Report says global regulation needed
We’re world’s No. 3 Net-gambling host, Nov. 6, 2006. 06:34 AM, TARA PERKINS Toronto Star BUSINESS REPORTER
It appears Canada is going to come under pressure to outline a stance on online gambling as Britain pushes countries around the world to regulate, while the United States moves toward outlawing it.
Canada — specifically the Mohawk reserve of Kahnawake, outside Montreal — is the third-biggest host to online gambling sites in the world, according to research commissioned by the British government.
The U.K.’s secretary of state for culture, media and sport, Tessa Jowell, released the report in conjunction with "the first ever online gambling summit," which she hosted outside of London last week. She was seeking international support for standards of regulation over the online gambling industry. According to a spokesperson at the British ministry of culture, a representative from Quebec attended the summit but Canada did not participate at the federal level.
An official with the federal department of justice has suggested that online gambling is not currently a priority issue.
Proponents of regulation argue that the rules would bring in taxes and that, rather than prohibit online gambling, governments should keep the industry above board so that minors would be restricted and gamblers could have more faith that sites are safe and secure.
Those in favour of prohibition argue that Internet gambling is currently drawing in the underaged, gambling addicts and organized crime.
According to the report, online gambling has more than doubled in the last five years.
"This research shows that online gambling is on the rise and there is a need to do something about this at a global level, as well as in the U.K.," Jowell said.
"However good the new regime will be in the U.K. for online gambling, it might not be as effective if overseas websites simply ignore the high standards we have set," John Carr, new technology adviser for children’s charity NCH, stated in a press release from Jowell’s office.
Michael Lipton, a Toronto lawyer specializing in gaming law, said "twelve years ago, this industry wasn’t alive. It’s now about $14 billion U.S."
"This is an industry that certainly cries out for regulation," he said, adding "that would also give rise to a fairly significant amount of tax revenue."
The British approach differs from that of the United States, where President George W. Bush last month signed an act banning the processing of payments for online gambling websites.
"It has tried to use the banking system to choke off the flow of funds relating to illegal gambling," Lipton said.
"The United States seems to be going in an opposite direction to what the United Kingdom is doing," he said. "The United States doesn’t want its citizens to involve themselves in online gambling."
Carolyn Weyforth, spokesperson for Bill Frist, the senate majority leader who rushed through the U.S. legislation, said the new legislation "simply put a mechanism in place to enforce existing laws that already made online gambling illegal."
"The United States is a nation founded on the rule of law," Weyforth said in an email to the Star. "We cannot allow companies to flagrantly ignore our laws just because they are based overseas. Shareholders in corporations that were betting on U.S. authorities looking the other way in the face of illegal conduct have every reason to be upset — it was a bad bet and they lost big."
Billions in market value from publicly traded online gaming firms evaporated this year as the U.S. crackdown began.
According to the U.K.’s research report, there are about 2,300 Internet gambling sites across the world. Antigua leads the way, with 537, followed by Costa Rica, with 474 and Canada’s Kahnawake reserve, with 401.
One of the report’s sources was a 2004 report by the Canadian Centre on Substance Abuse’s national policy group, titled Internet Gambling in Canada Waits in Legal Purgatory.
The report said "this issue deserves consideration given the rate of Internet expansion, coupled with a growing concern over Canadian gambling in general."
Internet gambling sites take millions of dollars in bets from Canadian citizens, it said.
"The loss of government revenues to international companies, compounded by the possibility of land-based casinos forfeiting profits to online gaming, is a concern," the report said. [Editorial comment: What about consumer protection?]
In 1996 Dennis Mills, a federal member of Parliament, introduced a bill to amend the Criminal Code to permit the regulation of Internet gambling by federal authorities, but it did not pass, the report said.
The 2004 report also said that while Loto-Quebec and Canada’s attorney general have deemed a casino operated by the Kahnawake Mohawks illegal, no charges had been laid.
The Kahnawake Mohawks say that under the Constitution, "which is the highest law in this land, that they have a right that is integral to their culture, that gaming was an essential part of their culture," Lipton said, noting they have a heritage of settling disputes using competition rather than violent means.
The federal government effectively transferred the operation of all gambling to the provinces at the time of the Calgary Olympics, in return for payment, Lipton said, but because "gambling falls under criminal law, the laws that are made in respect to this area must come under the federal government."
Similarly, Ottawa is responsible for banking, and so it would be up to the federal government to move toward prohibition in the way the United States has.
Last month, Ontario Government Services Minister Gerry Phillips introduced a bill that would ban all advertising of Internet gambling. He’s hoping the bill will pass by the end of this year.
Revenues at the province’s Ontario Lotteries and Gaming Corp., which operates casinos, have dropped more than $300 million in three years, though it’s not known how much of that is because of competition from Internet gambling. And Ontario’s horse racing industry fears Internet gambling as a threat to its viability.
At the end of September, Phillips wrote a letter to federal Justice Minister Vic Toews, saying that "the growth of online gaming raises concerns related to its potentially addictive qualities and the difficulties faced by parents in controlling access to minors."
It is also "a threat to legitimate gaming, such as provincially administered or licensed gaming operations," he wrote. [Editorial comment: And corporate gambling interests?]
"The Government of Ontario considers illegal Internet gaming to be a serious issue," he added. It is clear, he wrote, that "illegal Internet gaming presents complex regulatory challenges requiring a co-ordinated effort by provinces and the federal government on several fronts."
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