Internet Gambling - The Internet, Internet Gambling Becomes Big Business, Online Games, Online Gamblers, The Legal Issues

Internet gambling is a relatively new phenomenon. The first gambling Web sites on the Internet launched in the mid-1990s. The new medium has since soared in popularity, particularly in the United States. Millions of Americans gamble online each year, even though the government considers the practice to be illegal. In April 2003 the U.S. Department of Justice estimated that there would be 1,800 Internet gambling sites operating around the world by the end of 2003 earning revenues around $4 billion.

Industry analyst Christiansen Capital Advisors, LLC, estimates that Internet gambling generated nearly $5.7 billion of revenue in 2003. Revenue is expected to double by 2006 and exceed $18 billion by 2010.

Exact figures on Internet gambling revenue are not known. Online gambling sites are not permitted to operate within the United States, and most of the countries that do allow them to operate do not collect or report revenue statistics. Bear Stearns & Co., Inc., reports that three-fourths of Internet gambling operations are located in small Caribbean countries that provide little or no government oversight of the industry.

It is believed that many Internet gambling sites do not pay taxes to their home countries, or pay lower taxes than land-based businesses. According to Mike Brunker in "Antigua Aims for Silicon Makeover" (MSNBC.com, November 19, 2003), the tiny island of Antigua in the Caribbean is home to about a hundred online gambling sites that pay $7 million in licensing fees to the government. Other popular locations include Central and South America, Australia, and the British Isles.

Unlike most land-based casinos, the vast majority of Internet gambling sites are operated by small, virtually unknown companies. Gambling Web sites are much cheaper to build and operate than traditional casinos. A land-based casino could cost hundreds of millions of dollars and require hundreds of employees. An online casino can be set up and operated by a handful of people for an initial investment of $1–2 million. The low setup and operating costs make the businesses very profitable and allow them to offer higher payoffs to winners than traditional casinos.