It’s A Fact: Online Gambling Regulation Shuts Out Offshore Sites

John Mehaffey June 27, 2015 699 Reads
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Wednesday’s California online poker hearing before the Governmental Organization Committee invited comment from all sides of the debate. One hot topic was the how offshore sites fit into the equation.

The consensus among all interested parties is that unlicensed sites must be pushed out of the market. There is an easy solution to this problem.

Richard Schuetz, commissioner of the California Gambling Control Commission, commented on the need for a reasonable tax rate and licensing fees to enable the state’s online poker sites to compete against offshore entities.

This is a legitimate concern, but disregards action that already occurs in the country’s three regulated online poker markets.

Unregulated sites have typically departed regulated markets

Delaware, Nevada, and New Jersey have all regulated online poker. These states have one thing in common: most offshore sites left these markets.

  • It all started with Carbon Poker and other Merge Gaming skins leaving these three regulated markets in January 2014. This was eight months after Ultimate Poker launched in Nevada, but just three months after regulated online poker was introduced in Delaware and New Jersey.
  • The New Jersey Division of Gaming Enforcement sent a cease-and-desist letter to six online poker affiliates in May 2014. This action appeared to give U.S.-facing offshore sites a reason to be concerned.
  • Bovada left the New Jersey market in May 2014. The U.S.-facing Bodog skin dropped out of the Delaware and Nevada market three weeks later.
  • The Winning Poker Network, named in the Blue Monday indictment, left all three regulated states in May 2014.
  • The Equity Poker Network also left all these regulated markets in May 2014. The Equity Poker Network went so far as to geo-block its websites to players in these states.

The three states that currently regulate online poker have specific regulations pertaining to legality and licensing. These laws allow little in the way of gray area for offshore sites. It seems to be enough for unlicensed sites to reconsider doing business in those states.

Most U.S.-facing offshore sites spread sports betting, a business specifically illegal under the Wire Act.

The offshores offering sports betting in the U.S. market are not deterred in most states, but voluntarily left regulated ones, even though there is little doubt about the legality of the business.

This speaks volumes about the effectiveness of regulating online gaming at the state level.

The solution is simple

States that have yet to regulate online gaming have two options.

  1. One is to ignore the fact that residents have access to offshore sites. This allows unlicensed sites to operate with impunity and total disregard to responsible gambling. Problem gamblers and minors are free to play at these sites. These offshore sites pay no taxes to local jurisdictions, nor do they create any jobs.
  2. The other option is to regulate the activity and deter unlicensed sites from operating in the state, while at the same time offering financial and responsible gambling protections.

States must decide between the two scenarios. The days of pretending online gambling doesn’t exist are long gone.

It is impossible to fight technology and its ability to reach online gamblers looking for action, regardless of its legal standing. The next logical step is to regulate online poker and casino games to provide protections that are not available in unregulated markets.

This would prevent minors and problem gamblers from sites, while at the same time generating economic activity at the local level.

Offshore sites have already shown a willingness to respectfully bow out of regulated states. It is time for new jurisdictions to take them up on that offer.