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Protect Your License - Internet Gambling Operations

13 August 2002

By Steve Toneguzzo

In June we looked at certain aspects of selecting a software supplier and concluded with regulatory matters. The key takeaways from the conclusion were:

a) If one steps back and takes an objective look, it becomes evident that a well defined regulatory requirements framework is in essence the basis for a requirements specification that, with some editting, simply defines good business practices in any event. Regulatory requirements or guidelines, if structured properly, can and will be an aid to business, not an incumbrance.

b) Probity is a major consideration in selecting a system supplier for a U.S.-based bricks-and-mortar business. Is the supplier good, bad or dodgy, and who defines what is what? We left the probity issue for the lawyers and the international regulatory community to resolve, but the influence of the regulator on the business must never be underestimated.


Your company may have just installed a network of 1000 computers in an office for a client and developed a new widget-gadget software package that sold globally. The thing is, you just can't understand why the Internet system you developed and installed will not be approved by the regulator, why your trial customers don't like it, why it looks like it will cost three times as much as you budgeted and take three times as long to get to market and why, therefore, your investors are pulling out.

You must understand the politics, the regulations, the technology, the punters, the operations and plan accordingly.

It has been said by some that you don't need any gambling experience to establish and operate an Internet gambling business. Well, unless you are simply providing your brand for hosting in an unregulated market and having an expert run your site, experience is essential.

If you don't understand or don't know what the right questions to ask are, find someone who does; it will prove to be a worthwhile investment.

Internal Controls and Operating Procedures

Don't just focus on the technology. How are you going to operate the system... indeed your business? Your documented controls define your business.

What is your business model?

The development of the controls is a significant part of your business and a substantial undertaking. There are two major aspects, the business controls and the IT controls, both of which sit under the umbrella of the regulatory controls. The IT controls and procedures are not mutually exclusive of the system you select, so as an operator, you need to ensure you have selected a software supplier that has documented procedures such as release, installation, system configuration, fault reporting and management. To help guide and fast-track you through the process, GGS sells a comprehensive internal controls manual template; you just fill in the blanks. The template has been followed by many major companies, including MGM Mirage Online.


The global economy is based on trust. Security facilitates trust.

How many times have existing operators been hacked? Is it none? Is it they don't report it, or they don't know?

You may be surprised what a simple port scan reveals about the many current online gambling operations. How valuable is your player database, and how valuable is your player trust?

Is your physical, technological, personnel and procedural security adequate? You security policies and procedures should address these issues.

Social Issues

We covered this issue in some detail several moths ago. One must recognize online, interactive (Internet, cable-TV, wireless) gambling will inevitably result in a social cost to be borne by society if not managed well.

Social considerations are a major issue that differentiates Internet gambling with standard e-commerce applications. It is also a major differentiator between a gambling technology project and an information technology e-commerce project.

If you "burn" customers in a local market, you will destroy your future, as your market is relatively limited. In an international market, an additional threat is posed from the damage your business practices may have on international trade relations between the country in which your operations are resident and its trading partners.

Be socially responsible.

Be cognizant of the issues.

The Australian market is observing litigation against a few "rebel" bricks-and-mortar venue operators for a breach of duty of care. This has resulted in significant government intervention across the entire industry. As grandma used to say, "It only takes a few rotten apples to spoil the bunch." The industry, as a whole, should be as proactive as possible in ensuring it does not obtain a bad name, in this respect.

Government Inspections

If you have a terrestrial gambling operation, you know the drill; routine inspects and all that. But is that same inspector capable of inspecting the Internet gambling operation? How capable are your surveillance or security staff? Does anyone other than your computer operators know what is going on? What are these computer operators really doing with your Internet gambling system during the eight-hour shift they sit in front of a terminal waiting to respond to an alarm, or other incident. Gets pretty boring sometimes. Who are your cleaners and/or service people, and what is are they really doing? The statistics demonstrate that the majority of white-collar crimes are internal to the organization.

In the past, you may have relied on government inspections as a sanity check for your bricks-and-mortar properties. Seriously rethink this strategy when you go online.

Protect Your License - Internet Gambling Operations is republished from

Protect Your License - Selecting a System

21 June 2002
In April we moved on from the regulatory issues and more toward the business issues associated with operating in a regulated environment. We looked at establishing strategic direction and identifying the choice of "vehicle" to move your profit margin from A to B. Now let's look closer at that vehicle selection. ... (read more)

Protect Your License - Establishing Strategic Direction

15 April 2002
Up to now my commentary has focused on regulatory issues. It may be both timely and appropriate, with the Global Interactive Gaming Expo and Conference on in Toronto next month, to turn attention toward the business issues. To this end, the next few months will focus on strategic direction, project planning, and related matters. ... (read more)

Protect Your Licence - International Regulatory Issues

11 March 2002
Last month we considered a 10,000-foot view of the key ingredients for a "world's best practice" regulatory model for interactive gambling. However, the focus was national. This month we briefly look at some international issues that may impact the direction for the regulation of interactive gambling. ... (read more)

Steve Toneguzzo
Steve Toneguzzo