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Check this out from CNBC...
Laws Fail to Dampen Online Gaming Boom
by John W. Schoen
Senior Producer,
MSNBC "This business will continue to grow. Essentially, it's a question of demand exceeding supply, and the marketplace responding."
-- Mark Hardy
Forrester Research
Since it began appearing on the Internet four years ago, online gambling has been virtually unregulated. While efforts to control the industry may soon bear fruit, they appear unlikely to slow the rapid growth of gambling on the Internet.
The latest shot was fired by a New York state court, which ruled last week that a New York-based Internet gaming company with server in Antigua is subject to state laws.
Online gambling sites have so far largely evaded U.S. regulation by locating their hardware offshore. But State Supreme Court Justice Charles Edward Ramos ruled that World Interactive Gaming Corp. had violated state and federal laws with a gambling Web site that "creates a virtual casino within the user's computer terminal."
Efforts to regulate online gambling have failed to slow the industry's growth.
The decision is a somewhat novel legal approach, and subject to appeal. But the battle is being waged on many fronts, including a bill sponsored by Sen. Jon Kyl (R-Ariz.), which earlier this month won a key Senate vote.
Though time is running out on the bill in this session, the measure got a big boost from the recent release this of a two-year Congressional study, backed by anti-gambling interests and the traditional gaming industry, which concluded that online gambling should be banned.
Read the National Gambling Impact Study
The stakes are getting higher. Since the first virtual casinos went on line in 1995, an estimated 400 to 600 sites have set up worldwide. Internet gambling is expected to do about $900 million in revenues this year, according to Prudential Securities analyst Joseph Coccimiglio. Other estimates see that figure to climbing to as much $3 billion by the year 2002
(Chart from MSNBC.com)
But that amount pales in comparison to the $26 billion the conventional U.S gambling industry expects to take in this year. (Those gambling revenues make up about half of the industry's business; the other half comes from hotel rooms, restaurants, shopping and entertainment.)
And, for the time being, the traditional U.S. gaming companies are reluctant to set up shop on the Web.
"Until there's more certainty about regulation, they don't want to make a major move into Internet gaming," said at Morgan Stanley Dean Witter analyst Mike Happel. "It's not worth putting at risk their licenses for established, physical gaming."
But some gaming companies are trying to hedge their bets.
The industry is closely watching recent efforts to legalize and regulate online gambling in Australia.
As first reported by MSNBC earlier this year, U.S. gaming giants Park Place Entertainment {PPE} and Harrah's {HET} bought stakes in gaming companies there that are moving to set up gambling sites on the Internet.
Harrah's took a 25 percent stake (which it has since sold) in Star City Holdings Ltd. {SCITY}, which owns the only licensed gaming complex in Sydney and is working on regulatory approval for up a gaming site.
Park Place bought 20 percent of Jupiters Ltd, which operates four casinos in Queensland and owns a Web-based sports betting operation. Microsoft's partner in its Australian NineMSN portal site, Publishing and Broadcasting Ltd, is also getting into the online gaming business down under. PBL recently bought Crown Ltd, owner of Melbourne's only licensed casino.
Australia, U.S. at odds on Net betting
Internet Roulette: MSNBC's special report on Internet gambling
Y2K's Safest Investment Bet: Casino & Gaming Industry
The Internet offers some undeniable opportunities for the gaming industry. Like most Internet businesses, it's a lot cheaper to set up.
While a typical bricks and mortar casino might cost upwards of $300 million and require a staff of thousands, a typical online gaming site costs about $1.5 million and employs 17, according to a report by Boston Consulting Group.
And the report said the house's cut on the Web comes to about 24 percent – compared with a traditional U.S. casino's take of between 8 to 16 percent.
(Chart from MSNBC.com)
And, like other forms of e-commerce, online gaming offer opportunities for additional revenue streams -- including valuable customer databases. The gambling audience is attractive to a host of conventional businesses, from travel companies to sports care manufacturers, according to Mark Hardy, who follows the online gaming industry at Forrester Research.
"From a marketing standpoint you're always trying to qualify your audience," said Hardy. "There are attractive attributes to a gambling audience, just as there are to housewives who buy bleach."
Regulation of online gambling – short of an outright ban – would likely be a boon to the fledgling industry, according to Joe Coccimiglio
"If it was regulated it would grow much more rapidly," he said. "People wold be much more comfortable. How do you know the games are not fixed? How do you collect your money if you win?"
Ironically, while the Kyl bill calls for banning online gambling outright, it may eventually clear the way for state regulation and licensing.
For one thing, the bill demonstrates the problem inherent in tackling shutting down gambling sites altogether.
An earlier provision of the bill that would have subject online bettors to prosecution was abandoned. Enforcement of the ban would rely on Internet Service Providers blocking access to gaming sites. But the language in the latest version exempts ISPs if they find it technically or financially burdensome to do so.
"The Kyl bill has been watered down to make it more palatable," said Happel. "The general idea now is that it would prohibit online gaming unless a state proactively passed legislation to allow gaming in that state. So it passes decision-making back to the states."
Even if the ban is successful in the U.S., online gaming is expected to continue to thrive elsewhere.
"The business will continue to grow because it's a global business,' said Hardy. "Essentially it's a question of demand exceeding supply, and the marketplace responding."
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