Industry Watch: Roll the Digital Dice

Online casinos are big business

In 2005, before the feds cracked down on it, the online gambling market in the United States alone was estimated at $6 billion, nearly half of global revenues. And there's little overlap between those who game online and those who travel to casinos to play, according to analyst firm River City Group.

Advertising by this segment of the gaming industry is stifled by discrepancies between U.S. law and international law, as well as crusades by some legislators who want to wipe it out.

In 2003, the feds warned media trade groups that accepting ads for gambling Web sites could land them in the stir for aiding and abetting illegal gambling. In 2006, Congress passed the Unlawful Internet Gambling Enforcement Act. But efforts to stop online gambling aren't working.

In 2005, 15 to 20 million U.S. gamblers placed bets online. It hasn't stopped gambling advertising, either. There is a lack of reliable data after 2005, because public companies moved offshore after the gambling act, but Anthony Cabot, an attorney with the firm of Lewis & Roca whose practice includes interactive gaming, sizes the current global market at $20 billion a year.

"Basically you're advertising a service that's illegal," says Mark Balestra, vice president of publishing for River City Group and the editor of Interactive Gaming News. Advertisers can get around that, he adds, by marketing a service that is legal, and then ask people to opt in to email.

To many email users, Internet gambling equals spam.

Keith Furlong, deputy director of the Interactive Gaming Council, has acknowledged that his industry is plagued with all the things that create negative attitudes: credit card fraud, spam, pop-up ads, and underage and problem gambling. The spam, which, anecdotally, seems to have abated, was likely the result of affiliate marketers, who are notoriously difficult to monitor.

"The IGC represents the more responsible segment of the industry, so spam is not acceptable to our members," Furlong says.

In 2004, the IGC produced an Advertising Code of Practice similar to the CAN-SPAM Act of 2003. The Code makes recommendations for consumer privacy and data protection, and warns against unsolicited advertising. It also holds Internet casino operators accountable for the actions of their affiliates. But as it stands, the organization lacks the threat of government fines or sanctions to give weight to these recommendations.

Unlike most segments of the Internet industry, the IGC is actually begging for regulation. If the government would just license and regulate the industry, it could force unscrupulous or spammy operators to get wise.
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