What Does the Future Hold for Online Gambling in the Caribbean?

Change is in the air for the Caribbean's online gambling jurisdictions. While most nations in the area are just tiny islands miles from their nearest neighbors, the majority of e-gaming companies call one or more of the islands home. This can be an asset and a liability, as Caribbean governments face persecution from far larger governments that consider Internet gambling to be an unregulated and illegal activity.

How can this be if the likes of Antigua, the Netherlands Antilles, Jamaica and Grenada have laws and/or regulations in place for operating Web-based gambling services?

A number of factors are behind the condemnation. Foremost, Caribbean countries are frequently ridiculed by their land-locked neighbors as being "banana republics." They're also often held hostage by the vagaries of wind and weather, unstable governments, restless populations and insecure economic conditions.

"In St. Kitts and Nevis we recognize that hosting Internet gaming operators in our jurisdiction is more than just an opportunity for generating much needed income."

- Perry Peets, St. Kitts

And then there's the Financial Action Task Force, an inter-governmental body that develops and promotes policies, both nationally and internationally, to combat money laundering. The FATF regularly publishes a long list of nations that have been deemed "uncooperative" in efforts to fight money laundering, and Caribbean nations are always represented on the list.

Some nations comply with the FATF requirements; others are willing to fight the requirements in several areas. And the FATF has expressed concern that Internet gambling sites could be used to promote money laundering. Balancing the needs of the FATF while keeping the Net betting operators--and their money--ensconced in their Caribbean home can be difficult. The balancing act, however, has proven fruitful for several island governments.

As the government representative from St. Kitts, Perry Peets, remarked at the recent Global Interactive Gaming Summit in Toronto, "Internet gaming means opportunity for us."

He added, "In St. Kitts and Nevis we recognize that hosting Internet gaming operators in our jurisdiction is more than just an opportunity for generating much needed income."

Internet gaming has proven to be such a boon for St. Kitts that its government is actively recruiting new operators and has even labeled itself as the "turnkey" solution country for Internet gaming companies.

At the same time, officials in the Netherlands Antilles are considering changes to the supervision of interactive gaming services. One suggested change would have the Gaming Control Board of Curacao assume supervision of all gaming activities in the Netherlands Antilles, a chain of five islands including Curacao (the largest), Bonaire, St. Maarten, St. Eustatius and Saba. This, of course, is dependent upon whether the N.A. government agrees that this is a good and/or necessary move, explained Raynold Nivillac, a director with the Curacao Gaming Control Board.

In this case, Nivillac explained, the Gaming Control Board has two objectives in overseeing Internet gaming for Curacao and possibly all of the Netherlands Antilles: First, the government will get what it's entitled to (probably through the collection of licensing fees) and secondly, the development of strong consumer protection for the players. "We're still working out the details," he added.

The twin-island king of Net betting, however, is Antigua and Barbuda, which currently boasts nearly 90 licensees. During the past year the Antiguan government has worked to put together a stronger, more credible set of regulations that has received kudos from many in the industry. (See related article, Antigua Moves Forward with Gambling Regs.) Plus, the Antiguan government has been blessed with a rescinding of a two-year long financial advisory by the British government. (See related article, Great Britain Lifts Financial Advisory on Antigua.) Once the FATF determined that Antigua had fallen in line with international rules and regulations to cutback on money laundering, the British government soon followed suit.

"I think it's much too early to tell really. From my reading, the enabling legislation (in Nevada) is only step one in a complex and ill-defined process, and we're still a long way from any of the big Nevada brands actually opening up online casinos."

- David Harding, William Hill

All around the Caribbean, change is afoot. While some of these changes can be attributed to the need to follow the FATF's money laundering edicts or even a desire to attract more online gaming companies as license holders, another factor could be inspiring this change: the effect of Nevada having passed Internet casino enabling regulations.

