BusinessWeek Computers Editor Spencer E. Ante recently spoke with Furlong about the state of online gambling and efforts to regulate the industry. Edited excerpts from their conversation follow:
Q: How many members do you have?
A: Three years ago we had 100 members. Today we have 70. There has been a lot of consolidation. Three months ago, Sportingbet bought Paradise Poker for $300 million. That's by far the biggest deal. You might see some big deals going forward. I think the industry is on the verge of increasing credibility.
Q: Who are the big players in this industry?
A: The software companies that run the casinos are controlling the industry. The software companies would license software and in most cases would become a partner, getting 20% of gross commissions. PartyPoker is the biggest [gaming site]. The parent company is iGlobal Media, based in Gibraltar. They license their software to online casinos.
Casino-on-Net is a huge company in this space. The biggest software player is Microgaming, which is based in South Africa. The people that I deal with now are much more experienced businessmen. People don't realize how much money is involved.
Q: How can you regulate online gambling? It seems impossible with all the fly-by-night operators.
A: With this technology, there are actually better controls for regulators. There's a trail for every transaction. You need to know your players. There are registration processes that need to be implemented. In any case, how many times have you heard of a land-based casino stopping its players? In my experience as a regulator, I've never heard of a pit boss saying you have a problem.
Q: The U.S. Justice Dept. says online gambling companies have links to organized crime. Is that true?
A: I haven't seen it. I have heard there are some connections with sports-betting companies based in Costa Rica. But if the U.S. regulated online sports betting, they would hurt the organized-crime groups.
Q: So far, the U.S. government shows no appetite for regulating online gambling. What's the cost of maintaining such a policy?
A: The U.S. will be left out of the game. The U.S. government will be left out of the tax equation.
Q: The biggest news on the regulation front is the new British gambling bill. What's its purpose?
A: It deals with land-based casinos and online casinos. The gist of the bill is to set up new locations for land-based casinos and to regulate and tax online casinos. But there are so many different interests, if everyone doesn't get what they want, they'll just kill it. I just came back from the U.K. from an online gambling conference. I'd say there's a 20% chance it will pass.
Q: What challenges does the industry face?
A: It's not expensive to open a Web site. There are these wild sites that open up and disappear -- but not as much as before.
Transparency is another challenge. We need to have more background checks on owners and more phone numbers and contacts on Web sites. Player-protection issues are big. The industry is struggling with a lot: game fairness, underage playing, taxation issues, the potential for money laundering, problem gambling, and international standards.