In the early 1990s when internet gambling first started, it was the Wild West. Claims were made by optimistic would-be online-gaming entrepreneurs that the internet was outside the jurisdiction of any country, so anything was allowed. And to be fair, gaming regulators had not even thought about what the internet would mean for the gambling sector. So companies began offering their services anywhere they were able to. 

In 1995, I was lucky enough to be hired by one of the large U.S. casino operators to tell them what the internet meant for their business. Was it an opportunity or a threat? 

When they first called me up and asked me what I knew about the internet, my reply was “Not much”.  

“Great,” they responded, then tasked me with finding out as much about the internet as I could. What might it mean for a traditional brick-and-mortar casino business? 

I was paid to travel the world, meet technologists and financiers, and ask about their thoughts on the future “information superhighway”. 

One of my first points of call was British Telecom (BT). They were conducting an experiment with a new technology, ADSL and MPEG compression, for subscription Video on Demand (VoD). They laughed at the idea that the internet could become the “information superhighway”. They described it as a “dirt track” and insisted that traffic would grind to a halt if anyone tried to attempt what BT was attempting in Colchester using the internet.  

BT’s experiment was not developed further due to a lack of demand. They had built a “walled garden” and were offering a number of services to paying subscribers, including VoD, but they hadn’t figured out that people pay for content, not just technology. Nobody wanted to pay for second-rate movies and very clunky services. 

It wasn’t until I got to Silicon Valley and saw the amount of money being invested in internet-ready technology and infrastructure that I understood the internet was not going away any time soon. Sometime around this visit, Bill Gates made a speech stating that the future of Microsoft was the internet, which only confirmed my view. 

Based on my discussions on the West Coast, I came to realise that internet gambling would present many issues for regulators. So I put together a presentation to raise awareness of the issues.  

The first part of the presentation concerned how the internet worked and some of the challenging technical issues — bandwidth, file sizes, etc. The second part covered the issues that online gambling would force regulators to confront. 

Having presented it at one of the gaming conferences, I was invited to do the same at the Gaming Regulators European Forum in Budapest. It provoked a lively discussion amongst the regulators, some of whom immediately understood the implications and thought regulators had to cooperate, while others believed the solution was to ban online gambling. Clearly, the first part of the presentation on how the internet worked had fallen on some deaf ears. 

Now, almost 30 years on, regulators are still struggling with the same issues. Having introduced the concept of licensing operators and suppliers, how do you “ring fence” a country so that only those licensed to accept bets from the residents of that country do so? 

Clearly, the “whack a mole” of IP blocking does not work. Bans on advertising and other forms of marketing are only partially effective and applying fines or taking court action (which is very expensive) against rogue operators only work if the operator believes that the outcomes of these actions can be enforced. 

As we know, some jurisdictions take the view that operators can act with impunity from their territories and the results of successful overseas court actions can be happily ignored. The only pressures that remain on regulators are political with overseas governments and on financial-service companies to block payment transactions to offshore operators. 

The financial-payments ecosystem tries as best it can to stop these payments, but plenty of intermediaries are happy to cloak transactions and make them appear to be for another purpose. When one Payment Service Provider (PSP) loses the right to accept one of the credit card brands, plenty of others pop up to take their place.  

Payment Service Providers retain a certain percentage of the volume of transactions processed for a number of days, weeks even. The amount retained from a single operator can be a considerable sum, sometimes in the millions of dollars. PSPs willing to accept “high-risk” transactions are notoriously unreliable and can disappear without trace, along with the money being retained. 

Acceptance of crypto currencies by operators is one method by which they can reduce their dependence on dubious PSPs, but there is still too much friction and bad press around using this method of payment for it to become a realistic replacement for more usual payment methods, (credit/debit cards, ewallets, etc.). 

Political pressure can be successful. The Netherlands, since it has regulated online gambling and is now concerned about the size of the black market, has been trying to persuade Curacao to reign in online operators and stop allowing them to target the Netherlands.  

Curacao is an autonomous country within the Kingdom of the Netherlands, which means the government of Curacao is responsible for everything except defence and foreign policy. This gives the Netherlands some leverage. 

Curacao recently changed its regulatory regime, so that each operator is licensed and has a direct relationship with the regulator, rather than the regulator having a relationship with a master licence holder that then has relationships with several sub-licence holders. Perhaps it will not be long before an online-gambling licence is revoked for not following the rules. 

One thing that might prove effective against black/grey-market operators would be if gaming regulators took a leaf out of Nevada’s book. The condition of retaining a Nevada licence is not only that you operate according to the laws and regulations of Nevada, but it also controls how you do business and who you do business with wherever you operate. 

If regulators got together and agreed that companies providing essential technology or services to online-gambling operators require a license and a condition of that license is that you do business only with companies not subject to, or likely to become subject to, sanctions from other gaming regulators, the pool of technology and services available to black market operators would fall dramatically. 

The Gambling Commission of Great Britain (GCGB) has taken the first step, investigating Evolution to determine whether black-market operators targeting the UK are doing so with Evolution’s technology and services. Evolution’s share price fell almost 12% when it announced this move by GCGB. 

Now imagine what might happen if regulators decided to investigate not only based on supplying unlicensed operators targeting their jurisdiction, but supplying a company that targets any jurisdiction where online gambling was illegal or unregulated. But then, pigs might fly.