Lee Rousso has a secret. It’s one that he is nervous to share, even with friends over drinks, he says. The Renton, Washington-based attorney is an online poker player — or he was for three years until last year when Washington state declared Internet poker illegal and designated most forms of online betting a class C felony with a maximum penalty of five years in prison and a $10,000 fine. Recently married, Rousso didn’t see his hobby as an activity worthy of legislative intervention. “I have a business to take care of , a family. If it were legal, I would play for about an hour a day, and my wife is fine with that,” he says. “I think anybody, if you had your hobby declared a crime, would be pretty upset.”

Unwilling to quietly pack up his game and quit, Rousso took his battle to court, challenging the 2006 Internet gambling ban as unconstitutional. Since filing his suit, he’s been dismayed by the state’s reaction. In August, he was served with interrogatories (written interrogations) about his banking records — questions he thinks were designed to intimidate and harass him. “It’s hard for poker players to be vocal. To speak out against the law, you have to identify yourself as a criminal.” The information that the state sought in the interrogatories “was incriminating and I shouldn’t have to reveal [it] under the Fifth Amendment,” he says. On a Web site that carries updates of the Lee Rouso vs. State of Washington case, he explains that “Instead of seeking information related to my constitutional challenge, the State is attempting to collect information so that it can charge me with a crime.”

This legal minefield became even more treacherous for online gamblers in October 2006 when the U.S. Congress passed the Federal Unlawful Gambling Enforcement Act, or UIGEA, which tightens the definition of illegal gambling by forbidding the cross-border transmission of gambling from states or countries where it’s legal to states where it is not. It also makes banks and other financial gateways responsible for identifying and then blocking illegal transactions, a task that’s likely to be cumbersome and less-than-perfectly executed given the mish-mash of laws and exemptions. At least two challenges to the new state and federal regulations are now in court, with more in the wings. The battle to follow, which is creating odd bedfellows in and out of the gambling industry, is complicated by the fact that some form or another of gambling — huge revenue-generators for local governments — is legal in 48 states.

Conservative groups like Focus on the Family vow that the Internet-betting ban is just one step in their mission to outlaw all gambling. The negative social costs, including increased crime, bankruptcy, and family disruptions, outweigh any claimed economic benefit, they say. Pro-gaming groups counter: “The worst possible thing to do is take this entire industry out of the view of regulation and taxation and put it into an underground environment,” says Edward Leyden, president of Interactive Media Entertainment and Gaming Association, a non-profit that lobbies for online-gaming interests.

The U.S. has had a long and complicated affair with gambling, going through phases of prohibiting and allowing various games of chance from lotteries to horse racing and card games. Since the 1930s, however, legalized gambling has slowly gained currency, with 27 states allowing some form of casino gambling between 1977 and 1996, according to a 2000 paper “Casinos, Crime, and Community Costs” by researchers at the University of Illinois and University of Georgia. Today, 48 states have some form of gambling, most sell their lotteries online, and 29 allow Internet-based horse betting, says Martin Owens, a Sacramento-based attorney and co-author of Internet Gaming Law.

At this point, only nine states, including Washington, have laws specifically banning Internet betting. In states with no special ban, some businesses and players have interpreted silence as acquiescence. Owen points to Illinois as a good example of the contradictions in all these overlapping laws and regulations. A crap game on a riverboat casino, which is licensed, is okay. The same game played in somebody’s garage or via the Internet is illegal. “If a licensed operation can get Internet gaming approved, its license will cover it,” he says. “The important thing is government permission and licensing. It is relatively easy to control, tax, and supervise gambling establishments that must occupy actual real estate … It is much harder to impose rules on somebody located thousands of miles away in another country. That’s the main reason [lawmakers] are trying to block Internet gambling.”

Russo hopes his constitutional challenge of Washington state law will deal a deathblow to the tangle of regulations. He and the Interactive Media Entertainment and Gaming Association, which is fighting the Federal ban, are prepared to take their battle to the U. S. Supreme Court. Both lawsuits, however, are at a standstill. Rousso challenged the state’s demands for his banking records and, after losing the first round, has filed an appeal. Interactive Media, on the other hand, is waiting for the Federal District Court of New Jersey to rule on its motion for a preliminary injunction against UIEGA and on the defendants’ cross-motion to dismiss their suit.

Another important voice in the debate has been the Poker Players Alliance, which has spent $520,000 on its lobbying efforts, according to a news report in Washington-focused Politico.com. The Alliance, which claims to represent more than 800,000 members, recently launched a massive effort in the Washington D.C., meeting with 50 members of the U.S. House and Senate over two days. “We want to demonstrate that we are a real, growing and vocal constituency,” says John Pappas, president of the Poker Players Alliance. “And that we will be very vocal and active in future elections.” The Alliance’s lobbying efforts support regulation and taxation of the industry in lieu of an outright ban, and it is pushing to carve out an exemption for “games of skill,” such as poker, according to its members.

Chad Hills, a gambling research analyst for Focus on the Family — a non-profit with the goal of nurturing and defending families — is skeptical of the Poker Players Alliance’s membership claims. “I think they’re getting a lot of members that aren’t really individuals; that are one person applying under multiple names,” he says. Even if the numbers are true, he contrasts them with the problem of twenty-million odd pathological gamblers in the U.S. The “Casinos, Crime, and Community Costs” study also found that crime increased in communities with casinos.

The domestic-gambling debate club got a new member earlier this year: the World Trade Organization. The WTO ruled that America’s Internet gambling laws are a discriminatory hurdle to trade. With the U.S. unwilling to change its stance, it might be forced to pay compensatory damages of over $100 billion to trading partners like the European Union, Japan, and India, according to online industry sources. Regulating and taxing online poker businesses has the potential to net the government $2 billion to $3 billion in tax revenues, says Pappas. “Now this new law is actually going to cost the federal government billions of dollars.”

With all sides hunkering down for an extended battle, the virtual gambling debate will continue for years to come. Anthony Cabot, a partner at Lewis and Roca LLP, a law firm in the southwest U.S. and co-author of Internet Sweepstakes, Contests, and Games, feels that legal efforts to strike down UIGEA might be premature at this time. Its legality, he says, is more likely to hinge on the “practical implications” of trying to adopt the regulation. For example, how do you stop a company in England from doing its online-gambling business just because a player logs on in Washington state? Creating penalties in the law for banks that handle the transaction is one way. Still, what happens if the bank gets it wrong? What happens if the player is in Massachusetts — which doesn’t have an outright ban on Internet betting — instead of Washington State (which does)?

Opponents of online gambling are counting on Congress and state legislators to continue tightening the screws on the industry. Gamers hope that their multi-pronged attack — legal, political, economic, and international — will eventually wear down the opposition. Rousso, for one, has already mapped out an alternative course of action if the uncomfortable questions posed by the attorney general’s office force him to withdraw his suit against Washington state. “If I can’t go to court, I have a different plaintiff who will be able to step into my shoes” and take the same challenge forward, he says. The plaintiff? Another poker enthusiast who moved from Washington to Massachusetts to stay in the game.

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