The North American Gaming Regulators Assn. (NAGRA) is exploring how to deal with the advent of internet gambling. Their committee on the topic developed some issue questions to guide discussion at their recent conference in Norfolk, Virginia. You'll find those questions here which will give you a sense of what sorts on concerns are arising among North American regulators. The first section, albeit short, discusses how they might handle prohibition should such legislation be passed federally. The larger set of questions gets into the myriad of details which would help guide them should a regulatory scheme be adopted in lieu of prohibition.
IGN thanks Mike Petersen, chairman of NAGRA's Internet Gaming committee, for sharing this insight into their committee work.
The models presented in this document are for discussion purposes at the North America Gaming Regulators Association Conference Cyberspace Gaming Committee Breakout Session May 19, 1998, at 10 a.m.
Model No. 1
A Model to Prohibit Internet Gaming
- Prohibit Internet carriers from offering gaming web sites.
- Can access to web sites be blocked by area codes.
- Prohibit all advertising of gaming web sites.
- Treaties with other countries—negotiate agreements with foreign governments.
Model No. 2
A Model to Regulate Internet Gaming
- Licensing of operators (web sites) and creators of gaming software.
- Base this item on NAGRA Licensing Standards.
- Comprehensive background checks of all owners (5%) and management personnel.
- Licenses may be revoked or suspended as contested case in accordance with the Administrative Procedures Act.
- Would an operator have to get a license in each jurisdiction where they plan to offer the games or only in the jurisdiction where the web site is located?
- Ensuring the honest of games
- Only approved games may be offered.
- All game algorithms must be open to inspection at all times.
- Controls are in place to ensure the software used in operating the games is from the source code that has been reviewed and approved.
- All game rules must be approved in advance by the regulatory body where the web site is located.
- Minimum payout percentage.
- Odds of winning and payout percentages would be posted.
- A notice that tells the player what currency the wagers are places in and winnings paid.
- A method to verify that prizes won have been paid.
- A method for ensuring the delivery of nonmonetary prizes.
- Internal controls and audit trail—The internal controls and audit trails will be different from licensee to licensee and the regulator will have to adapt to rapidly changing technology. The regulatory body would either have to hire staff trained in auditing and testing through computers or hire an outside firm.
- Each prospective licensee would have to document the internal controls and audit trail for each critical process.
- Regulators would need access to the physical premises on demand.
- Regulators would need real time on-line testing ability of programs.
- The operation must take place at an approved site.
- Regulators would need seizure powers if sufficient evidence suggests improper activities.
- The regulatory body would have the authority to require changes to management practices, control procedures, accounting practices, game operations, etc., in order to ensure the integrity of the operation.
- Controls would have to be in place and documented to prevent external breaches.
- Disaster recovery plan.
- Disaster recovery capability is sufficient to ensure player winnings and audit ability is possible up to the point of the disaster.
- In the case of aborted games a plan of action approved by the regulatory body would be required.
- Ensuring the financial stability of the operator.
- Require a bond or trust/escrow account.
- Backing by an outside financial entity.
- Insurance for large payoffs.
- Determining the location of the player.
- Require the player to establish an account and verify the information as to identity and location (social security number, fingerprinting, Smart Card).
- Credit betting.
- Do not allow any betting with credit.
- Must use prepaid cards or set up an account.
- Bet limitations.
- Limit any one wager to $______.
- Limit amount wagered per week to $______.
- Wagers may not be accepted from jurisdictions where Internet gaming is prohibited.
- Underage gambling controls.
- Do not allow gambling with credit or with credit cards. It would be much more difficult for an underage person to set up an account and come up with the cash.
- May want to require a social security number.
- Compulsive gambling controls.
- Do not allow gambling with credit or with credit cards.
- Set limits on losses for a specific time period.
- Players could set up their own maximums or register to be prohibited from playing.
- Cross jurisdictional agreements
- A game approved in one jurisdiction would be allowed in all participation jurisdictions.
- Each participating jurisdiction would be required to enforce prohibitions against unlicensed providers.
- Information concerning denials of licenses would be shared between jurisdictions.
- A method to collect taxes.
- The licensee would remit taxes to the jurisdiction where the bet was placed.
- If the bet was placed in a location that does not allow Internet gaming the tax would be remitted to the jurisdiction where the server resides.
- Unclaimed prizes or unclaimed accounts would remit to the jurisdiction where the server resides.
- A method for resolving disputes.
- Prizes may be withheld from players if there is sufficient evidence that indicates cheating.
- Complaints are handled in the jurisdiction where the web site is located.
- The operator must have the ability to generate a detailed transaction report.
- Restrict location of gaming to private residences.
- Computers may not be used as gambling machines to create a gambling house or to circumvent local restrictions on the number of gambling machines allowed on a licensed premise.
- Advertising.
- Only authorized games may be advertised.
- Advertising would only be allowed in jurisdictions where Internet gaming is legal.
- Privacy issues.
- Lists of registered players may not be used for any other purpose than to verify the player and the
player’s location.