US-barred gambling set to roll in
Asia By Indrajit Basu
KOLKATA - Close friends since college
days, Akhil Gupta and Sunil Baheti have never
missed each other on the Diwali (Festival of
Lights) night gambling bashes each year, even
though they have lived some 13,000 kilometers
apart for the past four years. Every year while
Akhil and his other ex-college mates assembled at
his living room in Delhi for a few hours of online
gambling at PartyPoker.com, Sunil joined in too by
logging on to the site from Texas, where he is
currently a practicing lawyer.
This year,
though, it was a little different. Instead of
playing at
their usual site, the old
friends switched to 3Patti.com, an Indian
card-game website that also offers the local game
called teenpatti, a favorite among ritual
gamblers.
"We couldn't play at PartyPoker
because it was closed to Sunil following the ban
on online gambling in US," said Akhil, "but that's
okay. 3Patti was as much fun."
Akhil and
his friends were not the only ones making that
shift that night. According to 3Patti.com, which
claims to be the largest Indian online gambling
den, for about a week leading to the Diwali night
on October 21, the site recorded its highest hits
from Indian clients (that was second only to the
number of hits from the US) since October 13, the
day President George W Bush signed a law that
seeks to ban most online gambling and criminalizes
funds transfers in the US.
3Patti is
reportedly planning to invest more in India as
industry sources say several other sites, too, are
shifting operations out of the US and may be
heading toward India and elsewhere in Asia. "The
[online gambling] companies, particularly the
large ones with large resources, that have ceased
operations in the US have all said that they would
refocus their efforts on other markets, and
particularly the Asian markets," said Eugene
Christiansen, chairman of Christiansen Capital
Advisors LLC, a US-based consultancy firm that
provides gambling and entertainment-industry
analysis and management services.
The
exodus in fact has already started. On the day
Bush signed the new law, Sportingbet for instance,
a UK-based online-gambling firm that derived about
56% of its business from the United States, sold
its US operations to an Antiguan company for US$1
and said "it is focusing on Europe and the rest of
the world including Asia". While closing their
operations to all US customers, others such as
PartyGaming and 888Holdings too said they would be
moving elsewhere.
Indeed, the Unlawful
Internet Gambling Enforcement Act may be making
online gaming firms rush out of the US, but
experts say a new Internet-gambling ban won't keep
bettors from looking over their shoulders for
long, and they may just turn to offshore sites and
overseas payment services out of the law's reach.
The impact of the ban, then: online gaming is all
set to bloom in Asia.
According to William
Eadington, a professor of the Institute for the
Study of Gambling and Commercial Gaming at the
University of Nevada, Reno, with mega-casinos
already open in Macau, Singapore scheduled to open
gambling in 2009, South Korea permitting limited
legalization of gambling, and with no clear laws
in India along with its residents' notorious
gambling instincts, Asia certainly looks all set
to emerge as the next gambling den of the world.
"End of prohibition and high level of
enthusiasm from Asian customers makes Asia the
next emerging growth market," Eadington said,
adding that of all the centers being developed in
the region, Macau promises the maximum
opportunity. Macau is already becoming the "Las
Vegas of Asia", after a new gambling law in 2002
broke up the gaming monopoly, allowing Las Vegas
entrepreneurs to open major new casinos such as
the Wynn Resorts, The Venetian, MGM, Melcor, and
Galaxy.
Singapore, too, has decided to
legalize gambling, "enhancing the attractiveness
of a prosperous but boring city, while [South]
Korea, Japan, Thailand, Taiwan, India, China are
watching others and trying to decide what to do,"
Eadington said. All these Asian countries, as well
as European countries, he said, are tying to
regulate Internet gambling rather than banning it
as gamblers are increasingly turning to the Web.
So the serious question is, can the new US
law really be effective in stopping US residents
from betting online? After all, the online sites
may be moving out of US, but they still have
e-wallets to help them attract the US crowd even
though it may be on the wrong side of the law.
Take the instance of 3Patti.com: this site offers
various payment options, two of which could easily
be used by a US resident to open an account at the
site.
Besides, says Christiansen of
Christiansen Capital Advisors, e-payment outfits
not subjected to the US authority such as
NETeller, based in the Isle of Man, a dependency
of the United Kingdom, can accept payments from a
US citizen if it wants.
"The problem is,"
said Christiansen, "the new law has already made
many exceptions that make Internet gambling a
wide-open area." For instance, although the new
law knocks offshore companies out of the US, it
does not appear to change existing definitions of
federally prescribed gambling, which allow
state-licensed casinos, the horse-racing industry,
state lotteries and fantasy sports leagues.
In fact, like Professor Eadington,
Christiansen agrees that the new law will not stop
gambling but will create black market in the US
that will thrive on diverting the US customers to
online gambling sites in Asia and Europe. He said,
"Laws that prohibit widely accepted behavior are
directed against legitimate businesses, not
criminals," and cited as a pointer the 18th
Amendment of the US constitution and the Volstead
Act, which in 1920 prohibited the manufacture,
distribution and sale of beer, wine and spirits.
Prohibition transferred the alcoholic
beverage industry from licensed and regulated
companies to organized crime but failed to stop
Americans from drinking and did nothing to
ameliorate the harmful effects of alcohol. "Online
gambling is unstoppable, and the new law would
just drive gamblers into the arms of touts and
crooks," Christiansen said.
Meanwhile,
many equate the carnage this ban caused to the
London Stock Exchange (LSE) to the dotcom-bubble
collapse following AOL's purchase of Time Warner
in January 2001. Most of the US gambling websites
are run by European gaming companies listed on the
LSE. PartyGaming, for instance, the world's
largest online poker company, lost 75% of its
revenue by shutting its US sites, and at least two
publicly traded companies, World Gaming and
BetonSports, are in effect out of business in the
US.
The market capitalization of large
online gambling companies has also been cut in
half at the LSE. Christiansen Capital Advisors
says the US market, at $6 billion, accounted for
half of the $12 billion global Internet gambling
market last year, which is expected to double to
$24 billion by 2010.
Still, there may an
upside to this ban. "Companies listed on the
London Stock Exchange or the London AIM
[Alternative Investment Market] in 2005 have
substantial cash reserves," said Christiansen.
"That cash will buy more in the way of online
competition than it would have six months ago,
which means that consolidation in the online
gambling is likely to accelerate."
(Note: Real identities of players
mentioned here have been masked for obvious
reasons.)
Indrajit Basu is a
Kolkata-based journalist.
(Copyright
2006 Asia Times Online Ltd. All rights reserved.
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