Editorial: Dispelling the Border-Control Myth

26 June 2003

While those who favor containing interactive gambling within geographic borders joyfully choreograph their victory dances, let the rest of us mourn their divorce from reality.

I'm hearing that the closure of online casinos run by the likes of PBL, Tattersall's, MGM Mirage and Kerzner are signs that the opponents of globalization are winning and that measures taken to block cross-border betting are unequivocally successful.

I'm hearing that De Lotto, the Netherlands' lottery monopoly, has proven by successfully blocking 62 Internet gambling sites that the days of invading foreign markets are numbered.

There's more "distressing" news for global I-gaming, but you get the picture.

I've been reading the gloom and doom in some of the world's prominent business pubs for months and the two consistent themes I'm seeing are: 1) a new order of I-gaming--void of a global market--is inevitable; and 2) None of these publications seem willing to go beyond scratching the surface.

Intrigued, I looked at the numbers to see just how doomed global I-gaming is. The most recent edition of the River City Group's annual "Wagering on the Internet" report documents 1,800 Internet sites at which you can gamble for real money. This data dates back to late 2002, but I think it's safe to say that the number is in the same neighborhood today.

Let's very conservatively say there are 1,000 sites (in all likelihood, it's at least double that) and let's very liberally say that 500 sites are effectively blocking play from jurisdictions that don't want their business. That's quite a stretch in the favor of the anti-globalization movement, but even with this generosity, they're far from achieving their goal.

It's true that Ladbrokes has agreed to the demands of the Netherlands, that operators in the Isle of Man and Alderney have agreed to block play from U.S. customers and that MGM Mirage, Tattersall's, Crown and others have failed online because regulations have kept them from targeting players in markets where their brands are strong.

But the last time I checked , Golden Palace and Casino-On-Net were doing just fine. And the last time I checked, global industry leaders like Betfair and Sportingbet were begging to be taxed and denied by governments that would rather collect no taxes and subject players to "rogue" operators.

My point is simple: Outside of severe restrictions on citizens' Internet access, no country can prevent Internet gambling transactions from crossing its borders. Period.

You may get cooperation from certain jurisdictions and operators licensed in those jurisdictions, but the vast majority of online gambling operators are located in Caribbean and Central American jurisdictions, where there are virtually no restrictions (outside of Curacao's relationship with Holland) preventing operators from targeting customers in Australia, the United States, Denmark, Hong Kong, the Netherlands, or anywhere else where the delusion of impenetrable cyber walls is rampant

And of course, those who argue that geo-location software is up to speed are forgetting one very basic concept: It's the responsibility of the operator to employ border-control software, and the majority of the world's I-gaming operators have no obligation or motivation to cooperate.

The only effective means of deterring I-gaming to date has been cutting off payment channels, and with so much at stake, I guarantee operators will adjust and learn to circumvent these restraints. And unfortunately, their only payment processing options will be under the radar and out of the reach of regulatory instruments that protect players.

So, is the writing on the wall for the global I-gaming industry?

Not quite... More accurately, it's on Mark Roberts' ass, and it reads: "GoldenPalace.com," i.e. "Vive la cross-border gambling," i.e. "Thanks to all you gaming ministers who are driving our First World competitors out of the business." (If you're scratching your head, Mark Roberts is the infamous "streaker" who's turned himself into a prancing billboard by crashing major sporting with "Golden Palace" written across his back.)

In the name of "fair competition" (a euphemism for "greed"), the monopolists have done an admirable job of warding off foreign name-brand operators, but they are far from eliminating all of their competition. They've only managed to block those who are willing to play by their rules, and they've greatly underestimated the abilities of those who are not.

Now, here we are eight years into the age of Internet gambling and in a lot of ways we're right back where we started. With not nearly enough properly regulated sites and the dwindling online presence of established land-based gaming businesses, untaxed, barely (if at all) regulated offshore operators are in control.

The movement to kill the global I-gaming market doesn't mean putting an end to cross-border gambling. It merely means putting an end to the presence of operators with land-based gaming licenses; i.e. those who are best suited to service gamblers. The bottom line is the consumer--once again--loses.

As long as the United Kingdom stalls in its liberalization of gaming laws, the near-term outlook for interactive gambling is clear: The second Golden Age for offshore operators is about to begin.

The victory celebration will have to wait... or at the very least be modified to include limbos and pina coladas.

See also: Tim Ryan's rebuttal.

Mark Balestra

Mark Balestra is the Managing Director at BolaVerde Media Group. He previously worked at Clarion Gaming and the River City Group where he was the publisher of iGamingNews. He lives in St. Louis, Missouri.