Online gambling

Online gambling is a general term for gambling using the Internet. This article provides a brief introduction to some of the forms of online gambling, as well as discussing general issues.


 

• 1Online casinos
• 2Funds transfers
• 3Legality
  • 3.1United States
  • 3.2Australia
  • 3.3South Africa
  • 3.4Other countries
• 4Problem gambling
• 5Money laundering
• 6External Links

[top]Online casinos

There are a large number of online casinos, in which people can play casino games such as roulette, blackjack, pa*****o, baccarat and many others. These games are played against the "house", which makes money due to the fact that the odds are in its favor.

Online casinos, also known as virtual casinos or internet casinos, are online versions of traditional brick and mortar casinos. Online casinos enable gamblers to play and wager on casino games through the Internet.

Online casinos generally offer odds and payback percentages that are comparable to land-based casinos. Some online casinos claim higher payback percentages for slot machine games, and some publish payout percentage audits on their websites. Assuming that the online casino is using an appropriately programmed random number generator, table games like blackjack have an established house edge. The payout percentage for these games are established by the rules of the game.

Reliability and trust issues are commonplace and often questioned. Many online casinos lease or purchase their software from well-known companies like Microgaming, Realtime Gaming, Playtech, and CryptoLogic Inc in an attempt to "piggyback" their reputation on the software manufacturer's credibility. These software companies either use or claim to use random number generators to ensure that the numbers, cards or dice appear randomly.


Online casino types

Online casinos can be divided into three groups based on their interface: web-based casinos, download-based casinos, and more recently live casinos. Some casinos offer multiple interfaces.


1. Web-based online casinos

Web-based online casinos are websites where users may play casino games without downloading software to the local computer. Games are mainly represented in the browser plugins Macromedia Flash, Macromedia Shockwave, or Java and require browser support for these plugins. Also, bandwidth is needed since all graphics, sounds and animations are loaded through the web via the plugin. Some online casinos also allow gameplay through a plain HTML interface.


2. Download-based online casinos

Download-based online casinos require the download of the software client in order to play and wager on the casino games offered. The online casino software connects to the casino service provider and handles contact without browser support. Download-based online casinos generally run faster than web-based online casinos since the graphics and sound programs are located within the software client, rather than having to be loaded from the Internet. On the other hand, the initial download and installation of a download-based online casino client does take time. As with any download from the Internet, the risk of the program containing malware does exist.


3. Live-based casinos

Live-based casino gaming allows web players to interact with games played in a real world casino environment. Online players can see, hear, and interact with live dealers at tables in casino studios worldwide.


Games offered

A typical selection of games offered at an online casino might include:

• Baccarat
• Blackjack
• Craps
• Roulette
• Slot machines
• Video poker

Online sports betting

Bookmakers and betting exchanges offer fixed-odds gambling over the Internet on the results of sporting events.


Online poker

Online poker tables commonly offer Texas hold 'em, Omaha, Seven-card stud, razz and other game types in both tournament and ring game structures. Players play against each other rather than the "house", with the card room making its money through "rake" and through tournament fees.


Online bingo

Online bingo is the game of bingo played on the Internet. Online bingo is a multi billion dollar business.

Unlike balls used in regular bingo halls, online bingo sites use a random number generator. Online bingo halls usually offer online casino games as well as the bingo, but the actual bingo play works almost exactly like playing online poker or online casino games, with everything being virtual. One notable feature of online bingo is the chat functionality. Successful online bingo sites foster a sense of community and interaction between players.

Some operators require players to download free software to play their games. Other operators use Java or Flash based games that allow you to play immediately online after registering a player account.

To win the largest prizes, users must fund an account, but free bingo games are also available offering players a way to win smaller amounts of money with no risk of gambling. Some online bingo sites offer no deposit bingo with sandbox play. This will allow the player to get the hang of the system without a cash investment, but no monetary value can be gained.

Most sites accept a standard range of e-wallet funding options, such as Neteller, Firepay, Citadel, and PrePaidATM. Sites often provide a number of incentives to deposit, including matching bonuses where the site will reward depositing players by matching a percentage of their deposit.

Recently, the USA government has passed laws that may limit banks ability to process credit cards for US citizens. The laws will soon be detailed and may put a crimp in the ease by which US citizens have been able to play their online bingo pastime in the past.

