Roger Clarke's Web-Site

 

© Xamax Consultancy Pty Ltd,  1995-2016


Roger and Friends' 'Internet Gambling Regulation'

The Technical Feasibility of Regulating Gambling on the Internet

Principal, Xamax Consultancy Pty Ltd, Canberra

Visiting Fellow, Department of Computer Science, Australian National University

Visiting Fellow, Department of Computer Science, Australian National University

Gillian Dempsey, Department of Commerce, Australian National University

Ooi Chuin Nee, Electronic Trading Concepts - ETC, Sydney

Robert F. O'Connor, Departments of English and Commerce, Australian National University

Version of 6 May 1998

© Xamax Consultancy Pty Ltd, 1998

This paper was prepared in response to an invitation to present at the Conference on 'Gambling, Technology & Society: Regulatory Challenges for the 21st Century', Rex Hotel Sydney, Potts Point, 7 - 8 May 1998

organised by the Australian Institute of Criminology (AIC) and Australian Institute for Gambling Research (AIGR), at the University of Western Sydney, Macarthur (UWSM)

This document is at http://www.rogerclarke.com/II/IGambReg.html


Abstract

The Internet is a connected set of networks that extends across the globe, and which is, as a result, trans-, extra- and even supra-jurisdictional in nature. It therefore presents considerable challenges to regulators and law enforcement agencies. This paper builds on considerable previous research undertaken by the authors into the regulation of the Internet. Relevant aspects of Internet technology are reviewed, and difficulties confronting regulators are analysed.

The conclusions drawn are that Internet gambling poses very significant challenges to regulators; that awareness-raising, education and training in relation to Internet technology are very urgent; that agencies need to adapt existing regulatory regimes, and develop new strategies for unlicensed and extra-jurisdictional Internet gambling; and that governments need to establish contingency plans in case Internet gambling substitutes for licensed gambling, and reduces gambling tax revenues.


Contents

1. Introduction

2. Gambling

3. The Virtualisation of Gambling

4. Internet Technology

5. Internet Gambling

6. Illegal Internet Gambling

7. A Framework for the Regulation of Internet Gambling

8. Technical Feasibility

9. Conclusions

References


1. Introduction

This paper has been prepared as a result of an invitation to address a conference on the challenges that technology poses for the regulation of gambling.

The team of authors blends long and deep experience in information technology strategy and policy, expertise in information technology and its impacts in such areas of law as intellectual property, and deep knowledge and research capabilities in diverse aspects of computer science and the Internet.

The analysis provided in this paper leverages heavily off prior work by the team on regulation of the Internet including Clarke (1995-), Clarke (1996-), Clarke (1997a), Clarke (1997b), Clarke (1997c), and Clarke et al. (1998). The last of those papers was prepared in response to an earlier invitation by the Institute of Criminology in relation to its conference on the topic of 'Internet Crime' in February 1998.

The approach adopted in this paper is as follows. A working definition and scoping of the concept of gambling is provided, including consideration of the ongoing 'virtualisation' of gambling. Key features of Internet technology are identified. Internet gambling is examined. Difficulties that exist in relation to the criminalisation of gambling activities are addressed, and the authors distance themselves from any assumptions about the appropriateness of particular aspects of Internet gambling regulation.

A framework is suggested for the regulation of Internet gambling, and an analysis is undertaken of the technical feasibility of preventing, detecting and investigating illegal Internet gambling. Conclusions are drawn.


2. Gambling
2.1 Definitions and Examples

Gambling is an amorphous concept, which rarely appears as a legal term. Australia's authoritative dictionary, the Macquarie Dictionary, provides several definitions of gambling, most of which revolve around the concepts of 'chance' and 'risk', viz.

  1. to play at any game of chance for stakes;
  2. to stake or risk money, or anything of value on the outcome of something involving chance;
  3. to act on favourable hopes or assessment;
  4. to lose or squander by betting;
  5. to risk or venture;
  6. any matter or thing involving risk or venture;
  7. a venture in or as in gambling.

