Online gambling

From Wikipedia, the free encyclopedia

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.

1 Online poker
2 Online casinos
3 Online sports betting
4 Online bingo
5 Mobile gambling
6 Funds transfers
7 Legality
- 7.1 United States
- 7.2 Other countries
8 Problem gambling
9 Money laundering
10 Notes
11 External links

[edit] Online poker

Main article: online poker

Online poker rooms commonly offer Texas hold 'em, Omaha, Seven-card stud, 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.

[edit] Online casinos

Main article: online casino

There are a large number of online casinos, in which people can play casino games such as Roulette, Blackjack, Craps, Baccarat and many others. These games are played against the "house", which makes money due to the fact that the odds are in its favour.

[edit] Online sports betting

Main article: sports betting

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

[edit] Online bingo

Main article: online bingo

There are a number of online bingo rooms offering games on the Internet.

[edit] Mobile gambling

Main article: mobile gambling

Developments in the use of wireless, mobile devices to gamble follow in the wake of mainstream online gambling.

[edit] 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.^[1] A number of electronic money services, including Firepay, Neteller, and Moneybookers, offer accounts with which online gambling can be funded.

Payment by cheque and wire transfer is also common.`

[edit] Legality

[edit] United States

The United States Court of Appeals for the Fifth Circuit ruled^[2] 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^[3] 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.^[4] 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.^[5]

The US Court of Appeals, 5th Circuit, dismissed Casino City's appeal in January, 2006.^[6]

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.^[7] 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 the 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.^[8]

The BetOnSports indictment^[9] 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^[10].

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.^[11] 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.^[12]

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.^[13] 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.^[14]

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 and Bodog announced their intention to continue serving customers in the U.S.

[edit] 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.

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 defence 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. Although the Dispute Settlement Body of the WTO recommended that the United States bring the three federal laws into compliance with the GATS, as of the third quarter of 2006 the United States and Antigua and Barbuda disagreed on the status of the United States' compliance. The dispute has recently been referred back to a WTO panel to assess the status of compliance. ^[15]

[edit] Problem gambling

Main article: Problem gambling

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.^[16]

[edit] 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.^[16]