Case Study Iv: Internet Gambling

Running head: CASE STUDY IV: INTERNET GAMBLING

CASE STUDY IV:

Internet Gambling

May 6, 2006

This document will inform you about the history of internet gambling, the existing issues, and a number of concerns involved with online gambling. Prior to the launching of the World Wide Web in 1993 which changed the setting of gambling, people had to travel great distances to gamble. The world's first virtual online casino, Internet Casinos, Inc. (ICI) commenced operation on August 18, 1995 with 18 different casino games. Most of these online gambling companies are located outside of the U.S. to avoid government prosecution. ICI operates out of the Turks and Caicos Islands (Kish, 1999). One of the main reasons internet gambling started was because of costs. The value to start up an internet gambling site is around 1.5 million dollars, which is half of what it costs to actually construct a casino. ICI estimates that the company averages about a twenty four percent profit margin, versus the typical United States casino, which ranges from eight percent to sixteen percent of each dollar wagered (Kish, 1999). An estimated twenty million people are currently online with a projected 160 million online by the year 2020. The overall market for online gambling is estimated to be approximately $49 billion worldwide (Kish, 1999). The history of internet gambling is only a decade old, however, its history will hold on for several more.

There are several existing issues facing internet gambling. The first issues we will discuss are how to regulate internet gambling. The question raised by the emergence of Internet gambling is whether old laws--based mainly on a world of atoms--are still viable, and if not, in which way the Internet should be regulated (Walther, 2000). Some scholars believe that internet gambling needs to be regulated, and of course there are those that say let the owners of the sites regulate themselves. Regulatory procedures can be targeted at either or both of the providers and the consumers of gambling services. In the case of consumers, regulation is usually implemented by age, through prohibition of the participation of minors. Procedures might also be contrived to prohibit problem gamblers or undischarged bankrupts from engaging in gambling (Clarke, 2000).

Another existing problem with internet gambling is The Wire Act which was intended to assist the states, territories and possessions of the United States, as well as the District of Columbia, in enforcing their respective laws on gambling and bookmaking and to suppress organized gambling activities. Subsection (a) of the Wire Act, a criminal provision, provides:

“Whoever being engaged in the business of betting or wagering knowingly uses a wire communication facility for the transmission in interstate or foreign commerce of bets or wagers or information assisting in the placing of bets or wagers on any sporting event or contest, or for the transmission of a wire communication which entitles the recipient to receive money or credit as a result of bets or wagers, or for information assisting in the placing of bets or wagers, shall be fined under this title or imprisoned not more than two years, or both” (Rodefer, 2003).

During the House of Representatives debate on the bill, Congressman Emanuel Celler, Chairman of the House Judiciary Committee stated "[t]his bill only gets after the bookmaker, the gambler who makes it his business to take bets or to lay off bets. . . It does not go after the causal gambler who bets $2 on a race (Rodefer, 2003). What the government is having a problem with is that most internet gambling sites are run ran in foreign countries, and they cannot enforce this act against them. What they are trying to do is change the act to include these third parties. An example of this is the introduction of the Internet Gambling Prohibition Act of 1997 (Walther, 2000). The bill would have prohibited Internet gambling by extending the Wire Act's prohibitions on traditional forms of gambling by phone or wire to the Internet (Walther, 2000). This amendment would provide penalties for online bets and wagers. This so far seems to be the best solution, however ethical and moral dilemmas still rest in the hands of our lawmakers today.

The next issue facing internet gambling is taxes. This seems to be the government’s biggest issue. This is because of the billions of dollars we mentioned for profit by these online sites, government can gain significant amount of money from it. The legalization of Internet gambling may cause states to lose some revenue generated from legalized gambling operations because