Gambling is usefully categorised into several types:

In the physical world (or 'in real life' - IRL - as netizens conventionally express it), gambling occurs in a variety of settings:

The Macquarie definition clearly encompasses activities that would not typically be considered gambling for the purposes of regulation. Most investment activity constitutes risking money on the outcome of something that involves chance. Indeed, financial economics is based on the tenet that return is directly proportional to risk. The degree of risk varies according to the type and nature of the investment and the prevailing economic conditions.

To address risk, it is conventional in investment activities to adopt a portfolio approach, in such a manner that the risks are spread much more thinly than if only a single gamble were being conducted.

Shares, futures, land, vintage wines, stamps, antiques and even bank accounts may, in the long run, provide a reasonable return for their relative levels of risk. Investment in futures, which is arguably the most highly luck-dependent form, has varying degrees of risk, including:

A further distinction between investment and gambling is that, in investment activities the loss may be mitigated by the retention of an underlying capital asset; whereas, with gambling, it is usual for a loss to result in the foregoing of the entire financial stake.

Hence, the distinction between gambling and investment can be defined to lie in the degree to which risk has the potential to be managed by the participant.

With an investment such as a share portfolio, the degree of risk can be selected with more precision than is available in gambling. The portfolio can be constructed to as to reflect varying degrees of randomness, risk and return (depending on the extent to which the investor is a 'risk taker' or 'risk averse'). Lotteries, on the other hand, have a fixed mathematical relationship. This also applies, at least over the long term, to games such as roulette and blackjack, even if the gambler applies some kind of 'system'. This mathematical relationship ensures that, regardless of the strategy of an individual, gamblers in aggregate lose over the long run, and the house wins.

In investment activity, the service provider takes a transaction fee rather than acting as a principal in the transaction. The parties to an investment transaction face the same degree of risk, based on a combination of the expertise with which they invest, and environmental randomness; whereas in gambling the risk is expressly in favour of the service provider.

On this analysis, lotteries are the most distant form of gambling from investment, and betting the closest.


2.2 Gambling Regulation

Regulation of gambling appears to be motivated by a range of rather different considerations. These include:

There appears to be no single, unified approach to the regulation of gambling. The previous sub-section introduced a three-way categorisation of gambling activities, based on the nature and extent of risk involved. It is useful to examine the approaches to regulation adopted in each of those three categories.

In the case of lotteries, regulation appears to be intended to make the element of chance consistent. As a result, much attention is paid to the manner in which the numbers are selected or are generated. Other controls relate to the verification of the winner such as data contained on magnetic strips and alphanumeric sequences covered with "void if removed" notices.

Gaming combines a large element of chance with a small element of skill on the part of the player. There are two main sets of controls over such activity: licencing regulations and proscription of such activities as dealing from the bottom of the deck, 'fixing' roulette wheels, and altering the EPROMS on the poker machines to reduce the house's exposure to risk.

With betting, the person placing the bet has no control over the conduct of the contest and is subject to either accepting or rejecting the odds offered to him by bookmakers, or accepting the rules of the totalisator operator. Regulation focuses on the licencing and location of bookmakers, the performance of the contract, and controls over the underlying events which are intended to preclude manipulation of the results.


3. The Virtualisation of Gambling

During the last few decades, same-time-same-place gambling has been complemented by same-time-different-place activities. Telephone betting has a long history that includes activities that have been proscribed (e.g. starting price or S.P. bookies), that have been approved (e.g. on-course bookies), and that have been State-conducted (e.g. phone-betting with State Government Totalisator Agency Boards or TABs).

TAB offices enable punters to bet on events remote from their own location. Relatively recently, TABs have located themselves into licensed clubs, and have been enhanced with TV broadcasts (also called 'real-time video') of the remote events on which people place their bets. The substantial capital costs involved, and the visibility of such enterprises, would appear to have been a factor in discouraging illegal operators in this area.

It has long since been recognised that the virtualisation of gambling could result in major changes to society. A particularly graphic image was provided by sci-fi author John Brunner, in 'The Shockwave Rider' (1975). As a mere contextual side-play in his novel, Brunner depicted ubiquitous display-boards for gambling pools on an enormous range of events of varying degrees of likelihood.

