Internet gambling on 60 minutes

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So many Americans use their computers to gamble on overseas Web sites that if those virtual casinos were to be regulated and taxed by American authorities, tax revenues would be in the billions of dollars.

But the federal government says Internet gambling is 100 percent illegal, and people who want to keep it that way believe that the sites, legal in a growing number of foreign countries, can never really be effectively regulated.

What’s more, they say, those sites can and do corrupt children and create more addicted gamblers. 60 Minutes correspondent Lesley Stahl examines this contentious issue this Sunday, Nov. 20, at 7 p.m. ET/PT.

In Britain, where many online gambling firms are based, a gaming executive says America’s treasury is missing out. “We calculated that, were America to have regulated the industry in 2004, the American states would have earned $1.2 billion in tax,” says Nigel Payne, who runs London-based Sportingbet, one of the biggest online gaming companies.

Payne says he would be glad to pay an American tax in return for regulation of his industry, which he believes would eliminate some of the less-than-reputable sites he competes with. Payne estimates that 12.5 million Americans gamble on the Internet.

Bets placed from the U.S. comprise as much as 80 percent of global online gambling, and contribute most of the $10 billion in profit the overseas “I-gaming” industry will make this year.

Despite a long-standing federal ban, more Americans gamble more money on the Internet each year. U.S. authorities have never prosecuted individual bettors and don’t plan to start. Web site operators are beyond the reach of U.S. law because they’re all based overseas, so they operate with impunity, even spending millions to advertise here.

The U.S.’s own domestic gambling industry, which long opposed legalizing online gaming, has begun to shift its position. Seeing offshore competitors make billions while his U.S. company is shut out of the Internet is frustrating for MGM/Mirage CEO Terry Lanni.

“There’s gaming in every state but two states in the United States,” Lanni says. “If it’s legal [in 48 states] and it’s regulated and taxed and we’re comfortable with it, why don’t we allow it also in the area of the Internet? It makes no sense.”

But there’s no serious move yet in Congress to legalize the industry, and at least one member, Sen. Jon Kyl (R-Ariz.) wants a new law to put more teeth in the federal prohibition against online gambling. “It’s so easy to do. It’s so easy for kids to do. It’s so addictive,” says Kyl, who’s pushing a bill that would prohibit U.S. banks and credit card companies from handling any online betting transactions. “We may not be able to stop it all, but if we can stop the major part of it that’s coming from offshore, we will have done something very, very good.”

Kids can get onto some of the overseas sites, as Alex Hartman, the 16-year-old son of 60 Minutes Producer Rome Hartman, demonstrated. Using his dad’s credit card, he gained access to a gaming Web site and quickly lost $100 playing roulette.

Some sites rejected him, however, including one owned by Payne’s company.

Payne says properly regulating the industry so only responsible companies like his will survive is the best and only way to control the inevitable. “Think people are going to stop gambling? Seriously? Do you think the Internet’s going to go away?” he asks Stahl.

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OVer/Under 7 years before it becomes legal.

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