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Electronic Gambling Report: Commercial Development Trends, Participation and Site Location

Online, a source of such information, reported 282 individual sites accepting real-money wagers in February 1999.)

According to reports, sites may be established with relatively low capitalization for equipment, software, setup, and maintenance expenses. However, final startup costs depend on the amount required for licensing and bonding by the jurisdiction in question.

Once a site is in operation, it must achieve a relatively high volume of gaming transactions to make a profit. One gaming expert estimates that $10 must be wagered for every $1 of revenue realized by an Internet gaming operator.

Participants:

According to the former chair of the Interactive Gaming Council (IGC), the growth of Internet gaming has been fueled mainly by the work of young computer and marketing specialists interested in applying their technology in a high-risk venture with some prospects of profitability.

However, larger software and electronics companies, many of which have connections to other, more conventional parts of the computer and telecommunications industries, are playing an increasing behind-the-scenes role in the Internet gaming industry. The character and long-term prospects of this role are not clear.

Some of those companies sell gaming systems outright to gaming operators; others take an ongoing percentage-licensing fee. According to the former IGC chair, the number of companies with such involvement has grown slowly but steadily, with most companies appearing to maintain the balance of their activity in jurisdictions with more established financial regulatory programs until governments set firmer national policies.

Site Location:

The number of countries currently licensing Internet gaming also is a matter of speculation. One industry analyst estimated 20 such countries in November 1998. Among those known to offer some form of licensing are Antigua, Australia, Austria, the Bahamas, Belize, Costa Rica, Dominica, the Dominican Republic, Ecuador, Gibraltar, Grenada, the Netherlands Antilles, St. Kitts, and Venezuela.

However, the definition of "licensing" also differs by jurisdiction. Observers of the industry have pointed out that websites often label themselves licensed by virtue of holding only a general license to conduct business, as opposed to a specific license for Internet gaming.

The latter license may not be granted in jurisdictions such as Costa Rica and Venezuela, even though Internet gaming operations apparently are based in both countries.

In addition, many casinos operate in countries that do not license Internet gaming. The choice of a site location for Internet gaming may have nothing to do with whether or not a country licenses the operations.

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