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Brief History of Internet Gambling

A look at the history of gambling in the United States shows that it has evolved in waves, with public sentiment shifting back and forth from embracing gambling to prohibiting it.Gambling was largely practiced in the early U.S., primarily in the form of lotteries, until it was completely banned in the 1890ís.However, gambling started making a comeback in the 1920ís and was fully legalized in Nevada in 1931, providing American gamblers with an outlet through which to place their bets. Las Vegas remained the primary location for legal gambling until the 1970ís, when more forms of casinos began to be legalized, including riverboat and Indian reservation casinos. In fact, gambling has now evolved to the point that at least some form of gambling is legal in all but two states and revenues from gambling eclipse the revenues from theme parks, video games, movie tickets, and music recordings combined.

With the expansive growth of the gambling industry and the evolution of technology, it is no surprise that the new wave in gambling is occurring on the world wide web.Though internet gambling is a relatively recent phenomenon, it has exploded in a way that few industries ever do.The first online casino began operation in 1995 with an offering of eighteen online games, and since then the industry has boomed at such a rate that an estimated 30 million gamblers visited internet gambling sites in July of 2005 alone.While data about revenues is varied, even conservative estimates have the industry growing from $1 billion in profits in 1997 to a staggering $10.9 billion in 2006.This phenomena has truly revolutionized gambling, allowing gamblers to place wagers on all sorts of games and events from the comfort of their home.However, the new industry also raises a variety of concerns over how the law ought to properly deal with internet gambling


Internet Gambling Today

Types of Gambling Sites

Almost every single internet gambling site is physically located offshore.These sites offer all types of gambling games, from traditional card games to lotteries to sports wagering.Some of the more exotic gambling options include what are known as proposition bets, where you can wager on everything from the winner of American Idol to the likelihood that Jessica Simpson will adopt a child.Examples of internet gambling sites are below:

How Internet Gambling Works

Gamblers wishing to bet online are usually required to set up an account with the gambling website and to make a payment into that account before betting.Payments have traditionally been made using major credit or debit cards, private debit cards (debit cards issued by small, private companies), online payment providers (i.e. Paypal), wire transfers, or e-cash (digital money that is purchased from a provider).However, there have been some recent events that have changed the way online gambling is funded.

For one, most major American credit companies now prohibit payments to online gambling services.†These policies are mostly self-implemented due to the high risk of fraud and bad debt in the online gaming industry.† However, the companies have also had some assistance in forming the policies by New York Attorney General Eliot Spitzer, who threatened Citibank with criminal prosecution for knowingly assisting in internet gambling that was prohibited by New York law.† Though the charges were dropped after Citibank promised to give $400,000 to counseling services for gambling addicts, the threat of prosecution was enough to force these companiesí hands in banning internet gambling credit.


After credit card companies banned online gambling credit, gamblers began to use online payment providers such as Paypal with increasing frequency.† However, Attorney General Spitzer then went after Paypal with a prosecution similar to the one threatened against Citibank.† Though Paypal claimed that it already had a policy against allowing payments to online gambling sites the business was still forced to disgorge profits of $200,000 in a settlement with New York.


Despite this apparent crackdown by some American financial institutions, gamblers have still found ways to fund their wagers.For one, online gambling sites can mask the code that attaches to credit card payments to make the payment look like it was for something other than gambling, which would allow consumers to continue to use major credit cards regardless of their policies.However, even more legitimate means of payment exist.For example, once Paypal announced that it would prohibit payments to online gambling sites there were plenty of similar online payment providers that began to offer service to gambling sites to pick up Paypalís slack.In addition, gamblers can always set up accounts at foreign banks that do not prohibit transfers to gambling sites or send an international money order to those sites that accept them.One thing is for sure: as long as internet gambling continues to attract more bettors and more money, companies will find ways for bettors to pay for their bets.