Monday, October 09, 2006

The world's largest computer facilities for online gaming are located in
Canada and are nicknamed MIT. This doesn't stand for the Massachusetts
Institute of Technology: It stands for the Mohawk Institute of Technology.
That is because this gigantic "server park" -- which drives many of the
online gambling sites -- is inside the Mohawk First Nations Reserve, also
known as Akwesasne, which straddles the borders of Ontario, Quebec and the
United States. "It operates just like the server parks in Costa Rica or
Belize," said William Rutsey, president of the Canadian Gaming Association,
which represents those gambling enterprises in Canada that are legally
licensed. The Americans are cracking down on Internet gambling, but nothing
is being done in Canada. This is because gambling is a provincial matter and
most governments and their gaming partners may not be aware of the huge
growth of the business. Their inaction is combined with governmental fear of
enforcing laws on any First Nations Reserve. So the beat goes on at MIT and
elsewhere, with many Canadian players involved. Meanwhile, the United States
has launched a crackdown and prohibition against online gambling. Stocks of
Internet gambling companies around the world tumbled after Congress passed a
law banning U.S. banks from financing online bets.

Two British CEOs of Internet gambling sites (both publicly listed) were
temporarily arrested when changing planes on U.S. soil. Online gaming is not
illegal in Britain and two of the biggest publicly listed gambling companies
are on the London Stock Exchange.

Another weapon U.S. prosecutors have used is to attack the media for
carrying online gambling ads.

This year, the Sporting News paid US$7.2-million to settle a case by the
U.S. feds that claimed the publication promoted illegal gambling by
accepting ads. The magazine did not admit or deny liability.

The worldwide online gambling market is estimated at more than US$11-billion
annually and is projected to reach US$25-billion by 2010. More than half
comes from U.S. gamblers.

In Canada, the online gamblers are breaking the law but no one is getting
pursued and, alternatively, there is no move to make it legal.

"Canadian laws are different. Under the Criminal Code of Canada, only
provincial governments, or their agents, can conduct or manage gaming.
Gambling is owned by governments here, then contracted out to managements,"
Mr. Rutsey said in a recent interview.

"Our position is that the law should be enforced which is on the books or
else governments should look at creating an environment where online gaming
can be regulated and taxed."

Right now, slots, race tracks and casinos are allowed by provinces in
Canada.

"The Canadian model is for government to regulate, own and outsource gaming
operations to the private sector. Gross revenues are $14-billion a year and
50% of this goes to governments, charities or not-for-profits, or
$7-billion," he said.

Provincial failure to crack down, or license, Internet gambling operations
exposes the public to needless risk.