By Chuck Humphrey
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Online casino websites contend they are legal because they have gotten a license in one or more jurisdictions. The online casinos thus contend that they are legal gaming enterprises, not illegal gambling operations. Being licensed supposedly adds legitimacy and credibility to the business that has received a license. To my mind licensing should imply investigating and assuring the legitimacy of the licensed business and ongoing regulation of the licensee.
Is there substance to the licensing process in the jurisdictions that grant licenses to online casinos? What is the cost of the license? How much effort does it take to get a license? Are there any meaningful standards that have to be met to get a license? Is ample time provided to conduct a background check? Is the licensee required to prove its legitimacy? Is there any ongoing regulation and oversight by the licensing authority. Here is some background on the licensing process in Nevada and New Jersey, jurisdictions we know thoroughly investigate licensees. Information on the processes in the jurisdictions that license online casinos is not available, but some inkling of what it must comprise can be discerned from the costs involved in obtaining those licenses and the time it takes to get them.
In Nevada and New Jersey the applicant for an unrestricted gaming license can expect the process to take one to two years. The applicant has the burden of proving to the licensing authorities that it is legitimate and has the necessary skills available to operate a casino in compliance with the law. The applicant must pay the costs of the independent investigation undertaken to test the accuracy and complete truthfulness of its responses to the myriad questions answered in filling out the application. These costs routinely amount to between $500,000 and $1,000,000. There are public hearings to delve into personal and business transgressions admitted in the application or turned up in the investigation. These amounts do not take into consideration the legal fees that each applicant incurs in getting help and advice in connection with the process.
In Nevada the fees charged licensees are based on the number of slot machines and games that the licensee wants to operate. The annual fee is $250 per slot machine and between $200 and $1,000 for each table game. There are also quarterly fees paid on a per machine and per table basis. The annual total of these fees for a bricks and mortar casino with 2,000 slot machines and 200 table games would come to over $800,000. The licensee is also taxed on the gross revenue from the gaming operation, with the tax being 3.5% of the first $50,000 per month, 4.5% of the next $84,000 and 6.75% of the amount over $134,000. So, if gross revenues amount to $100 per day per slot machine and $500 per day per table, the annual gross revenue would come to about $100 million, with a resulting total annual state tax of about $6,700,000.
The following table is taken from information presented by Slogold (Last Visited 11-9-2003), a member of the Haglley Holding group, which assists in setting up offshore businesses and obtaining offshore casino licenses. The table shows the license fees, tax rates, estimated times for licensing and estimated legal fees that an applicant can expect in each of the offshore jurisdictions noted.
|Mohawk Territory (Canada) ||$10,000||0%||2-4 weeks||$15,000|
|Costa Rica||$100||0%||1 week||$5,000|
|Liberia||$10 to $20 thousand||0%||2 weeks||$8,000|
 A report in 2001 commissioned by the Canada West Foundation says: " Internet Gambling: Kahnawake Gaming Commission In June 1996, the Mohawk Council of Kahnawake established the Kahnawake Gaming Commission to approve Internet gambling activities. The Commission has been providing gaming licenses for firms to use their Internet servers to host online casinos. The Kahnawake First Nation claims that they are
offering their clients the legal protection of a sovereign nation. While the Kahnawake Nation are not
themselves conducting gambling activities, under the Criminal Code they do not have the authority to
license such activities without provincial approval.
The issue of Internet gambling and online betting is a controversial policy area. While in North
America Internet gambling is prohibited, it is relatively hard to regulate. There is concern that even if
Internet gambling continues to be prohibited in Canada, there is no realistic way to stop Canadians
from placing bets on offshore gambling sites. Some people, including Liberal MP Denis Mills, have
lobbied for legalizing Internet gambling in order to stop revenues from being lost to Internet gambling
sites located offshore.
For more information, visit: http://www.gambling-law-us.com