Gambling.Now!

[tag]Omakase[/tag] [tag]Links[/tag] from [tag]Amazon[/tag] [tag]Associates[/tag] for [tag]gambling[/tag] content

This information does not purport to be the alpha and omega of online gaming laws. Please in accordance to your local laws:

United States

The United States Court of Appeals for the Fifth Circuit ruled^[2] in November 2002 that the [tag]Federal Wire Act[/tag] prohibits electronic transmission of information for sports betting across state lines but affirmed a lower court ruling^[3] that the Wire Act “‘in plain language’ does not prohibit Internet gambling on a game of chance.”

Some states have specific laws against online gambling of any kind. Also, owning an online gaming operation without proper licensing would be illegal, and no states are currently granting online gaming licenses.

In March 2003, Deputy Assistant Attorney General John G. Malcolm testified before the Senate Banking Committee regarding the special problems presented by online gambling. A major concern of the United States Department of Justice is online money laundering. The anonymous nature of the Internet and the use of encryption make it especially difficult to trace online money laundering transactions.

In April 2004 [tag]Google[/tag] and [tag]Yahoo![/tag], the two largest internet search engines, announced that they were removing online gambling advertising from their sites. The move followed a United States Department of Justice announcement that, in what some say is a contradiction of the Appeals Court ruling, the Wire Act relating to telephone betting applies to all forms of Internet gambling, and that any advertising of such gambling “may” be deemed as aiding and abetting. Critics of the Justice Department’s move say^{[citation needed]} that it has no legal basis for pressuring companies to remove advertisements and that the advertisements are protected by the First Amendment. As of April 2005, Yahoo! has provided advertising for “play money” online gaming.

In August 2004, Casino City, an online portal for internet gambling sites, sued the US Department of Justice. The complaint alleged, inter alia, that the websites business—promoting internet gambling—was legal, and requested a declaration from the court that its business was protected by the First Amendment. The U.S. District Court for the Middle District of Louisiana dismissed the case in February of 2005.

In its opinion, the District Court wrote,

It is well-established that the First Amendment does not protect the right to advertise illegal activity… The government’s interest is specifically directed towards the advertising of illegal activity, namely Internet gambling… Furthermore, the speech in which the plaintiff wishes to engage is misleading because it falsely portrays the image that Internet gambling is legal… Because plaintiff’s speech concerns misleading information and illegal activities, it does not fall within the speech that is protected by the First Amendment.^[5]

The US Court of Appeals, 5th Circuit, dismissed [tag]Casino City[/tag]’s appeal in January, 2006.

In February 2005 the North Dakota House of Representatives passed a bill to legalize and regulate online poker and online poker cardroom operators in the State. Testifying before the State Senate, Nigel Payne, CEO of Paradise Poker, pledged to relocate to the state if the bill became law. However, the measure was defeated by the State Senate in March 2005. Rep. Jim Kasper, who sponsored the 2005 legislation, plans to introduce similar bills in the 2007 North Dakota legislative session.

In July 2006, David Carruthers, the CEO of BetonSports, a company publicly traded on the London Stock Exchange was detained in Texas while changing planes on his way from London to Costa Rica. He and ten other individuals had been previously charged in a sealed indictment with violations of US Federal laws relating to illegal gambling. While as noted above, a United States Appeals court has stated that the Wire Act does not apply to non-sports betting, the Supreme Court of the United States previously refused to hear an appeal of the conviction of Jay Cohen, where lower courts held that the Wire Act does make it illegal to own a sports betting operation that offers such betting to United States citizens.

The BetOnSports indictment alleged violations of at least 9 different Federal statutes, including 18 USC Sec. 1953 (Operation of an Illegal Gambling Business). Carruthers is currently under house arrest on a one million dollar bail bond.

In September 2006, [tag]SportingbetPLC[/tag] reported that its chairman, Peter Dicks, was detained in New York City on a Louisiana warrant while traveling in the United States on business unrelated to online gaming. Louisiana is one of the few states that has a specific law prohibiting gambling online. At the end of the month, New York dismissed the Louisiana warrant.^[12]

Also in September 2006, just before adjourning for the midterm elections, both the House of Representatives and Senate passed legislation (as an amendment to the unrelated Safe Port Act) that would make transactions from banks or similar institutions to online gambling sites illegal. This differs from a previous bill passed only by the House that expanded the scope of the Wire Act. The passed bill only addresses banking issues.^[13] The act was signed into law on October 13, 2006 by President George W. Bush, and there is a provision for a 270-day period to develop enforcement measures. At the bill-signing ceremony, Bush never mentioned the Internet gambling measure, which was supported by the National Football League and opposed by banking groups.

