Who or What are Worldwide Prohibitions of Online Gambling Truly Meant to Protect?

There currently exists one particular area of online commerce where international companies dominate not just the United States, but the world – online gambling. In fact, the overwhelming majority of websites that allow people to gamble online are located in Europe.  This is based upon various factors. First, Europe is where the market is – Europeans place more than half of the world’s online wagers. Second, and perhaps most indicative, is that the United States currently prohibits online gambling.

Nevertheless, Europe itself is somewhat divided when it comes to online gambling. In theory there is a single European market.  In reality, only 13 of the European Union’s 27 member states approve of online gambling. Approximately one-quarter of the countries restrict it to gambling “monopolies” owned or licensed by the member state, and another 25% are in-line with the United States and and attempted to outlaw it. Banks in some member states actually face prosecution if they transfer money to online gambling firms abroad, while others have expended significant efforts to get ISPs to block access to gambling websites, outright.  While the European Commission consistently defends the right to offer online gambling (even while some countries try to ban it), difficult questions about individual states’ abilities to override the single market policy and defy specific EU directives raise significant concerns abroad.

Naturally, the questions becomes – what is the desire of national and international governments when implementing online gambling prohibitions? Is it to protect revenues or consumers? In the United States, industry entrepreneurs have been arrested and banks ordered to halt payments to online gambling firms. Indeed, politicians have argued that prohibition is the best way to protect vulnerable consumers from themselves.  However, both nationally and abroad, local gambling monopolies are allowed to offer the same kinds of bets that are outlawed if placed with firms abroad. This obviously suggests that country specific prohibitions are squarely aimed at protecting the revenue that they themselves earn from state-approved monopolies.

Notions that coercing banks and ISPs into taking steps to preclude consumers from placing bets is ignorant, at best naive. Why? Because online gamers know that they can obtain more favorable odds when placing bets elsewhere.  In effect, the prohibition in the United States has far from chipped away at the popularity of online gambling, evidenced by what seems to be semi-regular arrests and prosecutions. What the prohibition has done, however, is forced legitimate online gaming businesses to more accommodating locales and those in the United States to satisfy their habits in what might be considered less reliable places on the Internet.

The United States government will continue to make every possible effort to stem the tide. However, the demand itself will most likely continue to make such efforts pointless. As with many popular activities that have been redefined by the evolving world of eCommerce, regulation is not only a more plausible solution, it is the most obvious method to stimulate online domestic economic growth.

Richard Newman, Internet Law Attorney, Hinch Newman LLP

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