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October-24-2006,
It?s Déjà vu All Over Again...By Hartley Henderson

It was the early 1990s and the internet was still a glimpse in Al Gore's eyes. As a man in my late 20s I was looking to bet and gambling on sports was of particular interest to me. I went to the horse races regularly, played in sports pools and rotisserie leagues and every so often would bet with an illegal bookmaker. It was always a concern, however, whether the bookies would pay or not since bookmakers were being arrested far too often in Canada. Then one day in 1993 there was an ad on the radio for Bowman's International. They claimed to operate out of Manchester, England and you could wager legally with them. I was skeptical, since sports betting was always a bit taboo but I decided to take a shot and figured that if I lose 50 bucks and I get stiffed it's not the end of the world. I placed a wager on the Toronto Blue Jays to win the World Series at odds of 9/2 and parlayed that into just under a dime betting hockey before I took a withdrawal back to my credit card (legal at the time). In 24 hours the payment showed up on my visa statement and my world was changed forever. All of a sudden I could indulge in a favorite hobby without the concern that I was dealing with shady characters which would break people's legs if those people didn't settle their accounts on time. Other scam sportsbooks showed up including Top Turf, RKR Sports and Goldcoast which advertised heavily in the local papers but a couple of calls to those places clearly indicated that they weren't on the up and up including the fact that they claimed to operate out of Belize but the Belize government had never heard of them. But Bowman's was legitimate and legal.

A bit later other sportsbooks started advertising in local media but the deposit limits there were very high and the minimum bet was generally $100 to justify the massive phone costs. This made them unusable at the time to the smaller bettors like myself. But my world really changed in 1995. The internet was just in its infancy and while I didn't bother with waste of time initiatives like the offer of free stock if I could get 10 friends to visit a couple of ridiculous named websites, Yahoo and EBay and instead used my valuable time to surf the web as best as possible to see if there was anything related to sports betting. I came across a text only watchdog site and from there learned about a sportsbook offering online wagering. The book was called Intertops and operated out of Austria. Anyone could wager via the internet, the minimum wager was $10 and while the bettor had to pay Austrian tax on winnings (similar to the British tax you had to pay at Bowman's), it clearly indicated there was a big potential for betting on the horizon. In the next year dozens of online sportsbooks came to existence when Caribbean countries allowed operators to set up in their country and offer tax free betting. Even Intertops and Bowman's moved to tax free islands. But two things were clearly evident in those first couple of years when all these gambling operations set up, the very few payment options available and the lack of high profile European operators. All payments had to be made either by credit card or by cashier's check and the credit card numbers had to be given over the phone since online processors didn't exist at the time. Obviously this was not ideal for the sportsbooks since they had to endure the high credit card fees and absorb the cost of any charge backs, and it wasn't ideal for the customers since they likely had to figure out ways to explain to their significant others why there was a charge for a company in Antigua on their credit card statement. But soon shady bettors started charging back credit card deposits in droves and the U.S. government went into its anti gambling campaign led by Senator Kyl. Consequently, credit card companies greatly limited deposits by North Americans for betting. As well Western Union which had just become a deposit option via its quick collect option, closed that payment solution to Americans almost as soon as it opened. And thus here was a billion dollar industry just beginning to flourish with really no way for the bettors to get money to the sportsbooks. But anyone who has taken basic economics knows that if there is a demand someone will be there to fill it and this came about by way of 3rd party credit card processors and of course the new e-wallet solutions of paypal and neteller, which had become popular for online purchases at Ebay and Amazon.com. With the newfound ease of getting money to the sportsbooks along with the droves of worldwide bettors looking for tax free ways of betting, many of the high profile European and Australian sportsbooks started to set up offshore and offered betting worldwide. The likes of Ladbrokes, Victor Chandler, Centrebet and William Hill soon set up offshore operations and took accounts worldwide. The significance was not overlooked by the industry and sportsbetting in North America outside of Las Vegas had finally become legitimized. After all, if the official bookmaker to the Queen of England was taking bets from Americans then it had to be legitimate. New payment solutions continued to evolve, new sportsbooks, casinos and poker rooms emerged and everyone but the U.S. government was happy. Within the next 8 years the industry experienced its ups and downs but throughout the turmoil the industry grew to a $12 billion industry. A few politicians continued to try and curtail the industry but each time it came to a vote it didn't pass the house most of the U.S. congressmen realized that they could not enforce their laws on other countries nor could they control the internet. But then in October of this year Senator Bill Frist in an underhanded fashion got an anti gambling bill passed, by sneaking it into an unrelated port bill and the world of U.S. internet gambling was changed forever. Publicly traded companies had no choice but to abide by the new law and all the public companies pulled out of the American market wiping $8 billion off the UK stock market. Furthermore the new law will ensure that credit cards can never be used for gambling in the U.S. and Neteller has recently announced it will comply with the law also (PayPal has long ceased as a payment option for Americans). So here we are once again in 1996. With the jot of a signature by George Bush the clock has been turned back 10 years. Internet gambling is a thriving industry, and millions of Americans are anxious to bet on sports, poker and online casinos with their favorite operators. But like in 1996 there soon will be very few payment options available to Americans by which to do so. As well the European gambling juggernauts have fled the U.S. and William Hill has gone back to the Queen. One thing has been proven time and again, however, and it is as true today as it was in 1996. Where there's a demand someone will be there to fill that demand. This law is a major setback but you can't put the genie back in the bottle. Americans have tasted the sweetness of offshore betting and will not be denied a pleasure they were once afforded. It didn't work with alcohol in the 1930s and it won't work with internet gambling today. Monopolies, whether business related or state run do not work. This is just the beginning. It's just a shame that the birthplace of Milton Friedman and James M. Buchanan can't fathom basic economics.

Hartley Henderson
MajorWager.com  



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