Bingo is one of the easiest games to play and the online version is no different. Playing bingo online, players can make use of optional features which make playing the game easier, such as auto-daub. Auto-daub automatically marks off the numbers on cards as they are called, so players don't have to. Most software providers support other gaming features as "Best Card Sorting" and "Best Card Highlighting" where players cards are sorted and highlighted by closest to bingo. Some of these features are designed to free players to enjoy the communal pleasantries of the chat features.


Mobile gambling

Mobile gambling refers to gambling done on a remote wirelessly connected device. These devices can include wireless tablet PC's, mobile phones and other non traditional mid-level networked comuting devices. Some online casinos and cardrooms offer mobile options.

Mobile gambling requires a data connection to operate and in most cases this data layer is provided by the telecom provider for the region or country. GPRS, GSM Data, UMTS, I-MODE are all data layer technologies upon which mobile gambling depends.

While still relatively underdeveloped, analysts place the value of the market space at US$20 billion by 2010. Jupiter, Gartner and Seymour Pierce all project rapid growth in the sector through to 2010.

The market is still at a nascent stage at the moment, as mobile operators and brands/ media owners are currently not in a position to create this market due to the potential reputational risk. This is mainly because of the uncertain nature of most countries' in-decision towards regulation of remote gambling online gambling.

Some companies however have begun developing and testing mobile platforms to position themselves early in the anticipated growth of the market.

[top]Funds transfers

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. However, most US banks prohibit the use of their 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.

Payment by check and wire transfer is also common.

[top]Legality

[top]United States

The United States Court of Appeals for the Fifth Circuit in November 2002 that the Federal Wire Act prohibits electronic transmission of information for sports betting across state lines but affirmed a lower court ruling that the Wire Act "'in plain language' does not prohibit Internet gambling on a game of chance."

Some states have specific laws against online gambling of any kind. Also, owning an online gaming operation without proper licensing would be illegal, and no states are currently granting online gaming licenses.

In March 2003, Deputy Assistant Attorney General John G. Malcolm testified before the Senate Banking Committee regarding the special problems presented by online gambling. A major concern of the United States Department of Justice is online money laundering. The anonymous nature of the Internet and the use of encryption make it especially difficult to trace online money laundering transactions.

In April 2004 Google and Yahoo!, the internet's two largest search engines, announced that they were removing online gambling advertising from their sites. The move followed a United States Department of Justice announcement that, in what some say is a contradiction of the Appeals Court ruling, the Wire Act relating to telephone betting applies to all forms of Internet gambling, and that any advertising of such gambling "may" be deemed as aiding and abetting. Critics of the Justice Department's move say that it has no legal basis for pressuring companies to remove advertisements and that the advertisements are protected by the First Amendment. As of April 2005, Yahoo! has provided advertising for "play money" online gaming.

In August 2004, Casino City, an online portal for internet gambling sites, sued the US Department of Justice. The complaint alleged, inter alia, that the website's business—promoting internet gambling—was legal, and requested a declaration from the court that its business was protected by the First Amendment. The U.S. District Court for the Middle District of Louisiana dismissed the case in February of 2005.

In its opinion, the District Court wrote,

It is well-established that the First Amendment does not protect the right to advertise illegal activity... The government's interest is specifically directed towards the advertising of illegal activity, namely Internet gambling... Furthermore, the speech in which the plaintiff wishes to engage is misleading because it falsely portrays the image that Internet gambling is legal... Because plaintiff's speech concerns misleading information and illegal activities, it does not fall within the speech that is protected by the First Amendment.

The US Court of Appeals, 5th Circuit, dismissed Casino City's appeal in January, 2006.

In February 2005 the North Dakota House of Representatives passed a bill to legalize and regulate online poker and online poker cardroom operators in the State. Testifying before the State Senate, Nigel Payne, CEO of Paradise Poker, pledged to relocate to the state if the bill became law. However, the measure was defeated by the State Senate in March 2005. Rep. Jim Kasper, who sponsored the 2005 legislation, plans to introduce similar bills in the 2007 North Dakota legislative session.

In July 2006, David Carruthers, the CEO of BetonSports, a company publicly traded on the London Stock Exchange was detained in Texas while changing planes on his way from London to Costa Rica. He and ten other individuals had been previously charged in a sealed indictment with violations of US Federal laws relating to illegal gambling. While as noted above, a United States Appeals court has stated that the Wire Act does not apply to non-sports betting, the Supreme Court of the United States previously refused to hear an appeal of the conviction of Jay Cohen, where lower courts held that the Wire Act does make it illegal to own a sports betting operation that offers such betting to United States citizens.

