Online Gambling


Gambling on the internet

In the United States, internet gambling is still considered to be a relatively new phenomenon. Following the launch of the first gambling websites in the mid-1990s, their popularity skyrocketed, particularly in the United States, as a result of the sites’ widespread availability. Despite the fact that online gambling is prohibited in the United States, millions of Americans have taken part in it anyway. In 2008, Christiansen Capital Advisors (January 9, 2006), a company that provides gambling analysis and management services, estimates that Internet gambling generated $21 billion worldwide in revenue, a significant increase from the $3.1 billion earned by the industry in 2001.
The fact that internet gambling sites are not permitted to operate in the United States, and that the vast majority of countries that allow them to do so do not collect or report revenue statistics, makes it impossible to calculate exact figures for internet gambling revenues. According to David Stewart’s 2006 report, An Analysis of Internet Gambling and Its Policy Implications, small Caribbean and Central American countries with little or no government oversight of the industry account for two-thirds of all Internet gambling activities in the world, with the United States accounting for the remaining third.

Internet gambling sites frequently pay no or little tax to their home country, and in some cases, pay less tax than traditional gambling establishments in their home country. When it comes to gambling establishments, Stewart points out that the small Caribbean island of Antigua was the headquarters of 536 gambling establishments in March 2005, which was more than any other country at the time. Government of Antigua required gambling sites to pay only 3 percent of their gambling revenues (profits after payouts to customers) to the government of Antigua, with a monthly cap of $50,000 for each gambling site in the country. Other popular destinations included Central and South America, Native American reservations in Canada, and the British Isles, amongst other locations.
In contrast to the vast majority of land-based casinos, the vast majority of internet gambling sites are owned and operated by small, virtually unknown corporations, which is in stark contrast to the vast majority of traditional casinos. It takes hundreds of people to set up and operate a land-based casino, which costs hundreds of millions of dollars to build and operate, whereas an online casino can be set up and operated by a handful of people for an initial investment of a few million dollars. These businesses are extremely profitable due to the low start-up and operating costs, which allows them to pay out larger winnings to players than traditional land-based casinos.
According to industry experts, the future of internet gambling in the United States is still up in the air. Banks and credit card companies that transfer money from Americans to online gambling sites are in violation of the Unlawful Internet Gambling Enforcement Act (UIGEA), which was enacted in 2006 and prohibits the practise of illegal internet gambling. The law, while likely to be circumvented by serious internet gamblers who will find ways to transfer money to online casinos and card rooms, is intended to prevent casual gamblers from participating in these activities. Many of the larger publicly traded internet gambling companies, such as PartyPoker, had stopped accepting new customers from the United States entirely by the end of 2006, citing concerns about possible legal action from the United States government. Although this is the case, there is still some scepticism regarding the legality of internet gaming. Horse racing and Native American tribes are not specifically mentioned as being exempt from the online gambling prohibition in the law, which leaves room for interpretation.


In terms of when the first internet casino went live, who was behind it, and who started it, there is no general agreement on any of these points. It is generally agreed, however, that the first online casinos began operating sometime between 1995 and 1996, when the internet was still considered to be a relatively new technology. In fact, Intercasino, which is based in Antigua and has established itself as one of the world’s leading internet gambling destinations, was one of the first. In 1996, the government of the country legalised and licenced online gambling websites. Foreign-owned trade zone businesses, which operate in specific parts of the country as if they were on foreign territory, operate these websites. Because companies operating in Antigua’s trade zone are not permitted to manufacture products for domestic consumption, Antiguans are not permitted to participate in online gambling with companies operating in the trade zone that are based in the nation.


A total of $4 billion in revenue was generated by sports betting in 2005, according to Stewart, accounting for approximately one-third (35 percent) of all internet gambling revenue in the same year. About a quarter of the total online gambling market was accounted for by casino games. When it comes to online gambling revenue, online poker accounted for 18 percent of all online gambling revenue in 2005, according to the International Gaming Revenue Association. Compared to other forms of online gambling, such as casinos, poker is gaining in popularity at a faster rate than any other. As reported by the company, online poker sites such as PartyPoker generated revenue of $82 million in the year 2000. Approximately $2 billion in revenue was estimated to have been generated by poker sites around the world in 2005. Additionally, pari-mutuel race bets (in which those who bet on the best competitors split the total bet amount and the house receives a percentage) and other games accounted for the remaining portion of online gaming revenue, in addition to ticket sales.