A brief review of the legal debate surrounding the online gaming industry.

A short legal history of online gambling…

It should first be noted that many online casinos are licensed in the Caribbean Islands, and are providing jobs and economical growth where it is well needed. Licenses are also available in Africa, Europe, and other parts of the world as the debate over legalization, regulation, and freedom on the Internet is widened.

Originally the U.S took a stand opposing online gambling, using a law known as the Wire Act to prohibit online casinos. To date, 18 U.S.C.1084, is still the law most likely to be used in prosecuting casinos. However as legal experts have tried to demonstrate, the Wire Act is riddled with loopholes. In fact, invocation of this law has only added to the contention that new legislation is necessary.

On March 19, 1997 the Internet Gambling Prohibition Act, better known as the “Kyl bill” was originally introduced. The proposed act would modify the federal Interstate Wire Act 18 U.S.C.1084, which forbids interstate gambling by telephone or other wire devices but not the Internet by name. (The Wire Act is a law dating back approximately 40 years, and predates the Internet and most other modern communications networks.)

Senator Kyl’s bill threatened to authorize the Federal Communications Commission to enforce regulations against interstate computer service providers, prohibiting the interstate or foreign transmission of gambling information. The FCC could potentially order ISPs to shut down or block access to gambling Web sites, even if those are based outside the United States. Online casinos assert that they fall under the legislature of their Country of licensing, and that U.S. law would not affect them. Many doubt the technological ability for governments to insure a blanket ban, although a recent initiative in the U.S. calls for a ban on the use of credit cards and wire transfers for the purposes of web wagering.

Australia had originally positioned itself to generate tax revenues through regulation of this hugely profitable Slot Gacor industry. The Interactive Gambling (Player Protection) Act was passed by Parliament on March 18, 1998 and commenced on October 1st 1998, but recently there has been a reversal of fortune for casino operators Down Under. After a prolonged moratorium on the spread of online gambling, the Australian Senate passed a ban on interactive gaming, forcing Australian sites to close their doors and declaring that the public would not be allowed to gamble on the Net.

In the U.K., where gambling on sports has long been an accepted part of life for many, signs of easing restrictions on Internet gaming are many. Recently The Isle of Man, which is part of the United Kingdom, but makes many of its own laws, opened its doors and began to grant licenses to new cyber-gaming ventures. Las Vegas-based casino giant MGM Mirage was one of the first to apply. Even more sweeping was a relaxation in England’s betting tax, a move that coincided with the government’s decision to woo British operators of large-scale sportsbetting sites back into the motherland, thereby keeping countries overseas from collecting massive tax profits from U.K. businesspeople.

The converse attitude has recently been displayed in the United States, where the Wire Act was successfully used to prosecute Jay Cohen, former owner a the sports wagering site World Sports Exchange. Cohen was sentenced to serve one year and nine months for his activities. His recent appeal to overturn the conviction was upheld by the 2nd U.S. Circuit Court, saying that betting was “clearly illegal in New York”. No further comment was issued on the legality of hundreds of other sites that offer the same services to U.S. bettors.

Results show that despite fractured attempts to ban or place tighter controls on Internet gambling, more and more people worldwide are wagering online. Expert opinion is that legislation cannot constrain the rate of growth taking place in the industry, no matter the legal issues involved.

Despite efforts to pass a bill in the U.S. Congress, many people in America do gamble online. Americans spend US$600 billion a year on gaming every year, and even the land-based casinos in Vegas are starting to get in on the action. Around the world, different countries have taken varying stances: In China, Hong Kong passed a bill tightening gambling controls but leaving online gambling alone, in recognition that a ban would be unenforceable.

The most recent failure of the “Kyl Bill” in the United States to ban online gambling in the last quarter of 2000 came as little surprise. There was a race between the states of Nevada and New Jersey to develop a framework for the regulation of legal online gambling, as the first to do so would gain a competitive advantage over the other. That race looks to have ended when support for online gaming in the New Jersey dwindled.

Assembly Bill 3150 would have legalized Internet gambling in New Jersey operated by Atlantic City casinos, and played by New Jerseyans. Assemblyman Anthony Impreveduto, who wrote the bill, said legal interpretations could open the state to gamblers throughout the U.S. It was his stated belief that both the Nevada and New Jersey bills might permit any U.S. adult to gamble because the casino’s computer server would be located in a legal gaming jurisdiction. Alas, Bill 3150 never came to pass into law, and New Jersey legislators have missed their first opportunity to open up the state to online gambling. There’s no telling if and when the bill will be re-introduced, or whether New Jerseyans will ever be permitted to open their own casinos online.

The dice have now been cast in the opposite direction by legislators in Nevada, who have recently signed into law a bill that would see legal, regulated online casinos being operations. Should the gambling state’s cautiously optimistic Gaming Commission prove able to offer a regulated industry, where virtual dollars could turn to real tax benefits for the people and government of Nevada, it will open the doors for the world’s most famous gambling destination to lead the way in online entertainment. The legalization is contingent upon the Gaming Commission, who need satisfaction that any licensed website offering legal, 24 hour virtual casino games can be regulated using current technology. Concerns range from keeping minors from wagering, to guarding against network intrusion, to simply keeping gamers from a non-gambling jurisdiction from playing.

Many website operators welcome regulation as a way of insuring a common set of ethics that all would adhere to. An industry-wide set of standards provides more security for the consumer in this growing field of e-commerce, without infringing on the right of the owner to conduct a fair and profitable business. Regulation could also provide for a better means of monitoring and responding to the social aspects of gambling, while allowing people the freedom to entertain themselves however they choose.