In response to this new legislation, a number of online gambling operators including PartyGaming, The bwin Group, Cassava Enterprises, and Sportingbet announced that real-money gambling operations would be suspended for U.S. customers. PartyGaming’s stock dropped by 60% following its announcement. Other operators such as [tag]PokerStars[/tag], Bodog, and WSEX.com announced their intention to continue serving customers in the U.S.

On April 26, 2007, Rep. Barney Frank (D-MA) introduced [tag]HR 2046[/tag], the Internet Gambling Regulation and Enforcement Act (IGREA). The [tag]IGREA[/tag] would modify the [tag]UIGEA[/tag] by providing a provision for licensing of Internet gambling facilities by the Director of the Financial Crimes Enforcement Network. On June 8, 2007, the House Financial Services Committee, chaired by Rep. Barney Frank, held a hearing entitled, “Can Internet Gambling Be Effectively Regulated to Protect Consumers and the Payments System?”. Expert witnesses at the hearing testified that Internet gambling can be effectively regulated for age verification, money laundering issues, facilitation of state and federal tax collection, and for issues relating to compulsive gambling.

On June 7, 2007, Rep. Robert Wexler (D-FL) introduced HR 2610, the Skill Game Protection Act. This act would legalize Internet poker, bridge, chess, and other games of skill. Also on June 7, Rep. Jim McDermott [D-WA] introduced H.R. 2607, the Internet Gambling Tax Act. The IGTA would legislate Internet gambling tax collection requirements.

Australia

On the 28th of June 2001 the Australian Government passed the Interactive Gambling Act 2001 (IGA). The government said that the IGA was important to protect Australians from the harmful effects of gambling.

The IGA targets the providers of interactive gambling services, not their potential or actual customers. The IGA makes it an offence to provide an interactive gambling service to a customer physically present in Australia, but it is not an offence for Australian residents to play poker or casino games online. In stark contrast to the USA, sports betting online is also completely legal in Australia, with many state government licensed sportsbooks in operation, such as Centrebet, Sportingbet & [tag]Betfair[/tag].

The offence applies to all interactive gambling service providers, whether based in Australia or offshore, whether Australian or foreign owned. The offense carries a maximum penalty of $220,000 per day for individuals and $1.1 million per day for bodies corporate. (More information regarding the Interactive Gambling Act 2001 can be found Here.

Complaints regarding Online gambling facilities serving Australian users can be made to the Australian Communication and Media Authority at its Homepage.

Other countries

Various forms of online gambling are legal and regulated in many countries, including most members of the European Union and several nations in and around the Caribbean Sea.

In India it is neither legal nor illegal the Law is silent on the issue, but in the state of [tag]Maharashtra[/tag] it is a banned offence under the “[tag]Bombay Wager Act[/tag]“.

The government of the island nation of Antigua and Barbuda, which licenses Internet gambling entities, made a complaint to the World Trade Organization about the U.S. government’s actions to impede online gaming. The Caribbean country won the preliminary ruling but WTO’s appeals body somewhat narrowed that favorable ruling in April 2005. The appeals decision held that various state laws argued by Antigua and Barbuda to be contrary to WTO agreements were not sufficiently discussed during the course of the proceedings to be properly assessed by the panel. However, the appeals panel also ruled that the Wire Act and two other federal statutes prohibiting the provision of gambling services from Antigua to the United States violated the WTO’s General Agreement on Trade in Services, or “GATS”. Although the United States convinced the appeals panel that these laws were “necessary” to protect public health and morals, the asserted United States defense on these grounds was ultimately rejected because its laws relating to remote gambling on horse-racing were not applied equally to foreign and domestic online betting companies, and thus the United States could not establish that its laws were non-discriminatory.^[16]

On March 30, 2007 the WTO confirmed the U.S. “had done nothing to abide by an earlier verdict that labeled some U.S. Internet gambling restrictions as illegal.”^[17]

On June 19, 2007, Antigua filed a claim with the WTO for USD $3.4 billion in trade sanctions against the United States, along with a request for authorization to ignore U.S. patent and copyright laws. This followed by a day similar demands for compensation made by the European Union.^[18]