Whereas in 1975 few people might have contemplated a future in which bets could be placed on which member of the British Royal Family would die next, or on which state would next erupt in civil war, such bets can now be placed in the United Kingdom and in several other nations around the world. As betting houses offering such services become readily findable on the Internet, at least part of Brunner's vision arrives.

Generalising from this, gambling can be readily envisaged based on the directions or distance of movement of suicide and homicide rates. With the Internet's global reach, betting on the results of specific sporting events can be readily generalised to specific non-sporting events, such as the area of the globe in which the next earthquake of Richter-scale 6.0 or above will strike, or the date of the next documented use of biological weapons. More intrusively, a bet can be placed on which government will legalise marijuana usage, and when; and whether or not Kosovo will erupt in civil war. More chillingly, betting can be conducted on the next head of state to be assassinated, or the date the next attempt will be made on the life of the U.S. President.

Interactive networks are emerging from several hitherto separate technologies, including:

Gambling is increasingly becoming a major feature of interactive networks, and, along with sex services, it appears to be one of the largest sources of revenue generation in the net. A recent research report concluded that "Gambling, home shopping and computer games appear to be the major markets for on-line services" ( APLRN 1997).

The Internet is especially significant, because:

This paper is specifically concerned with gambling on the Internet. Satellite and cable infrastructures may be used to operate services independent from the Internet. It is important to note, however, that they are also entirely capable of being used as carrier mechanisms for Internet traffic, and indeed to support both proprietary and Internet channels at the same time. Hence, should satellite and/or cable come to supplant the PSTN-carried Internet, it will not necessarily supplant the Internet itself.

The next section provides a brief background to the Internet technology, drawn from Clarke (1998). This establishes a basis on which an analysis of the technical feasibility of regulation can be undertaken.


4. Internet Technology

"There was no analogy for the way in which Great A'Tuin the world turtle moved against the galactic night. When you are ten thousand miles long, your shell pocked with meteor craters and frosted with comet ice, there is absolutely nothing you can realistically be like except yourself". Terry Pratchett 'Sourcery: A Discworld Novel' Corgi, 1988, p.13

It is a fundamental requirement of an analyis of gambling on the Internet that participants have, or acquire, a sufficient appreciation of the technology underlying the Internet. This is a non-trivial requirement, because the technology is complex, is still reasonably new, is foreign to most criminologists, law enforcement officers and gambling researchers, and is usually explained in terms that are reasonably accessible to computer technologists, but not necessarily to normal people.

It is essential that the reader of this paper already has an appreciation of Internet technology at at least the level provided by the primer at Clarke (1998), or acquires it before actively participating in policy debates.

Some of the key points that must be appreciated are as follows:

In short, the Internet is a very complex and dynamic beast, and presents a cluster of challenges to regulators the like of which have never been seen before.


5. Internet Gambling

This section provides a brief overview of the incidence, characteristics and impacts of Internet gambling. In contrast with gambling generally, there is a fairly sparse literature to date on Internet gambling. Relevant journal articles include Janower (1996) and Gordon (1996), magazine articles of value include Schwartz (1995) and Scanlon (1997), and web-pages include Hanneman (1998).

The information in this section is accordingly based on a combination of limited research into secondary sources, and a rapidly performed scan of the myriad of relevant web-sites.

5.1 Incidence

A great many web-sites supporting Internet gambling have sprung into existence since the third quarter of 1995 ( Janower 1996). They offer a wide variety of simulated gaming, mostly offered 'on-site', meaning that they are run on the gambling provider's server. A few sites require the downloading of software, in order to perform some function on the player's own computer, which then communicates the results to the host. See, for example, U.S. Lottery.

Gambling sites are readily located using search engines. As their numbers have increased, index sites have started to appear, such as Wheretobet, and Topsites.

The quality of information on these sites is variable, but ranking systems may become increasingly more sophisticated and the information content more useful. See, for example, Bingo Bugle. This site mainly advises on location of games, but it also provides important information such as noting that 'Bingo World' has "shut down due to complaints of fraud". Unverified information also appears on the bulletin board (such as that the 'Casino Royale' site had being involved in complaints of cheating - it appears they had refused a pay-out, claiming the player had hacked into their site).


5.2 Characteristics

This sub-section examines characteristics of casino gambling, and observes the extent to which Internet gaming appears to be subject to similar controls.

