Should Online Gambling be Legal?
There has been explosive growth in online gambling sites since the introduction of the World Wide Web in the early 1990s. With the increasing presence of these operations, which are mostly managed from other countries, the U.S. Congress as early as 1995 began to address this issue through legislation that would ban Internet gambling.
The first online gambling site launched in August 1995. The Internet Gambling Prohibition Act was filed in the US Senate in 1997. At that time, Internet gambling had grown into a 300 million dollar industry with some 32 online casino sites.
Today, it is estimated that there are well over 2,000 Internet gambling Web sites offering various wagering options, including sports betting, casino games, lotteries and bingo.
Internet gambling revenue in the United States was $5.9 billion in 2005, according to Christiansen Capital Advisors (CCA). CCA estimates that nearly 23 million people gambled on the internet in 2005. Approximately 8 million of those gamblers were from the United States.
Legislation on Internet Gambling
Although technically, online gambling should have no territorial boundaries since the Internet knows no boundaries, the US is seeking to control online gambling.
On Friday the 13th of October, 2006, the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA) was enacted into law. It does not forbid online gambling per se, but prohibits the funding of unlawful Internet gambling.
The UIGEA criminalizes the acceptance of funds from bettors by operators of most online gambling Websites. The operators affected are those who being engaged in the business of betting or wagering knowingly accept proceeds from credit cards, electronic fund transfers and checks in connection with or with the participation of a bettor in unlawful Internet gambling, which is the sponsorship of online gambling that violates any other federal or state anti-gambling law.
Typically, gamblers upload funds to the online gambling company, make bets or play the games that it offers, and then cash out any winnings. European gamblers can often fund gambling accounts by credit card or debit card, and cash out winnings directly back to the card.
Because of the UIGEA, most US banks now prohibit the use of their credit and debit cards for the purpose of internet gambling, and attempts by Americans to use credit cards at internet gambling sites are usually rejected. A number of electronic money services offer accounts with which online gambling can be funded. However, many top fund-transfer sites such as FirePay, Neteller & Moneybookers have discontinued service for U.S. residents. Instead, payment by check and wire transfer is accepted by these online sites.
Some officials say it’s against the law to wager over the Internet or telephone. Others say the illegal part is the gambling operation itself, if it’s set up on U.S. soil — which is why Web sites operate offshore in places such as the Caribbean, Latin America and Australia. And still others say it’s not worth debating because the government has larger fish to fry, plus gambling cases are unpopular to prosecute and often ignored unless it’s serious, illegal, mob-type stuff. The Internet Gambling Regulation and Enforcement Act, introduced in Congress in April 2007, established an enforcement framework for licensed gambling operators to accept bets and wagers from individuals in the United States.
If the bill becomes law, it would essentially hit Internet gambling by choking off the money supply — making it illegal to write a check or use a credit card or any other form of payment in gambling online. Provisions in the bill would have bank regulators use their enforcement powers to go after the banks to stop payments from going to the cyber casinos.
Revenues from Internet Gambling
Back in 1997 the American economy was still booming and dot.coms hadn’t yet gone bust but today advertising revenue from offshore gambling sites fuel the Internet economy. Over the past few years, Internet businesses have been scrambling to stay afloat and the advertising revenue from these gambling sites has been too irresistible to refuse. If that revenue were to be suddenly cut off, many Internet companies would feel the crunch.
Since most of these offshore gambling sites are out of the reach of US authorities and are legal in the countries where they exist, there is really little US authorities can do to stop them. It is estimated that 60 percent of all offshore gambling dollars comes from Americans.
According to the Justice Department, Internet gambling is illegal for Americans. The courts have ruled that under the 1961 Wire Wager Act, which prohibits the use of phone lines for placing sports bets, Internet sports betting is illegal.
Many credit card companies have already distanced themselves from online gambling. The list includes Bank of America, Fleet, MBNA and Chase Manhattan, as well as Citibank, which controls about 12 percent of the U.S. credit card market.
Credit card transactions are often coded to indicate what is being bought or sold. By blocking certain codes, banks that issue credit cards can avoid issuing credit for much of the gambling activity that occurs on the Internet.
In the past companies like PayPal predominated the online gambling payment market. This is no longer the case, however, since PayPal recently decided to stop taking gambling payments due to the uncertainty of the law.
