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Mark Balestra

Top Stories of 2003

2 January 2004

See Also:

A Look Back at 2003

The Best and Worst of 2003

A Glance at 2004

  1. Operators and governments battle over cross-border gambling.
  2. Authorities deter online gambling by going after advertisers.
  3. Betfair targets the world; the world targets Betfair
  4. Major operators close up shop in Isle of Man.
  5. Big-brand operators get out of the I-gaming space.
  6. The industry continues to grapple with payment issues.
  7. Russian hackers extort money from I-gaming operators.
  8. British, American and Australian legislators put forth new I-gaming policies
  9. iTV Betting takes England by storm.
  10. The popularity of online table poker soars.

Border Wars

The convergence of the bricks-and-mortar and I-gaming worlds was inevitable, but who knew it would be this difficult? The European Economic Community hasn't come to terms yet with what to do with Internet gambling. Most member states want to protect their gambling monopolies by blocking foreign operators, but England wants to establish an open market across geographic borders. Betting companies, most prominently Ladbrokes, are challenging member states, particularly those in Northern Europe, and the battles have been taken to the E.U. courts. The Gambelli ruling in November confirmed that member states with legalized gambling must open up their borders, but also emphasized member states' rights to control the amount of gambling available for social reasons. Some thought the Gambelli ruling would mark the end of the border wars, but it appears to have marked the beginning.

A similar war is being fought in Australia, where the heavily populated states aren't too keen on Internet operators from less populous states chipping away at gambling revenues. Foreign operators with higher profit margins and lower tax rates, meanwhile, can offer better prices than state-licensed operators, and the states naturally haven't taken too kindly to them. Australia, thus, has championed its "Good Neighbor" policy, which calls for gambling jurisdictions to respect other jurisdictions' wishes to block foreign operators.

While "border control" is being blamed by some for stunting the growth of interactive gambling in Australia and Europe, it could be the key to opening up the U.S. markets. In all likelihood, any prohibition law passed in the United States would include a states' rights provision. The result could be legalized Internet gambling restricted to only those states that choose to authorize it.

The Advertising Crisis

The most effective method of keeping Internet gambling out of the United States over the last three years has been severing the flow of funds between consumers and operators. It still is, but the Department of Justice has found another strategy that has proven successful. The federal court in the Eastern District of Missouri in 2003 subpoenaed a number of Web site operators, radio stations and other media outlets carrying advertisements for I-gaming services, requiring them to turn over information related to the gambling ads dating back to 1997.

The investigations haven't led to charges filed, but they've created a panic in the industry. Major broadcasting groups, such as Clear Channel and Infinity Broadcasting, have subsequently dropped all I-gaming advertising, creating a domino effect throughout media outlets in the United States. A few small portals have folded, while some of the industry's most established portals have sold out.

Betfair, Betfair, Betfair

Regardless of your stance on peer-to-peer betting, there's no denying that Betfair, the world's largest P2P betting exchange, has been an amazing story. The company, which matches more the £50 million in bets per week, is now a major betting brand in the United Kingdom and they're on a mission to duplicate that success throughout the rest of the world. Traditional bookmakers say betting exchanges have an unfair advantage over them, and are fighting them tooth and nail. Betfair has acquired a U.K. betting licensed, and is operating legitimately in England, but the country's leading bookmakers, led by Ladbrokes and William Hill, are lobbying hard for a taxation scheme that levels the playing field. Australian bookmakers, meanwhile, aren't interested in a level playing field; they're seeking an all out ban on betting exchanges, while Betfair is seeking an Australian license. Betfair continues to thrive, however, because sports bettors love the P2P model and the competitive prices available at betting exchanges.

Exodus from Isle of Man

What a difference a year makes. The Isle of Man capitalized on the absence of I-gaming regulations in the United Kingdom by scooping up several big-name licenses in '01 and '02. But the jurisdictions herd of cash cows, Kerzner, MGM Mirage, Hard Rock and Littlewoods all left in 2003, with the first two closing up for good and the latter two leaving for other jurisdictions. Policymakers and regulators on the island admit that their highly restrictive regulations prevented licensees from operating successfully and have pledged to make changes.

