By Adam L. Penenberg

ichard Jacobs, a TV and film director, often goes to Las Vegas to play high-stakes blackjack. But on a recent trip to Hong Kong in February, he decided to give Internet gambling a try, and wired $20,000 to the Tradewinds Casino, which operates out of Costa Rica. 

Over the course of six weeks, he says, he got lucky and his stake grew to $70,000. But Jacobs, whose professional name is Richard Munchkin, claims that when he tried to withdraw some of the money, Tradewinds accused him of taking advantage of a "bug" in the software and not only refused to pay him his winnings, but has not even returned his initial $20,000. 

"Twenty grand is a lot of money, but I do gamble for these types of amounts," Jacobs says. "I was somewhat worried about this kind of thing but I had heard that Tradewinds was one of the larger and more reliable casinos. I also heard they were making a lot of money. To date, I have never received a dime so I am out not just the $70,000 I won, but also the $20,000 initial investment." 

Horror stories like the one Jacobs tells are not uncommon in the freewheeling and dealing Internet gaming world, a virtual world where consumers are at the mercy of the casino operators, some of whom have shown themselves to be less than scrupulous. 

Yvonne Siu, the owner of an import-export firm in Hong Kong, says she wired $18,000 to Tradewinds last March, but was told that the amount exceeded the casino's monthly limit. When she asked for her money back, she had no luck. 

The owner of Tradewinds "lied to me twice that he had wired the money back to me," Siu says. "He has been avoiding my phone calls, faxes and E-mails ever since April 20th. He has stolen $18,000." After Forbes Digital Tool began making inquiries, Tradewinds promised to Fedex her a cashier's check, but she has not received a dime yet. (Click here for Tradewinds' response.) 

The online gambling market promises to be huge, even if Americans are restricted from participating. Senator Jon Kyl (R-Ariz.) has sponsored "The Internet Gambling Prohibition Act," to take the ambiguity out of the Federal Wire Act, which makes it illegal to take sports bets over telephone lines. Kyl’s law would prohibit all gambling over the net. 

Sebastian Sinclair, a gaming analyst for New York-based Christian Cummings Associates, a consulting firm that focuses on gambling and entertainment, estimates that online gambling brought in about $895 million last year, although numbers are hard to come by since the activity is not regulated. Sinclair expects the market to grow to $6.5 billion by 2001--a drop in the bucket compared with real-world gambling, which saw $50 billion in revenues last year. 

Unlike the traditional casinos of Las Vegas and Atlantic City, which are intensely regulated by the government, online casinos are usually located on servers in the Caribbean or Latin America--sunny locales like Antigua, The Bahamas, Costa Rica and the Dominican Republic. The net result: If a gambler is swindled by the house, it could be tough to recover his money. 

But refusing to pay winnings is only one way unscrupulous online casinos have of bilking gamblers. There are a number of methods virtual gambling dens can use to pad their profits--jiggering software to further stack the odds in favor of the house, refusing to credit gamblers’ accounts and stiffing people who post click through banner ads on their sites. 

"In one world you have the land-based casinos of Las Vegas and Atlantic City--the most highly regulated industry in the world," says Anthony Cabot, a gaming attorney and author of Internet Gambling Report II. "This clashes with the most unregulated environment on the planet: The Internet, a place where there are bound to be people who don’t play fairly." 

In Nevada, state regulators keep a tight rein on the casinos. For example, each manufacturer is required to submit slot machines for testing, to ensure that each machine pays out 97% of every dollar inserted. (Other gambling locales average a payout of 85%, depending on the amount of competition.) Regulators check the source code for each brand to make sure there is no hidden code that would, for instance, cancel out all flushes in poker, or in other ways increase the odds that the house will win. After the machine is approved and put into the field, regulators randomly select machines and compare the source code to the chip in the machine. If you’re caught cheating, you can lose your license. 

But how do you introduce such tight regulation to the Internet, when casinos and gamblers are scattered across the globe, subject to their own local laws and ordinances? 

On the Internet no one can check for cyberscams

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