Online Gambling in the USA - Research Paper Example

Running Head: Online Gambling in USA Contents Introduction 2 Thesis ment 2 Significance of the Research 3 Background of online gambling in USA 3 Federal Laws prohibiting online gambling in USA 5 Literature review 6 Methodology 7 Issues and Rules 7 Application of the rules 8 Assumption 10 Benefits of legalizing online gambling 10 Conclusion 11 Bibliography 11 Introduction Technological changes have changed business settings, social interactions and globalization due to the ease to access the fast and cheap internet. The invention of the internet in the early and mid-1990s changed the gambling industry where major gambling films took advantage and started online gambling sites. The first online site according to online gambling records dates back to 1995. Since then, online gambling has rampantly grown in many parts of the world where it is legalized thus leading to economic benefits. The aim of this paper is to formulate the best strategy that is safe and restrict criminal offenses with the intention of making the federal government legalize internet gambling1. The paper intends to cover the growth and development of online gambling since 1995 and the reasons behind its illegalization by the US government. Past research papers on online gambling will provide the literature review to help raise the major Issue affecting online gambling thus generate an applicable rule, in the IRAC method in the methodology part of the research. The use of IRAC will reveal the contentious issues, which will be discussed using various rules that will govern its application in the real world. The conclusion will be the final part of the research, summarizing all the key findings. Thesis Statement The research aims at formulating the best strategy to regulate online gambling in the U.S. By covering the general background of the online gambling in the U.S., using past researches on online gambling regulations and using IRAC methodology the research will achieve its aim and objectives. Significance of the Research This paper intends to effectively and efficiently-answer the following questions as a gauge of its success: What are the failures of the current laws used to prohibit online gambling? Are the US government’s actions to prohibit online pros or cons towards economic growth? What should be the gauge of the best strategy of regulating online gambling in the U.S. and other countries? Will undertaking this research be an improvement of past researches and will provide reliable information for future researches on the topic in hand? Answering these questions will entail using several online data on internet gambling in the U.S, U.K. and other developed countries. Since UK online gambling is legal, this research intends to use its regulatory laws when formulating the best regulatory Law to govern online gambling in the U.S. Economic growth based on online gambling will be generated from data of the major countries that has legalized online gambling2. The data and statistics will prove the majority of participants in internet gambling thus answering if the, government is right or wrong in prohibiting online gambling. Background of online gambling in USA Online gambling began about two decades ago in the U.S. In 1996, the first betting sites created, involved bettors to buy tickets or vouchers. These sites did not accept money, but winners’ received vouchers and lottery tickets but as the demand increased, other forms of betting were invented. Internet bingo site was the first online gambling site that offered cash as prizes for the winners in 1998. This laid the background for the current internet gambling since then money is awarded to winners. In the same year, internet poker room introduced poker among the online games. Online poker expansion in 2003 led to many participants entering the world series of poker that involved poker tournaments televised on USA3. These tournaments between 2003 generated about $365 million and with the increased popularity of the online poker revenue generated rapidly increased as in 2006 it generated about $2.4 billion. The growth and the increment in revenue generated by online poker made it the most popular game thus many online gaming sites with poker as their main game. Other common games that rapidly grew between 1996 and 2006 in the U.S. involved online casino games, horse race betting and other online betting sports. Past researches portray that men are the main participants of online gambling with more than 63% of all participants being men and only 37% being women. The participation of men in online gambling is relatively equal in all age groups from 21 years, but researches prove that many women below 45 years did not engage in online gambling as they comprises only 46% whereas women above 45 years engage in online poker more as they comprise about 54% of the total women participating in online gambling. These women participated in online gambling 2 to 3 times a week and use at least three online gambling sites within a month. Men participated more in online gambling even after the federal government prohibited it. They engage in online gambling 3 to 5 days in a week and in more than 10 online gambling site within a month. The number of Americans participating in online has decreased due to the illegalization of online gambling by the federal government. In previous research, it is clear that security issues involved in participating in illegal online gambling has limited women more than men, although the general participation has declined from 15 million to 10 million Americans engaging in online gambling4. The 10 million still participating in offshore online gambling sites spent more than $30 billion between 2003 and 2010. The $30 billion