Just two weeks after the UIGEA came into force, officials from more than 30 countries attended a half-day conference hosted by British culture secretary Tessa Jowell at Ascot Racecourse, near London. In what became the first international summit to discuss the global internet gaming industry, Jowell sought to build support for improved regulation, amid fears the US ban could lead to the exploitation of children and a burgeoning of criminal activity...

Jowell likened the US legislation to a newly manifest form of the 1920s prohibition on alcohol, and warned that it would drive the industry underground. True, the idea that Bill Frist’s social crusade may drive the industry into the open arms of the underworld is not impossible to imagine, especially when we consider the battering received by the publicly traded heavyweights. Should investors lose confidence after a sustained decline in share value, some observers have argued the bottom could eventually fall out of the large public firms, leaving the illicit operators free to fill the void.

John Shepherd director of corporate communications for PartyGaming, agrees with Jowell when it comes to online gaming. “Regulation is the only sensible route to take,” he said. “The UK Government is unquestionably a bright light in this regard, and has taken a firm grip of the global leash of responsible online gaming by hosting the international online gaming summit.”

Notably, however, Frist, was not the first to draw attention to potential problems posed by online gambling. In March 2003, deputy assistant attorney general John Malcolm testified before the Senate Banking Committee, drawing attention to the idea that the anonymous nature of the internet and the use of encryption can make it difficult to trace online money laundering transactions.

Regardless, if a global ban on internet gaming were to simply make it even easier for the more dishonest operators to flourish, it becomes clear that regulation is key. “By having a regulatory framework, governments are much more effective at protecting consumers and the vulnerable - and in preventing criminal activity,” Shepherd continued. “No policing quite simply equals internet anarchy - a virtual playground for anything that goes, especially for making money from the vulnerable. We can ill-afford to have unregulated black holes in cyberspace.”

Current figures suggest the UK may be ideal for spearheading this regulatory change. The latest independent research commissioned by the government shows that there are nearly one million regular online gamblers in Britain alone. They make up nearly one-third of Europe’s 3.5 million regular online gamblers, which stake an average of £1,000 each - a massive £3.5bn a year.

The Gambling Act was passed in the UK in April 2005 and will come into force on September 1, 2007. With regards to remote gambling, the act has three key objectives: to ensure it is fair, crime free and that children and vulnerable people are protected. To enforce this, the British Government has created a powerful new regulator, the Gambling Commission, which replaces the old Gaming Board.

Bwin spokesperson Karin Klein said she “sees the UK as a good example of how regulation works for the better for all stakeholders involved. Contrary to most national legislations, the UK aims at regulating gaming taking into account modern society’s requirements, including the internet.”

While those present at the summit in October agreed to co-operate further in the three key areas highlighted by Jowell, one important element that has still to be finalised. Given the financial impact of the recent attempts in the US to prohibit rather than control internet gambling, Stuart Hehir, a spokesman for eCOGRA, the independent standards authority, said the likely tax burden assumes even more importance to online companies.

Said Hehir: “This is a topic that is being energetically discussed with the UK government by leading online gambling companies and other interested parties and it is one that will have a significant bearing on any decision to license in the UK and therefore become regulated under British law.”

Despite the ostensibly delicate nature of the subject, Hehir was adamant that the issue of tax for online gaming should be dealt with in a progressive manner. “There is already serious international respect for the way in which the UK has approached the question of control and regulation and one of the major benefits that will flow from a British licence is the knowledge among players and business associates alike that it is independently monitored and controlled to best practice standards,” he said.

Hehir explains that although companies operating under a UK licence would no doubt have to take an unfavourable tax hit, they would be “demonstrating that they are top-tier global organisations that have been carefully examined and are held accountable by a viable authority.” In short, they will be perceived as safe havens for fair gambling.

“The support of successful and big brand online gambling companies for the UK licence will wield major influence in how it is perceived by other nationalities and, most importantly the playing public,” he added.

Indeed, observers maintain that the British Government’s initiative to legalise, control and tax online gambling is one of the most carefully considered and thoroughly organised that the industry has seen in remote gambling.

While Jowell’s likening of the UIGEA to the prohibition of alcohol acts as a useful rhetorical device, we must remember that analogies only go so far. In relative terms, the very idea of internet gaming is something completely new, and Jowell herself acknowledges this. “Remote gambling has gone from a niche to mass market in a matter of years,” she said.

The future remains unclear, but one thing is certain: the majority of those within the industry - and indeed those on the periphery - have applauded the UK’s recognition that, first and foremost, it is in the public interest to move to a framework of global standards on internet gaming. And if this progressive attitude consequently places Britain at the forefront of global efforts, then, moving forward into 2007, this certainly qualifies it to maintain its leadership position and set a continued example to other nations.

“The UK government’s approach to all of these issues by going down the path of regulation is highly credible and an excellent model for other governments around the world. Responsible online gaming is not an optional extra; it is what we do and consumers deserve nothing less. This is what effective regulation, such as that being cemented into place by the UK Government, is all about,” concluded Shepherd.