The BetOnSports indictment alleged violations of at least 9 different Federal statutes, including 18 USC Sec. 1953 (Operation of an Illegal Gambling Business). Carruthers is currently under house arrest on a one million dollar bail bond.

In September 2006, SportingBet PLC reported that its chairman, Peter Dicks, was detained in New York City on a Louisiana warrant while traveling in the United States on business unrelated to online gaming. Louisiana is one of the few states that has a specific law prohibiting gambling online. At the end of the month, New York dismissed the Louisiana warrant.

Also in September 2006, just before adjourning for the midterm elections, both the House of Representatives and Senate passed legislation (as an amendment to the unrelated Safe Port Act) that would make transactions from banks or similar institutions to online gambling sites illegal. This differs from a previous bill passed only by the House that expanded the scope of the Wire Act. The passed bill only addresses banking issues. The act was signed into law on October 13, 2006 by President George W. Bush, and there is a provision for a 270-day period to develop enforcement measures. At the bill-signing ceremony, Bush never mentioned the Internet gambling measure, which was supported by the National Football League and opposed by banking groups.

In response to this new legislation, a number of online gambling operators including PartyGaming, The bwin Group, Cassava Enterprises, and Sportingbet announced that real-money gambling operations would be suspended for U.S. customers. PartyGaming's stock dropped by 60% following its announcement. Other operators such as PokerStars, Bodog, and WSEX.com announced their intention to continue serving customers in the U.S.

On April 26, 2007, Rep. Barney Frank (D-MA) introduced HR 2046, the Internet Gambling Regulation and Enforcement Act (IGREA). The IGREA would modify the UIGEA by providing a provision for licensing of Internet gambling facilities by the Director of the Financial Crimes Enforcement Network. On June 8, 2007, the House Financial Services Committee, chaired by Rep. Barney Frank, held a hearing entitled, "Can Internet Gambling Be Effectively Regulated to Protect Consumers and the Payments System?". Expert witnesses at the hearing testified that Internet gambling can be effectively regulated for age verification, money laundering issues, facilitation of state and federal tax collection, and for issues relating to compulsive gambling.

On June 7, 2007, Rep. Robert Wexler (D-FL) introduced HR 2610, the Skill Game Protection Act. This act would legalize Internet poker, bridge, chess, and other games of skill. Also on June 7, Rep. Jim McDermott [D-WA] introduced H.R. 2607, the Internet Gambling Tax Act. The IGTA would legislate Internet gambling tax collection requirements.

[top]Australia

On the 28th of June 2001 the Australian Government passed the Interactive Gambling Act 2001 (IGA). The government said that the IGA was important to protect Australians from the harmful effects of gambling.

The IGA targets the providers of interactive gambling services, not their potential or actual customers. The IGA makes it an offence to provide an interactive gambling service to a customer physically present in Australia, but it is not an offence for Australian residents to play poker or casino games online. In stark contrast to the USA, sports betting online is also completely legal in Australia, with many state government licensed sportsbooks in operation, such as Centrebet, Sportingbet & Betfair.

The offence applies to all interactive gambling service providers, whether based in Australia or offshore, whether Australian or foreign owned. The offence carries a maximum penalty of $220,000 per day for individuals and $1.1 million per day for bodies corporate.

More information regarding the Interactive Gambling Act 2001 can be found here, Australian Department of Communications, Information Technology and Arts.

Complaints regarding Online gambling facilities serving Australian users can be made to the Australian Communication and Media Authority at ACMA Homepage.

[top]South Africa

CAPE TOWN (Reuters) - 08/05/2008 - South Africa's parliament approved a new Internet gambling law to regulate an industry plagued by crime and vulnerable to money laundering and terrorism financing, parliamentary papers showed on Monday.

Read more...

South Africa parliament approves Internet gambling law - Yahoo! Canada News


INTERNET LAW - THE SOUTH AFRICAN NATIONAL GAMBLING AMENDMENT BILL

Ira Piltz, Greenpoint Technologies

The South African National Gambling Amendment Bill (the “NGAB”) legalizes online gambling in South Africa and establishes a licensing and regulatory system for this industry. NGAB curtails the negative socioeconomic effects of an unregulated online gambling industry. The NGAB is still pending signature by the South Africa’s President.

