[Congressional Record Volume 141, Number 177 (Thursday, November 9, 1995)]
[Senate]
[Pages S16929-S16930]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




  ELECTRONICS IS BRINGING GAMBLING INTO HOMES, RESTAURANTS, AND PLANES

 Mr. LUGAR. Mr. President, I ask that the attached article be 
printed in the Record.
  The article follows:

             [From the Wall Street Journal, Aug. 16, 1995]

Feeling Lucky: Electronics Is Bringing Gambling Into Homes, Restaurants 
                               and Planes

                        (By William M. Bulkeley)

       Think you can avoid gambling? Don't bet on it.
       Gambling once involved clandestine dealing with unsavory 
     bookmakers, or trips to the horse track or Las Vegas. But 
     electronics is making it ubiquitous. Innovators are using 
     technology to extend the frontiers of gambling--often to the 
     frustration of regulators.
       On-line casinos and sports books are springing up on the 
     Internet. With central computers in Caribbean tax havens, and 
     play-money bets mingled with real wagers, sponsors think they 
     can evade U.S. laws barring gambling by wire. ``Gamble from 
     home in comfort on a Sunday morning in your PJs,'' suggests a 
     page on the Internet On-line Offshore Casinos, one of the on-
     line betting parlors.
       Get bored flying? This fall, British Airways will 
     experiment with a seat-back electronic system that can be 
     used for gambling on flights outside the U.S. Betting limits, 
     naturally, will be higher in first class.


                               charge it

       By the end of the year, the Coeur d'Alene Indian tribe in 
     Idaho plans to run a national lottery with weekly $50 million 
     jackpots that will allow players to use credit cards and dial 
     in their number picks over toll-free 800-lines. Graff Pay-
     Per-View Inc., a publicly held New York-based movie and 
     adult-television programmer, is working on a system to let 
     people participate--by phone or computer--in high stakes 
     bingo games on Indian reservations. It says regulators have 
     approved the idea of ``proxy'' bingo from home, so long as 
     the game is actually played on a reservation. Graff says it 
     has also acquired a company that does television broadcasts 
     of race-track action ``to facilitate Graff's initiative to 
     bring wagering into the home.''
       Connecticut and New York recently started permitting 
     telephone betting on horse races from all over the country. 
     The horse-racing industry has been able to transmit gambling 
     information across state lines for years.
       Experts say electronic technology will accelerate increases 
     in gambling revenues, which have been climbing for years; 
     John Malone, president of cable-television giant Tele-
     Communications Inc. has called gambling one of the 
     ``killer applications'' for interactive networks that 
     might justify the cost of building the information 
     highway.


                             Risky Business

       But there will be losers, too. Expanded electronic gambling 
     means tougher competition for existing lotteries casinos, 
     riverboats, racetracks, Indian gambling parlors and charity 
     bingo.
       Some electronic wagering--especially the kind operated by 
     foreigners that relies on telephone lines and high-speed data 
     transmission--is difficult to monitor and may prove 
     impossible to control. There are no assurances that 
     electronic winners will actually see their jackpots.
       And experts say electronic gaming is far more dangerous 
     than old-style betting to the 1% to 3% of the population 
     prone to gambling addiction. Widely dispersed electronic-
     betting machines, for example, tempt teenagers already fond 
     of video games.
       ``Electronics as a vehicle of administration for gambling 
     activities changes the experience to make it more dependence 
     producing, ``says Howard Shaffer, director of the division on 
     addictions at Harvard Medical School. ``As smoking crack 
     cocaine changed the cocaine experience, I think electronics 
     is going to change the way gambling is experienced.''


