Logging On to Lose a Wad

Given the human prediliction for losing money, the proliferation of virtual casinos has a range of special interests calling for a crackdown before things get out of hand. In all likelihood they are wasting their breath. As one American academic commented recently: "[Computer] bits don't have morals."

The tiny European principality of Liechtenstein pioneered online gambling when it launched InterLotto in 1995. Open to players around the world, InterLotto pays out an unusually large 65% of the pot. The game is simple enough: players register and open an account on the Web site with a credit card, against which they purchase lottery tickets. Draws are held weekly, and winnings credited to a special account. By international standards, the jackpots are small -- no more than $60,000 -- and so far only about 30,000 people have signed up, 15% of them in Asia, says InterLotto, many of them logging on from cybercafes.

Still, most experts agree that online gambling will one day become a huge international business worth mega-billions. There is an enormous appetite for gambling in Asia, much of it in illegal numbers rackets. In Hong Kong, punters wager some $10 billion a year on the horses. And before student protests prompted the Indonesian government to cancel a national lottery in 1994, it was raking in $5 million a week.

Right now, however, three key things are holding back cyber-betting: ominous legal threats, lackluster technology and a healthy dose of consumer skepticism. In the U.S., where much of the activity is centered, online gambling is technically illegal, and authorities have been pushing to clarify existing laws. For example, is it illegal for someone living in a place where gambling is banned to access a virtual casino based in a place where it is accepted? Last year law enforcement officials asked the Clinton administration for an outright ban. No dice. The Justice Department vetoed the idea, arguing that it would take hundreds of thousands of agents just to monitor all the online gamblers, let alone bust them. A Republican-sponsored bill banning the practice went nowhere.

Nonetheless, all the official rumblings and the growing moral outcry about bringing yet another vice into the home have, at least in part, kept established casinos on the sidelines, and prompted startups to head for places such as Antigua, where officialdom is less squeamish. The most draconian laws, however, probably won't prevent gamblers in Hong Kong, Manila or Bangkok from playing craps at a virtual casino based elsewhere.

What will hold back most would-be namblers for the time being is the dicey proposition of betting against a computer program that holds all the cards. In places where traditional betting is legal, gaming is heavily regulated, in large part to protect the consumer. For casino owners the lawless and borderless Internet offers a return to the good old days -- when they could weight the games even more heavily in the house's favor. For example, there is no way to tell if an online slot machine is rigged; in a real casino regulators ensure that it is working properly.

Then there is the question of winnings. Like Internet shopping, online gambling has been slow to develop because most people won't provide their credit card numbers to an unregulated Website. Such security concerns prompted the Hong Kong Jockey Club to postpone plans for an online betting system. Gamblers willing to part with their credit card or bank account numbers instantly lose the anonymity they take for granted at a brick-and-mortar casino. There is no guarantee the cyber-outfit will observe its guaranteed payout percentage, or, for that matter, pay at all. Nor is there legal recourse for those who get burned.

The advent of secure, anonymous electronic money may well resolve these problems and send online gambling stratospheric. Indeed, Internet casinos could one day pose a threat to the glitter palaces that light up the night skies of gambling centers such as Las Vegas and Macau. The American Gaming Association, which represents hotels and betting-equipment manufacturers, opposes cyber-gambling as "unregulated and a potential rip-off." But they may also be worried about losing potential customers who decide to forgo a flight to Vegas and put the cash into cyber chips instead.

For the moment, most online gambling is harmless fun. Virtual Vegas is a Web site offering slot machines and card games -- but no money. Winners receive prizes such as T-shirts and playing cards. Hardly the stakes to set a gambling addict adrool. When real online wagering takes off, though, it may be unstoppable. China, Vietnam and Singapore control Internet access and may keep their citizens out of the virtual casino. Elsewhere, however, gambling is about to find a whole new audience, hoping to make a million with their mouse -- or, more likely, logging on to lose a wad.