As Internet gambling – whether via mobile or fixed lines – continues its upward path, Windsor Holden looks at the different approaches of prohibition versus regulation currently exhibited by governments on opposite sides of the Atlantic
Before we kick this off, I would like to get one thing straight. “Tex” Holden, king of casinos, lord of the gamblers, is a myth. You will not espy me playing the roulette wheel at the Golden Nugget, nor cleaning up at baccarat in Monte-Carlo, nor even studying the form guide in the Racing Post. In short, I am not ordinarily a gambling man, although one might suggest taking a through train on a Friday evening from Manchester Piccadilly to Cambridge represented a bit of a punt, particularly if I were expecting it to arrive on time, or even arrive at all, rather than bundling all its passengers into the cold dark night at Sheffield.
And yet, while drafting some notes for this article, and cursing Central Trains, I remembered that it was the Euromillions umpteenth draw that night, and I’d forgotten to buy a ticket, and the hundred million ackers destined for my wallet would now slip regrettably into the pockets of some undeserving continental chappie.
Because the lottery doesn’t count, does it? It’s just a couple of quid here and there, a bit of a laugh, a bit of a giggle: not proper gambling, with big money an’ that. Indeed; and the vast majority of us do not count ourselves as gamblers, although more than three-quarters of the UK adult population, for instance, play the National Lottery at least once per year, and most on a more regular basis. Even if the Lottery is excluded, nearly half of us dabble in one form or another. Gambling, in its myriad forms, is popular. People want to gamble. And, with more and more people acquiring access to the Internet, whether through a fixed line or mobile phone, companies are naturally eager to allow them to fulfil their desires online.
But governments have not always seen it this way, and generally feel disposed to impose some or other form of regulatory structure on the industry. There are two extreme approaches here. The first, which may still be practised in some relaxed and possibly dangerous environs, is anything goes. The problem with this regulatory model is that it offers enormous scope for the following scenario: a couple of characters named Slim and Frenchie set up www.greatbets.com, offer wonderful odds for the less percipient and discerning customers and then silently disappear into the night with the loot. While profitable in the short term, this business model is probably not sustainable in the longer haul, if only because people are highly unlikely to be repeat visitors to your site. Furthermore, and unfortunately for Slim and Frenchie, very few – if any – governments are inclined to be so laissez-faire, with the possible exception of countries where Slim and Frenchie are first cousins to/and or best buddies with the Minister of Commerce.
The second model, which the United States has employed, lies at the other end of the spectrum. Here, under the quaint and misplaced belief that prohibition actually works, the feds will send in the modern day Eliot Nesses to arrest anyone who places a bet over an Internet connection. There are many things that could be said about this policy, and while, as Johnson said of Cymbeline (and, latterly, if somewhat unkindly, Muggeridge said of Sons and Lovers), it is pointless to criticise unresisting imbecility, it can be enjoyable and cathartic nonetheless. And so, let us take a closer look at the US approach.
While you can legally buy lottery tickets, gamble in licensed casinos, and place a bet at a bookmakers in person, it becomes a heinous crime should you wish to do so remotely via a telephone. The legislation which decrees that it is so is the 1961 Wire Act: this was originally drafted to prohibit bookmakers in states where gambling was then legal taking bets from would-be gamblers in other less liberal areas of the US. However, times have changed, and America has become exposed to the wonders and depravities of the World Wide Web, and various upright (or uptight, depending on your viewpoint) congressmen and senators have sought to update the 1961 Act to ensure that those pesky remote gamblers don’t gamble online across state lines: in fact, to ensure that they can’t gamble online at all. Senator John Kyl repeatedly tried to introduce various incarnations of the Internet Gambling Prohibition Act , none of which made it to full senate vote, before Senator Jim Leach took up the baton for righteousness and sponsored HR4411, the Unlawful Internet Enforcement Act. The argument behind this legislation is as follows:
“The Internet's ease of accessibility and anonymous nature: (1) make it difficult to prevent underage gambling; and (2) feed on the compulsive behaviour of the millions of Americans suffering from gambling addiction.”