Exodus from I-Gaming

The trend of major gaming companies taking their brands online came to a screeching halt in 2003. The most notable operators making quick exits were PBL, MGM and Kerzner--all of which went online in 2002 with very high expectations. The Internet space was a bust for all of them because restrictions prevented them from leveraging their brands online.

The Payment Crisis

It's getting old, but it's still a big story--and for I-gaming operators and suppliers, a big problem. By the end of 2001, most major credit-card-issuing banks were denying all Internet transactions tagged with the 7995 code, which is reserved for online gambling. By the end of 2002, Visa and MasterCard had stepped up efforts to prevent merchants from miscoding I-gaming transactions. Policies restricting payment processing have crippled businesses that rely on U.S.-based customers, but there have been high hopes that a viable alternative to credit cards will emerge. There's no end to the payment crisis in sight, but the strong have adapted and survived. Operators are relying less on U.S. customers; some are finding ways to accommodate them. Meanwhile, Australian policymakers have considered provisions banning credit-card transactions to its Interactive Gambling Act, which will be updated in 2004.

Denial of Denial of Service

In the third and fourth quarter of 2003, several I-gaming operators where hit by hackers demanding that they pay $50,000 or face distributed denial of service attacks on their sites. Most of the affected operators have remained silent because they don't want to expose their vulnerability, so how many were hit isn't clear, but it appears to be a significant amount.

Policy... or a Lack Thereof

I-gaming opponents in Washington, D.C., had their strongest showing to date in their efforts to pass a prohibition bill, but once again, they didn't get it done. The United Kingdom and Australia, meanwhile are on the verge of updating their gambling policy, but neither passed legislation in 2003. Australia is expected to move toward a more restrictive system, while England is expected to open to open its markets to more gambling, including online casinos.

I Want my iTV

It was no secret that gambling via interactive television would eventually be huge, but it finally showed signs of coming alive in 2003. For now, all roads lead to the United Kingdom and BSkyB, the country's leading iTV provider. In the past year, BSkyB added numerous gambling channels to its Sky Active network, which reaches bettors in the United Kingdom and Ireland. The media giant carries betting services offered by top operators, such as Ladbrokes, Rank and attheraces, as well as its own channels, Fancy a Flutter (through a partnership with Rank) and Sky Bet Vegas. iTV betting is poised for major growth when England liberalizes its gambling laws.

Online Poker Arrives

After four or five years as a relatively small, niche industry, online poker finally broke through in a big way. The surge was helped immensely by the World Series of Poker, which was won by a player who qualified online, as well as promotional opportunities through World Poker Tour, a big hit on the Travel Channel. Most online casino have added table poker to their offerings, greatly increasing the volume of online players. Professionals are flocking to online poker rooms and players of all calibers are following.

Additional Top Stories:

  • The industry continued to expand, entering new markets all over the world. Estonia, Romania Six Nations, Philippines, New Zealand and Hong Kong all welcomed new I-gaming services.
  • In a dispute handled by the WTO, Antigua and the United States battled over Antigua's right to offer licensed I-gaming to U.S. residents.
  • U.S. Rep. John Conyers pushed for Congress to explore regulating Internet gambling.
  • Richard Alston stepped down as the minister for Australia's Department of Communications, Information Technology and the Arts, the ministry that oversees I-gaming policy.

Stories that Weren't

  • The Kyl bill passes, making the six-year effort to prohibit online gambling successful.
  • The expansion of betting exchange provider Betfair is slowed by British and Australian bookmakers looking to protect themselves from unfair competition.
  • The industry finds a solution to the payment processing woes that have plagued it for three years.
  • Major land-based casino operators dominate the I-gaming space, putting offshore operators out of business.
Top Stories of 2003 is republished from
Mark Balestra
Mark Balestra is the Managing Director at BolaVerde Media Group. He previously worked at Clarion Gaming and the River City Group where he was the publisher of iGamingNews. He lives in St. Louis, Missouri.
Mark Balestra
Mark Balestra is the Managing Director at BolaVerde Media Group. He previously worked at Clarion Gaming and the River City Group where he was the publisher of iGamingNews. He lives in St. Louis, Missouri.