used in illegal online gambling prove that Americans’ love for online gambling is high since they participate in the risky activity, even if they have to break federal laws, thus it is the high time for the government to embrace and legalize online gambling as it would help generate revenue5. Federal Laws prohibiting online gambling in USA In 2000, Interstate Horse-racing Act (IHA) amendment aim was to limit the participation in internet betting by limiting wagering via the internet as it violated the Wire Act. This amendment did not limit the expansion of horse race betting online as about $300 million revenue were generated from bettors in 37 states. The failure of this amendment in limiting online gambling led to the adoption of the UIGEA in 2006 that prohibits financial support of illegal online gambling6. The war against online gambling by the US government took another turn in April 2011, where the U.S. Department of Justice (DOJ) ordered FBIs to shut down several online poker sites claiming that the site had violated the Wire Act7. The DOJ later stated that some online gambling does not violate the Wire Act. DOJ opinion claimed, “…of wire communications that do not relate to a ‘sporting event or contest’ fall outside the reach of the Wire Act.” This statement was contradicting and complex as DOJ did not give clear details of the legal and illegal online gambling. The inadequate laws against online gambling make it questionable to many states where most senators and governors are on the verge to legalize online gambling to increase state revenues, as it is evident that online gambling creates much revenue that can be used to provide better social amenities to their states as Americans are still participating in illegal online gambling8. Literature review In a research carried out to evaluate different regulation strategies and rules governing online gambling in different countries, it reported that there were three types of regulations commonly used. They include lack of laws regulating internet gambling, forming a monopoly to provide online gambling and using cooperate rules to govern and regulate online gambling. In countries where there are no rules governing online gambling, there are many sites that are unregulated and operate even in locations that gambling is illegal thus they are used by most Americans. In some countries, the regulatory strategy is based on monopolizing online gambling. The licensed monopoly is the only online site allowed to provide online gambling within the country thus other sites are blocked. In the Netherlands and UK, the countries adopt cooperate rules and regulations where any site that is legalized can operate within their territory. The licensed online gambling is free to operate, thus it is up to the participants to know if the companies are licensed and not the duty of the government to block sites. Other researches portray that bettors fear entry into betting on sites that are not secure, as they do not want to suffer the risks of fraud or exposing their personal information. The rampant rise in hacking money laundering and criminal offenses are the major limitations of online gambling thus making several countries illegalizing online gambling. These limitations have provided loopholes that affect the economies of various countries as the internet gambling sites engage in foreign exchanges illegally. The major benefit of using the monopoly and cooperate regulation strategy is the reduced cases of underage gamblers that is rampant in countries that do not regulate online gambling. Methodology Issues and Rules Issue, Rule, Application and conclusion (IRAC) is the best methodology use in Law researches hence the most suitable to ensure the research is able to achieve its thesis statement. The issue at hand is the lack of regulating policy that would ensure the legalization of online gambling in the U.S. Under previous laws as indicated in above in the federal laws against online gambling, it is clear that the US government feared involvement in online gaming would lead to frauds and other criminal activities for participants to raise the payments. These in turn changed the general perception amongst many Americans, thus decline in participating in online gambling9. The move of some states to legalize online gambling is another issue that needs to be addressed to ensure that Americans who fear the risks involved in online gambling are regulated in by the regulatory policy. These rules should evolve as the world is evolving and should embrace modern technology. The federal laws used in prohibiting online gambling are based on anti-gambling statutes adopted in 1960s, thus they are not useful at all in the 21st century as their failure illustrates. The rules should target the risks involved in engaging in online gambling. The first major issue raised is the lack of integrity in online games. Some operators have cheated other players literary looking at the “hole cards” thus tampering with the game’s fairness. The new rules should thus protect online integrity to limit such occurrences10. The rules should ensure that money from laundering and illegal activities are not used in the gaming systems and the online gambling companies should issue limit of money deposits and age limits. Limiting the access to online gambling services to people not within the territorial market authorized this will ensure that the licensed companies will ensure that unlicensed online gambling sites do not operate in their authorized territorial markets due to demand and supply11. Addressing these issues will be the key to a successful regulatory rule that will in return reduce risks for both the government and Americans. Application of the rules Integrity of online gambling is the basic issue of concern