Online and Offshore: Online Casinos Skirt American Laws

**Administrator**

Online and Offshore: Online Casinos Skirt American Laws

Online casinos are popular and becoming more so. It is estimated that 160 million people will be playing in online casinos by the year, 2020. According to Will Gatten of www.sportscrew.com, by 2008, online poker revenues – that’s just poker, not the other games like blackjack, craps, and roulette - will exceed $275 billion dollars, with not a cent of it in taxes coming into the United States.

Why is that? Because online casinos are offshore operations, located in about 76 different foreign countries (as of October, 2005) to avoid U. S. gambling and tax laws.

Another reason why they are so popular from an industry point of view is that they are cheap. Steve Wynn opened his bricks-and-mortar, Wynn Hotel in Las Vegas in early 2005, at a cost of more than $2 billion dollars. Then he pays an annual fee per slot machine and table, and is taxed on gross revenue.

Still another reason is that they can get into business quickly. If someone wanted a new gambling license in Nevada, it may take one to two years of paperwork and investigations, plus a ton of legal fees. An online casino can be opened in Belize in a little over a week with a capitalization of a little over a million for a fee of about $30,000. Oh, and the tax rate in that country? Zip. Steve Wynn, eat your heart out.

Gambling PhD.com reports that online gambling casino operator, 888 Holdings Plc, is planning to sell approximately $500 million of its stock in an initial public offering. The casino company has appointed HSBC Holdings Plc to operate the sale. 888 is based in Gibraltar and is estimated to be worth around $1.5 billion when it sells its shares in London on the London Stock Exchange in September of 2005. Online, offshore, and big bucks!

Are online casinos good? Bad? Depends who you ask. In the U.S. Congress, efforts continue by Senator Jon Kyl of Arizona and others to enact a law to specifically prohibit internet gaming because it violates federal law. Another concern: for sure, for sure, minors are gambling.

Now ask the millions of players from around the world who are online every day, playing their favorite games. A typical poker table may look like a U. N. meeting. Good? Bad?

The casinos’ defense is to be located “offshore,” meaning in some foreign country, outside the jurisdiction of U. S. (and other countries which also prohibit gambling) laws. They charter their business in places like Antigua, Costa Rica, Gibraltar, Colombia, and India. The server may be in some other country. Administration may be in a third country, often the United States. See if you can find an online casino that willingly offers this information on its website. Not likely.

Since it will be little hard to arrest millions of American bent over their beloved games on a Saturday evening, the efforts to enact new laws are directed at advertisers, credit card companies, and banks.

Senator Kyl expresses alarm at the proliferation of casinos and estimates that 2,000 of them are in existence today. His legislation is aimed to curb Internet gambling by requiring credit card companies, and banks refuse payments to online gambling sites. So far, nothing has come of any legislation that would seriously threaten the operation of the offshore casinos.

North Dakota State Representative Jim Kasper took a proactive stance when he introduced several bills – the state’s constitution would have to be changed - to allow online casinos in North Dakota. The bill called for regulation, taxation under North Dakota and United States laws, and would create hundreds, maybe thousands of jobs, for North Dakotans. However, in a letter from the United States Department of Justice, North Dakota was warned that the bills could – it didn’t say they would – violate the federal “Wire Act,” which prohibits gambling across state lines. And, of course, if you set up an online casino in Bismarck, North Dakota, how do you keep its activity only within the borders of one state? Representative Jim Kasper intends to push his bills in another session of the legislature.

So, stay tuned. It’s unlikely that online and offshore casinos are going to be shut down though some of the ways they receive and return money may be limited if Congress moves on its efforts to limit the activities of U. S. banks and credit card companies.

The coast looks clear. “Shuffle up and deal.”

© 2005 Murphy James

Murphy James is a freelance journalist specializing in the gaming industry. He has been published in men's magazines, gaming publications, business journals, and newspapers. His website is http://www.murphyjames.com His email address is [email protected].

His most recent interviews have been with poker pros Barry Greenstein ("Ace on the River") and Jen Harman (one of the players in the richest poker game in history) about their philanthropic activities, and gambler, author, and teacher, Jerry Patterson ("Casino Gambling"), about his blackjack, craps, and roulette systems.