The Emergance and Evolution of The Internet Gambling in The US

A key mandate of the National Gambling Impact Study Commission was to assess the impact of technology on gambling in the United States. Technology in this area is evolving at a rapid rate, and its potential is only beginning to be glimpsed. This is especially true regarding Internet gambling. On-line wagering promises to revolutionize the way Americans gamble because it opens up the possibility of immediate, individual, 24-hour access to the full range of gambling in every home.

To better understand the impact of Internet gambling, the Commission and its Subcommittee on Regulation, Enforcement, and the Internet received testimony from technology experts, the interactive gambling community, and public officials and reviewed the growing research on Internet use and the efforts of regulators to match the unprecedented pace of change. This chapter presents a summary of those findings and recommendations for meeting the challenge posed by this technology.

The increasing number of people who use the Internet and the growing consumer confidence in conducting on-line financial transactions have led to a greater number of people who are willing to engage in Internet gambling. Although the phenomenon is difficult to measure, all observers agree that the growth is rapid. Sebastian Sinclair, a research consultant for Christiansen/ Cummings Associates, Inc., estimates that Internet gambling more than doubled from 1997 to 1998, the number of gamblers increasing from 6.9 million to 14.5 million and revenues from $300 million to $651 million. 1 (See Figure 5-1.) Other studies indicate similar rates of growth. One study, which looked at Internet gambling revenues and the revenues of companies that produce software for on-line gambling operators, concluded that the Internet gambling industry’s revenues grew from $445.4 million in 1997 to $919.1 million in 1998. 2

Although projections concerning the turbulent world of the Internet are notoriously inaccurate, virtually all observers assume the rapid growth of Internet gambling will continue. Sinclair estimates that Internet gambling revenues will reach $2.3 billion by 2001. 3 The Financial Times and Smith Barney have estimated that the Internet gambling market will reach annual revenues of $10 billion in the beginning of the next millennium. 4

Obviously, the numbers are greatly influenced by a number of hard-to-predict variables, the most important of which are regulatory measures undertaken by governments. Such efforts are unlikely to be uniform, however: Even as the U. S. Congress debates legislation to prohibit Internet gambling, several foreign governments have moved in the other direction and have licensed Internet gambling operations within their own borders, which Americans can access. 5 Clearly, the politics of Internet gambling are evolving almost as quickly as the medium itself, and with a similar lack of common direction.

1 Sinclair, supra note 12. 2 Glenn Barry, “Seven Billion Gambling Market Predicted,” Interactive Gaming News (May 11, 1998) (http:// www. igamingnews. com.) 3 Sinclair, supra note 12. 4 Sinclair, supra note 12. “Starnet Communications: Internet Gambling Pioneer Switches to Starnet Technology,” Business Wire, Aug. 27, 1998 available in LEXIS, Nexis Library, News File. 5 The countries with laws in place to extend Internet gambling licenses include: five territories within Australia, Antigua and Barbuda, Austria, Belgium, Cook Islands, Costa Rica, CuraƧao, Dominica, Dominican Republic, Finland, Germany, Grand Turk, Grenada, Honduras, the territory of Kalmykia in Russia, Liechtenstein, Mauritius, St. Kitts and Nevis, St. Vincent, South 1