Online Betting Is Booming, Despite Critics

Accoring to John Shelk, vice president of the American Gaming Association in Washington, D.C., the mounting legal barriers will make it difficult for casino companies to get into online gaming.

And if Congress is not able to tie up anti-gaming legislation soon, Sen. lawmakers who would like to put online gaming out of business.

The number of Web-based gaming site users in the United States grew to 5.2 million in the first quarter of this year, up from 3.4 million in the third quarter of 1999, according to Cyber Dialogue.

“Prohibition didn’t lower the consumption of alcohol,” says Albe Angel, head of public policy at the Interactive Gaming Council. laws won’t mean he’ll be closing up shop.

Another anti-gaming bill’s prospects are also in doubt, say experts. “This sort of business, when it comes in the form of bricks and mortar, brings in economic development in the form of jobs and taxes — Internet gaming does none of those things.”

Starrs is president of Antigua-based Starnet Systems, one of a number of Internet gambling operations that have increasingly come under the scrutiny of U.S. Indeed, the global online gaming market has the potential to grow to $10 billion by 2002, according to Internet research firms Frost & Sullivan and Datamonitor.

Growth Amid Legislative Inaction

Lack of Jobs, Taxes Cited

The association has strongly opposed Internet-based casinos, arguing that those running offshore gaming sites are evading state taxes, licensing requirements and regulations, all of which apply to conventional bricks-and-mortar establishments.

But so far, legislators have remained unable to push through Congress any substantial measures to curb Web wagering.

And for Starrs, whose company supplies around 40 percent of the world’s online gaming operations, even prohibitive U.S. Richard Bryan, R-Nev., recently speculated, some big Nevada casino companies might be tempted to launch their own Web-based gaming operations..

For its part, the Interactive Gaming Council, which represents Internet-based casino companies and companies like Starrs’, likens the prohibition of Internet gaming to the prohibition of alcohol. “They thought that people wouldn’t go to theaters anymore, but they did keep going to see movies and now the video has become a whole new revenue source for the entertainment industry because it’s a different product.”

“This is a global marketplace,” says Sinclair. 4419, is designed to stem the flow of funds to Web-based wagering sites by prohibiting the use of credit cards or other financial instruments for Internet gambling transactions. Instead, the association is pushing for establishing the online gaming industry as a regulated business.

Such restrictions simply mean he’ll concentrate his efforts in the rapidly expanding overseas market for Internet gaming, in particular nations like Europe and Australia, where the regulatory environment is much more friendly.

Bills Sidetracked in Congress

Starrs remains concerned that U.S. “Other first world countries are considering changing their gaming laws to allow for online gaming so the United States could find itself out-of-sync with other countries as the market continues to grow.”

“Our concern is that gaming regulations in each state will be overruled,” says Shelk. “The United States government is missing the big picture here.”

Online gaming — operated mostly by offshore, unregulated companies — has grown at an explosive rate. “But these companies will simply open an account for consumers at an offshore bank.”

Anti-gaming legislation, citing the dangers of addiction, crime and consumer debt, first made its way before Congress in early 1997. Most online gambling sites accept payment via credit card or let you wire cash electronically.

The trade group that represents the commercial casino entertainment industry disagrees with that assessment. That’s because efforts by lawmakers to fight to outlaw the expanding Internet-based gambling industry have so far come to naught.

“The gaming market is changing and the biggest area of growth is in places like Europe and Asia,” says Starrs. legislators consider the legality of online gaming, experts say that the business is flourishing overseas.

Explosive Growth, Unchecked by Law

In late June, Christian activists and conservatives pressured House Republican leaders into withdrawing the Internet Gambling Prohibition Act (H.R. 3125), a bill that prohibits gambling businesses from taking bets or wagers over the Internet, in order to toughen its language and alter its exceptions.

Ed Starrs may be a gambling man, but his latest bet has him worried.

And by backing the outlawing of online gaming, the established casino industry is very shortsighted, Sinclair says. laws to do away with gambling on the Net could harm his company, which licenses customized Internet gaming software to 60 Web-based gaming operations that derive about $2 billion from wagers placed in the United States.

But he appears to have little to fret over, at least for now. “We believe that the efforts of legislators to limit people’s rights to gamble online and short-sighted and inappropriate, and we think there ought to be a way for responsible companies to offer online wagering as a regulated product.”

It might a legal gray area in the United States, but online gaming is still legal in many parts of Europe, Australia and the Caribbean. “They are doing the same thing as the big entertainment companies like Disney tried to do when the VCR came out,” Sinclair says. After working its way through the House at a snail’s pace, those those legislative efforts have recently become sidetracked.

And in the absence of such laws, say observers, Internet gambling has flourished.

While U.S. There are now over 250 online casinos, 64 lotteries, 20 bingo games and 139 sports books in operation on the Internet, according to the National Gambling Impact Study Commission.

Despite the anti-gaming efforts, the use of gambling Web sites continues to rise, says Ed Lopez, an analyst at Cyber Dialogue, an Internet services and research firm based in New York.

Global Gamble

“They think that this bill will stop people with credit using these sites,” says Sebastian Sinclair, an Internet analyst at investment bank Christiansen Capital Advisors in New York. The measure, H.R

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