Originally posted in 2003, [Updated as to Dutch Supreme Court decision on February 21 and 22, 2005]

Here are a few facts, statistics and observations culled from Internet Gambling Report, Sixth Edition (The River City Group, copyright 2003.) [1]

Legality of Online Gambling Websites:

“If no specific Internet gambling legislation is adopted, the off-line rules remain applicable to the virtual world.  Gambling Web sites are subject to the same regulatory and licensing requirements as the off-line world.  What is illegal off-line remains illegal online; it is illegal to offer (Internet) gambling services to consumers resident in a country where a license has not been granted by the appropriate authorities.”  (Parentheses are in the original text.) [2]

[[A recent decision by the Dutch Supreme Court is reported as concluding: “The court says that no gambling provider may offer services to Dutch residents without a Dutch license, and Ladbrokes has been ordered to implement geolocation systems and other measures to insure that its Web site cannot be accessed by Dutch residents.

[[Several other European gaming companies have legal cases tied up in the Dutch court system, but this ruling from the highest court in the country should serve as an affirmation that the law of the land prohibits foreign operators from offering services in the Netherlands

[[The Guardian newspaper reports that a spokesman for Ladbrokes “said the ruling was entirely expected in the context of Dutch law. However, he said recent rulings from the European court of justice (ECJ) could force member states to open up their controls on betting.

[[Ladbrokes and rivals are pursuing parallel cases in the Netherlands and elsewhere in Europe, looking for the issue to be referred to the ECJ.

[[In 2003 the ECJ ruled that an agent acting for Stanley Leisure was within his rights to take bets in Italy. UK operators hope this ruling will force continental markets to open up. ]]

Who Gambles Online?

In Chapter 5 Sue Schneider [3] summarizes the results of a survey of 2,900 gamblers from thirteen countries conducted in July and August of 2001.  She notes: “The majority of gamblers, 83%, play online, however, only a third of that group plays for real money.  In other words, the major attraction for online players is Web sites that offer free games.  In all, 28% of those who gamble do so online for real money.” [4]  She also says:  “Seventy-three percent of those who play for real money both online and offline lost money in the past month, while 80% of land-based-only players lost money.  Online gamblers, however, lose more money.  Those who gamble for real money both online and offline lost in the past month more than double what those who gamble exclusively off line lost.  Further, there are more than four-times more high rollers (percentage wise) among the online players than there are among land-based-only players.” [5]

Financial Services Industry View of Wisdom of the Proposed Unlawful Internet Gambling Funding Prohibition Act

Two of the contributors to the compilation discuss and opine on the effects of the passage of federal legislation like the pending Unlawful Internet Gambling Funding Prohibition Act, which passed the U. S. House on June 10, 2003 by the overwhelming vote of 321 to 101.

   “…[L]egislation that would prohibit any financial institution in the United States to facilitate in any way any part of an online gaming transaction has been seriously debated n the U.S. Congress since 2001…  If passed, this type of law would formally deputize the banks and processors and put practical ‘teeth’ in place that could eliminate most of the revenues online gaming operators receive from the U.S. market—which constitutes arguable 60 percent or more of the total market worldwide.

“While this type of sanction is understandable\y tempting, because it disrupts the industry’s payment flows form players, nevertheless it is a dangerous precedent for government to impose, of for the financial services industry to accept.  Previously, only when there has been a demonstrably national 0policy concern, such as the need to stop drug lords and terrorists from money laundering, has there been sufficient justification for using the U.S. banking system as the primary instrument of enforcement of laws.  The fear of the financial services industry is that if it is made a reluctant partisan and primary enforced of a ban on online gambling funds movement, if it can be deputized for such a frivolous and insignificant purpose, what will keep Congress from turning to the industry again and again, with more and more requirements and restrictions, for other issues du jour? [6]

Advertising in the United States

The compilation contains a truly excellent article on the history, background and legality of gambling advertisements in the United States.  The contributor has previously published much the same information (in three parts) at an adult website. [7] The conclusion expressed puts the best foot forward for the online gambling industry.  I suggest a thorough reading of the entire article to truly appreciate the enormity of the problems confronting advertising by an online gambling website that is not licensed in the United States.  The contributor says in conclusion:

“Advertising liability issues are subject to a different analysis than the liability associated with operating an online gambling business itself.  Advertisers have different, and better, constitutional arguments against the application of laws prohibiting commercial speech-even speech associated with gambling.  However, a multitude of intangibles play into the risk factors associated with any particular advertising campaign.  Some of these issues will work themselves through the courts in the coming years.  Others will remain as variables in the analysis.  Issues such as the legality of the underlying business activity have not been resolved by the courts.  Online gambling is substantially different in nature and character than land-based gambling.  None of the typical justifications asserted as a basis for gambling regulation, such as infiltration by organized crime or increase in prostitution, appear to apply to online gambling operations.  These differences may be exploited in future cases to convince the courts to treat the advertising of online gambling differently than traditional gambling promotion.  Industry participants are in a unique position to influence the development of advertising law applicable to online gambling businesses, given the lack of any controlling decisions in the field.” [8]

Immediately before this conclusion the author notes some practical and political realities, as follows:

“Certain fundamental realities regarding the advertising of Internet gambling cannot be ignored when analyzing the advertising liability issue.  A relatively low-key mailing or Internet promotion is simply less likely to garner the attention of law enforcement than a prime-time television advertising blitz.  The content of the marketing material itself will also bear on the likelihood of government intervention.  The use of sexually oriented images or suggestive language will make a promotional piece stand out to law enforcement.” [9]

End notes:

[1]   Anthony Cabot, a well-known gambling law attorney and partner in the Las Vegas law firm of Lionel Sawyer & Collins, is the Founding Editor of this compilation.  The publisher of this volume, The River City Group, is affiliated with a trade association for online gambling enterprises, the Interactive Gaming Council. http://www.igcouncil.org/

[2]    Internet Gambling Report Sixth Edition at 337.  The context of quotation indicates that the observations is specifically applicable to Internet gambling in various European nations.  This portion of the compilation, chapter 20 The EU and Cross-Border Challenges, and is written by Phillippe Vlaemminck “a senior partner of [a] Belgian law firm…and a visiting professor in European law at Ghent University…  He is a member of the International Masters of Gaming Law.  He has a very important pan-European gaming law practice advising both operators and regulators in several European jurisdictions.  He has been involved in all gaming law cases before the European Court of Justice, including those currently in court….”

[3]   She is the CEO/President of the River City Group and serves as chairman of the Interactive Gaming Council, a trade association with 75 members as the time of the writing of her chapter.

[4]    Id at 56.

[5]   Id at 57, footnotes omitted.

[6]    Id at 86-7.  The contributors are Charles Crawford and Melody Wigdahl.  He is the director of strategic development for Surefire Commerce, a publicly-listed Montreal-based provider of processing services to electronic commerce merchants.  Her Cincinnati-based firm is Glenjirk West, which specializes in payment and fraud screening solutions for clients.

[7]   The contributor is Lawrence G. Walters, a partner in the San Diego office of the law firm Weston, Garrou & DeWitt.

[8]  Id at 314.

[9]  Id.

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