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New York’s Attorney General, Eliot Spitzer, recently announced that Citibank, the largest U.S. credit card issuer, has agreed to block online gambling transactions with its credit cards. Given the inability of the law to fully grapple with the problem of online gambling, efforts by credit card issuers like Citibank could really help to reduce illegal Internet gambling. THE PROBLEM According to the Attorney General, “Americans now waste $4 billion a year” on online gambling. In various states like New York, the promotion of unauthorized betting and gambling is illegal, no matter whether the betting and gambling take place in the brick and mortar world or in cyberspace. Enforcing the law is another issue altogether. Many Internet gambling businesses operate offshore in foreign locations, in an attempt to place themselves beyond the enforcement power of U.S. governmental authorities. Meanwhile, some online gamblers go deep into debt and at times into bankruptcy. Moreover, it is difficult to prevent minors with access to credit cards from gambling over the Internet. HELP IS ON THE WAY Citibank has agreed to block credit card transactions that are identified by casinos and Web sites as constituting online gambling. Credit card transactions are “coded” when initiated to show items that are to be purchased or sold. By blocking certain codes, banks that issue credit cards can avoid issuing credit for quite a bit of online gambling activity. Other credit card issuers, such as Bank of America, Fleet, Direct Merchants Bank, MBNA, and Chase Manhattan Bank, have blocked such transactions over the past several years. However, Citibank, which reportedly controls approximately 12 percent of the U.S. credit card market, did not block such transactions until reaching the recent agreement that was prompted by an investigation by the New York Attorney General. The New York Attorney General now has called upon all credit card issuers and other payment systems to follow the lead of Citibank and other banks that block online gambling transactions. WRAP UP The agreement reached between the New York Attorney General and Citibank represents a creative way of dealing with illegal online activity. When legal efforts to prosecute criminals abroad face obstacles, cutting the financial purse strings at home that drive the criminal activity is yet another way of helping to achieve the desired end. Eric J. Sinrod is a partner in the San Francisco office of Duane Morris, where he focuses on technology and litigation matters. His Web site is sinrodlaw.com and his firm’s site is Duane Morris.Mr. Sinrod may be reached by e-mail at [email protected]

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