World Wide Wagering : Santa Ana Company Bets Gambling Wins on the Web

Amid the din of a Las Vegas casino, with gamblers muttering to themselves and coins clanging into metal trays, you wander up to a slot machine, slip in a couple coins and give the handle a good crank.

But in this casino the noise is digitally recorded, the coins are minted in a software shop, and the handle is actually the mouse of your home PC.

Gambling over the Internet has so far generated a lot more software than hard cash. But that could change soon, with a handful of companies, including Santa Ana-based World Wide Web Casinos Inc., planning to launch online casinos in the upcoming months.

World Wide Web Casinos hasn’t started the betting yet, but on Thursday announced the opening of a glitzy Web site that by Thanksgiving, company officials say, will offer computer users around the world the chance to play poker, blackjack or slot machines with real money at stake.

Experts are urging consumers to be cautious, but given the rapidly growing popularity of both the Internet and gambling, an industry that combines the two could become a blockbuster. One analyst has predicted that online betting could be a $10-billion a year industry by the year 2000.

With that kind of loot up for grabs, companies like World Wide Web Casinos are scrambling for a place along this emerging casino strip in cyberspace. A few overseas companies are already accepting sports bets or operating international lotteries, but the casino-style gambling rush isn’t expected to arrive until later this year or early 1997.

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Expectations are soaring.

“We think we’re on to something rather huge,” said Peter Demos, a former pit boss in Lake Tahoe who is president of World Wide Web Casinos. “The Internet is the future, and the world is our casino.”

But financial success of any kind on the Internet has so far been about as easy to grasp as a mirage in the Nevada desert. And there is a great deal of uncertainty about whether online gambling operations violate federal and state laws.

Federal law “prohibits the transmission of wagering information by wire, and the Internet would be considered a wire transmission,” said John Russell, a spokesman for the Justice Department. He acknowledged that the government isn’t enforcing the law because “it isn’t one of our priorities.”

But World Wide Web Casinos and other companies contend that U.S. laws don’t apply because the online bets will actually be placed overseas in gambling havens such as Antigua, a sovereign island in the Caribbean.

A company news release issued Thursday challenged the government’s legal argument.

“The Internet is a global communications technology not bound by the laws or control of any one government,” said Chairman Peter D. Michaels. He added that online betting “cannot be illegal” because betting transactions take place overseas in casinos that are “legally licensed and taxed by the host government.”

The matter may not be resolved for years, but is certain to get a great deal of attention soon. Congress recently approved plans to establish a commission to examine the rapid growth of the gambling industry in the United States and its impact on society. The commission is expected to pay particular attention to gambling on the Internet, including whether it should be allowed and how it should be regulated.

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The mechanics of casino gambling over the Internet are fairly simple. At World Wide Web Casinos, it all begins with a visit to the company’s Web site at https://www.netcasino.com. Bettors have to fill out an online registration card and set up an account in Antigua either by credit card over the Internet, or by mailing a check or money order.

In return, bettors receive in the mail a packet of CD-ROMs that contain the software needed to play the various games, Demos said, as well as a Visa debit card whose balance reflects online wins and losses.

Many consumers are likely to feel uncomfortable setting up such accounts or sending their credit card numbers over the Internet. And experts urge caution.

“Consumers need to realize that this is not the gambling they’re familiar with,” said Steve Telliano, a spokesman for the state attorney general’s office. “Las Vegas is very tightly regulated, and this has virtually none of that regulation.”

Further, he said that because the transactions take place overseas, U.S. government agencies will be of little help when disputes arise. Consumers, Telliano said, “will have no recourse.”

But Demos and others in the industry say they know consumers are going to be skeptical, and that the success of the industry depends on earning consumers’ trust.

“If you’re not fair and square, word gets out very quickly on the Internet,” Demos said.

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Despite the uncertainties both commercial and legal, industry experts are convinced that gambling over the Internet is a market waiting to explode.

Gambling of all legal varieties generated $44 billion in revenue in the United States last year, according to International Gaming and Wagering Business Magazine. The total amount of money wagered was $550 billion, compared to $126 billion in 1982.

And even if the U.S. were to crack down on online gambling, Demos and others say that overseas markets are still vast. “There are many more people in the world with computers,” Demos said. “Asia is just a huge, huge market.”

In fact, one budding online gambling company, VentureTech Inc. in Reston, Va., plans to avoid the U.S. market altogether when it launches its service in early 1997. Until the legal issues are resolved in the United States, company officials said, VentureTech won’t accept bets from U.S. consumers.

“Gambling is a trillion-dollar business worldwide,” said Art Rosenberg, chief operating officer of VentureTech. “It’s going to be an enormous market if it’s done right.”

For now, World Wide Web Casinos is getting ready. The company has 90 employees, Demos said, including software programmers and Web site designers. The company raised $7 million through a recent private stock offering, he said, and its equipment is already capable of handling 3.5 million bets per hour.

The company expects its typical customers to be “low-rollers, people willing to bet $15 or $20 a session, and play an hour or two at a time.”

In some ways, the wagering has already started.

“Peter Michaels and I have a bet,” Demos said. “I’m betting it’s going to be less than $1 million per month when we start, and he’s betting it will be more.”

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World Wide Web Casinos at a Glance

* Founded: 1995

* Headquarters: Irvine

* Chief executive officer: Peter Michaels

* Employees: 90

* Services: Facilitates legal gambling on offshore computers via the Internet.

Source: World Wide Web Casinos; Researched by JANICE L. JONES / Los Angeles Times