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US Restrictions Generate Profits for Offshore Operators

11/14/2000

Government losing out on major potential revenue source

At the recent World Gaming Congress & Expo, two of the most heavily attended seminars were "How Does the Internet Affect Every Aspect of Your Business?" and "The Inevitable Wireless Wager."
It was clear to all who attended the congress that U.S. restrictions on online gaming were helping to make several offshore operators very wealthy, while the government, as a result of its restrictions, was losing out on any revenues that could be earn through taxation. The experts also predicted that wireless technology would make tracking of illegal gambling even more difficult, as the process of placing a bet becomes significantly easier, quicker and more portable.
Internet gambling has carved out a US $1.2 billion niche in a global gaming market of US $830 billion. According to data compiled by Christiansen Capital Advisors, that figure is expected to grow to $6.3 billion by 2003, even without support from Congress.
"These sites are minting money," said Mickey Charles, president and chief executive of the Sports Network. Sports Network earns its revenue from banner ads on his web site promoting offshore gambling sites. Charles claims that American-based casinos, and foreign gaming interests that conduct business in the States, have held off entering into the online gaming business for fear that national and state governments will challenge their licenses.
However, in order not to be caught unprepared if legislation is approved, most of the major casinos have promotional web sites, which allow visitors to play games for points, discounts or promotional items. The casinos are preparing for foundations for turning these web sites into ?play for real? sites if legislation is approved.

If online gaming is permitted, these casinos web sites will be at a huge advantage over the other web sites without the branding that these sites have. According to Paul Siegel, vice president of business development for Global Cyber. "With legal operation and brand-name identification, you'll be able to run all the fly-by-nighters out of business."
In the meantime, although 800 to 900 operators are running offshore operations, the top 10 percent of them are making the major profits. "The rest are pyramid scams ... sites that are linked to other, larger operations," Charles said.
Although certain existing home-betting services, such as cable-based TV Gaming Network, have in place a series of security measures, including sending letters to adult credit card-holders confirming that their number has been used to access the service. Soon, through Global Positioning System technology, online gaming sites will be able to pinpoint any computer on their network, and biometric thumbprint readers will be standard on all Internet devices.
Like everywhere else in cyberspace, technology is out-racing the prohibitions put in place by the government to keep purveyors of pornography, gambling and other vices in check. However, wireless devices are making the job even tougher. "In Europe, bettors using cell phones or Palm Pilots can see odds, pick games and have instant access to their bank accounts," said Charles. "How can anyone stop it?"
While the government continues to waver, and gamblers continue to wager on foreign-based online gaming sites, the offshore operators, and the credit card companies and wireless services that provide the transaction pipeline, will profit while the government loses out.

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