Top Stories of 2004

	See Also: A Look Back at 2004 The Best and Worst of 2003 A Glance at 2004

1. The mass appeal of Internet poker takes online gambling to new levels.
2. The World Trade Organization rules that the United States should not be blocking foreign online gambling services.
3. The European cross-border gambling war rages on.
4. Hackers target the online gambling industry.
5. Casino City challenges the U.S. Justice Department's stance on I-gaming ads.
6. The United Kingdom moves toward gambling reform.
7. Racing interests battle betting exchanges.
8. Numerous jurisdictions welcome I-gaming services for the first time.
9. Australia's federal government reviews the Interactive Gambling Act.
10. Sportingbet takes the gambling world by storm.

Poker Mania

Internet poker went from virtually non-existent at the beginning of the decade to online gambling's most exciting segment in '03, and as it turns out, the '03 boom was only the beginning. Fueled by the table poker craze in the United States, online poker exploded in 2004 into a $2 billion a year industry. Look no further than the World Series of Poker to gauge how much the industry has grown. The field for the no-limit Hold'em main event grew to an impressive 800 players in '03 and to 2,600 in 2004. It's estimated that half the field in '04 qualified online, and the champions in both '03 and '04 qualified through online tournaments. World Poker Tour, meanwhile, has consistently been Travel Channel's highest rated show. There are an estimated 1.5 million real-money online poker players worldwide. Celebrities are partnering with online poker rooms, professionals are playing online and amateurs are quitting their "day jobs" to become professional poker players.

The WTO Dispute

Antigua & Barbuda filed a complaint in '03 with the World Trade Organization against the United States regarding the United States' policy of blocking Antigua-licensed I-gaming operators from U.S. players. To the surprise of many, a WTO dispute resolution panel ruled in favor of Antigua, stating that the U.S. policy was in violation of the general agreement on trade services. The ruling has led to speculation over whether the United States has the right to block legal foreign online gambling services. The United States is appealing the decision, and if it stands, it's questionable whether the United States will abide. Things could get interesting, however, should a larger country (e.g. the United Kingdom) file a similar complaint.

The Gambelli Aftermath

The idea that the European Court of Justice's Gambelli ruling of 2003 was the end of the cross-border gambling debate in Europe was put to rest early and often in '04. If anything, it's just the beginning. In a nutshell, the court ruled that European member states have the right block foreign gambling services if doing so is deemed socially hazardous (i.e. a member state cannot block foreign services for the sole purpose of protecting its gambling monopolies from competition). Advocates of an open market argue that the ruling supports their position, and vice versa for opponents of cross-border gambling. Subsequent cases are winding through the European courts, and the primary battle ground is the Netherlands, where Ladbrokes, Betfair and others are battling for the right to offer their services to Dutch residents.

The European Commission, meanwhile, has voiced its objections to gambling restrictions in Denmark and Greece on the basis that the policies are not consistent with E.U. policy, which calls for an open market for interstate commerce. The resolution could lie in the forthcoming services directive, but various factions are lobbying to have the gambling provisions removed from it, and even if they fail, it likely won't come into force until 2010.

No DDoS Relief

Hackers continue to be a nuisance to the entire online gambling industry. A major wave of attacks on Super Bowl Sunday set the tone for 2004, and the attacks continued throughout the year. The vehicle of choice is the distributed denial of service (DDoS) attack, and hackers make their money by collecting a "fee" from operators in exchange for not attacking. The common thread is the crippling of sites during peak betting times. Otherwise the extortionists don't appear to discriminate among victims, with sites of all sizes and sorts being targeted. The arrest of three Russian DDoS attackers over the summer was positive news for the I-gaming industry, but the attacks seem to be too wide-spread to be stopped altogether. Hacker networks are giving away technology that enables virtually anyone to bring down Web sites via DDoS attacks, and some are speculating that I-gaming operators have begun to attack their competitors. The attacks have also spread to other businesses, such as payment processors. Security companies are providing effective solutions, but many operators are finding that it's cheaper to pay the extortion fee (typically around $50,000) than it is to employ a DD0S-protection system. For now, there appears to be no end to the DDoS problem in sight.

Casino City's Campaign

The U.S. Justice Department held its stance on I-gaming advertising throughout 2004, and finally one company decided to fight back. A wave of warnings and subpoenas in 2003 scared most U.S. major media outlets away from accepting I-gaming ads. But in August 2004, gambling portal Casino City of Louisiana challenged the government by filing a motion in a federal court for a declaratory judgment on the legality of carrying ads for interactive gambling. At issue is whether the government's warnings created a chilling effect on free speech. The government has filed a motion for dismissal, and the court hasn't yet responded.

