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d000hg

Games involving real money and gambling

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Say I wanted to create an online poker site where real money is involved. I imagine this could have a lot of complications - money and gambling are involved. Leaving the technical issues aside, like security and so on, are there legal issues here? For instance online gambling is illegal in some places, so would I be responsible for stopping such people depositing money? The short version of the question is, if I wanted to go ahead and launch a site where you can deposit/withdraw money by PayPal and gamble with it, could I?

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There are lots of laws related to running a gambling business in the UK, and if you intend to deliver a service to other countries then you must adhere to the laws of that country too.

You'll need a lawyer, preferably one specialised in gambling law.

You're random number generation functions will probably have to be audited to prove the fairness of your system (this was so when I worked in coin-operated gambling machines, though I'm not entirely sure about skill-based games such as poker).

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If you don't prevent people from other countries using your services, you may be charged in such a country according to their laws even if you've never set foot there and you don't have any servers there.

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You would need a gaming license from the Gambling Commission and as mentioned above you would need a lawyer who specialises in Gaming Law.

As for other countries (especially US) you would either have to prevent people playing from those countries or be very very sure that you will never need to travel to the US. - The boss of a UK gambling firm who was travelling somewhere via the USA was arrested a while back because his firm allowed US residents to play.

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Wow, very tough then. There are a lot of these sites around (although many are owned by the same companies) which made me think it wouldn't be a massive undertaking.
Or do these companies operate out of countries without such laws? I know the OnGame network has official address in Gibralter for example.
So is it particularly expensive to meet such requirements, or just a pain in the ass?

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Quote:
Original post by d000hg
Wow, very tough then. There are a lot of these sites around (although many are owned by the same companies) which made me think it wouldn't be a massive undertaking.
Or do these companies operate out of countries without such laws? I know the OnGame network has official address in Gibralter for example.
So is it particularly expensive to meet such requirements, or just a pain in the ass?
Many operate out of countries friendly to unregulated gambling. Or they operate out of countries where regulators and law enforcement are easily paid off.

There are very good reasons that commercial gambling establishments are heavily regulated in much of the world.

For one reason, even the most minuscule bias in your random numbers can turn a "game of chance" toward the house's favor. If you stack the virtual deck of cards, even if it is a bias of a single card occasionally showing up at the same spot more than what is statistically random, you are cheating. If your dice aren't sufficiently statistically random, you are cheating. Nobody likes it when the house cheats.

Online gaming is a hotbed for identity theft and credit card theft. Along with the allure of getting money seemingly for free, the thief can use a stolen card for gambling, and then get payouts from you as a sanitized money source.

Next, organized gambling has traditionally had strong links to organized crime, mainly for the reasons above. If you don't care about regulation, you can stack the deck a tiny bit, and draw a lot of money from less-than-reputable sources, including stolen goods.

There are countless more reasons, but those are the biggies. You really need a lawyer, or more appropriately, a large legal team before starting up a commercial gambling site.

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> You're random number generation functions will probably
> have to be audited to prove the fairness of your system

In some jurisdictions, you even have to buy special hardware that ensures true randomness (based on a patented Zener diode method) and/or the server has to reside on the gambling agency's premises so they can be hooked up to their own random sampling hardware.

-cb

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Quote:
Original post by d000hg
Say I wanted to create an online poker site where real money is involved. I imagine this could have a lot of complications - money and gambling are involved.

Leaving the technical issues aside, like security and so on, are there legal issues here? For instance online gambling is illegal in some places, so would I be responsible for stopping such people depositing money?

The short version of the question is, if I wanted to go ahead and launch a site where you can deposit/withdraw money by PayPal and gamble with it, could I?


There are a variety of legal issues concerning online gambling, most notably the fact that it's illegal in the US under the Wire Act and it is heavily regulated in many other jurisdictions. While the UK is significantly more relaxed on the issue, you still need to be very careful to keep out of the reach of US long arm statutes. In short, like Frob said, you'd need not so much a gaming attorney but an entire legal team to keep your site on the up and up. You'll probably also be subject to a great deal of scrutiny, as online gambling is often suspected in cases of money laundering and illegal activities.

As for using Paypal, good luck. Paypal, for the most part, pulled out of online gambling in 2002. According to the Acceptable Use Policy:

Quote:
Prohibited Activities
You may not use the PayPal service for activities that:
...

5. involve gambling and/or gaming activities, including, but not limited to casino games, sports betting, horse or greyhound racing, lottery tickets, certain games of skill, and other ventures that facilitate gambling unless the operator has obtained prior approval from PayPal and the operator and customers are located exclusively in jurisdictions where such gambling activities are permitted by law.

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Personally I think it's best you just don't. Unless you have a whole load of start-up capital for lawyers, licensing and all the technical expenses it's not going to happen. On top of that you're unlikely to be successful anyway, and will inevitably face legal proceedings. Adhering to every country's laws is impossible, so the best you can do is rely on the honesty of your guests, maybe some IP checking and route tracing, but in the end you won't be able to stop people breaking their gambling laws. If that happens, even if you do your best, you may not be safe from legal action.

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So the long and short of it is, this isn't an area for a small team? It sounds like getting an MMO to production is less difficult :)

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