Rolling dice on the Web
Gamblers, day traders seek online profit, find risk, too
June 18, 1999
(CNN) -- Fred Marino knows from personal experience what can happen to Internet gamblers if they can't control themselves. "With a click of a mouse, you can lose your house," says the Californian. And he did.
Online gambling is a lucrative multimillion-dollar industry worldwide that's expected to grow to $10 billion in three years, according to Datamonitor PLC, a market researcher in London.
Hundreds of Web sites, mostly located outside the United States, currently lure surfers to virtual slot machines, craps and other Las Vegas-style games.
"This is a well-recognized and established form of entertainment that people enjoy," says Alex Igelman of the Web casino GalaxiWorld.com. "Why not let them enjoy it through a new telecommunications medium, which is the Internet?"
Such forms of gambling may -- or may not -- be legal for U.S. residents under a federal law that bans wagering through telephone technology, a 38-year-old law written long before the Internet boom.
As Congress considers plugging that loophole by amending the law to cover newer technological transmissions, some gambling Web sites are playing it safe.
On some, a disclaimer in small type reads, "This site does not allow for gambling for money by persons within the United States."
Gambling online and on credit, Marino's casino clicking cost him the equity in two houses and ruined his marriage as he ran up more than $80,000 in gambling debts.
Now, he's suing the credit card companies that let him do it. "(They are) extending credit to perform that illegal act," says Marino's attorney, Ira Rothken. "They are intimately involved."
A federal commission that spent two years studying America's gambling habit urged Congress in a report issued on Friday to make all Internet gambling illegal.
Some compulsive gambling counselors regret the report does not address a related problem: mounting losses suffered by untrained people who use the Web to trade stocks.
Too many of these amateur "day traders" are losing tens of thousands of dollars in their family savings with a single bad wager, experts say.
"Day trading is the addiction of the new millennium," said Ed Looney, a recovering gambling addict and executive director of the Council on Compulsive Gambling of New Jersey Inc.
Michael Terry knows that, but quit his job anyway to concentrate on day trading. Still, he says, the downside is always on his mind.
"The risks are huge," Terry told CNN, "so I think that's what keeps me on the fence in terms of wanting to get too involved with it and risk too much."
Risking too much is exactly what many Internet stock traders already have done. Some have even called agencies that specialize in gambling dependency.
"The Internet and the availability of an instant trade, without the use of even going through a broker ... has really made problem gambling show its face," says Thomas Tucker of the California Council on Problem Gambling.
Online brokers have become the stock market's answer to the ATM, and business is brisk.
"While they're not saying, 'Come over here, you'll make a lot of money (by) short-term trading,' ultimately it's set up to do that," says industry analyst Tom Taulli.
How many day traders are actually addicts is a matter of debate, but distinguishing the rational from the renegade investor is easier, says Terry.
"If someone has 95-percent of their portfolio in their day trading account and they're trading all 95-percent every day, I'd say that's dangerous, very dangerous," he told CNN.
By year's end, the Internet is forecast to be the favorite playground for 10 million individual investors in the United States.
While most are not addicted to day trading, it's feared that more of those who are will come forward when the market falls.
When that happens, warns Taulli, brokers may be blamed for putting day traders in financial danger. "You could be held liable if you, in a sense, put the gun in their hand ... and they injure themselves with it," he said.
For Charles Schwab, the top online investing firm, the best protection from such a scenario is "to educate our investors," says the company's Martha Deevy.
Or, as Terry puts it: "Learn your limits to stay within your comfort zone."
That's easy to say, but for Arnie Wexler it was hard to do. A recovering compulsive gambler for 31 years, he now runs a hotline for gambling addicts. His own dependency, says Wexler, nearly destroyed him.
"I was running around at that time of my life, wishing and praying I had enough guts to kill myself," Wexler told CNN. "I thought that if I killed myself and left my wife (and two children) with $5,000 of insurance money ... it was the only way out of this mess."
Pushed-to-the-edge experiences such as that are proof that compulsive gambling is a real illness, say medical experts in the field.
"The addiction to gambling is different in that it's purely a behavior," says Dr. David Yamins, a clinical psychiatrist. "It's not an addiction to a chemical or substance, but it involves a similar process, in that it's a compulsive behavior that the person has no control over."
The thrill, Yamins told CNN, is the expectation that a big payoff will solve all the gambler's problems.
But that hope is a myth, according to Wexler, who says occasional big wins only made things worse. "I chased that big win every day of my life, figuring that I can do (it) again."
While compulsive gambling is a legitimate medical diagnosis, treatment is not covered by insurance.
That's because society views gambling as a behavioral problem -- something people should be able to control. Such a policy is unlikely to change, compulsion experts say, until society accepts compulsive gambling as a real disease.
Correspondents Don Knapp, Mark Marino and Steve Salvatore contributed to this report.
Soup-to-nuts electronic trading
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