(a) Assurances

In some cases, assurances and explanations as to the manner in which the electronic games are conducted are provided. More rarely, the name of the provider of the software underlying the games is provided with a hotlink to that supplier for example the suppliers. See, for example, Casinosoft.

The Domini Corporation, a Commonwealth of Dominica government corporation whose stated intention is to establish an on-line gambling industry, is an example of a site that provides a reasonable amount of information on the games and their conduct.

(b) Gambler Registration

There are controls as to who may enter a real-world casino. Upon arriving at the entrance, anyone who looks as though they may be under-age will usually be asked to present evidence that they have reached the age of majority.

Currently there is no opportunity to seek or inspect such evidence online. Nevertheless, most gambling sites visited in a half-day trawl of a large number of sites required some form of registration, including demands for varying amounts of personal information. Common requests included name, address, e-mail address and credit card number.

Age was often either omitted or covered by a brief, layman-phrased clause to the effect that the site should not be entered by persons under the age of majority. This is in interesting contrast to many pornographic sites which have been developing intricate mechanisms for attempting to avoid legal liability for minors using the site, by attempting to force the registrants to read comprehensive disclaimers. It is possible that this difference may reflect the existence of criminal sanctions and/or the threat of legislation along the lines of the failed Communications Decency Act provisions.

Another prevalent disclaimer is in the form of a warning that the onus is on the gambler to check whether gambling is legal in their jurisdiction. This was often followed shortly thereafter by a statement to the effect that no liability is borne by the gambling provider.

(c) Security

In a physical casino, very strict controls exist, both for the protection of the player and for the protection of the house. These controls are both physical and logical.

The physical controls include cameras located above the gambling tables and throughout the casino. These cameras exist to prevent error, to act as evidence in the case of an error, and to assist in the detection of theft and cheating. Other physical controls include regular rotation of croupiers and the presence of 'pit bosses' who observe both the croupiers and the gamblers and resolve minor incidents. Security guards are on call and on patrol, within and outside the establishment.

Logical controls are present in such forms as password protection to major systems and inspections to ensure that games such as Keno (where the numbers are created by a pseudo-random number generator) have not been tampered with.

On the Internet, it becomes more difficult to implement effective controls. There is limited scope to exercise physical controls, and hence logical controls become even more important. One concern for gamblers is the transfer of sensitive data, such as credit card number (or, in extraordinary instances, bank account details). Data security at many sites is poor. Only a handful of those sampled provided a warning that the individual was about to embark on an unsecured transaction, although a few provided detailed information regarding their security arrangements.

Several sites, particularly the Commonwealth of Dominica and Liechtenstein sites, not only specify their logical security, but give the name of the accounting firm that guarantees their monies as well as the name of their auditor. It may be that the extra information is the result of legal requirements in the host or licensing nation; or it may be an attempt to differentiate the product, in an increasingly crowded marketplace.

(d) Payment

In a physical casino, the player exchanges cash for chips which may then be used on the table. In some jurisdictions, such as the A.C.T., there is a prohibition against the use of credit or debit cards in casinos. Even automatic teller machines must be located a certain distance from the entrance. The purpose is to give gamblers some time to consider the possible ramifications of their actions.

In a virtual casino, such prohibitions are difficult to enforce, and perhaps even to implement. Various payment options are available, by far the most common being via credit cards, with an evident preference for Visa. Several sites allow the use of e-cash. Some sites insist upon the purchase of their own redeemable electronic tokens.

For Australian residents, gambling at a foreign site generally requires currency translation. Most sites failed to address the question of how the exchange rate was set or how long the transaction may take to register. The risk exists that foreign exchange transactions may be performed in a manner that advantages the service provider.

Nomatter how the transaction is to be settled, the logical controls in the virtual world appear unlikely to meet the same standards that the combined physical and logical controls of the real world gambling regulation provide.

(e) Payout

The security risks inherent in payment are also present in payout. Only a few sites mentioned the potential for payouts to represent taxable income. Of those sites, the warning mostly came in the form of a disclaimer that stated that the onus was on the gambler to find out whether taxes were payable and that the provider bore no liability.

