Tuesday, July 25, 2006

At the World Series of Poker tournament at the Rio, operators of Internet
gambling sites are hosting swank hospitality suites to promote online poker
games. Potential customers are invited to learn the ropes by playing free
games where no money changes hands. But promotions can no longer be found
for online sports betting, which is being targeted by the U.S. government
because it is illegal in this country. So goes the convoluted, controversial
business of Internet gambling. The country's biggest Internet gambling
conference was supposed to have started Sunday as a welcome back of sorts
for the man who has become the industry's public face. But Calvin Ayre, the
only man to appear on the cover of Forbes' "Billionaires" issue and in
People's "Hottest Bachelors" issue in the same year, won't be posing with
leggy models or mixing with celebrities as planned at Wynn Las Vegas. Ayre
is founder and chief executive of Bodog.com, an Internet casino and sports
book located in Costa Rica that has become one of the most advertised online
betting operations in the United States. Ayre canceled his conference after
the arrest last weekend of online sports book operator David Carruthers at a
Texas airport. Carruthers runs BetonSports PLC, a company that launched a
successful public stock offering in London in 2004 and owns several online
sports books and casinos.

Insiders say the action is more evidence of a growing divide between the
flourishing world of online poker and its black sheep cousin, sports
betting - an activity with strong roots in organized crime.

The Department of Justice says it doesn't distinguish between types of
Internet gambling. It's all illegal, the government says, under the federal
Wire Act - a rule designed to combat Mafia-run bookmaking operations in the
1960s.

Internet casinos and poker sites are different from their sports-betting
counterparts, some legal experts say.

At least two courts have upheld the position that sports betting is illegal
based on the Wire Act, the primary federal rule on gambling. But one of
those decisions also said the Wire Act applies to sports betting and not
other forms of gambling.

That 5th Circuit Court decision in 2002 is one of the chief reasons that
online poker sites and advocates are breathing easy even after the surprise
arrest of Carruthers on 22 counts, including violation of the Wire Act.

The Toronto-based Interactive Gaming Council, the biggest trade group for
online casinos, about three years ago dropped members who took sports bets
from Americans. The trigger was a bill moving through Congress similar to
the Internet gambling prohibition that recently passed the House of
Representatives and now faces scrutiny in the Senate.

Even if the Justice Department doesn't end up targeting poker-only sites,
poker advocates say the BetonSports indictment is a disturbing development
in a libertarian-minded industry that generally dislikes government
intrusion.

Online poker players in Nevada already are breaking the law and getting away
with it. Nevada law prohibits the accepting and placing of bets with
operators that aren't licensed here. While offshore casinos would argue they
aren't based in Nevada or processing bets here, Nevada regulators disagree.

State officials are reluctant to prosecute offshore companies - a monumental
task that's viewed as the job of the federal government - nor do they have
the stomach to prosecute individual poker players.

Several sites, including Bodog.com and ParadisePoker.com, are in the
complicated situation of owning online sports books in addition to their
Web-based casino and poker rooms.

Ayre started Bodog.com as a sports betting site in 2000. The site has
ballooned into a major poker and casino game enterprise.

The Canadian was feeling confident at last year's convention, saying his
business isn't subject to U.S. regulation and is licensed and regulated in
Costa Rica and the United Kingdom, which is developing online betting rules.

His fearless attitude remains intact even as he called off his event and
jumped on a plane to Asia. (His philanthropic foundation is setting up a
sanctuary in Vietnam to protect bears from the underground practice of
farming bile from bears' livers - one of several far-flung charitable causes
he is pursuing .)

"The actions taken by the authorities (against BetonSports) have nothing to
do with our organization; we are simply acting prudently for all concerned,"
Ayre said in a statement.

Bodog canceled the event after getting flooded with calls from concerned
conference attendees after the Carruthers indictment, he said.

Ayre is moving the conference abroad but plans to continue hosting charity
events in the United States, which in years past have included
celebrity-studded parties in Hollywood and Hawaii.

One legal expert says he would be wise to stay out of the country for the
foreseeable future.

"I think the liability (for sports book operators) is open and shut," said
Joseph Kelly, a law professor and Internet gambling expert at State
University of New York at Buffalo and a speaker at last year's Bodog
conference.

Meanwhile, Bodog's hospitality lounge - which promotes the company's poker
site and makes no mention of sports betting - is open and ready for
entertaining at the Rio. So is the lounge for ParadisePoker.com, a site
owned by a publicly traded company in London that also runs a sports betting
operation here.

An after-hours party - a highlight of the Internet gambling conference -
will still go forward at the Venetian's Tao nightclub Tuesday, with
appearances by television celebrities and singer Vince Neil of the band
Motley Crue.

As online poker's estimated 23 million-player base continues to grow, the
Poker Players Alliance, a Las Vegas-based lobbying group that formed a few
months ago with the primary purpose of combating an online betting ban under
way in Congress, is gaining membership and some measure of respect.

The alliance claims more than 40,000 members and to be attracting hundreds
more since the House of Representatives passed an Internet gambling
prohibition two weeks ago aimed at capturing all casino games, including
online poker, under the Wire Act's net.

"Just putting the word 'Internet' in front of poker shouldn't make the game
or people behind it suspect," said Michael Bolcerek, an amateur player and
president of the alliance. "A lot of (legislators) will privately agree with
you, but publicly will take a political stand."