A recently published poll of some 30,000 Americans shows that the overwhelming majority – nearly 80% - do not want federal interference in recreational activities such as online gambling, and are opposed to pending bills in Congress that would outlaw online gambling if passed. Many would suggest that it might be far better to regulate and tax the burgeoning online gambling industry than to attempt to put the genie back in the bottle – a notoriously difficult task.

Online gambling is a growth industry and although analysts’ preoccupation with possible US legislation against the industry causes dips in Internet gaming companies’ share prices from time to time, and major investment funds are wary of committing, the numbers and nationalities of active players continues to ascend, as does online gaming revenue. With countries such as the UK opting for regulation, Internet gambling gains respectability. As the industry becomes established more people are willing to gamble online, particularly as most operators are licensed by reputable jurisdictions and comply with gaming association codes of conduct.

Regulation and taxation may be the dream of some governments, and a more sensible approach than trying to ban the inevitable, but it may be a pipedream. Major gaming concerns have shown a willingness to move offshore if taxation becomes onerous, already leading to a climb-down by authorities in the UK over bookmakers’ betting duty. Online betting exchange Betfair moved operations to Gibraltar at the first hint of possible high tax rates for online operators in Britain.

It remains to be seen whether the online gaming companies, with their steadily increasing customer base, find that their clients see any security advantages in being under UK regulation rather than that of Malta, Gibraltar, Isle of Man, etc. One suspects not, particularly if time goes by with no online gambling scandals to rock the boat, and the government may have missed the boat anyway. Companies paying higher taxes to be under British jurisdiction may mean a worse financial deal offered to online gamblers. By offering better odds the betting exchanges are winning clients from the traditional bookmakers, and it is likely that those becoming accustomed to betting online will be impressed more by favourable returns than by regulatory bodies. (E-04.26.06)

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