Will the Caribbean I-gaming industry be superceded by the entry of Nevada licensed companies, particularly those companies that currently dominate the land-based casino market? The reply varies depending upon who is answering the question. At least one person is reluctant to make a connection.

"I don't believe there will be any effects," Nevada Gaming Commission Chairman Brian Sandoval said. According to Sandoval, Nevada licensees won't be in direct competition with Caribbean operators.

On the other hand, Sandoval said, thanks to Nevada's sterling reputation in regulating its land-based casinos, Nevada companies going online will have an instant reputation by virtue of their Nevada licenses.

William Hill's David Harding is cautious in responding to inquiries about Nevada's entry into the interactive gaming arena. After all, the British bookmaking firm long ago established its reputation in the United Kingdom, an equally reputable jurisdiction. Unlike Nevada operators, which will be limited to offering casino games only, William Hill went whole hog by launching its own virtual casino, licensed out of Antigua, in addition to its telephone and Internet bookmaking services.

"For all the hype," he added, "change is evolutionary rather than revolutionary, and in the legal world evolution moves at about 10 percent of the pace of the marketing and technology worlds."

World Gaming CEO Michael Aymong is confident that current I-gaming companies have an advantage over any land-based gaming company entering the virtual market.

"A large part of the success of land-based casinos rests in an understanding of the lodging and hospitality industries," Aymong said. "World Gaming and all of our competitors are in the business of the Internet."

"The Internet is our core expertise. So, rather than seeing those potential operators as competitors, we see them as potential customers for our expertise," he added.

What about countries that permit Internet gambling? Will Nevada's entry affect them also?

"The Caribbean-based jurisdictions that have fully embraced the online gaming industry, like Antigua, are already tightening up their controls in order to maintain a semblance of credibility," GamblingSoftware Business Development Director Mark Waters said.

"Remember that offshore jurisdictions have the advantage of offering extremely low tax rates to the online gaming operators and desired levels of privacy," he continued. "Should they continue their efforts to gain increased credibility while still offering the tax and privacy advantages, then they will be able to compete for the operators' and subsequently the players' business. One could argue that as long as both operator and jurisdiction continue to build and maintain credibility, then they should be able to strongly compete."

"Nevada legislation is confined to Nevada operators, so there's no impact to start with. However, Nevada will force other First World jurisdictions to take it seriously. When these jurisdictions legislate/regulate (Internet gaming), legitimate operators will attempt to get licenses--subject to favorable regulation and taxation--in first world jurisdictions.

- Andrew Tottenham, Harrods Online

Mark Blandford, managing director for the Alderney-based betting firm Sportingbet offers a different perspective. Blandford predicts, "One development that may occur within the industry is that credible companies/brands that are non-gaming could make some moves into the industry as they seek to leverage new revenues from their brands' credibility. They will use 'new' credible locations such as Alderney, Gibraltar and Isle of Man, which are already or about to commence granting licenses."

Andrew Tottenham from Harrods Online summed up the situation: "Nevada legislation is confined to Nevada operators, so there's no impact to start with. However, Nevada will force other First World jurisdictions to take it seriously. When these jurisdictions legislate/regulate (Internet gaming), legitimate operators will attempt to get licenses--subject to favorable regulation and taxation--in First World jurisdictions.

"Caribbean nations will have to maintain loose regulation and low taxation in order to maintain their operator base. If Caribbean jurisdictions become too tight, why would anyone want to operate from there when they can get the credibility from operating with similar 'tightness' of regulation in more credible jurisdictions?"

The Caribbean region and its many operators appear to be safe from competition for the near future, as Nevada is unlikely to license its first Internet casino for at least a year and a half. Based upon the comments given by some in the industry, however, it would behoove these countries and their licensees to take a look at what steps they need to make for their long-term survival. It's obvious that, for good or for bad, Nevada's entry will affect the rest of the Net betting industry. And there will be a lot of people watching the inevitable shakeout.