Introduction to Online Gambling

Online Gambling (also called Internet Gambling or Internet Gaming) refers to playing games of chance for money over the Internet. There is a legal distinction between online poker and other forms of online gambling, as some regulators consider poker to be more of a game of skill than chance, and hence possibly subject to different rules. Online sports betting is also sometimes treated separately from games, as early judicial decisions singled it out for special treatment. The US "Wire Act" was made to apply to Internet sports betting by analogy to the use of telephones to place bets with bookies.

Since the mid-1990's online gambling sites have mushroomed, offering all kinds of betting opportunities, including electronic versions of casino table games as well as poker in all varieties, sports betting and bingo.

The subject can be divided into three parts: (1) the legal and regulatory issues, (2) the technology and functionality of online gaming, and (3) practical approaches to enjoying online gaming without being hurt or victimized by the unscrupulous. The remainder of this introduction is a summary of these three subject areas, treated more extensively on other pages.

Legal and Regulatory Issues. Most states in the United States outlaw the business of running a gambling operation and some criminalize the making of a bet by a customer. Both the states and the federal government face a problem in prohibiting online gambling in that the Internet does not "exist" in any given state or other location. As all online casinos are established elsewhere, there is a question about how far the law can reach. Both practical and constitutional questions arise if ever an individual state tries to criminalize the placing of a bet over the Internet. Federal courts have addressed the legality of Internet gambling by interpreting the "Wire Act" (a statute passed long before the Internet ever existed) to apply to some, but not all, Internet gambling activities.

In 2006 Congress passed the Unlawful Internet Gambling Enforcement Act, or UIGEA, which some believe forbids Internet gambling by US citizens, or perhaps by anyone on US soil. The problem is that the statute only defines "illegal online gambling" as that which was already illegal, and so a certain confusion still persists. The main thrust of the statute was to try to control financial transactions related to gambling.

Internet gambling is based exclusively in countries where gambling is legal. Because of the legal uncertainties that still persist in the United States, some of these online casinos will not accept "action" from US-based IP addresses.

Congress and some of the state legislatures forbid gambling altogether because some elements of the electorate disapprove of any and all games of chance as a matter of principle. In this context, prohibition (rather than regulation) is the only possible policy. Those opposed to gambling in principle were joined for a while by those already in the gambling industry who feared competition from gambling over the Internet. This included lawful casino operators in the United States and perhaps some proponents of state lotteries. At the federal level, a few politicians have argued that Internet gambling threatens national security because of the foreign financial transfers involved and the possibilities for money laundering.

Other legislators at the state and federal level have resisted laws prohibiting Internet gambling, usually on two grounds. First, it is technologically impossible to prevent it because the technology has created a global system beyond the abilities of any specific government to control. Second, they argue that having regulated Internet gambling within the United States would make foreign financial transfers unnecessary and create better controls for taxation of winnings as well as prevention of money laundering. They point out that by prohibiting Internet gambling in the United States, none of the issues are really solved, they are just sent offshore.

Currently the law is clear that online gambling operations (other than horse racing and state lotteries, which are exceptions in states where they are legal) can not be operated from within the United States. But the law is not so clear about being a patron of an online casino. To date no one has been prosecuted, at least at the federal level, for placing a bet over the Internet. Many financial institutions have decided not to be involved with online gambling because of the ambiguity of the legal situation. Others remain active.

Technological and Business Issues. The common element in all online gambling is the creation of an "account" of some sort with one or more online casinos, or virtual gambling establishments. This account can be made by charging a credit card, a debit card, or by making a money transfer. Increasingly, as the legal status of online gambling has become more and more complicated and dubious, credit card charges have become more limited; however, money transfers in amounts up to $5,000 can be accomplished with relatively little red tape. The safety and security of this "account" is probably the principal business and technology challenge faced by online casinos.

Once an "account" is in place, it is a rather simple matter to operate an online casino game or poker game in real time. It is essentially an application of the same technologies as those used for Internet conferencing in business. The graphical interfaces can be so elaborate and elegant that users can readily imagine that the online casino is a swank, luxurious place, with the highest standards of integrity, culture and courtesy. This is not true, of course. The casino exists, if at all, on the hard drives of servers perhaps in the back room of some modest building in a remote corner of a Caribbean island, Pacific paradise, European tax haven or similar destination.

The biggest theoretical fear that new players have concerning the online casino is the specter of cheating. It is true that in theory online casinos are able to interfere with the random nature of the rolls of dice or dealing of cards. In a brick and mortar casino, when cards are dealt face down on a casino table, they are whatever they are. They can not change between then and the time they are turned over. Online casinos could indulge the luxury of deciding what that card should be at the very last minute, as it is being revealed. Thus, the profitability of the casino could be assured by taking a few wins from the customer before the customer even knew what was going on.

This fear is mainly theoretical, as any honest casino will not manipulate the randomness of the games when converting a "real" casino scenario into a virtual one. The problem, of course, is that only the experts can tell for sure whether any manipulation is going on.