In Australia, gambling winnings prima facie represent a windfall gain, unless evidence exists that the person's gambling is repetitious, regular and relied upon on a continuous basis for income.


5.3 Impacts

Internet gambling has a wide range of potential impacts. These include negative impacts on consumer interests (e.g. services conducted in an unfair manner), on individual gamblers and their families (e.g. greater compulsiveness; and greater accessibility, both in time, such as during short breaks from work or family activities; and in space, such as from home and from the workplace), and on the scope for criminal activities such as money laundering. Internet gambling's impacts need to be considered, and their emergence needs to be monitored

Of particular relevance to this analysis is the question whether Internet gambling will substitute for existing forms of gambling. To the extent that this occurs, governments are at risk of losing substantial proportions of their revenue-base. On the other hand, of Internet gambling grows without substituting for existing gambling, then the economic and social impacts on gamblers and their families will increase.


6. Illegal Internet Gambling

Regulation of Internet gambling differentiates legal activities from illegal ones. In Australia's nine jurisdictions, gambling is generally proscribed except where it is conducted under specific conditions. The conditions are of various kinds, including:

In addressing this topic, it is essential to directly confront the conflict of interest of Governments and Parliaments in the regulation of gambling. In gambling regulation, the regulations should aim to strike a balance between, on the one hand, the social ills that may arise as a consequence of the activity (such as criminal involvement and gamblers failing to meet their economic and social responsibilities), and, on the other, allowing adults to exercise their free will, and encouranging economic activity which provides a net inflow of income into a jurisdiction. The political realities of the situation, however, lead to a rather different outcome.

A very important motivator for Governments in the States and Territories has been the raising of revenue. All taxes are unpopular, but invisible taxes, and taxes that can be rationalised because their existence tends to reduce public ills, are less unpopular than others. Hence, taxes on gambling are especially attractive.

Gambling taxes have been set at high rates, and governments have become increasingly dependent on them as a source of revenue to support governmental operations:

The inevitable results of governmental dependence on revenue from gambling taxation have been that government is an active stimulator of gambling, and that laws are defined to render illegal activities that the government considers to be contrary to its own interests, as distinct from contrary to the interests of its citizens.

This paper expressly avoids adopting any position in relation to contentions that particular aspects of the regulation of Internet crime may or may not be socially desirable. In the interests of enabling a brief but meaningful analysis, it explicitly adopts the Machiavellian position of 'if a government wished to regulate Internet gambling, then ...'.


7. A Framework for the Regulation of Internet Gambling

This section proposes a framework within which an analysis of the technical feasibility of the regulation of Internet gambling can be undertaken.

7.1 The Entity Subjected to Regulation

A fundamental distinction needs to be made between:

Particular characteristics of gambling consumers may provide a basis for regulatory actions. Specific categories of consumer who may be subject to particular forms of regulation include undischarged bankrupts, people under the age of 18 years, and registered 'problem' gamblers.

The primary target of regulation prior to virtualisation of gambling has been the provider. For simplicity, it is assumed that providers are controlled through a licensing scheme, and that it is illegal to provide gambling services without a licence. This is not meant to imply that a licensing mechanism is necessarily appropriate or effective.

Particular characteristics of gambling providers are very likely to provide a basis for regulatory actions. The following provider categories are suggested:


7.2 The Activity Subjected to Regulation

A further need is to identify what it is about Internet traffic that a regulator would wish to exercise control over, prevent, detect, and/or prosecute.

The following are suggested as bases upon which a Government might wish to regulate Internet gambling:

A further consideration that arises is characteristics of the location of the operation, especially whether it exists within the jurisdictional scope.


8. Technical Feasibility
8.1 Regulatory Activities

This section applies an understanding of Internet technology, as outlined in an earlier section and its supporting documents, to the framework for Internet regulation identified in the immediately preceding section.

It is assumed that regulatory action is of the following kinds:

It is further assumed that the data may be acquired from three sources:

The remainder of this section addresses the elements of the analytical framework proposed in the preceding section, and is structured into the following sub-sections:


8.2 The Act of Internet Gambling

The act of placing a bet or wager involves a consumer despatching a message that initiates a bet, and delivers, or approves the disposition of, the consumer's funds.

