The internet continues to cause difficulty for regulators due to its decentralised nature. Widespread online piracy caused a revolution in the music industry with the advent of Napster, where lawmakers struggled in block users around the world sharing MP3s, but the borderless nature of the web has caused even more problems for regulators of a another industry – gambling.
It was back in 1994 when Antigua and Barbuda passed the Free Trade and Processing Act, which provided for licenses to be granted to firms looking to open online casinos. This was the same year that launched Amazon and Yahoo, and four years before Google would appear online, but these two small Caribbean islands saw how the internet could change the world and open up new markets.
The opening up of licensing in the Caribbean islands proved prescient, and as the world went online in the late 1990s, online gambling exploded from 15 websites in 1996, to 200 just 12 months later, and reached 1400 by 2001, according to a report by Bear Stearns.
This rapid growth was soon met with regulation, and in the US lawmakers attempted to completely ban online gambling with the Internet Gambling Prohibition Act. The bill ultimately failed pass, but many of the reforms and regulations were later passed in the Unlawful Internet Gambling Enforcement Act of 2006 as part of the Safe Port Act.
These new regulations caused an instant reaction on the stock markets, with some gambling stocks falling as much as 60%. A number of operators, including PartyGaming, Bwin, Cassava Enterprises, and Sportingbet, announced that they would suspend certain real-money gambling operations and other chance-based casino games for US customers to comply with the laws.
As the 2006 Act made clear that the US prohibited some but not all internet gambling, the US lost its moral defence to claims that by banning all foreign internet gambling websites in the country, they were in breach of their free trade agreements. This led to Antigua and Barbuda, early leaders in offshore internet gambling, to take the case to the World Trade Organisation (WTO) and win. The ruling allows Caribbean islands to take retaliation against US firms, and they have threatened to set up a “pirate” download portal filled with US television, film, and music content to recoup the money.
Despite the introduction of regulations across the globe in the 2000s, the online gambling market had grown to $21bn (£17bn) by 2008. Now, with people able to connect to the internet anywhere at any time with their smartphone, and the resultant rise of the online casino has helped that number more than double to reach $46bn (£37bn) by 2016, according to Statista.
The US leads the world in most internet-related sectors, but its tangled web of outdated laws has made most US users look offshore for their gambling. This has deprived the US economy of taxes that could be spent on public services and infrastructure, but also means that the US is missing the opportunity to regulated the industry within its borders and make sure that vulnerable users are protected and US citizens are gambling responsibly and within their means.