What is Regulation of Online Casinos?

By Ben Hamill - December 31 2016

Regulation of Online Casinos

The term "regulation" as it applies to online casinos has two distinct meanings. First, any casino that wishes to be considered in the top echelon of online casinos, willingly submits to the regulatory requirements of several locations, the best known of which are Malta and Kahnawake. But the whole issue of online casino regulation began in the mid 1990's when Antigua and Barbuda passed a law giving itself the authority to license companies that own online casinos.

Fuzzy Law in Canada

A few years later, the Kahnawake Gaming Commission was set up in Canada. It was established that casinos based on First Nations land were to be exempt from national gambling laws. The same applies in the United States where casinos based on Native American lands are free to operate outside the control of state or national government.

The Kahnawake Commission at first dealt with land-based casinos but soon expanded to licensing online casinos which sought a measure of independence from government control.

Online sports books and online poker soon followed. The first few years saw the appearance of only a small number of online casinos; it soon became clear to entrepreneurs that online gambling was about to explode in popularity and the market, or number of casinos, that sought to benefit from this popularity exploded in size as well.

In many places the legalities of online casinos is unclear at best. In Canada, for instance, it is not illegal to accept bets from Canadian citizens so long as the casino is "based" outside the political boundaries of Canada. So, a couple of thousand casinos are based outside Canada to serve the Canadian and world-wide clientele.


Protecting State Sponsored Gambling

The main reason local governments, be they States, Provinces, or National Governments, are leery of legalizing online casino gambling for their citizens is because these local entities run their own legal gambling operations and feared inroads in their profits. These state sponsored gambling operations include horse and dog racing, jai alai, lotteries, off track betting, and others.

So, local governments found it proper to address the legalities of online casinos within their jurisdiction. For that reason, online casinos are happy to be regulated outside the jurisdiction of the biggest local governments. The question: is playing at an online casino legal?, differs from country to country. Even in the United States where online casino gambling has been at a virtual standstill since passage of the Unlawful Internet Gambling Enforcement Act (UIGEA) in 2006, the law does not specifically tell its citizens that online casino gambling is illegal. Rather, the law prohibits banks and credit card companies from transferring money to and from online casinos. The fear of arrest and prosecution has caused almost all operators of online casinos to leave the American market, a move that has had a "wonderful" effect on American state run gambling such as those mentioned above!

Managers at Microgaming, the first developer of online casino games and still the industry leader in casino games with hundreds of games featured at well-established casinos such as All Slots, pulled out of the US market entirely!

Governments Decide to Regulate Casinos

Now we arrive at the second understanding of online casino regulation. Many countries have decided to legalize and regulate online casinos taking bets from their citizens. The main purpose is to increase tax revenues from gamblers' winnings and especially from casinos' profits. This move has led some online casinos to leave some jurisdictions because after paying for the right to be regulated and then paying taxes, the casinos find that they can't make enough money to justify, from a business standpoint, staying active in those countries.

In several countries, the advent of state regulation of online casinos has caused many casinos to leave. The governments are less affected by such business decisions as the countries have other lucrative state run sources of gambling revenues.

Italy, France, the United States, Great Britain, South Africa, and many others have been in the news as making life difficult for online casino gamblers and the casinos they frequent. Casinos are always looking for new, fertile ground to create a vibrant local market for online casino gambling.

In Europe, online casino gambling is legal in the following large countries: Germany, Austria, Spain, and the UK. In most other European countries, online casino gambling is either illegal but gamblers are not prosecuted or it is entirely unregulated. However, in Poland and Cyprus players are prosecuted!

In Muslim countries, it is generally illegal for any organized gambling to take place because Islam prohibits profiting from gambling.

An Unclear Future

The situation is in a great deal of flux as countries seek to enter the regulatory field and impose manageable taxes on gamblers and casinos without forcing the casinos out of business in their jurisdictions. Even here in Canada, we have found that provincial casinos are less popular than free market online casinos. The free market casino return a much larger percentage of monies wagered to players than do provincial casinos. The provincial casinos respond that the difference is given to charities. As it turns out, Canadians are happy to support deserving charities but don't like being forced to do so!

For the foreseeable future, the online casino regulation is likely to remain in flux. Canadians gambling from Canada will likely never be prosecuted but, if we venture beyond our political borders, we might find ourselves gambling on a mobile device at an entirely illegal casino. So, when we travel abroad, it's a very good idea to check to law in whichever countries we plan to visit. It is still a long time away before we'll be able to say yes unequivocally to the question, "is playing at an online casino legal"?