The Audacious History Of Online Gambling
It started like a scent on the wind and then exploded into a phantasmagoria of falling coins, flashing graphics, and millions made and lost overnight. It was called Online Gambling and it still is. It was a logical step for bookmakers to move from the telephone lines to the Internet but it didn’t take the law long to catch up.
In its infancy online gambling was very much focused on America and since the economy was on an upswing, there was plenty of disposable income and the Internet was just getting settled into most every home in the United States.
But it wasn’t just bookies. Personal computers had evolved to the point that a slot machine could churn and a roulette wheel could spin. Wagers needed to be taken and players had to be paid. But it was a big wilderness and there was no place for a casino to call home.
Online Gambling Was a Sleeping Giant Until It Was Woken Up by a Tiny Mouse Who Roared in 1994!
That mouse was Antigua and Barbuda, and how it awakened the giant was by enacting a law called the Free Trade and Processing Zone. This law specifically made it legal to operate a casino from these Caribbean Islands. The law exists today.
Cowboys were still roaming wild and no one really knew what was what or how to do it until Cryptologic came along and created financial systems and software to handle the traffic.
At the same time Microgaming Systems was gelling from the ethers associating with another financial interface. Microgaming’s “Gaming Club” was the first full platform casino and is still in operation today.
Cryptologic/Wagerlogic hit the scene followed later in 1996 by Intercasino, the one that sticks in most “old timers” minds as the first casino.
Another development of 1996 was the formation of the Kahnawake Gaming Commission by the Mohawk Tribe in Canada who was exercising their “aboriginal rights” that were recognized.
Those “Rights” were recognized and affirmed in subsection 35(1) of Canada’s Constitution Act of 1982. Though their integrity had been called into question in relation to the (Absolute Poker/Ultimate Bet) scandal, the leading Industry Watchdogs believe they are on the right track now.
The Wild West of Online Gambling is Established Offshore
Sports Betting over the wires had been illegal in the US since the Wire Act of 1961, and in the early nineties a NY Court ruled that it was the place of incorporation, not where the games were served from, that determined jurisdiction in such cases. This effectively made sports betting over the Internet that was handled by an American Corporation, a federal crime.
As new corporations for Online Gambling were established offshore and the Costa Rican boom began, the only requirement to operate a sportsbook or casino from Costa Rica was a business license, not a gaming license, and the outlaws and a few good guys flocked to the new Wild West. Over the next couple of years the Online Gambling business began to boom and in 1998 the take was almost a million dollars, no known estimates of the actual handle can be found as the operators were private and did not release financial reports to the public.
Some of the bigger operators were recruiting top business administrators and it wasn’t long before franchises were being offered. A person with the right connections and deep enough pockets could now buy a sublicense and operate their own online casino using the big software. Legal wrangling occurred all over the planet as each government tried to get a finger in the pie by whatever means necessary, or protect their lobbies and constituents at whatever legal level they could. Some chose to license, some chose to ban and try to create monopolies, but the giant just kept on growing.
A brief fast forward so we can see where this behemoth was headed before special interests in the US and abroad poked their fingers into it: Industry analyst Christiansen Capital Advisors, LLC, estimated that Internet gambling generated nearly $5.7 billion of revenue in 2003. Revenue was expected to double by 2006 and exceed $18 billion by 2010. In 2005, Brokerage houses, Morgan Stanley and Goldman Sachs are doing private placements for investment in the industry. This ‘sure bet’ was brought down by the UIGEA of 2006.
But back to the past, Lasseters forms under new Australian law and continued to operate their Aus casino until October 3rd 2008. Quite handily, they were formed before the moratorium on Australian operations, but were still not allowed to service Aus accounts. There are many odd situations like this that occur later in the EU, but the results are not what the government or lobby hope for. Boss Media and Playtech have become major players while Microgaming and Cryptologic continue to boom in size and revenue. There were almost 1000 online casinos by some estimates before the turn of the millennium that offered online gambling!
