or rack up big gambling debts on the Internet might find
it harder to take advantage of consumer protections such as dollar
limits on liability and the right to stop payments to a merchant,
says Howard Strong, an attorney and author of What Every Credit
Card User Needs to Know.
"I think you're taking a hell of a chance that
a credit card company is going to tell you to drop dead and force
you to get a lawyer to fight it," he says. "It doesn't mean they
are right to do it. You're going to find it much tougher to get
credit card companies to honor them, even if they are in effect.
I think they are extremely concerned about this kind of stuff."
Laws and loopholes
The sturdiest legal leg against Internet gambling is arguably a
shaky one. The federal Wire Communications Act prohibits interstate
wagering over phone lines, but was written in 1961, long before
the global e-village's tentacles began to spread. Nevertheless,
it was threatening enough to send gaming entrepreneurs scurrying
to the Caribbean, Costa Rica, Australia and Asia to run licensed
businesses and avoid prosecution in the United States.
The Wire Act is also the backbone of several
class-action lawsuits filed within the last couple of years on behalf
of people who posted stakes online with credit cards and lost. Plaintiffs'
attorneys argue that issuers who authorize the charges violate federal
law, as well as state laws that deem gambling debts uncollectible.
Providian got stung three years ago by a sore
loser from California. The woman sued the issuer, as well as MasterCard
and Visa, after she gambled away $70,000 on plastic. Providian's
Loewenthal said the casinos ate those charges. "We didn't forgive
the debt because we weren't able to identify that that's what she
was doing," he says.
But ever since, Providian has been compiling
a database of gaming merchants' authorization codes, enabling the
company to identify them and bar customer requests for gambling
With the House of Representatives' rejection
last year of the Internet
Gambling Prohibition Act, these loopholes are intact -- which
means consumers probably do not have to worry about being collared
by the feds.
Even if Congress eventually bans the use of
bank instruments such as credit cards for virtual wagering, or prohibits
it altogether, the games will go on. Other e-payment methods such
as smart cards and software to set up cyber borders are being developed
to accommodate gamblers' thirst for chance.
"Right now, the politicians are looking for
a pressure point," says Philip McGuigan, a Chicago attorney specializing
in e-commerce. "It should be regulated and taxed, but it ain't going to
But the real hazard of gambling for consumers
is the cost. Ninety percent of online gaming accounts are opened
with cash advances from credit cards. Banks typically charge interest
rates of 20 percent or more for such loans and there is no grace
Furthermore, most issuers charge an extra 3
percent for casino chips, lottery tickets and other bets. That means
if you open a $500 gambling account -- whether at a brick and mortar
casino or a virtual one -- the bank tacks on $15.
As one cyber-gaming foe put it: "Internet gambling
means you can lose your home without leaving it."
Wells is a freelance writer based in Florida
-- Updated: June 4, 2001