Online Gaming: The Omnipresent Phenomenon

Posted by: on Oct 4, 2012 | One Comment

It’s ubiquitous and yet it is an elephant in the room. Online gaming is a popular practice throughout the world, despite the national or state regulations that have plagued it for a while.

However, this element of uncertainty surrounding the legalities related to this flourishing sector isn’t a healthy sign for the industry as a whole. Not only does this make it difficult to judge the impact of this sector, it also impedes planning and strategizing for the future.

How Regulated is the Online Gaming Market Worldwide?

Across the globe, the lawful existence, growth and trends of online gaming are defined by the regulatory environment in which the sector exists. The complexity arises out of the fact that the various forms of online gaming like casino gambling, poker, betting on horse races and other sports and online lotteries, are governed by different regulations.

As the services provided by the internet aren’t subjected to physical borders and boundaries, online gambling is accessible everywhere, giving rise to ambiguity related to its regulatory and legal position. Moreover, as various governments frame different rules on the practice of online gaming, this further aggravates the confusion in the minds of the market participants as well as the consumers.

A prime example of a law proving to be a cause of ambiguity is the US Federal Wire Act of 1961, which prohibits the conduct of sports bets over phone lines. This regulation has resulted in a large number of interpretations. Various authorities, such as the US Department of Justice, are of the opinion that the law considers all the forms of online gaming as illegal. The US Fifth Circuit Court states that the provisions of the Wire Act cater only to sports betting and not the other forms of online gaming.

The participation of tribal casinos is another point of conflict in the US gaming market. Whether these casinos are permitted to operate online gaming sites is a much debated issue. Many tribal casinos have also made sizeable efforts to legalize online poker in the nation.

Such haziness in structure and functionality exists in online casino markets across the world. This has a negative impact on the mindsets of consumers, as they remain unsure of the legality of online gambling. In April 2011, it seemed that the US suddenly discovered the challenges of this sector when it seized the accounts and the domains of Full Tilt, PokerStars and Absolute Poker. However, it was noted that even the raids couldn’t stop consumers from indulging in gaming online. In fact, the US patrons continued to dominate the global poker market post the raids, courtesy the involvement of the undaunted private offshore operators, who continued to receive bets and started ruling the market as public companies steered clear.

Non US Markets

The scenario is different in the rest of the gaming markets across the globe. No it isn’t better, rather is extremely worrisome. The law enactment bodies in many regions of the Asia-Pacific region haven’t paid heed to the flourishing online gaming sector, despite it not being legal. For instance, in countries such as India, the People’s Republic of China and the Philippines, gaming websites have registered heavy traffic and activity. Sadly enough, there have hardly been any efforts to look into this serious matter. Another thing that manages to raise eyebrows is the anonymity of the channel through which the money is bet. Whether the money goes directly though the offshore websites or the illegal bookmakers, it remains unclear.

Even if we talk about the jurisdictions that regard online gaming as legal and regulated, areas of qualm and uncertainty are very much present. In the European Union, though, online casinos are legal but are provided by a sole supplier approved by the government, reflecting a monopoly-like situation. This, however, has been challenged by the European Commission under the European Union law objecting the prohibition of fair competition in the market.

In France, turbulences related to the status of online gaming have been on the rise. Internet service providers in the country have been opposing attempts by the government to restrict access to online gaming websites that are based in countries like Costa Rica.

Even in the Czech Republic, online gaming has been largely restricted by the government. Yet, various operators openly run such websites and benefit from them, without any action being taken.

Protecting Consumers While Increasing the Tax Rate

The legal uncertainties prevalent today is a result of the gradual and sluggish response that online gaming witnessed from regulators and legislatures when this section initially emerged in the new millennium. This meant that many countries either took it casually or believed that online gaming couldn’t be regulated. Besides the United Kingdom, which did legalize most of the forms of online gaming through the Gambling Act of 2005, other national as well as state governments were wary of doing the same. However, after the financial crisis that hit the global economy in 2008 and its repercussions on the public sector, governments have changed their outlook towards online gaming.

As a result of fiscal constraints, governments have realized the benefits that legalizing and licensing online gaming can proffer. It can be a precious source to attract tax revenues.

The supporters of legalizing online gaming are of the opinion that people will indulge in online gaming irrespective of whether or not it is legal. Thus, licensing and taxing is a win-win situation for both consumers and governments. It goes without saying that this can only be done in the presence of active and sound regulations.

In addition, technology can play an effective role in mapping online security, which can take note of the location and contact of those accessing online gambling. All these developments are a strong reason for governments across the globe to consider introducing suitable license regimes. What comes as a challenge here though is the viability of regulating online gaming within borders considering its cross-border nature.

Moreover, consumer protection laws are required urgently, so that people can safely access online gaming websites. Gaming should be adequately taxed and the questions over its ‘legal’ status should be addressed soon. Agreed, there is no magic wand to do this, but such measures are the need of the hour, irrespective of the time they take.

Don’t miss the next article on Online Gaming.

1 Comment

  1. Online Gaming: Time to Give it its Due!
    October 9, 2012

    […] the first part of this article, which you can read here, we discussed the hurdles that online gaming and its legal status have witnessed worldwide. While […]


Leave a Reply