Back to the future now… in 2001 Great Britain begins to pass laws to not only allow but also encourage online gambling. Eventually licensing standards are put in place. A law was passed in Great Britain in 2005 that created the UK Gambling Commission. Of course in the US the special vested interests that would soon carve out exceptions for horse racing and lotteries (and protect land based interests in Las Vegas) were hard at work trying to figure out the right moment to put their prohibitions into place. Eventually they would, but only after several failed bills over most of a decade. Reps Goodlatte and Kyl would slip in an earmark in the dark of night, attached to an important Security bill, that would effectively forbid US financial Institutions from processing online gambling transactions, legal or not!
The ‘House of Cards’ Comes Crashing Down!
The world at large is moving toward regulating online gambling and even the World Trade Organization intervenes in the US discrimination of the ‘Mouse who Roared’ and rules against the US. Not to be deterred by rule of law, Rep Kyl is slyly helping to craft the Unlawful Internet Gambling Enforcement Act of 2006 (or better known as the “UIGEA“) behind the scenes.
All of Kyl’s previous efforts to ban Online Gambling had died in committee or on the House Floor so he now had move like a fox to get his mercenary work done. In October 2006, Senate Majority leader, Bill Frist, slips the willy into a “must pass” Security Bill without debate; the Safe Ports Act, and fortunes are to crumble overnight.
The major US financial processor at the time, Neteller, is delivered a stunning blow when the Principals are arrested in the US for money laundering and sports betting crimes.
The Department of Justice sends a clear warning that the UIGEA has teeth. The fact is that ‘sports betting’ was illegal and online gambling had yet to be so defined to this day except by self-imposed policy from the Dept. of Justice. The current administration neglected to clean house as most administrations do so it is still status quo in the DOJ, “creating law by policy” as there has never been a successful prosecution of an online casino gambler, casino, or financial processor who stayed within the law. Nor has there been a precedent set in that regard that can be relied upon as “case law”. Only sportsbetting is illegal at the Federal level to the best of our knowledge.
The writers and sponsors of the UIGEA may have been acting in their perception of what is best for America. But any online gambler knows how hard it would be for an underage person to play. The document requirements have become more than cumbersome and we challenge the authors of that earmark to attempt to process a wager in and out of a reputable online casino in the guise of the cleverest pimple farming hacker; they would fail. The safeguards are in place. And if they are concerned about US Dollars leaving the country they can simply regulate and tax all action after creating a law that actually addresses online gambling.
It is in the public record that Mr. Frist received almost $50,000 in contributions from the land based casino mogul, Harrah’s, and that their stock increased over 20% or almost two billion dollars almost immediately after his bill was passed. Mr. Goodlatte, the author of the bill, wrote in exceptions for fantasy sports, lotteries, and horseracing while receiving $10,000 in contributions from the National Thoroughbred Racing Association though he did nothing in those provisions to protect the under aged from gambling on lotteries.
Since the inception of UIGEA nothing has gotten safer or better for the online gambler, or for the American economy. Casinos that chose to stay in business have had to resort to any means possible to process the funds into and out of their casinos. All of the publicly traded companies bailed out of the US market as Senator Frist attached the UIGEA to the Port Securiity bill on Sept. 30, 2006. In some cases this has probably put legitimate business into the wrong circles. The rogues and thugs of unregulated Costa Rica and elsewhere continue to prey upon the ignorant and the greedy, and franchises or “white labels” have proliferated themselves all over the internet in the void of Online Gambling Regulation.
We have no idea where all this will eventually lead, but one thing is certain; as long as there is man, there will be gambling and most likely online gambling as well. All a person can do is stay informed, so that their wager is only against the house edge as much as possible in this environment, and not on whether the casino will honor a bet laid or even be there in business tomorrow.
You’re on your own. It’s still the Wild-Wild West in the Online Gambling world. Stay tuned-in as a player and check back here to GamblingGurus.com often to see our latest updates about the online casinos available out there. Most importantly, never, ever play with more than you can afford to lose. Also, please be aware of and play within your local jurisdictions laws as well and you should be okay, but of course we have no definitive insight on that one per se.