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Betting Against Online Gambling By: Megan Frankowski Section 605 From Casinos to Computers In an era marked by computers, gambling has easily spread from casinos to the internet. Internet gambling is at least a $200 million-per-year business.

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betting against online gambling

Betting Against Online Gambling


Megan Frankowski

Section 605

from casinos to computers
From Casinos to Computers
  • In an era marked by computers, gambling has easily spread from casinos to the internet.
  • Internet gambling is at least a $200 million-per-year business.
  • By the end of the century, Internet gambling may be a $10 billion-per-year business.
  • Although some states have taken decisive action to prohibit or regulate online gambling, state regulation is largely ineffective because the Internet transcends state and national boundaries.


"For addicts, net gambling is the great rock-candy mountain. It's like an alcoholic being given a bathroom in which the taps run with iced vodka."

- The Guardian Unlimited

"People are betting billions of dollars online and they've no idea who they're giving their money to. They could be betting with the Mafia, for all they know."

- Dr. Howard Schaeffer, Harvard Center for Addictive Studies

dangers of online gambling
Dangers of Online Gambling

Although most states allow some form of

gambling activities, many seek to prohibit online gambling

because of the following dangers unique

to online gambling:

1. The potential for fraud over the Internet.

2. Children's access to gambling sites.

3. An increase in gambling addictions.

4. The need to preserve state revenues

generated from legally enforced

(and state-run) gambling operations.

gambling guaranteed
Gambling – Guaranteed?
  • How does a typical Internet gambling site work?
    • To open up an account, gamblers provide their credit card numbers and social security numbers or mail in deposits.
    • The bets that gamblers place are received by on-site operators.
    • Upon completion of a game, an on-site operator reports back to gamblers whether they won or lost.
  • Are these games operated fairly?
    • There is no distinct way to know and henceforth, gamblers are at the mercy of those on-site operators who may manipulate the odds or falsely report game results.
    • A spokesperson for the National Coalition Against Gambling Expansion states, “T]here's just no way to tell if virtual dice, roulette or cards are rolled, spun or dealt randomly...or whether they're responding to a cheat customers.“
    • On-site operators may not properly credit winnings and because of the difficulty of finding on-site operators in cyberspace there is little to be done
    • If too many gamblers win, online operators can simply shut down their web sites and open new online gambling sites.

Addictions Arise

  • How can online gambling lead to a rise in gambling addictions?
    • The detached gambling environment on the Internet feeds addiction because there is no tangible representation of money, such as chips, being won or lost over the Internet.
    • As a result, gamblers may lose track of how much money is being won or lost and may gamble beyond their means.
government gambling
Government & Gambling
  • Why do states want to prohibit online gambling?
    • Protecting state revenues generated by legal and state-run gambling operations is a key reason why states want to prohibit online gambling.
    • States profit from taxes on winnings and net revenues from legalized gambling.
    • States lose revenue by not being able to tax gamblers who win over the Internet.
    • *Gamblers who win over the Internet have an incentive not to pay taxes on their winnings because the Internal Revenue Service lacks the resources to track online gamblers.
cyber casinos
Cyber Casinos
  • State regulation makes logical sense when dealing with a lottery or a casino, since the establishment and regulation of those can be confined within a particular state's borders.
  • Because the Internet is not confined to a specific place, the regulations are largely ineffective.
  • Consequently, legislators addressing Internet gambling cannot rely on existing gambling laws.
  • Henceforth, many states have turned to the federal government for help in regulating Internet gambling.

Legislative Solutions

Federal statues that apply to online gambling:

  • The Wire Act
  • The Travel Act
  • The Interstate Transportation of Wagering Paraphernalia Act
  • The Professional and Amateur Sports Protection Act
  • The Aiding and Abetting Statute.
betting or wagering
Betting or Wagering
  • The most used law concerning online gambling is the Wire Act.
  • It states that persons or organizations "engaged in the business of betting or wagering who knowingly use a wire communication in interstate or foreign commerce" are subject to penalties.
  • Operators of cyber-casinos do fall within the scope of the statute.
  • Online gamblers and Internet service providers fall outside of the statute because they are not "engaged in the business" of gambling.
  • To extend the Wire Act the Internet Act was introduced, which would extend the Wire Act by imposing penalties, not only on operators of cyber-casinos, but also on online gamblers and ISPs.
  • Under the Internet Act, the definition of "betting or wagering" has been clarified to encompass the offering of prizes in lieu of money.
  • Penalties for online gamblers include fines up to $2,500 and/or a jail term not to exceed six months
  • Operators of cyber-casinos are subject to fines up to $20,000 and/or a jail term not to exceed four years. The Internet Act authorizes local authorities to seek injunctions against operators of cyber-casinos as well as ISPs and telephone companies that, upon notice of gambling sites, do not block access to these sites.
other solutions
Other Solutions
  • As part of its licensing requirements, the government could require all gambling sites to have credit limits.
  • Taxing winnings may be another way to prevent against a rise in gambling addictions. If winnings are taxed, gamblers may be more inclined to gamble in moderation.
works cited
Works Cited

Ahrens, Frank. “U.S. Outlaws Internet Gambling.” 14 October 2006. The Washington Post. 11 November 2006. <>

Holahan, Catherine. “Against Online Gambling.” 12 July 2006. 11 November 2006.<>

McCullagh, Declan. “House Bets Against Online Gambling.” 6 May 2003. CNET 11 November 2006. <>

Richtel, Matt. “U.S. Threatens Action Against Online Gambling.” 15 March 2004. The New York Times. 11 November 2006. <>

Wenzel, Elsa. “Odds Go Against Online Gambling.” 11 June 2003. Medill News Service. 11 November 2006. <PDT,111129-page,1/article.html>