The 64-team playoff is not only one of the biggest events in US sports -- it's a sports-betting bonanza. For the next few weeks, gamblers will scan charts and statistics, monitor their bracket choices, and, in many cases, log onto the Internet.
And that's where they could foul out.
That's because, despite estimates by a Bears Stearns report that it could be a US$3 billion industry by 2002 and that five percent of all new Web sites are gambling sites, Internet gambling is illegal in the United States.
"It has tremendous potential to take off," said Ellen Guion, an analyst at Greenfield Online, which has done its own study of the online gambling world. And that potential is already, according to the Bears Stearns report, converting itself into an Internet gambling industry that's "thriving in the loopholes."
Kyl, Goodlatte bills
Internet gambling currently falls under the 1961 Federal Wire Act, which bans the use of telephone lines for betting on sports events, contests and races. But several people have challenged that law, claiming that: it doesn't cover the Internet; and, even if it does cover the Net, it doesn't cover offshore operations.
"I'm opposed to gambling and I wanted to do what I can to halt its expansion on the Internet," Goodlatte said.
"It's the equivalent of having a casino in your home town," he added. "All the problems -- addiction, crime -- they're all there."
Feds cracking down
Cohen, whose World Sports Exchange is located on the Caribbean island of Antigua, is scheduled to be sentenced in May. He faces a maximum total of 19 years in prison and fines of up to US$1.75 million.
But it's not just anti-gambling advocates who are backing the new laws. Goodlatte's bill is co-sponsored by a Nevada-based Republican, Rep. Jim Gibbons, and Rep. Frank LoBiondo, R-N.J., whose district includes Atlantic City. The American Gaming Association, which represents casinos, has also supported legislation that would outlaw Internet gambling.
Net gambling proponents argue that gambling interests are just fighting to protect their mainland monopolies. According to the statistics, though, Las Vegas and Atlantic City don't have that much to worry about.
The Greenfield Online study found that, while online gamblers spend more time in casinos than traditional gamblers, they don't spend nearly as much money.
Greenfield Online determined that a typical casino patron makes 6.2 visits a year and spends around US$300 per visit, while an online patron makes 20.8 visits per year and spends US$30 each time. On the other hand, Bear Stearns predicted that, if gambling were legalized in the United States, big-name casinos would easily trump the market and "devour the smaller Internet gaming companies and a slew of the some 650 gambling Web properties."
"There is a certain fear by the states that they'll lose money. But I don't think it's fair to say that the American casinos are afraid they'll lose money," said Joseph Kelly, a professor of business law at the State University of New York College at Buffalo.
What the casinos are worried about, he said, is their reputation.
Backlash concerns
"Our license to operate in Nevada is predicated on anything we do anywhere else," said Alan Feldman, vice president of public affairs at Mirage Resorts Inc.
"In our industry we go through unbelievably rigorous background checks at levels which the current Internet properties don't understand. In our state, and most states with casinos, every check you've written in the last 10 years has to be produced. They go to your hometown, they talk to your teachers. The process takes a year with 20 individuals investigating you," he added.
The casino industry is concerned that a rise in Internet gambling could cause a concurrent rise in the problems associated with gambling, such as addiction and crime, and that lax regulation could erode trust among consumers.
"They're afraid that if Internet gambling catches on, it might result in a national backlash against all gambling," Kelly said.
Banning no simple task
Besides the local, national and international legal issues, enforcement is a nightmare. For instance, virtually all online gambling sites already operate outside the United States in countries like Australia and Antigua, where online gambling is licensed and legal. And, while Cohen may have been willing to reenter the United States to fight his gambling charges, authorities may have a much tougher time prosecuting other offenders who reside out of the country.
"Prohibition will not work, just like prohibition against booze did not work," Kelly said, pointing out that the only people the United States could go after inside the country are the gamblers themselves. "If we were really serious about stopping it, could we? Sure, if we were willing to shoot every tenth bettor, install an inquisition or cut off people's left hands."
Goodlatte's bill originally did go after the actual bettors, but that provision was eventually eliminated because the states are able to handle it on their own without federal assistance.
Kelly said the United States should be able to work with countries that license online casinos, encouraging them to prohibit those online casinos from soliciting American gamblers and developing extradition policies. The U.S. government could also work with ISPs and credit card companies to make the gambling more difficult to achieve in the first place, he said.
Credit card firms gun shy
Haines' attorneys argued that California law barred the collection of gambling debts. She eventually settled with both Visa and MasterCard -- prompting Providian National Bank, the sixth-largest Visa issuer in the United States, to create a policy to automatically deny approval for most online wagers requested by its customers.
That suit, along with a few others has put a scare into credit card firms. Add in some requests from Congress and federal law enforcement, and online gamblers could find themselves without means to wager online.
But Kelly thinks that, even if the credit card companies do get scared off, gamblers will find another way to bet, be it wiring money, setting up special offshore accounts or using new forms of electronic cash.
"Once that happens I don't see how federal authorities can enforce the prohibition," he said.
Australia the model?
In Australia, for instance, the government decided that, rather than fight online casinos, it would set up a regulatory system to license them. Several of the country's six states have legalized gambling, and some state governments actually subsidize casino companies.
"What we would like to see is a regulatory bill," said Sue Schneider, chair of the Interactive Gaming Council, a trade association representing online gambling firms. "It's our opinion that you can't regulate the Internet but you can regulate the gambling product. It's being done in 50-odd countries. They do the same kinds of thing they do with land-based operations."
Schneider said that regulation would help solve many of the problems posed by Internet gambling, including concerns about shady operators. And the technology itself could be put in place to work on other problems -- for example, including loss limits in software to prevent addictive gambling behavior.
Regulating the industry would also encourage online operators to engage community efforts to prevent problems like teen gambling.
"That's the way to stop it," she said. "It's just a matter of time before things sort out and US name brands get in on this. That's when the market will really expand."
But how does this "thriving" industry beat the gambling prohibition? For one thing, the illegality of Internet gambling is hardly clear cut.
Rather than wait for the bills, though, federal authorities have begun a crackdown.
The tight regulation of gambling in Nevada and New Jersey involves extensive checks and measures to make sure that everything is on the up and up. Venturing into online gambling, even in countries where it is legal, could put American casino's licenses in jeopardy.
Banning anything on the Internet is problematic.
The credit card companies are already wary of online wagering. A major blow came in October when Cynthia Haines, of California, settled a lawsuit brought against her by her bank after she refused to pay credit card debt from money lost gambling online.
What does make sense, say advocates of online gambling, is regulation.
