Country of Origin or Destination Regulation

It is estimated that in 2005 $12 billion was generated by online gambling, an increase from $ 8 billion the previous year (source: Christiansen Capital Advisors ’ Global Internet Gambling Revenue Estimates and Projections). The cross-border online gambling industry has grown so fast that a harmonized legal frame work for it does not seem to exist.
      It may be argued that a lack of such regulation has allowed some online gambling operators to prosper. However, there is a contrary view that it also presents problems, with certain countries or states placing their differing domestic objectives above those of their region or country, thereby creating inconsistencies and uncertainty. This can involve interpreting domestic law to regulate online operators offering services in their jurisdiction, regardless of the lawfulness of providing those services in the operators location.

      The country or state of “origin ” versus country or state of ‘destination ” debate  is central to any future cross-border regulation of online gambling. Should an online gambling organization be regulated where it is based, or where its consumers are?
      This article considers how these two conflicting philosophies have impacted on attempts at harmonized regulation from a United States (US) and European perspective.

US Approach

In the US, each of the fifty states decides whether, and to what extent, gambling is permitted within the state. Since each state acts for itself, there is little legal uniformity in the US. States differ in many respects, including, the types of gambling prohibited (e.g. casino versus poker versus games of skill), the penalties associated with violations of gambling poker laws, and whether gambling online is explicitly prohibited.
      All states, in one form or another, prohibit at least some gambling activities. Even in Nevada, where most forms of gambling are permitted, unlicensed persons are prohibited from accepting or receiving through any medium of communication (i.e. mail, telephone, facsimile, cable, or wire) a wager from another person who is physically present in the state. Two states prohibit all gambling – Hawait and Utah. Other states ban almost all forms of gambling – e.g. Alabama, Georgia, South Carolina, Illinois, Maryland, Michigan, Missouri and Rhode Island.

      In the vast majority of states prohibited gambling is defined as betting wagering or risking something of value for gain contingent in whole or in part upon lot, chance, or the happening or outcome of an event over which the person taking such risk has no control. Typically, a state gambling statute will except bona fide contests of skill, speed, strength, or endurance.
      Under this majority definition, casino gambling would be considered to encompass games or contests of chance and be prohibited gambling activity. Poker, however, is another story as the states are not consistent in their  categorization of poker as a game of chance or a game of skill. Most states that have considered the issue have found vidio poker to be illegal gambling. But few states have had occasion to differentiate between video poker (which is typically considered illegal gambling) and the typical online P2P format which involves individuals playing against each other.