Likewise, in a poker situation, the "house" provides the game in exchange for a commission or "rake" out of the pot. But the house does not otherwise enter the game to be an adversary to a player. Since it is so simple to create different online personalities, however, a casino's poker computer program could readily "create" an apparently independent player who, by virtue of knowing the cards in everyone else's hands and in the deck, can win any amount the programs wishes to set as the goal. Even under honest conditions, a casino could conceivable want to create an online player just to provide a full table for the real online customers. In truth, though the technology exists to do such a thing, casinos do not take the risk and the trouble. In fact, the risk of collusion is greatest from private players at the virtual table, who might collude by some other form of communication. Casinos are constantly trying to police poker tables to make sure their customers are being honest. Though the technology exists to create "virtual players," all the good casinos have so many customers that they do not need to go out of their way to create electronic versions of more.

Starting around 1997 or so, the "early days" of online gambling (other than sports betting), the serious online casinos became interested in overcoming the fears and suspicions of the gaming public. Any other approach would have ended the bubble quickly. A few maverick start-ups would cause headlines and damage the situation for the others, but they would not remain in business long. The "main stream" online gambling operations understood clearly that the public will disappear if they win less money or lose more money than they would in brick and mortar casinos. For this reason, both the public and the casino operators themselves regard the honesty and integrity of the online casino as the principal business and technology issue they face.

Most other questions of technology are relatively simple to resolve. Online casinos have acquired all the software necessary to present credible images of all the sights in a real casino:

Poker. A full array of online poker games are available to players. Casinos regularly host games and tournaments in Texas Hold'em, Omaha, Seven-card Stud, and Razz. Draw poker is also feasible, though less common. The players are interconnected through the casino in real time, and are seated at a virtual table, visible to all players, with the ability to send "chat" messages one to the other.

Table Games. Table games have also made the move to the virtual world, including Blackjack, Baccarat, Roulette and Pachinko. Craps can be adapted for Internet play, but it loses some of its cache with the virtual dice rolls and the yelling that cannot easily be heard over the Internet connection.

Sports Betting. Unlike real world sports and race books, online casinos do not offer bets in pari-mutuel pools, though they mirror the track odds posted at pari-mutuel facilities. The bets are funded by the casino, or increasingly through a syndication of online casinos. Athletic events are bet upon in the same way as in the real world, with straight bets, spreads, money lines and exotics. Thoroughbred racing has also made a transition to online gambling, even though off-track-betting from the home has been available in some states for a while.

Bingo and Keno. Bingo and Keno are particularly well-suited to the virtual world, and several online bingo parlors and keno games are available.

User interfaces have come a long way since the first days of online gambling. Now, with high-speed broadband, the graphics are more life-like than ever. Portable devices such as iPhones and Blackberries can send and receive gambling news and instructions, so that the sheer volume of interactions between casino and clientele has grown enormously, and continues to expand, often at increasing rates of growth.

Confidence and Honesty Issues

As mentioned, it is hard to "lift the hem" of the cloak surrounding virtual casinos to determine whether they are honest, competent or appropriately capitalized. Three levels of security or inquiry can help sort this out for the person new to online casinos.

Reputation. The best approach towards confidence and honesty in online casinos is to take recourse to the millions of daily customers of these websites. Blogs of customers have formed around individual games, specific jurisdictions, and named casinos. Be cautious about blogs, relying on opinions expressed by people known to be independent of the casino or the software licensor to the casino.

Time in Business. Although persistence in operation is not necessarily a good measure of integrity, the fact that a casino has been in operation for several years (rather than several weeks) is a positive sign that it has gained repeat business. This stands to increase confidence in the establishment's integrity and in its competence. The biggest risk with an online casino is not cheating,
it is financial failure.

Licensing. Some jurisdictions, like the United Kingdom, Antigua and the Isle of Man, license online casinos, subjecting them to a certain amount of scrutiny. They must comply with minimal requirements of capital and competence, and their procedures are subject to inspection and approval. A bond may be required in the event of a financial failure (sometimes just to ensure payments to local authorities). A complaint procedure should exist with the jurisdiction for people who fell mistreated or swindled. While the level of oversight in some of these countries may be low
by US standards, it can be relied upon. The host jurisdictions regard online gambling as a welcome local industry, worthy of protection from scandals caused by the unscrupulous. They cynic may wish to be cautious here, too, in that of the smaller jurisdictions are so protective of their industries that they show much less than
an appropriate level of concern for the overseas customers.

Web Information. The casino itself will explain how it operates. While it used to be possible for the business to lie through its teeth, the many watch dogs on the web these days would "out" such a business in a matter of a few hours. The casino should show an appropriate concern for security and honesty on its web site, and all of them do. It is appropriate to be suspicious of a lot of "hype"
or offers of gaming credits and other benefits that seem too good to be true. It would then be time to check out how long the casino has been around and if there are any testimonials from real customers.

Summary

The steps to becoming an active online gambler involve reviewing the legal and regulatory context for the industry, which in the United States is still somewhat in flux, then choosing one or two online casinos that inspire confidence, creating an account, and beginning to play. As is detailed later on, it is always important to keep clear and detailed records of the online activity. This will help the gambler decide which are the best sites and games for his or her enjoyment, and will prove invaluable in sorting out any confusion with an online casino about the account.