Such transactions may be broken up into packets for transmission. Those packets may or may not be transmitted along the same path. The 'meaning' of the transaction is intended to be able to be extracted by the recipient. The Internet's designers placed little importance on enabling the meaning to be extracted at any point along the transmission path. Moreover, security features are available whereby access to the meaning can (and in some cases, must) be denied to would-be interceptors. The result is that an interceptor cannot reliably access the content of an Internet transaction.

Even where the content of an Internet transaction is accessed, it may not be able to be reliably interpreted, because its meaning may be dependent on the software that processes it, which may apply proprietary protocols.

Establishing that an Internet transaction infringes a gambling law, with the degree of confidence necessary to have evidentiary value, is extremely difficult indeed. Even ensuring that information is of value for detection and investigation is seriously challenging.

This applies particularly in circumstances in which the parties to the act of gambling have a significant interest in avoiding detection, and some degree of Internet technical competence. This suggests that casual usage of the Internet for gambling (e.g. the despatch of emails containing submissions to a football-tipping competition) are more likely to be detectable than wagering at an unregistered on-line casino.

The possibility exists of a regulatory agency acting as though they were an illegal gambling organisation, in order to establish that a particular consumer conducts such transactions. Such an approach would raise significant public policy implications.


8.3 The Act of Providing an Internet Gambling Service

The act of providing an Internet gambling service involves the advertising of a service, the receipt of transactions containing bets or wagers and funds or the means of gaining access to them, accumulating transactions in interim storage, processing in order to establish an outcome, the communication of the outcome, and the disposition of resulting funds.

As with the transactions initiated by the consumer, considerable difficulties arise in detecting that an Internet transaction relates to gambling, especially if the service provider takes advantage of Internet technology to obscure that fact. Techniques are available whereby an enterprise can obscure the identities and the net-locations of itself and its clients. Cryptography-based anonymous and (more practicably) pseudonymous email and web-surfing services are outlined in Clarke (1997d).

A regulatory agency may act as though they were a consumer, in order to establish that a particular organisation offers such services. Such an approach would raise public policy implications, but would appear to be more tenable than pursuit of individual consumers. Even in this case, however, considerable doubt could be thrown on the evidentiary value of the data, and hence additional evidence from sources other than the Internet would be likely to be necessary.


8.4 The Act of Providing a Service Related to Internet Gambling

A service may be provided whose sole, or at least dominant, purpose is demonstrably to support Internet gambling. An example would be a deposit account, whose operation were such that funds from it could be transferred solely to an organisation whose express purpose was gambling.

Where, however, Internet gambling services make use of mainstream funds management and funds transfer services, the investigator would need to establish a linkage between the funds flow and an act of gambling.


8.5 The Act of Promoting Internet Gambling Via the Internet

Promotions may be sent to a very specific target audience, such as existing clientele. Alternatively, it may be 'broadcast', or at least 'narrowcast', in order to reach and attract new prospects. Existing Internet technologies are oriented towards message-transmission from a sender to a single nominated recipient. Promotion therefore commonly involves the initiation of a large volume of Internet transactions, typically email messages.

A difficulty that arises is that senders of messages can readily obscure the origin of the message and their identity, or use anonymity services to make the origin and identity effectively undiscoverable. For an analysis of spam, see Clarke (1996). For a discussion of anonymity services, see Clarke (1997d).


8.6 The Act of Promoting Internet Gambling

Internet gambling may be promoted through conventional channels (such as mail, billboards, newspapers, radio and television), or through the Internet itself. This may be more readily able to be detected, investigated, and, to the extent that it is illegal, prosecuted.

(Promotion of gambling generally, through the Internet, may also be a matter of concern, but is not addressed in this paper).


8.7 Characteristics of Providers

Many Internet gambling transactions are of interest to regulators because they are performed by an organisation that is not licensed to perform them. To the extent that a transaction may be shown, or at least suspected, of being an infringing transaction, it is necessary to identify the legal person responsible for it and/or establish particular characteristics of the enterprise, in particular whether they have a licence.