                              new outlets

       Operators, however, like technology because it works. State 
     lotteries, for example, are starting to add electronic keno, 
     a game in which a player selects up to 12 of 80 possible 
     numbers and watches to see if they are flashed on a screen. 
     Games happen every five minutes and tempt captive audiences. 
     ``Keno brought the lottery product to a distribution outlet 
     that was underused--bars, bowling alleys and restaurants. 
     It's helped states realize 30% to 100% revenue growth,'' says 
     a spokesman for Gtech Corp., a fast-growing West Greenwich, 
     R.I., company that runs 70% of the world's on-line lotteries. 
     The New York State Lottery will start using Gtech's keno 
     system at 2,250 outlets next month.
       Gtech has developed communications systems in outposts from 
     Scotland's Sheltland Islands to the Strait of Magellan in 
     Chile. Bettors can now pick numbers for national lotteries 
     and receive confirmation of their bets via satellite in less 
     than four seconds. Long before places such as Lithuania get 
     reliable national phone service, they will have networks 
     linking urban and rural stores by satellite and microwave to 
     central lottery computers.
       Salomon Brothers, in a report on the gaming industry, says 
     Americans lost $41.9 billion gambling legally in 1993, with 
     30% in casinos and the rest in lotteries. Lotteries now exist 
     in states with 89% of the nation's population, so growth is 
     largely based on introducing new games that get people to 
     play more often.
       Still, saturation isn't imminent. Salomon analyst Bruce 
     Turner says that if Americans gambled at the same rate as 
     Australiians--who spend 2.5% of their disposable income on 
     gaming vs. 0.8 here--the U.S. gambling market would be more 
     than $100 billion.
       The U.S. is now in a growth phase of a cyclical pattern of 
     gambling expansion and restriction, contends I. Nelson Rose, 
     a Whittier College law professor and gambling expert. Between 
     1910 and 1930, the only legal gambling in the U.S. was at 
     racetracks in Kentucky and Maryland. Gambling began to spread 
     during the Depression when Nevada relegalized it and many 
     states allowed race tracks. In 1964, New Hampshire approved 
     the first state lottery. Today, there is legal gambling in 
     every state except Utah and Hawaii.
       The biggest wild card is gambling on the Internet because 
     it is so difficult to regulate and it offers all types of 
     wagering to anyone who has access to a computer. Players 
     either send money into an account from which they then bet, 
     or charge their bets on a credit card. They take it on faith 
     that they will be paid if they win.
       The Justice Department says such online gambling is illegal 
     in the U.S. The department says it will act when it believes 
     a violation of the law has occurred.


                             virtual casino

       Sports International Ltd., which already operates an 800-
     line telephone betting service from its headquarters in 
     Antigua, has opened an on-line sports book on the World Wide 
     Web segment of the Internet. Players can bet a minimum of $10 
     picking the World Series or Super Bowl winners. Recent on-
     line odds quote the New York Yankees at 9-to-5 and the 
     division-leading Boston Red Sox at 4-to-1 to win the American 
     League crown.
       Michael Simone, president of publicly held Sports 
     International, says it plans to develop other games. ``The 
     cost of managing, and operating the proposed virtual casino 
     is almost nonexistent when compared to a live casino,'' he 
     says.
       Last month, Toronto entrepreneur Warren Eugene began taking 
     blackjack bets via computer, in what he calls the ``Caribbean 
     Casino.'' To play, people must register with E-Cash, a Dutch 
     firm that handles financial transactions on the Internet. 
     Starting with little more than a vision and a colorful 
     Internet home page, Mr. Eugene claims nearly 1,000 people 
     have already deposited money to play.
       With his computer in the Caribbean tax haven of the Turks 
     and Calcos Islands, he 

[[Page S 16930]]
     says he offers a tempting option to gamblers. ``They're going to bet 
     with a bookie. They might as well bet with us and keep the 
     money offshore.''


