FOR DISCUSSION: Let's talk about legality ! (Part II)

On the part II discussion of legality, we would be giving a brief explanation on how organisations tend to escape regulation and liability while operating a gambling website.

An issue that arises when a gambling website is blocked by a country. Say for example, Malaysia. Malaysia blocked a gambling website called winningft.com and prohibits the country's resident to use the website for inappropriate gambling activities. However, the company is clever enough to setup an alternative website to solve the problem. By logging into www.ft9933.com, players can still login into the same website and carry out gambling activities. Therefore, it can be seen how website blocking can be solved by the advancement of IT. Even in Malaysia where most users do not have a constant IP address, the government would find it hard to track down particular users engaged in online casino games activities. What happens when players earn or lose money through the alternative website? Do they get taxed? Do they get sued once transactions are identified?

Besides that, when a transaction occurs, it is hard to determine the execution of law whether in the origin and destination jurisdiction. This is also known as the issue of jusrisdiction (Dewar 2001). Dewar (2001) also emphasized that it is hard to maintain jurisdiction on Internet gambling due to its nature and suggested that Internet regulation would be a way to tackle the current issue. Disputes may arise when countries argue on which jurisdictions to use on. It isn't only prosecution that is complex, court cases could be equally complicated to bring a illegal gambler to justice.

Internet Gambling: An Overview of the Issues (2002) stated that gambling companies might miscode their transactions to prevent their transactions being blocked by credit card companies. Miscoding will prevent denial of authorization and allows the transactions to go through the credit card. One of the ways is through factoring, whereby the gambling companies uses another merchants bank account to initiate these transactions (Internet Gambling: An Overview of the Issues 2002). In return, these merchants receive a percentage profit.

Apart from that, credit card holders does not directly deal with Internet gambling sites. These credit card holders purchases online-payment providers to engage in gambling activities (Internet Gambling: An Overview of the Issues 2002). They pay for real cash virtual credits on some online-payment providers and uses these credits to gamble on internet casino websites which are approved by the online-payment providers. Smith (2009) concluded that the current legal foundation are still uncertain. Smith (2009) quoted an example of employee using different emails to gamble and will not be prosecuted under certain situations.

Besides that, to escape from regulations, these Internet gambling sites are smart enough to penetrate the issue by incorporating their companies in some offshore islands which mainland governments do not have authority in. For example, Pokerstars.com acquired a license and their company is owned by Rational Entertainment Enterprises Limited, which is located at Isle of Man. By such, it is hard for prosecution to be impose on these websites since they could defend themselves by claiming that their business is licensed in the place of incorporation.

In a nutshell, it is hard for prosecutions to be held against these gambling site companies because alternatives could be taken by them to pass through these regulations. They could be 'creative' in their business strategies and still be 'legal' without getting caught. This is similar to 'creative accounting' where managers manipulate numbers to make financial reports look good !


(Disclaimer: Pokerstars.com is a real Internet Gambling website and no liabiliy shall be incurred by our party on any damages suffered by visiting the website.)

Dewar, L 2001, 'Regulating Internet Gambling: the net tightens on online casinos and bookmakers', Aslib Proceedings, vol.53, No.9, pp12-13.

Internet Gambling: An overview of the Issues 2002, United States General Accounting Office, GAO-03-89, Pp 15, viewed 5 October 2010, http://www.gao.gov/new.items/d0389.pdf.


Pokerstars.com 2010, Rational Entertainment Enterprises Limited, viewed 6 October 2010, http://www.pokerstars.com/.


Smith, A 2009, 'Controversial and emerging issues associated with cybergambling (e-casinos)', Vol. 28, no.6, pp 435-443, Emerald Group Publishing Limited, viewed 6 October 2010.