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Early arcade games were crude by today’s standards, but kids lined up in droves to feed quarters into 2-meter-tall video boxes like Space Invaders, Pac Man, Donkey Kong, and Defender. Video game companies like Atari, Midway, and Sega ruled the roost, but many imitators followed, leading to a multi-billion dollar market by the mid-80s.
Video arcade games were all the rage, but it wasn’t until the development of the microchip that the bulky arcade games shrank down to the size of a home pc—and this was literally a game changer. Earlier video consoles like Pong were crude instruments connected to the home television, made up of white-on-black lines of light moving on an x/y axis. But the continuous technological development of the home computer advanced video games to the next level.
As technology marched on, video graphics and game sound increased in quality as well. Flat, pixelated graphics found in earlier games quickly became a thing of the past. The new era of gaming punched, kicked, and chopped its way onto the scene via martial arts fighting games like Mortal Kombat and Tekken.
Early pcs had rudimentary casino-style games built in (or easily added). Basic card games like blackjack and poker did not demand high quality graphics or stereo sound. But over the coming decade, the technology driving video games dovetailed with the emergence of the internet, and it was only a matter of time before people would begin gambling in online poker rooms.
As gambling has been strictly regulated over the past century (and has only recently seen reduced restrictions), there were only a few countries which allowed online gambling in the mid-1990s.
In 1994, the Caribbean island nation of Antigua and Barbuda passed the Free Trade & Processing Act, which paved the way for casino licenses. The biggest advantage of online casinos is that they could operate from outside countries hostile to gambling, while providing services globally. As long as the company offering online gambling was located in a neutral territory, online casinos were permitted to operate.
In order for an online casino to work, special dedicated software had to be developed. Microgaming, a software company based in Isle of Man, developed the first fully functional gambling software. For gambling software to work properly, it must employ random number generators (RNG) in order to mimic the random probability of a real-life game of chance. The best online casinos use RNGs in their gaming software to ensure a safe, fair, and realistic gaming experience for their players.
As the internet became slowly commercialized, the need for safe transactions became apparent. In 1995, Dublin-based CryptoLogic Ltd, developed software for the secure processing of transactions.
Brothers Andrew and Mark Rivkin founded CryptoLogic in the basement of their parents’ house in Toronto, Ontario, Canada. They developed the software in order to process secure financial transactions online, a critical component necessary for the success of online casinos.
The company expanded to its base in Dublin, Ireland, and the brothers opened a subsidiary company, WagerLogic, to handle the licensing of its gaming software. The new payment processing system was dubbed ECash.
Once the software for secure online payment processing was in place, online casinos could begin processing deposits and payments in a safe and secure environment. As soon as this crucial piece of the puzzle fell into place, the world was ready for its first online casino. InterCasino opened the first online casino which accepted real money wagers on November 17, 1996. CryptoLogic provided its WagerLogic software to power the InterCasino platform, which was located in Antigua.
Gambling taboos are firmly entrenched in the governments of some countries, and they often enact draconian laws to maintain the status quo. The year 2011 would spell the end of online casinos operating in the United States.
All through the 1990s, online casinos met with the same legal blowback which kept most U.S. states casino-free for hundreds of years. One such law, the Internet Gambling Prohibition Act (IGPA), was introduced in 1999. The Act tried to prohibit companies from offering any online gambling product to U.S. citizens. It did not pass, but the seeds of doubt were sown.
In 2011, the United States government effectively killed online casino sites in the U.S. in one fell swoop. In a court action referred to by gamblers as ‘Black Friday,’ the 3 largest online poker companies were indicted in a case named United States v. Scheinberg. PokerStars, Full Tilt Poker, and Cereus were indicted for alleged violation of the Unlawful Internet Gambling Enforcement Act (UIGEA). The act was an updated gambling law which included online casinos operating outside of the U.S. providing gambling to U.S. customers.
The case resulted in arrests, asset seizures, and the end of online gambling for U.S. customers. Online casino companies were fined for violations of obscure Wire Act provisions, and accused of money laundering. The casino companies operated under the premise that poker was exempt from the law, as it was more of a game of skill than a game of chance. The courts did not see it this way. Unfortunately, most of the customers who held millions of dollars in online casino accounts never got their money back.
But still, people continue to gamble online in the U.S., playing in online casinos located elsewhere. As the anti-gambling laws are archaic and vague, most people who want to gamble online in the U.S. use VPN and/or third-party, offshore payment means to do so. And then there’s cryptocurrency…
Online casinos simply moved to jurisdictions more interested in economic development than the U.S., which turned down billions in potential tax revenue in one misguided decision against online gambling.
But the tides are turning. Just as Prohibition ended and alcohol could once again be enjoyed by popular demand, gambling laws are also changing. As many U.S. states are beginning to relax their laws on land-based casinos and sports betting, online gaming is soon to follow. The need for new revenue has led remote areas of the U.S. to embrace casinos as a viable economic solution. Online casinos also provide much-needed tax and licensing revenue to countries which allow them to operate.
Online gambling software is used all over the world on home computers, tablets, and mobile phones. The potential for global reach is impossible to ignore. Soon, virtual reality applications will provide a full 3D casino environment, all online.
Even though 3 dozen countries currently forbid online casino gaming, on top of other forms of gambling online for real money, the total revenue is growing in countries where it is legal. A study by Juniper Research predicted that by the year 2021 the online gambling market would reach revenues of $1 Trillion.