Identifying senders of Internet messages, and publishers of web-pages, is seriously difficult. Internet traffic carries little or nothing in the way of attributes of a party, other than their net-identification. It is possible that this may change, such that some form of certification of identity and/or eligibility may gradually become mainstream.


8.8 Characteristic of Consumers

Many Internet gambling transactions are of interest to regulators because they are performed by individuals with particular characteristics. The most apparent characteristic is age, since most jurisdictions proscribe gambling by persons under a given age, typically 18.

Establishing relevant characteristics of senders of Internet messages is seriously difficult. Moreover, a significant, vociferous and technically-capable proportion of the Internet-public is very interested in denying organisations the ability to identify the individuals with whom they deal.

It may be feasible to establish an 'eligibility authentication' scheme whereby such features as age can be tested, without thereby providing access to the person's identity. Precluding people on the basis of other qualifications, especially negative discrimination such as on the basis of disqualification of inveterate gamblers, would be even more fraught with difficulties.


8.9 Characteristics of Location

Many Internet gambling transactions are of interest to regulators because relevant acts are performed within their geographical jurisdiction.

Multiple steps are involved in establishing the location in physical space of Internet nodes, and hence of relevant acts. This is even more challenging where the organisation or individual takes active steps to obscure the location of the device at any given time.


9. Conclusions
(a) The Seriousness of the Challenges

The regulation of Internet gambling is confronted by a wide range of very substantial technical difficulties. Effective regulation of within-jurisdiction, licensed providers requires significant adaptation of existing regulatory activities. Addressing the challenges of unlicensed and extra-jurisdictional providers is a great deal more challenging. Janower (1996) concluded that "Internet gaming ... threatens to be ungovernable under current legal regimes and territorially-based jurisdictional rules. Entrepreneurs are acting quickly to uilize technology and gaps in the law to their advantage".

There is little prospect of regulation becoming less challenging. Internet architecture and protocols will not become substantially more amenable to regulatory activities, or at least not very quickly. There is very limited scope for effective unilateral initiatives; regional multilateral initiatives will have only modest effect; global multilateral initiatives are difficult and very slow to achieve; and there is in any case a low likelihood of gambling law havens being forced to participate in global multilateral initiatives. Nonetheless, it is important for Governments to at least embark upon multilateral negotiations.

(b) Awareness, Education and Research

To date, little substantive regulation exists whose direct objective is to address gambling on the Internet. In the United States, and even in Australia, a few people have called for it to be prohibited, which is neither a sensible nor a feasible option. It would appear to be appropriate to permit Internet gambling within Australian jurisdictions, in order to impose controls, and to extract revenue from it. This approach is evidence in the joint State and Territory discussions, and in both the Queensland and the Northern Territory proposals.

The Internet is a totally new world. Analyses in reports published to date have been seriously hampered by an insufficiently deep appreciation of Internet technology. This research programme, and its associated resources, are intended to assist in redressing that deficiency.

Regulatory agencies, and Governments generally, need to ensure broad awareness of the Internet's potential impacts; provide education and training for relevant executives, managers and operational staff; and commission studies of relevant aspects of Internet technology and operations, of gambling on the Internet, and of regulatory initiatives in jurisdictions around the world.

(c) Operational Adaptation

Regulatory agencies need to leverage off the education, training and research activities, in order to adapt existing control regimes to cater for within-jurisdiction, licensed gambling providers; and to conceive and articulate new strategies to address unlicensed and extra-jurisdictional Internet gambling providers.

(d) The Seriousness of the Impact on Government Revenue

Governments need to actively discourage the substitution of existing gambling by untaxable Internet gambling. Measures might include promotion of public awareness of the risks involved in dealing with unregulated gambling service providers, and of the irresponsibility of such enterprises in relation to minors and problem gamblers. A credible impression may be able to be created that law enforcement agencies will provide difficulties to unlicensed operators.

The impact on revenue is uncertain, because the characteristics of Internet and conventional gambling are very different, and the extent to which a rise in the former will result in a fall in the latter is far from clear. Nonethless, Governments need to develop contingency plans to cater for the possibility that Internet gambling may result in drastic reductions, or at least drastic slow-downs in the growth, of gambling-based revenue.

