The practice of online gambling is relatively recent. Midway through the 1990s saw the debut of the first gambling websites, which quickly gained enormous popularity, particularly in the United States. Even though online gambling is against the law, millions of Americans nonetheless do it. According to Christiansen Capital Advisors, a company that offers monitoring and management services for the gaming industry, Internet gambling generated $21 billion in revenue globally in 2008, up from just $3.1 billion in 2001.
Because the sites are not permitted to operate in the United States and the majority of nations that help them do not collect or report revenue statistics, exact numbers for internet gambling income are unknown. According to David Stewart in An Analysis of Internet Gambling and Its Policy Implications, two-thirds of online gambling is conducted in the small Caribbean and Central American nations with scant or no regulatory control.
Many online casinos either don’t pay taxes to their home nations or pay fewer taxes than land-based casinos. For instance, Stewart mentions that in March 2005, the tiny Caribbean island of Antigua was home to 536 gaming establishments, the most of any nation. The Antiguan authorities only required the websites to pay 3% of their gaming revenues (profits after paying out clients), with a monthly cap of $50,000. The British Isles, Canadian Native American Reservations, Central and South America, and other popular destinations were also included.
Contrary to the bulk of physical casinos, most online gambling establishments are run by little, essentially unheard-of businesses. A land-based casino requires hundreds of personnel and costs hundreds of millions of dollars to create and run, but an online casino can be set up and run by a small team for an initial investment of a few million dollars. The businesses are incredibly profitable and may pay out more wins than traditional casinos, thanks to their comparatively inexpensive start-up and operational costs.
The future of online gambling in the US is still up in the air. The Unlawful Internet Gambling Enforcement Act (UIGEA) of 2006 makes it illegal for banks and credit card firms to transfer funds from American customers to online gambling sites. Legislators hope the measure will prohibit casual gamblers, even if serious internet gamblers will probably find a way to move money to virtual casinos and poker rooms. Many major publicly traded online gambling businesses, including PartyPoker, had stopped accepting US customers entirely by the end of 2006 to avoid legal issues with the US government. The legality of online gaming is, however, still debatable. According to the legislation, the horse racing industry and Native American tribes may not participate in online gambling.
THE GROWTH OF ONLINE GAMBLING
There is disagreement around the launch date and the founder of the first online casino. On the other hand, it is generally acknowledged that the first online casinos opened their doors in 1995 or 1996. One of the earliest was the Antigua-based Intercasino, which has established itself as a pioneer in online gambling. The nation authorized and permitted online gambling sites in 1996. These websites are run by trade zone corporations, foreign-owned businesses that conduct business in some areas of the country as if they were outside. Enterprises in the trade zone in Antigua are not permitted to produce goods for domestic use. Hence residents of Antigua are not allowed to engage in online gaming with companies operating there.
Stewart claims that in 2005, sports betting accounted for $4 billion, or almost a third (35%) of all online gambling. About 25% of the online gambling business was made up of casino games. 18% of all internet gambling earnings in 2005 came from online poker. Poker is the online gambling game with the fastest rate of growth. Online poker rooms like PartyPoker brought approximately $82 million in revenue in 2000. The total revenue generated by poker sites globally was estimated to reach $2 billion in 2005. The remainder of the money made via internet gambling came from ticket sales, pari-mutuel race wagers (where those who bet on the top competitors divide the winnings and the house keeps a portion), and other games.