The Odds Are Good That Online Gambling Will Continue to Thrive -- But at What Price?
- Jul 22, 2005
- Article is provided courtesy of Wharton School Publishing
- The Odds Are Good That Online Gambling Will Continue to Thrive -- But at What Price?
- Regulating Beyond Borders
- Word-of-Mouth Success
- Future Problems
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This article is provided courtesy of Knowledge@Wharton.
Online poker is on a winning streak. According to research firm River City Group, Internet poker alone is a $2 billion-a-year industry with a million players monthly. ComScore Media Metrix -- which measures all U.S. Internet users at home, work and college locations -- reports more than 29.1 million unique visitors to online gambling sites in April, out of a total audience of 165 million.
And, according to a recent survey from The University of Pennsylvania's Annenberg Public Policy Center, card playing for money has increased among males between the ages of 14 and 22. In 2004, 11.4% of in-school male youth reported betting on cards at least once a week, up from 6.2% in 2003; furthermore, 11.4% of these weekly card players are likely to gamble on the Internet. In addition, 43.2% of players who bet money weekly on cards were under 18, according to the Annenberg survey.
The most popular online poker sites, as compiled by CasinoCity.com, include PartyPoker.com and Pacific Poker, based in Gibraltar; PokerRoom.com and Empire Poker, based in Kahnawake, Canada; and Poker World Online Cardroom, based in Jamaica. Meanwhile, PartyGaming, the parent of PartyPoker.com, is planning to go public this week on the London Stock Exchange in an IPO valued at $9 billion. According to press reports, the company reported a profit of $371 million in 2004 on revenue of $601.6 million. For the first quarter of 2005, PartyGaming reported a profit of $125 million.
Observers agree that the numbers are impressive -- at least for the leaders. "It's a big business, widely distributed and badly regulated," says Wharton legal studies professor Dan Hunter. Indeed, the proliferation of online gambling operators such as the Gibraltar-based PartyGaming has opened a host of public policy, legal and e-commerce debates: What is legal? Do current laws on the books have any impact on Internet gambling? Can U.S. authorities realistically cut off Internet sites that operate offshore? Is it up to states to legalize online gambling?
"There's a lot of concern about whether this is legal, especially when it's a form of gambling that's accessible to adolescents," says Daniel Romer, research director of Annenberg's Adolescent Risk Communications Institute. He notes that casinos are limited to people over 21 years of age, and lottery tickets are sold to those 18 and older. While some online gambling sites check age, underage players can simply bluff about their real birth dates.
It all adds up to a growing gambling paradox in the U.S., where policymakers are trying to put the kibosh on online gambling sites even as games of chance are a part of daily life. Lottery tickets are sold in vending machines, and states looking to boost revenue are launching casinos at a rapid clip. Poker-game broadcasts abound on cable television: "Celebrity Poker Showdown," "Poker Superstars Invitational Tournaments," "National Heads-Up Poker Championship," "Ultimate Poker Challenge" and "World Poker Tour" are just a few. Toss in games found online, and poker itself could become a 24-hour obsession with the potential to lead to other forms of gambling.
"We have a strange relationship with gambling," says Hunter. "Not only do many states rely on it for their revenues -- a situation that generates its own weird political economies -- but we don't really like the state [watching over] what we do with our free time and money. Against this, we have reasons why gambling might be regulated, including moral reasons, social problems, or protection of certain classes who are uniquely unable to deal with the issues that gambling presents. So, in the abstract, gambling is a vexed arena."
One thing is certain: Curtailing Internet gambling won't be easy. "It would be difficult to stamp out online gambling," says Kevin Werbach, legal studies professor at Wharton. "U.S. states have tried, and there have been various federal bills proposed, but the activity continues to grow. As long as gambling is legal somewhere, it's difficult to ban it based on its illegality elsewhere."