The Internet may well force a substantial re-think of revenue-raising by governments, particularly within federal structures like Australia's, with a consequential shift in emphasis towards taxation of things that are within jurisdictional reach, such as land buildings, and relatively non-mobile people and their activities.


References

APLRN (1997) 'Wait- there's more: the Internet on your very own home television!', Australian Parliamentary Library Research Note 24 1996-97, at http://www.aph.gov.au/library/pubs/rn/1996-97/97rn24.htm

Brunner J. (1975) 'The Shockwave Rider' Ballantine, 1975

Clarke R. (1995-) 'Papers on Information Infrastructure - Policy Aspects', at http://www.rogerclarke.com/II/AnnBibl.html#Policy

Clarke R. (1996-) 'Regulating the Net', at http://www.rogerclarke.com/II/Regn.html

Clarke R. (1996) 'Spam', at http://www.rogerclarke.com/II/Spam.html

Clarke R. (1997a) `Regulating Financial Services in the Marketspace: The Public's Interests ', Proc. Conf. 'Electronic Commerce: Regulating Financial Services in the Marketspace', Sydney, 4-5 February 1997, at http://www.rogerclarke.com/EC/ASC97.html

Clarke R. (1997b) 'Encouraging Cyberculture', CAUSE in Australasia '97, Melbourne (March 1997), at http://www.rogerclarke.com/II/EncoCyberCulture.html

Clarke R. (1997c) `The Monster from the Crypt: Impacts and Effects of Digital Money', versions published in Computers, Freedom & Privacy Conference (CFP'97), San Francisco, 12-14 March 1997, and Proc. QuestNet'97, Brisbane, 4 July 1997, at http://www.rogerclarke.com/EC/Monster.html

Clarke R. (1997d) `Protecting Your Privacy On the Internet', Seminar on 'Consumer Protection on the Internet', The Policy Network, Mitchell Library, Sydney (April 1997), revised version presented at IBC 1997 Australian Privacy Forum, Sydney, 21-22 October 1997, at http://www.rogerclarke.com/DV/Internet.html

Clarke R. (1998) `A Primer on Internet Technology', February 1998, at http://www.rogerclarke.com/II/IPrimer.html

Clarke R., Dempsey G., Ooi C.N. & O'Connor R.F. (1998) 'Technological Aspects of Internet Crime Prevention', Proc. Conf. Internet Crime', Australian Institute of Criminology, February 1998, at http://www.rogerclarke.com/II/ICrimPrev.html

Gordon B. (1996) 'Gaming on the Internet: The Odds are on the House, but How Long Will it Last?' Cyberjournal (November 1996), at http://www.cyberlaw.law.ttu.edu/cyberspc/jour9.htm

Hanneman (1998) 'Gambling on the Internet', at http://ucsu.colorado.edu/~hanneman/gaming.html

Janower C.R. (1996) 'Gambling on the Internet', J. of Computer-Mediated Communication, 2, 2 (September 1996), at http://jcmc.huji.ac.il/vol2/issue2/janower.html

Scanlon J. (1997) 'The Human Genome Controversy' Wired 5, 8 (August 1997) at http://www.wired.com/wired/5.08/updata.html

Schwartz E.I. (1995) 'Wanna Bet?' Wired 3, 10 (October 1995), at http://www.wired.com/wired/3.10/features/gambling.html



xamaxsmall.gif missing
The content and infrastructure for these community service pages are provided by Roger Clarke through his consultancy company, Xamax.

From the site's beginnings in August 1994 until February 2009, the infrastructure was provided by the Australian National University. During that time, the site accumulated close to 30 million hits. It passed 50 million in early 2015.

Sponsored by Bunhybee Grasslands, the extended Clarke Family, Knights of the Spatchcock and their drummer
Xamax Consultancy Pty Ltd
ACN: 002 360 456
78 Sidaway St, Chapman ACT 2611 AUSTRALIA
Tel: +61 2 6288 6916

Created: 13 April 1998 - Last Amended: 6 May 1998 by Roger Clarke - Site Last Verified: 15 February 2009
This document is at www.rogerclarke.com/II/IGambReg.html
Mail to Webmaster   -    © Xamax Consultancy Pty Ltd, 1995-2013   -    Privacy Policy