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. Last Updated: 07/27/2016

Law Excuses Internet Gambling Debts

LOS ANGELES -- From her Northern California home, Cynthia Haines used her personal computer and a stack of credit cards to gamble on the Internet. With each click of her mouse, money flowed from her credit card accounts into the virtual craps, roulette and blackjack tables of Caribbean cyber-casinos with names like Acropolis, Grand Dominican and Cyberthrill.

When the banks that issued her 12 credit cards tried to recover the $115,000 in debts that she'd piled up, Haines sued and hit the jackpot: As part of a settlement reached last month, her credit card debts were wiped out along with a $225,000 lawyer's bill.

Bolstered by old laws - some dating back to the 18th century - that make gambling debts legally uncollectable in all 50 states, bettors like Haines are going to court to have their online losses canceled.

Their lawyers are going even further. They've charged in suits filed across the country that banks and credit card companies are engaged in racketeering by allowing offshore casinos to process illegal bets on their customers' credit cards.

As Congress debates whether to ban Internet gambling, some credit card issuers are rethinking their policies. Providian National Bank in San Francisco, one of the United States' largest Visa card issuers, says it will no longer process gambling transactions for its 11 million customers.

Of the 14.5 million people who gamble over the Internet, the vast majority are U.S. citizens with credit cards. Nearly all pay their bills without questioning them.

Tomio Narita, a San Francisco attorney for Providian, argued in court papers that Haines should not be allowed to sue because she said she indulged in illegal gambling.

Someone who has to acknowledge committing a crime in order to establish a claim is barred from suing in California courts, he contended. The judge ruled Haines' case could proceed.

Legal experts say it is unclear whether these bettors and online casinos - mainly located in foreign countries - are breaking U.S. anti-gambling laws. The 38-year-old federal Wire Act prohibits taking bets on sports by phone or wire, which some interpret to include the Internet. Legislation pending in both houses of Congress would clear up that ambiguity by prohibiting all forms of gambling on the Internet.

Casinos in Las Vegas and Atlantic City accept credit cards because most gamblers pay up, and credit card issuers keep allowing cash advances in casinos.