PAGE2

Internet Gambling

History

The history of Internet gambling has been short, but one that can be characterized by rapid growth. According to Rolling Good Times Online, web sites offering on-line gambling has grown from 15 to 140 sites from January of 1997 to March 1998. The growth of the use of the Internet itself has only recently proliferated and can be traced back to the computer marketplace, where desktop computer growth has been exponential. Improvements in technology and decreases in hardware prices have made the personal computer a ubiquitous part of American society. Accompanying this growth has been the explosion of the Internet. The number of U.S. users on the Internet is estimated to be at approximately 47M. Many traditional forms of entertainment have been supplanted by what people are calling a "cybercultural revolution".

Survey of Gambling Web Sites

We surveyed 22 Internet gambling sites to understand what types of games were being offered and how the on-line casinos operated. Here is a summary of the results:

Number of Sites

We found a variety of estimates of the number of active internet casinos. We believe the true number is between 150-200, but growing rapidly.

Yahoo lists 46 sites under on-line casinos
Gambling.com provides a Top 30 list and has 76 Sites in its On-line Gambling Directory
Place Your Bets gives a top 100 list and has 160 sites in its database

Location

Greatest number of sites in Curacao (Netherlands Antilles)
Other popular locations: Antigua, Dominica

Games Offered

% of Internet Casinos Offering Games (n=22)
Blackjack	73%
Slot Machines	82%
Video Poker	82%
Roulette	68%
Keno/Lottery	41%
Craps	27%
Sports Betting	23%
Live Poker	5%

Payment Mechanisms

Almost all take credit cards, most take wire transfers
Some take personal check with clearing period
A few rely exclusively on third party payment providers such as Cybercash

Payout Mechanisms

14% offered direct credit back to credit card
Others provided checks or wire transfers on demand, sometimes with a nominal service fee

Business Model

At almost all sites players competed against the casino
One site, Planet Poker hosted live poker games, and charged a % of the pot

Software Required

88% of the sites required downloadable software interfaces in addition to the web browser

Multilingual Capability

32% of the sites supported multiple languages including French, German, Spanish, Japanese, and Chinese, suggesting the global nature of this business

Potential for Player "Cheating"

One of the biggest concerns about Internet ganbling is the potential for operator fraud (discussed below under Building Trust) however, player cheating is a potential issue as well:

Card Counting: In games like Blackjack relatively few players have the mental discipline to apply card counting techniques. A player at an Internet casino could use a computer or other means to make card counting very easy.

In response to this concern, some sites shuffle after every hand or only deal only 1/3 of a large shoe

In multi player games like poker, collusion among the several players is easy to achieve

Building Trust

Some of the key concerns about the reliabilty of Internet Casinos are:

Will the house pay out winnings?
Are the odds what they claim to be?
If there is a dispute what channels are available?

Sites are addressing these concerns and trying to build trust in several ways:

Outsourcing money handling to third party (i.e., Cybercash, other electronic cash providers)
Independent audits or ratings (i.e., MaBullking audit data available to players)
Adhering to established codes of conduct (see IGC)
Live customer service
Extensive disclosure of information on site

Starting a Site

Start-up costs for a virtual casino are relatively inexpensive, and are about one-tenth of what it costs to start a physical casino. Antigua, St. Kitts, and Grenada offer Internet casino licenses for a $100,000 annual fee. In Antigua, $75,000 buys a sports betting permit. In Antigua, casino licensees get to keep their profits tax-free and are offered complete financial secrecy. This is in comparison to traditional casino that operates under strict regulations, including rigorous auditing and background checks of owners. Back to Table of Contents

15.963 Class Web Site Internet Gambling Information Directories of On-Line Casinos If you have comments or suggestions, email me at jcliffor@mit.edu