for the government and Americans who participate in online gambling. The first step of addressing this issue is ensuring that the government offer licenses to trusted online gambling firms only. To ensure the firm is trustworthy the federal government should borrow suitable jurisdictions that are used in licensing commercial casinos in U.S.that is suitability-based licensing. These rules state that the operator of the casino should satisfy regulators that their personal and business backgrounds demonstrates that they are trustworthy12. This move of suitability-based licensing will ensure that people with criminal records are excluded from licensing their online gambling sites. This method also ensures that the federal government is able to investigate professionalism of the operators of online gaming. The licensed online gambling firms should maintain their integrity as failure to do so will result in license revocation and the closure of their sites. The government should order licensed online gambling sites to formulate procedures to identify their customers. This will ensure exclusion of underage gamblers, excluding customers out of their territorial market as per jurisdictions, excluding customers with bad reputations of cheating and ensure they limit risks of criminal offenses and laundering13. The government should ensure they regularly carry out tests and audits ensure that the software used by the online gambling firms operates as it is supposed to, that is played within its rules and pay off its winners as promised by the sites terms and conditions. DOJ should form Anti-laundering programs that will end money laundering that previously dominated online gambling sites. The program should record all transactions in the online gambling. These records will ensure that the currency of deposited money and when withdrawing is similar to eliminate transfer of laundered money. The rule should make it clear that failure to respect the jurisdictions territory by an online gambling site will lead to automatic license revocation and closure of the site. The federal government should use Canada’s strategy that connects to the gaming site to ensure that the site does not accept entries from people not within the territorial market. Assumption The issues raised and the rules formulated in this methodology shows best strategies fully and conveniently address the issues or risks engaged in online gambling. The application of the rules proves that the rules that seem too complex to formulate are easily applicable in the real world. Application of some of the rules have been tested and worked in Canada thus giving a higher chance to work in the U.S. These rules will generally restore integrity, protect Americans, and exclude criminals from using their laundered money in online gambling site. The rules will be effective in excluding people with the bad reputation of cheating from participating in online gambling for the benefit of other trustworthy Americans. Benefits of legalizing online gambling The essence that Americans comprises of about 48% of all participants of online gambling and the more than $30 billion revenue generated from these Americans participation online gambling between 2003 and 2010 portrays that the country can generate about 16% of its revenue by legalizing online gambling. Past researches portray that these large figures decline in the guaranteed revenue, but there is an estimate of about $100 million annually. These amounts will help the states in offering better social amenities to the public and reduce their debts. By legalizing online gambling, the state will limit money laundering by formulating anti-laundering programs and auditing to ensure that the sites do not exploit the customers14. Conclusion Undertaking this research has been a tough task since it required broad information summarized and analyzed to come up with the best strategy and formula that the US government should use before legalizing online gambling15. The use of IRAC has helped ease the task of formulating the rules and providing the best application methods. The experience of FBI in dealing with technological bleach is key for the application. The FBI should hence form a good relationship with the trusted and professional owners of the licensed online gambling sites to ensure they are able to identify and deal with any bleach efficiently and effectively within the shortest time possible. The increasing plea by the senators and governors to legalize online gambling will help yield much benefit at the state level, hence improved living standards, sanitation and health care at the state level and eventually at the national level helping the national government implement their promises to the citizens. The research has benefited from previous researches. It gives a reliable formula for future researches on the topic and its failure to address the laws that will govern and regulate online gambling if legalized leaves room for improvement in future researches. Bibliography Barker, Thomas, and Marjie Britz. 2000. Jokers wild legalized gambling in the twenty-first century. Westport, Conn: Praeger. Dudley, Alfreda, James Braman, and Giovanni Vincenti. 2012. Investigating cyber law and cyber ethics: issues, impacts and practices. Hershey, PA: Information Science Reference. Gainsbury, Sally. 2012. Internet gambling current research findings and implications. New York: Springer. Glazer, Andrew N. S. 1999. Casino gambling the smart way how to have more fun and win more money. Franklin Lakes, NJ: Career Press. Hörnle, Julia, and Brigitte Zammit. 2010. Cross-border online gambling law and policy. Cheltenham, UK: Edward Elgar. Ruschmann, Paul. 2009. Legalized gambling. New York: Chelsea House. 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