In May 2008, the South African Parliament approved new legislation regulating online gambling in South Africa. The NGAB was drafted in response to a report conducted by South Africa's National Gambling Board (the “Board”), which found that the National Gambling Act 2004 had to be amended to include regulations for online gambling. NGAB's objective is, "to provide for the regulation of interactive gambling so as to protect society against the stimulation of the demand for gambling; to provide for the registration of players and opening of player accounts; to provide for the conditions applicable to interactive gambling licenses; to provide for further protection of minors and other persons vulnerable to the negative effects of gambling; … to prevent gambling from being associated with crime, money laundering or financing of terrorist and related activities."

The NGAB establishes rules for online players' registration and allows Websites to exclude certain group of players. It also requires that online gambling providers afford fairly treatment to their registered players. Dispute resolution procedures between players and online gambling operators are also set forth in the NGAB.


How does the NGAB ensure that minors and other protected persons are excluded from participating in online gambling?

The NGAB requires that online gambling providers protect minors and other vulnerable persons by posting notices stating that registered players must be at least 18 years old. Additionally, NGAB includes a method that allows South African authorities to establish mechanisms and procedures to ensure that unregistered players and children cannot access interactive gambling facilities.


What are some of the main provisions of the NGAB that govern the conduct of online gambling providers?

The National Gambling Board is the national body overseeing compliance of the NGAB's provisions.

Advertising: the NGAB includes provisions regulating advertisement of online gambling. Only licensed online gambling providers can advertise in South Africa, and such advertisers are subject to the same restrictions set out in the National Gambling Act for other forms of gambling. South African authorities are also authorized to further regulate online gambling advertising.

Licensing requirements: the NGAB gives South African authorities the right to set licensing requirements to comply with technical specifications, equipment standards, and software.

Privacy: Provisions in the NGAB allow for the monitoring and reporting of registered players' gambling habits to assist the National Gambling Board in detecting problems associated with addictive or compulsive gambling. The NGAB also requires online gambling providers to develop self-diagnosis systems to supply players with early warning signs.

Illegal activities: NGAB gives South African authorities the right to set control systems to prevent money laundering and other illegal activities. Internet gambling sites are obligated to report suspicious and illegal activities.

Delivery of prizes: section 9 of the NGAB states that if a player in an interactive game wins a monetary prize, the interactive provider must immediately credit the prize amount to the player's account and if the prize is non-monetary, the provider must:

"(a) have the prize delivered personally, by courier or by post to the player; or

(b) give the player written notice of an address within the Republic where the prize may be collected."


What is the procedure for dispute resolution between players and the interactive provider?

According to Section 6B of the NGAB, if there is a dispute arising out of an interactive game, either party may refer the dispute to the National Gambling Board. The NGAB must resolve the dispute in accordance with the complaints' resolution procedure.


What is the role of the National Gambling Board?

The role of the National Gambling Board is to enforce NGAB's provisions. According to the NGAB, the Board must "take reasonable steps to ensure" that "unlawful activities relating to interactive gambling and unlicensed interactive gambling activities are prevented, detected and prosecuted;" that "undertakings made by licensees, holding a license to make interactive games available, are carried out to the extent required by the license; to supervise and enforce compliance by licensees with the obligations of accountable institutions in terms of the Financial Intelligence Centre Act, to the extent required by that Act, in so far as it applies to the gambling industry."

See also...

Mary Ann Liebert, Inc. - Gaming Law Review - 9(4):318

[top]Other countries

Various forms of online gambling are legal and regulated in many countries, including most members of the European Union and several nations in and around the Caribbean Sea.

In India it is neither legal nor illegal the Law is silent on the issue, but in the state of Maharashtra it is a banned offence under the "Bombay Wager Act".

The government of the island nation of Antigua and Barbuda, which licenses Internet gambling entities, made a complaint to the World Trade Organization about the U.S. government's actions to impede online gaming. The Caribbean country won the preliminary ruling but WTO's appeals body somewhat narrowed that favorable ruling in April 2005. The appeals decision held that various state laws argued by Antigua and Barbuda to be contrary to WTO agreements were not sufficiently discussed during the course of the proceedings to be properly assessed by the panel. However, the appeals panel also ruled that the Wire Act and two other federal statutes prohibiting the provision of gambling services from Antigua to the United States violated the WTO's General Agreement on Trade in Services, or "GATS". Although the United States convinced the appeals panel that these laws were "necessary" to protect public health and morals, the asserted United States defense on these grounds was ultimately rejected because its laws relating to remote gambling on horse-racing were not applied equally to foreign and domestic online betting companies, and thus the United States could not establish that its laws were non-discriminatory.

