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Remote Gambling and Government Alternatives

Remote Gambling

Governments often think about internet and other forms of remote gambling by asking: “Should we permit this activity and, if so, how much should we permit and how should we regulate it?” However, in light of the reality of remote gaming already in existence, the appropriate questions that governments should ask are: “How can this activity be properly regulated? What will the consequences be of trying to do so?” From the point of view of government, the issue is much like wondering what to do given that there is a large and growing illegal gambling industry in a situation where there is little popular support for enforcing prohibition.

One alternative is to declare that all forms of remote gambling are illegal and that consumers found gambling on the internet will be prosecuted. This, however, poses serious problems with enforcement. With remote gambling, there is no consensus that such policing measures would be acceptable.

Governments are often encouraged to explore the option of prohibition because they are lobbied either by existing gaming industries or their benefactors that wish to avoid competition, or by those who are opposed in principle to any (additional) form of legal gambling. However, the underlying problem for any jurisdiction contemplating prohibition of remote gambling is whether there is sufficient political will to enforce prohibition, which is a function of the level of popular support for the policy.

The next alternative is regulation. The primary reason for wanting stricter regulation on remote gambling than applies to other forms of entertainment is to minimize problem gambling that might occur because of the potential for high-stakes gambling continuously available via remote gambling channels. This is also a reason for Member States to consider legislation that regulates remote gambling in a manner that encourages citizens to gamble on sites regulated by their home governments. Governments are also motivated to improve their current account balances and to stimulate their domestic economies; they can accomplish this by regulating remote gambling in a manner that encourages increased spending by foreign customers and/or discourages spending by their own citizens on remote gaming sites based in foreign countries. In general, to fulfill these objectives, they should establish legal and institutional structures which inspire customer confidence in the probity of the remote games, the companies which offer them, and the comparative advantages of gambling with home-based companies rather than others.

In order to achieve the aim of encouraging both consumers and suppliers to buy and sell gambling services primarily via the internet sites which they authorize and regulate, governments need to make it more attractive to consumers and suppliers to operate (and pay fees and taxes) within their jurisdictions, rather than going abroad. For consumers, this means that gambling products must be as attractive, as easily accessible and as inexpensive as the products offered from overseas jurisdictions. For suppliers, it means that the costs of doing business onshore (including most notably taxes) must not exceed the costs of doing business offshore by more than the increased benefits which the company would derive by operating and being regulated onshore. For both consumers and suppliers, it means that the burden of regulation must not be onerous and unnecessarily bureaucratic, in comparison with that imposed upon offshore sites.

One means of encouraging remote gambling companies to operate in European jurisdictions which offer strong protections against problem gambling and other negative social impacts (and thereby impose some additional regulatory burdens) would be to prevent anyone who is not so regulated from advertising their products through land-based media within the jurisdiction or, in the case of the EU, via any website with a suffix referring to a Member State (.fr, .uk, etc). This would give operators of e-gambling businesses duly licensed in the EU an advantage in relation to the task of attracting and retaining customers. Advertising could also be used by governments to make the public aware of the dangers and disadvantages of gambling with sites not regulated according to EU standards and not subject to EU compliance procedures, including the dangers of fraud and uncertified technology.

It would also be possible to attempt to control internet gambling (or unlicensed, uncertified remote gambling) via the banking industry by, for example, declaring that debts owed to credit card companies as a result of internet gambling may not be enforceable at law, and electronic funds transfers for gambling purposes are illegal. (Indeed, this is the essence of a strategy put forward in 2006 with proposed legislation in the U.S. Congress.) This is not as easy as it sounds, because it is at present quite easy to disguise, through various mechanisms, payments made to e-gambling companies. Another difficulty is that, just as anti-usury legislation creates an environment conducive for illegal loan-sharking, making debts unenforceable at law might lead to the emergence of e-banking businesses which enforce their debts by extra-legal means.

Nevertheless, if both gambling operators and their customers were aware that the likelihood of their being able to collect their respective winnings depends on the jurisdiction regulating their gambling activity, this would provide a major incentive for both to do their business subject to local regulation.

It seems likely that as more and more gambling takes place via remote technologies regardless of the status of national laws, with perceived dangers to citizens of individual countries, and with loss of tax and other revenues, pressure will mount to establish and enforce international agreements among nations which permit and regulate remote gaming.

The ultimate result may eventually be the establishment of common international standards and regulatory requirements that will minimize differences among jurisdictions. This may be an important way of encouraging EU citizens to gamble within EU regulated companies because of the legal protections afforded.

Credit © European Union

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