For now, restrictions on advertising persist. Virtually all major broadcasters and publications are staying away from I-gaming ads. Even Travel Channel has stopped carrying Internet poker ads during its broadcasts of the World Poker Tour. Internet search engines Google and Yahoo! also recently joined the long list of media outlets dropping the ads.

The UK: One of These Days. . .

It sounds like a broken record, but the United Kingdom continues to crawl toward reforming its gambling laws, and the proposed Gambling Bill would create a framework for Internet casinos. One could argue that an overall lack of significant progress makes it a non-story, but U.K. policy has captivated the I-gaming industry, which has shown great interest in each and every development involving the bill. For months, debate has focused on land-based casinos, and there's been little action on the I-gaming front.

Continued Resistance to P2P

The traditional race betting and sports betting industries don't want betting exchanges to be allowed. Their reasoning: betting exchanges breed the corruption of sport and don't return enough money to the industry and the government. The betting exchange industry's longtime leader, Betfair, has fought persistently to dispel these ideas by offering to pay the necessary taxes and by making their data available to leagues and associations so that suspicious betting activity can be monitored. But their arguments are falling on deaf ears. It's hard to believe that England will ban P2P (despite significant opposition) because doing so would contradict the country's progressive approach toward gambling policy. Australia is a different story. The federal government says the states can decide for themselves whether they want to license betting exchanges, but no states have come forward so far, and Australia's racing interests are fighting tooth and nail to keep this from happening. U.S. racing, meanwhile, has grown increasingly interested in the P2P issue. The idea of beating Betfair to the punch by establishing an industry-run betting exchange has been broached and--not surprisingly--met with resistance.

Worldwide Expansion

Despite prohibition movements in the United States, Greece and elsewhere, new jurisdictions continue to join the I-gaming race. While jurisdictions like Costa Rica, the Isle of Man and Malta are revamping their I-gaming regulations, numerous others are getting in the game for the first time. In 2004, Chile, Canada (British Columbia, Ontario and the Atlantic provinces), Israel, New Zealand, Hessen (Germany) and other jurisdictions rolled out interactive gambling services for the first time.

Status Quo Down Under

Australia's federal government reviewed the Interactive Gambling Act of 2001 for nearly a year and decided in 2004 that no amendments are necessary. The primary purpose of the review was to determine whether problem gambling was adequately addressed, but the hot issue was betting exchanges: Would they or would they not amend the act to ban P2P? The government ultimately elected to leave things be, putting the decision in the hands of the states.

Sportingbet Spreads Its Wings

Arguably the world's strongest Internet-only sports betting brand, U.K.-based Sportingbet proved its staying power in 2004. After a relatively difficult 2003 in which the better-than-expected performance from its Sportsbook.com resulted in £93.7 million in earn-out costs, Sportingbet cruised into 2004 with its best first quarter ever. In May, the company reported that its customer base had grown to 1 million players and that its turnover for the year ended March 31, 2004 eclipsed the £1 billion mark. In August, they reported that they were handling 8.3 bets per second. And in October, the company stayed true to its philosophy of aggressive expansion by acquiring Paradise Poker. It also has plans to launch an iTV service and will enter the P2P space if the U.K. government creates a favorable taxation scheme for betting exchanges. The expansion theme also extends to geography, as the company (already the only major British bookmaker to take U.S. play) challenged European gambling monopolies by launching new sites targeting bettors in France, Hungary and the Czech Republic. Shares of Sportingbet, traded on the AIM, doubled in value, and the impressive run led to speculation in December 2004 that Ladbrokes wants to acquire the company.

Additional Top Stories:

• Internet gambling reinvigorated the interest of major gambling and entertainment brands, including Virgin, PBL and Harrah's.
• The Australian wagering industry was redefined by consolidation among leading betting agencies.
• Mobile and iTV betting continued to grow impressively.
• The IPO became an attractive option again, with the likes of Neteller and BetOnSports leading the way.
• The attheraces consortium fell apart, leaving British racing with no broadcast agreements for a two-month period.
• The British racing industry battled bookmakers and lotteries over data usage rights.

Stories that Weren't

• The Kyl bill passes, making the six-year effort to prohibit online gambling successful.
• Thanks to the Gambelli verdict, the legality of cross-border gambling in Europe becomes crystal clear.
• The industry finds a solution to the payment processing woes that have plagued it for four years.
• England enacts its Gambling Bill.
• Australia amends its Interactive Gambling Act to further restrict Internet gambling.
• Australian states issue betting exchange licenses.