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Internet casino puts gambling beyond reach of governments and lawmakers

A Toronto entrepreneur is offering a Caribbean-based 'virtual casino' on the Internet. Warren Eugene, founder and president of Internet Casinos, says the operation is legal and above board, but police and government agencies aren't so sure.

Eugene understands that people may be suspicious. "We're proceeding with caution," he says. "We're not going to break any laws or rules or regulations in any country, intentionally or otherwise."

Internet Casinos is presented and managed by Volcano Casino and Amusements, a holding company registered in the Turks and Caicos Islands. An introductory World Wide Web site asks prospective users for preferred security features and whether they're comfortable with the concept.

Users can access Internet Casinos through Telnet and the Web. "The network links are by fibre-optic cable and satellite," Eugene explains. "The software runs on Windows, ASCII and RIFF [resource interchange file format], and the web server can handle 10,000 simultaneous users." The operation was begun in Nassau, but will move to St. Maarten, in the Netherlands Antilles, by the May launch date.

Eugene is negotiating with other island groups for additional sites. "We want to have redundant systems: there's always the chance of weather damage or political instability. We're also considering doing it all by boat."

The computer-based extraterritorial nature of this operation brings up an interesting question which has a real, practical dimension for police and legislators: where exactly is cyberspace?

In Canada, gambling is a provincial responsibility, as is prosecution of Criminal Code offences. It's not clear that Eugene is breaking any laws, but even if he is doing something illegal, a lawyer with the Ontario Ministry of the Attorney General says the nature of the operation presents complications.

The Criminal Code has limited extraterritorial application--if any," says Brian Johnston. "If an offence doesn't occur inside Canada, it's probably not covered by the Code. If the slot machine or blackjack program is physically in the Bahamas, would a judge rule that it's happening in Canada? That's a close call."

The police make the day-to-day decisions about whether to charge or not, and in Ontario that means the Ontario Provincial Police (OPP). Detective Sergeant Frank Elbers of the OPP's Gaming Section has heard of Internet Casinos, and says he knew this kind of thing was coming.

From what we've heard from other departments about how the Internet's being used, we knew it was going to come our way. How do we handle it? I'm not really sure. Is somebody actually partaking in a bingo game because they've got a screen in front of them with the game on it? Is the game here or in the Bahamas?

We're looking into it, we're researching it. But it's hard to come out and give a definite answer that yes, it's against the law."

Elbers is unconvinced by Eugene's protestations of innocence. "I'm sure everyone running a pyramid scheme masquerading as multi-level marketing thinks it's okay, too. I tend to disagree. If you fire up the Internet and the screen is advertising these games, it's an offence."

While advertising for foreign lotteries is illegal, Eugene says he's not offering a lottery, per se, and that the law is aimed at newspapers.

While police and lawmakers puzzle over whether and how to mount a legal challenge, Internet Casinos is preparing for business. And Eugene is preparing for what might come after that. "We're going to be taken to court sometime, somewhere," he says.

The real threat may come when the law becomes more cyber-savvy. Johnston says that legislation must be further developed to cope with computer crime. "When the laws were devised, nobody even considered that this kind of thing would come about. You're dealing with the concept of information as opposed to physical things."

Meanwhile, Eugene's advisors have taken a close look at the law in Asia, Europe and North America.

We've encountered a few things to be wary of," Eugene says. "We're applying for a Royal Charter from the Netherlands Antilles. It eliminates the need for me to justify my services. We'll manage and licence our technology and manage the concept, and if somebody decides to prosecute, it becomes a civil suit and a matter for the Hague--it won't be me they're coming after, it'll be the Netherlands Antilles government."

Eugene says he's confident the Charter will be granted. Until then, gaming will be free and only promotional prizes will be offered. Once the Charter is secured, there will be a fee to establish an account, and access charges will be paid for users who bet a monthly minimum.

Games will include video poker, video slots, Caribbean blackjack, roulette, backgammon, craps, a lottery and bingo. A few more will be added a bit later. All games will be real-time over the Internet.

A big user concern is likely to be that the games aren't fixed. Says Elbers, "If I was a poker or blackjack player, I'd rather have the cards in my hand. When it's not controlled, you don't know what's going on behind the screen, you don't know what you're getting into."

We'll publish our algorithms," responds Eugene. "Somebody will be able to look at those games and determine whether they're fixed. And a forensic auditor will be given reports and a continuing analysis. The auditor will be independent, from one of the big five accounting firms in North America."

Users will be able to place wagers by cashier's cheque, credit card, wire transfer or regular cheque--even Net Cash, when that service is available. "We may offer an ATM card which a user could plug into a device inside the PC. Internet Casinos would provide the device too." They'll also be doing encryption, to make it harder to trace users and to prevent cracker vandalism.

Our intentions are very long-term," says Eugene. "We are the first and the foremost, and we want to be poised and ready to handle this growth industry.

It's going to be massive, especially when cable and telephone companies offer seamless entry. We're trying to buy that real estate now. We want it to be easy for people to access our server site."

Dean Hopkins disagrees. Hopkins is president of Toronto-based CyberPlex Interactive Media, which helps organizations market via the Internet.

There's a small community of people that are going to use his site. I don't think its going to be huge--it's a niche market. Ninety percent will just be curious."

The Internet sometimes does its own ad hoc policing. Could gambling face the kind of grass-roots sanctions that have driven more sinister or annoying presences right out of cyberspace?

Pretty much anything is tolerated so long as it isn't in your face," says Hopkins. "It depends how far you push. If you abuse it, a portion of the community will respond.

Responses by people opposed to gambling would probably be restricted to vocalizing, 'flaming', sending e-mail and advising friends to stay away.

Crackers may try to tamper with the system. Some Internet directories may prefer to keep Internet Casinos out: if enough do, the site could be 'starved' for users. If there's broad objection, people will just stay away in droves.

The Net is self-regulating," comments Eugene. "People can monitor themselves, instead of being dictated to by governments.

It's a First Amendment issue, a whole new independence that breaks down borders. I wish government worked as well as this."