                            charges of fraud

       Since U.S. law bars interstate wire transmission of most 
     gambling information for business, Minnesota Attorney General 
     Hubert H. Humphrey III has already filed suit against Kerry 
     Rogers, one of the principals of WagerNet, of Las Vegas. The 
     company is negotiating with the government of Belize for a 
     license for an on-line sports book. The Minnesota suit 
     accuses Mr. Rogers of consumer fraud by representing that the 
     ``proposed sports bookmaking service is lawful.'' Minnesota 
     has even posted its suit on the World Wide Web.
       Under racketeering statutes, an American operating an 
     offshore casino might be subject to seizure of his assets, 
     says Mr. Rose, the law professor in California. However, 
     foreign nationals operating offshore casinos are probably 
     beyond the reach of U.S. laws. Individual bettors are hard to 
     track, and are almost never pursued by prosecutors, he says.
       On-line operators also face a credibility problem. ``In 
     Vegas, you have a gaming commission that comes in and checks 
     the returns. You won't have that in Antigua or Belize,'' says 
     Earl Gilbrech, a Fountain Hills, Ariz., consultant who works 
     with several Caribbean gaming operators. ``Some guy in Idaho 
     isn't going to tell his local newspaper if he wins $22,000. 
     But you'll hear all these people'' complaining on-line when 
     they lose.


                              High Rollers

       Major casino operators pooh-pooh Intenet gaming, saying 
     they prefer to concentrate on resorts that draw high-rolling 
     sociable gamblers. But British Airways thinks electronic 
     gambling can draw goodtime tourists away from rivals. The 
     company says it plans to spend as much as $130 million to put 
     interactive screens on seat backs in 85 long-haul planes if a 
     trial--planned for one Boeing 747 on routes around the 
     world--works out. Screens will let fliers choose from more 
     than 100 movies, play Nintendo games or play blackjack and 
     roulette. Bets will be charged on credit cards.
       The Federal Aviation Administration doesn't allow gaming on 
     flights that begin or end in the U.S., so if the airline 
     installs the devices widely, it will turn off gaming 
     functions on U.S. flights. Some localities have tougher 
     rules: Under laws prohibiting gaming devices, North Carolina 
     could try to stop even the gambling-disarmed planes from 
     landing, says one British Airways lawyer.
       One big caveat is whether the technology works. In 1993, 
     Northwest Airlines tried a system called WorldLink that 
     included video games and a shopping channel. But it pulled 
     the system in 1994 because at any given time about 10% of the 
     screens didn't work, infuriating passengers.


                           Invading the Home

       Technology's biggest impact may be in bringing betting into 
     the home--the place International Gaming and Wagering 
     Business, a trade publication, calls ``gaming's new 
     frontier.''
       The planned National Indian Lottery would let players pick 
     numbers by phone 24-hours a day, seven days a week. Players 
     would have to preregister with a credit card and get a 
     personal identification number to play.
       When the Coeur d'Alene tribe announced its plans last 
     winter it got approval from Idaho and from the National 
     Indian Gaming Commission, but drew a firestorm of opposition 
     from other states. Some have threatened to prosecute phone 
     companies under gambling statutes if they let customers reach 
     the lottery's 800 number. The tribe dismisses the challenges 
     as ``fear of competition'' and expects to start its lottery 
     by year's end.


                       Ponies in the Living Room

       The horse-racing industry is embracing technology as its 
     best shot at survival. For years, simulcasting of out-of-
     state races has let gamblers at tracks place bets during the 
     long intervals between post-times. Several states now permit 
     bettors to establish accounts with a track and then place 
     bets from home while watching races on TV.
       IWN Corp., a partially owned subsidiary of NTN 
     Communications Inc., Carlsbad, Calif., has been working with 
     California tracks on a personal-computer-based system that 
     could both receive data on horses in races and let players 
     bet. Dan Downs, president of NTN and a former racing-industry 
     executive, says he expects the system will be tested in 
     Connecticut toward the end of this year.
       This month, Churchill Downs, home of the Kentucky Derby, 
     will start testing a television-based home-wagering system 
     developed by ODS Technologies Inc., Tulsa, Okla. Rather than 
     having to actually go to the track, people will be able to 
     watch races on their television sets and use a five-button 
     remote control to place bets--which will be transmitted over 
     telephone lines--right from their own living room.
       ``The racing industry is dying,'' says an ODS spokesman. 
     ``We want to bring it right into the home and expose it to a 
     wider customer base.''

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