In 1997 and 1998, online gambling erupted, and the burgeoning industry’s estimated annual revenue rose to $835 million. North American players contributed a large portion of this, which began to draw the attention of U.S. and Canadian lawmakers. Several attempts were made to outlaw Internet gambling without success, although the Royal Police did raid the Vancouver offices of Starnet Communications, resulting in a $100,000 fine for “an illegal extension of betting activities, which the Canadian Criminal Code does not allow.”
By the close of 1999, the world was deeply divided over what to do about Internet gambling. While governments as diverse as South Africa, Argentina and Alderney embraced online gaming, along with the jobs and income it could produce, others sought outright prohibition. For example, the Australian Government made operations illegal for any Australia-based online casino or sportsbook firm not already licensed and operating prior to May 2000. This left Lasseters Online as the only Australian Internet casino to this day.
By contrast, there was little opposition to Internet gambling in the United Kingdom. The British Channel Islands passed a bill in 2001 to legalize online betting, establishing protocols, standards, and licensing processes. By April 2005, the U.K. Gambling Act was passed, going into full force in the fall of 2007. The Act created the U.K. Gambling Commission to enforce regulation in the areas of “licensing online casinos, preventing underage/problem gambling and organized crime, and ensuring gaming fairness through software fairness accreditations and monthly payout percentage reports.”
By issuing codes of practice, investigating and prosecuting illegal offences, and advising the Secretary of State for Culture, Media and Sport, the Commission serves as a global leader in comprehensive online gambling regulation. Indeed, England has become a model for other countries wishing to regulate the gambling industry online.
Meanwhile, U.S. authorities chose an opposite course. In 2000, they arrested Jay Cohen, an American whose Antigua-based World Sports Exchange was said to be taking in $100~200 million in bets per year. He was charged with violation of the 1961 Wire Act, which outlawed betting on sporting events via telephone and, according to their interpretation, via the Internet. A federal court sentenced Cohen to 21 months in prison for accepting sports bets from Americans, even though his operations were overseas.
This event sent a chill through the online gambling community, but it did not dissuade online operators from accepting American wagers—at least not initially. Then, the U.S. government turned up the heat. In July 2006, a non-American online casino operator, the British CEO of BetOnSports, David Carruthers, was arrested by federal agents while changing planes in Dallas. BetOnSports at that time was taking in roughly $1.8 billion in wagers a year, mostly from Americans.
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