I have a big problem with (1) and an even bigger problem with (2). To (1), I would answer: no, dear, it doesn’t. There are numerous checks and balances that can be put in place, notably age-verification requiring at least two items of identification, which actually works very well. And as for (2): up to a point, Lord Copper. The Internet can certainly facilitate mobile gambling (that’s why Ladbrokes, William Hill, Uncle Victor Chandler and all were in there like a shot); it makes it very easy to place bets without the bother of popping down to the bookies or the bingo hall (or, if you’re feeling flush and flash, the Golden Nugget). But I would question whether the majority of those Americans who do suffer from gambling addiction as a result of visits to the aforementioned locales would be significantly more likely to gamble were Internet gambling to be permitted. For one, as a recent survey by the American Gaming Association revealed, the demographic profiles of online gamblers are markedly different from, say casino gamblers: the former are predominantly males, aged under 40 and college educated; the latter are inclined to be older, less well educated, and with a greater preponderance of women in the mix. Secondly, and this is the biggie: why should the overwhelming majority of responsible gamblers be denied the opportunity to enjoy a leisure activity in their own homes which is perfectly acceptable and legal in public places?
This is not in any way to deny that gambling addiction, whether online or in any other form, is a serious issue: a short perusal of the website run by the charity Gamcare provides hair-raising evidence of the scale of problem gambling, and of its consequences, both to the gamblers themselves and to their families. But, as Gamcare acknowledges, there are ways of addressing the problem, not least by working with the gambling industry, regulators and the government. For Senators Kyl and Leach, that conciliatory approach would be anathema. Naughty Internet gamblers! Bad Internet gamblers! Ban them and lock them up!
I called it imbecilic: and yet (credit where credit’s due) there may be method in their apparent madness. Back in 2001, when the American Gaming Association was appearing before a Congressional Subcommittee, it grumbled that offshore Internet gambling sites: “Frustrate important state policies, including restrictions on the availability of gaming within each State… Unregulated Internet gambling that exists today allows an unlicensed, untaxed, unsupervised operator to engage in wagering that is otherwise subject to stringent federal and state regulatory controls. These controls are vital to preserving the honesty, integrity and fairness that those in the gaming industry today have worked so hard for so long to bring about.”
Untaxed. That is the key word here, the one which gives all governments the screaming habdabs. Those blasted foreigners are not paying tax – just look at all that gorgeous, lovely, sexy money being pumped offshore! Why not introduce an Internet protectionism; oh, sure, it’ll mean that us boys at the AGA don’t get any competition, but hell, we can put up with that! We’re good, God-fearing, tax-paying US citizens!
But the problem for the US government is that those blasted foreigners are not taking things lying down. In Antigua and Barbuda, gambling is the driving force behind the economy: the tiny nation is home to more than 500 remote gambling sites; it has been estimated that 3,000 of its 67,000 inhabitants are employed in the on-line gambling business. And many of its best customers are American. Accordingly, when the US government began using the Wire Act to prohibit foreign transmission of gambling information, its Antiguan counterpart lodged a complaint with the World Trade Organisation, which found in November 2004 that the US restrictions on remote gambling were in violation of international trade agreements. The US government, naturally, appealed against this verdict, before altering its standpoint and claiming that it was no longer in breach of the trade agreements, but hey, you still can’t gamble on Antiguan web sites. Much paperwork later, a WTO Dispute Settlement Body (DSB) will shortly adjudicate on the matter: whether the US will abide by its ruling is another matter entirely.
Well, then, we have had the two extremes: now for the middle ground, which is what Tessa Jowell, the UK Minister of Culture, is proposing. I am no lover of regulation for regulation’s sake; but in this the British government has been careful and reasoned at just about every stage in the process. Recognising the international nature of the industry, it has called for the implementation of international standards of regulation. Recognising that would-be punters tend, not unnaturally, to be more attracted to gambling websites where Frenchie and Slim don’t disappear into the sunset, it has backed the introduction of kitemarks for the online industry. It has worked with the Gambling Commission to develop proposed licensing conditions and codes of practice. It has called for greater co-operation with the industry as a whole.
But before I get too lovey-dovey with Tessa Jowell, I would venture to suggest that at that heart of the matter, there is a great deal of similarity between the US and UK governments. Both are aware that gambling is not going to go away; both, being pragmatists, would like to earn some money from it. However, while the US approach is rooted firmly in the past, in the robust and defiant protectionism it has so often mocked when its own products are being exported, the UK option has been to appreciate that it is better to have the gambling companies inside the tent rather than outside it (in Antigua, Gibraltar, or wherever). It is an approach which will ensure that the industry is well regulated, that gamblers’ rights are protected; it will also be an approach which is more financially rewarding. So I would say to the US government: do you sincerely want to be rich? If so, listen up.
Dr Windsor Holden is Principal Analyst at Juniper Research
Mobile Gambling Markets Re-Assessed (Post US Legal Changes), 2006-2011, published by Juniper Research, January 2007