July 12, 1999 5:55 PM PDT

Net gambler settles suit against MasterCard

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A woman who gambled away $70,000 online and then sued her credit card companies has settled with MasterCard, resulting in new rules about gambling on the Web with credit.

As previously reported, Cynthia Haines used her credit cards to gamble over the Internet and was sued by her credit issuer, Providian National Bank, over unpaid bills. She then filed a countersuit against the bank as well as Visa and MasterCard, claiming the companies were at fault for letting her gamble with credit in the first place.

Haines's lawyer, Ira Rothken, said Haines sued MasterCard for injunctive relief, to "get them to stop violating California law," and was not motivated by money.

The 1993 case Metropolitan Creditors Service of Sacramento v. Sadri determined that gambling debts are not collectible in California, Rothken said. "The settlement agreement with MasterCard coupled with the California law is devastating to the Internet casino merchants," he said.

Ed Dixon, a spokesman for MasterCard, said that as part of the settlement, the company has introduced new rules related to Internet gambling.

To continue using MasterCard credit cards, gambling sites will have to post a notice explaining that Internet gambling may be illegal in the user's jurisdiction, Rothken said. Internet casinos in their user agreements also must ask where the user is located.

"When you couple those requirements with the California law that stands, [Internet casinos] would be taking the bets at their own peril," Rothken said. "Internet gambling sites are going to find out they can't collect."

But others say Internet gambling will go on regardless. "They're not going to stop it," said Philip McGuigan, an attorney with Gordon & Glickson who specializes in Internet gambling issues. "As a practical matter, it is tomfoolery what is going on with the United States and Internet gambling?people have many ways to get around this."

He said he will focus the case on the theory that Internet gambling is illegal in California by the same laws that disallow poker machines. Visa, by allowing Internet casinos to use its credit card clearance system and making 2 to 5 percent off the transactions, "is essentially aiding and abetting illegal gambling in California and making money off it," Rothken explained.

Rothken said he also will point out that providing credit for gambling is unlawful in California because of the Metropolitan Creditors case. "Even if the game were lawful, the California court of appeals does not allow gambling on credit," he said.

Rothken filed the MasterCard settlement for approval by the Marin County Superior Court. He said he expects it to be approved July 29.

Haines also settled last week with some of the issuing banks that tried to collect money, according to Rothken. He declined to disclose the terms but said Haines is "pleased with those agreements."

Haines still will go to court October 20 against Visa, Providian, First Union, and related Visa members, Rothken said.

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Hmmm, this seems like a huge problem for online casinos. They can't collect their debts?!?!

I wonder why online forum sites like www.ch4nce.com haven't reported more of this.
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