WASHINGTON - Congress is considering legislation that would prohibit consumers from using credit cards to gamble on the Internet, but the card industry is steering clear of the debate.

Despite the loss of potential revenue from an industry that is growing by leaps and bounds, none of the major card companies are taking a position on the bill that until late Wednesday had been scheduled for a House Banking Committee vote today. As long as the bill limits card issuers' responsibility if gambling charges inadvertently go through, MasterCard International, Visa, and their banking partners will not attempt to influence its outcome.

"What's most important to us is that our members not be caught up in some sort of liability when they are basically innocent bystanders," said Lamar Smith, senior vice president for government relations at Visa.

The bill, chiefly sponsored by House Banking Chairman Jim Leach, R-Iowa, would ban the use of credit cards, checks, electronic funds transfers, debit cards, and other "bank instruments" in making bets online - though it could not stop U.S. consumers from setting up accounts with banks overseas.

In introducing the legislation last month, Rep. Leach called Internet gambling "an easy way for young people to lose extraordinary amounts of money."

"The tragedy is that excessive gambling leads not only to lost money but to lost homes and marriages and too often precipitates desperate acts such as suicide," Rep. Leach said.

Law enforcement agencies also suspect that some Internet casinos - most of which are based outside the United States - are set up to facilitate money laundering "by criminal groups as diverse as Latin American drug dealers and the Russian Mafia," Rep. Leach said.

Today's scheduled vote was delayed at the last minute after the Clinton administration raised some questions. Assuming the bill gets out of committee, its fate is uncertain. It could be attached to a larger bill that would ban Internet gambling entirely, though that bill, which has passed the Senate as well as a House committee, is losing steam amid concerns that it grants too many exceptions.

Brian W. Smith, a partner at the law firm of Mayer, Brown & Platt in Washington and former general counsel at MasterCard, said credit card issuers may be staying on the sidelines because they do not want to be viewed as gambling advocates. Indeed, both American Express Inc. and Discover said they do not work with merchants that they know to be involved in gambling.

"While they are always looking for ways to make money, this is a very controversial way to do it," Mr. Smith said. Besides, MasterCard and Visa have larger issues to deal with at the moment, specifically an antitrust trial that will begin next week. "They only have so much political capital to spend," Mr. Smith said.

Other observers suggested that bank and credit card executives - concerned about customer bankruptcy and merchant fraud - might actually sleep better knowing that their cards cannot be used to make bets online.

Just recently, MasterCard and Visa were ordered by a California court to forgive a $70,000 debt a customer had amassed gambling on the Internet. And credit card issuers have always found Internet gaming sites difficult to police, because many are set up in countries such as Belize and Antigua.

"Most card issuers aren't thrilled when their customers run up gambling debts, because there is the potential that those people could become insolvent," said Linda Echard, president of the bankcard division for the Independent Community Bankers of America. "With Internet gambling, there is a lot of potential for fraud," said Joan Warrington, who specializes in consumer credit issues as a counsel with the Morrison & Foerster law firm in New York. "Some controls might not necessarily be a bad thing."

Still, if the bill is passed, U.S. credit card issuers could regret the decision not to fight it. According to Christiansen Capital Advisers, a New York investment banking and consulting firm that specializes in gambling and entertainment, revenues from Internet gaming are expected to reach $6.3 billion in 2003, compared to $1.2 billion in 1999. About 50% of Internet bets are made by U.S. consumers, and the overwhelming majority are made by credit card, said Sebastian Sinclair, vice president at Christiansen Capital.

"We are at the very beginning of what will be a huge industry," Mr. Sinclair said. He noted that the number of sites has grown from a handful in 1998 to close to 1,000 today. In a recent report, Mr. Sinclair suggested that the market for online gambling would not level off until the Internet is as "ubiquitous" as telephones and televisions. He also questioned whether a credit card ban would ever succeed in discouraging U.S. consumers from betting online. As he sees it, Internet gaming sites will "make it very easy" for U.S. residents to set up accounts with banks in countries where gambling is considered less taboo.

"Other countries are recognizing that gambling on the Internet is a fact of life," said Mr. Sinclair. "The U.S. is going one way on this, and the rest of the world is going in another."


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