On March 30, 2007 the WTO confirmed the U.S. "had done nothing to abide by an earlier verdict that labeled some U.S. Internet gambling restrictions as illegal."

Malaysia has recently taken its action against Internet gambling activities.

[top]Problem gambling

Problem gambling is an urge to gamble despite harmful negative consequences or a desire to stop. The term is preferred to compulsive gambling among many professionals, as few people described by the term experience true compulsions in the clinical sense of the word. Problem gambling often is defined by whether harm is experienced by the gambler or others, rather than by the gambler's behavior. Severe problem gambling may be diagnosed as clinical pathological gambling if the gambler meets certain criteria.

In the United States in 1999 the National Gambling Impact Study stated "the high-speed instant gratification of Internet games and the high level of privacy they offer may exacerbate problem and pathological gambling". Recently in the UK another government-funded report came to a similar conclusion, claiming that 75% of people who gamble online are "problem" or "pathological" gamblers, compared to just 20% of people who visit legitimate land-based casinos.

Pathological gambling

Extreme cases of problem gambling may cross over into the realm of mental disorders. Pathological gambling was recognized as a psychiatric disorder in the DSM-III, but the criteria were significantly reworked based on large-scale studies and statistical methods for the DSM-IV. As defined by American Psychiatric Association, pathological gambling is an impulse control disorder that is a chronic and progressive mental illness.

Pathological gambling is now defined as persistent and recurrent maladaptive gambling behavior meeting at least five of the following criteria, as long as these behaviors are not better explained by a manic episode:

• Preoccupation. The subject has frequent thoughts about gambling experiences, whether past, future, or fantasy.
• Tolerance. As with drug tolerance, the subject requires larger or more frequent wagers to experience the same "rush".
• Withdrawal. Restlessness or irritability associated with attempts to cease or reduce gambling.
• Escape. The subject gambles to improve mood or escape problems.
• Chasing. The subject tries to win back gambling losses with more gambling.
• Lying. The subject tries to hide the extent of his or her gambling by lying to family, friends, or therapists.
• Loss of control. The person has unsuccessfully attempted to reduce gambling.
• Illegal acts. The person has broken the law in order to obtain gambling money or recover gambling losses. This may include acts of theft, embezzlement, fraud, forgery, or bad checks.
• Risked significant relationship. The person gambles despite risking or losing a relationship, job, or other significant opportunity.
• Bailout. The person turns to family, friends, or another third party for financial assistance as a result of gambling.
• Biological Bases. The person has a lack of norepinephrine.

As with many disorders, the DSM-IV definition of pathological gambling is widely accepted and used as a basis for research and clinical practice internationally.

[top]Money laundering

It has also been alleged that the largely unsupervised electronic funds transfers inherent in online gambling are being exploited by criminal interests to launder large amounts of illegal cash.

Money laundering

Money laundering, the metaphorical "cleaning of money" with regard to appearances in law, is the practice of engaging in specific financial transactions in order to conceal the identity, source, and/or destination of money, and is a main operation of underground economy.

In the past, the term "money laundering" was applied only to financial transactions related to organized crime. Today its definition is often expanded by government regulators (such as the United States Office of the Comptroller of the Currency) to encompass any financial transaction which generates an asset or a value as the result of an illegal act, which may involve actions such as tax evasion or false accounting. As a result, the illegal activity of money laundering is now recognized as potentially practiced by individuals, small and large businesses, corrupt officials, members of organized crime (such as drug dealers or the Mafia) or of cults, and even corrupt states, through a complex network of shell companies and trusts based in offshore tax havens.

The increasing complexity of financial crime, the increasing recognised value of so-called "financial intelligence" (FININT) in combating transnational crime and terrorism, and the speculated impact of capital extracted from the legitimate economy has led to an increased prominence of money laundering in political, economic, and legal debate.

[top]External Links

United States General Accounting Office—"Internet Gambling: An Overview of the Issues", December 2002, p. 28, PDF file

Gambling-Law—US

The Guardian: FBI detains online betting boss on airport runway

Las Vegas Sun: US Supreme Court refuses to hear Jay Cohen appeal

BetOnSports Indictment

Associated Press: Sportingbet PLC Chairman Detained in NYC

The Independent: Former gambling chief Dicks is freed in US

Safe Port Act: pages 213 and beyond

Bush signs port security bill

House Financial Services Committee website

World Trade Organization ruling

Reuters: WTO confirms U.S. loss in Internet gambling case

Sites offering online gambling




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