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US trys to stop internet gambling

Last week a United States House committee approved a bill aimed at stamping out the $12 billion internet gambling industry by stopping businesses from accepting credit cards and other forms of payment. Read the article from the Washington Post (free subscription required).

What dangers are posed by internet gambling? Should internet gambling be banned? How can we regulate internet gambling?


Simon said...
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Simon said...

One of the main dangers I see with internet gambling is the lack of regulation.

Firstly, in relation to basic human interaction: How do you regulate access to minors? - possibly with a credit card facility ... but how do you regulate access to problem gamblers?

Secondly, how can you trust the operator at the other end? How do you know that you're not being cheated?

What country are they in? For example, what sort of restrictions & regulations does a licence granted in the Caribbean have?

Do they have connections with organised crime? Is the financial transaction secure?

Floris said...


-Social considerations: Internet gambling leads to an increase in gambling addicts. Gambling problems are compounded by the addictive nature of the Internet and Internet computer games. As stated in Simon’s above comment, there is also the problem of access to online gambling by minors. The anonymous nature of the Internet means that minors can easily create an account by using their parents credit card. Children can easily gamble illegally since it is difficult for webmasters to verify a user’s age.

-Economic considerations: Internet gambling generates high profits and significant revenue. Established gambling businesses may be forced to retrench many employees due to the increased competition presented by new online gambling. Governments may face a significant decrease in tax revenue, since online casinos are often unlicenced or licenced/based in other jurisdictions.

-Problems stemming from Internet gambling’s lack of transparency: A website can be located anywhere; its Internet address does not reveal the physical location of the server or operators. Therefore, internet gamblers are often uncertain of the legal system governing the gambling website. There is a potential for fraud or misleading conduct since online gambling sites do not have the same consumer protection laws in place as physical establishments. It is difficult to assure the fairness of games, establish the responsibility of game operator and guarantee that winnings will be paid. There is also the possibility that criminal activity is being engaged in by the operator, server, financier or content host.

-Security problems: Software can be manipulated to cheat online gamblers or hackers may gain access to an online casino's internal systems, to steal winnings, credit card details and personal information from players. Consumers are exposed to numerous risks each time they make their credit card details available to the gambling provider.


-No one government has the technological or human resources to effectively enforce a prohibition. Inexpensive, sophisticated, rapidly changing technology makes it difficult to detect the occurrence of online gambling itself, the identity of the providers and location of the site.

-There are jurisdictional problems in relation to offshore gambling.

-Prohibition drives online gambling underground, to off-shore jurisdictions with few restrictions and this increases the dangers of online gambling in terms of theft, security and fairness.

-There is a demand for gambling services and new sites will bring increased competition to ensure that the existing services deal with customers fairly.


In Australia, the Interactive Gambling Act 2001 (Cth) establishes a complaints-based legislative framework designed to address public concerns about the increasing availability of online gambling. It targets the providers of interactive gambling services and prohibits the following:

-Individuals and corporations from making interactive gambling available to customers located in Australia;

-Australian-based interactive gambling services from being provided to customers in certain designated countries; and

-Advertising of interactive gambling services.

The Interactive Gambling Industry Code was developed by the Internet Industry Association. It imposes obligations on ISPs, Interactive Gambling Service Providers, Publishers, Datacasters and Broadcasters for acts or omissions in relation to Internet Gambling Content in certain circumstances. It also outlines the filtering/technology requirements that ISPs must comply with.

In the United States, supporters of the Internet Gambling Prohibition Act maintain that it is only an update of the Wire Act, which regulates wagering over telephone wires and maintain that it will ensure consistency so that activity which is illegal in one forum will not be allowed in another. The Act will prohibit a gambling business from accepting credit cards, cheques, wire transfers and electronic funds transfers in illegal gambling transactions. Unlawful gambling includes placing bets on online poker sites and any other online wager made or received in a place where such a bet is illegal under federal or state law.

Legislation focussing on payment methods may seem appropriate given that the Internet gambling industry is highly dependent on the use of credit cards as an easy means of making deposits. However, deposits may soon come in the form of "digital cash" which would be untraceable and perhaps beyond regulatory control. The jurisdictional provisions, which make interstate gambling illegal between states that have legalised the games in question, have also been criticised.

An alternative form of regulation is through licensing. If a government authority has screened the licensee there will be improved transparency. Licensing of operators locally could provide increased assurances of fairness, security, solvency and reputation of the operator and means of legal redress if a problem arises. As part of its licensing requirements, a government could require the following:

1. To prevent gambling addictions:

-All gambling sites have credit limits;

-Taxation of winnings; and

-Mandatory monitoring software to be implemented by gambling site operators that could assist in detecting gamblers demonstrating signs of addiction.

2. To prevent gambling by minors:

-Age verification technology to ensure that gamblers are of legal age; and

-Mandatory filtering technology to be provided by ISPs.

The costs of the regulation and government's endorsement could be covered through a taxation regime. The adoption of a licensing strategy would still require significant reliance on intelligence and law enforcement strategies.

Another alternative is for Governments not to regulate and only encourage parental regulation of online gambling through the use of filters and an Internet rating system to block children's access to online gambling websites.

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