Another issue is how to address the needs of problem gamblers. Online casinos present difficulties for these individuals, just as land-based casinos do. But through the Internet, it is possible to set financial limits on an individual’s gambling, through the use of shared record-keeping.
Sports betting is a more specialized form of gambling and attracts a much smaller set of habitual gamblers. With sports betting, even though there’s a following, it tends to be more technically challenging as quite a bit of analysis is needed compared to playing on a slot machine, which is a pure chance game.
Newsweek has reported that gambling has been a common feature of American life forever, but for a long time it was broadly considered a sin, or a social disease. Now it is social policy as the most important and aggressive promoter of gambling in America is the government.
There are Forty-four states who have lotteries, 29 have casinos, and most of these states are to varying degrees dependent on revenues raised from gambling activities.
The position of the American Gaming Association, which represents the commercial casino entertainment industry, has remained constant since Congress first began considering Internet gambling legislation. The association maintains the view ”that the technology necessary to provide appropriate regulatory and law enforcement does not presently exist with regard to Internet gambling… until those concerns can be adequately addressed, the AGA remains opposed to Internet gambling.”
Countries where online gambling is legal take exception with the fact the US is attempting to outlaw it. Antigua and Barbuda recently announced their intention to bring the United States before the World Trade Organisation (WTO) over its anti-Internet gambling stance and what is sees as interference in its economic development.
Antigua has more than 100 licensed online casino operators, which generate millions of dollars every year for the Antiguan government. With the downturn in the tourism industry, the country has come to rely on revenues generated from licensing and taxing of online casinos on its territory. The online betting industry employs 3,000 people in Antigua, and officials say the U.S. would be in violation to its commitments under the WTO’s commercial services agreement.
Pros and Cons
Legalizing Internet gambling has its positive sides for all parties involved – gamblers, gambling websites and government.
For online gamblers, security is arguably the most important feature of legal online gambling – how many times have you gambled online at a casino or a sportsbook and win, only to find out that there will be no check coming your way? Crooked online casinos and sportsbooks will continue to exist, even if Internet gambling is legalized, but the customer will have a wide array of licensed gambling websites to choose from, therefore curbing fraud to almost zero.
People want to gamble, they want to win and they want to get their winnings. A legal licensed gambling website would guarantee this.
The gambling websites also stand a good deal to gain from legal online gambling. Legalizing your online gambling business, whether it is a sportsbook, casino, poker room or payment processor would lift the burden of looking over your shoulder for the Federal authorities. Also, advertising your website in a legalized Internet gambling atmosphere would also be easier tenfold.
Which leads us to the third group of legal online gambling beneficiaries; the government. Supporters of online gambling cite a recent tax revenue analysis prepared by Pricewaterhouse Cooper that says federal revenue from regulated Internet gambling is estimated to be between $8.7 billion and $42.8 billion over 10 years.
Resources must be set aside to oversee the industry and the laws, but this is an insignificant cost compared to the benefits and revenues to be gained from legalizing online gambling.
On the other side, there are a small number of cons when we talk about legalizing Internet gambling. There are several parties which would hate to see the online gambling industry legalized in the United States. There are plenty of online sportsbook and online casino operators which have no interest in ever visiting the United States or desire to share some of the wealth with the government (in the form of taxes or fees).
As the gambling sites have already proven to us – you can always find a payment processor to take the customers’ money. And the U.S. cannot do anything to block those websites. So those individuals remain quite comfortable in the current lawless situations and would anything but lobby for legalization.
Online gambling is still considered a legal grey area. While it is technically illegal in most of the United States, the prosecution and conviction of individual players is very difficult because they’re gambling from home. It is also illegal for a gambling Web site to operate within the United States, which is why the offices and servers of most online casinos are located in other countries.
There are now more than about 70 countries that allow online gambling sites to set up shop, including Australia, New Zealand, South Korea, Denmark, Finland, France, Germany, and Canada.
When you register for an online casino, you are required to agree to the site’s terms and conditions. Finding out whether or not gambling is legal where you live is your responsibility. You must also abide by any age limits set on gambling in your locality. If online gambling is illegal in your area, and authorities discover that you’ve won money, your winnings could be forfeit. Check reputable web sources such as Gambling City to make sure you benefit from your winnings and are not violating any laws.