In probability theory, the [tag]Kelly criterion[/tag], or [tag]Kelly formula[/tag], is a formula used to maximize the long-term growth rate of repeated plays of a given gamble that has positive expected value. It was described by [tag]J. L. Kelly, Jr[/tag], in a 1956 issue of the [tag]Bell System Technical Journal^[/tag]. The formula specifies the percentage of the current bankroll to be bet at each iteration of the game. In addition to maximizing the growth rate in the long run, the formula has the added benefit of having zero risk of ruin; the formula will never allow a loss of 100% of the bankroll on any bet. An assumption of the formula is that currency and bets are infinitely divisible, which is not a concern for practical purposes if the bankroll is large enough to support the [tag]gambling system[/tag].

Statement

The most general statement of the Kelly criterion is that long-term growth rate is maximized by finding the fraction f* of the bankroll that maximizes the expectation of the logarithm of the results. For simple bets with two outcomes, one involving losing the entire amount bet, and the other involving winning the bet amount multiplied by the payoff odds, the following formula can be derived from the general statement:

where

• f* is the fraction of the current bankroll to wager;
• b is the odds received on the wager;
• p is the probability of winning;
• q is the probability of losing, which is 1 − p.

As an example, if a gamble has a 40% chance of winning (p = 0.40, q = 0.60), but the gambler receives 2-to-1 odds on a winning bet (b = 2), then the gambler should bet 10% of the bankroll at each opportunity (f* = 0.10), in order to maximize the long-run growth rate of the bankroll.

If the gambler has zero or negative edge, i.e. if b ≤ q/p, then the gambler should bet nothing.

For even-money bets (i.e. when b = 1), the formula can be simplified to:

Since q = 1-p, this simplifies further to

The Kelly criterion was originally developed by AT&T Bell Laboratories physicist John Larry Kelly, Jr, based on the work of his colleague Claude Shannon, which applied to noise issues arising over long distance telephone lines. Kelly showed how Shannon’s information theory could be applied to the problem of a gambler who has inside information about a horse race, trying to determine the optimum bet size. The gambler’s inside information need not be perfect (noise-free) in order for him to exploit his edge. Kelly’s formula was later applied by another colleague of Shannon’s, Edward O. Thorp, both in blackjack and in the stock market.^[2]

[edit] Disadvantages

Using the Kelly system in practice does have drawbacks. While it guarantees that you will never lose all your bankroll, it does not guarantee that you will not lose money. When a series of serial bets are made the chance of dropping to 1/n of your bankroll is 1/n. Thus you have a 50% chance of at some point losing 50% of your bankroll, a 10% chance of dropping to 10%, and so on.

The optimum bet for the greatest growth of bankroll is making the full bet suggested by the Kelly criterion, but this produces a volatile result. There is a 1/3 chance of halving the bankroll before it is doubled. A popular alternative is to bet only half the amount suggested which gives three-quarters of the investment return with much less volatility. Where money would accumulate at 10% compound interest with full bets, it still accumulates at 7.5% for half-bets.

Over-betting beyond that suggested by Kelly is counter-productive as the long run return will fall, dropping to zero (with the loss of all the bankroll) when the Kelly bet is doubled. Using half-Kelly bets also safeguards against being ruined by unknowingly overbetting, as it can be easy to over-estimate the true odds by a factor of two.

The above applies to a sequence of serial bets. It is better to diversify, as the gambler who for example bets on every horse at a race using the Kelly criterion makes on average a better long-run return than the gambler who only bets on one horse per race, and similarly for the diversified stock market investor.

In a 1738 article, [tag]Daniel Bernoulli[/tag] suggested that when you have a choice of bets or investments you should choose that with the highest [tag]geometric mean[/tag] of outcomes. This is mathematically equivalent to the Kelly criterion, although the Bernoulli article was not translated into English until 1954 (in an economics journal) and it is unlikely that Kelly was aware of it. For the investor who does not re-invest the profits, but only invests a set amount each time, this rule does not apply; instead the investor should choose the investment with the greatest arithmetic mean.

- The [tag]Kelly Gambling System[/tag]

Originally, [tag]martingale[/tag] eventually flip heads, the Martingale [tag]betting strategy[/tag] was seen as a referred to a class of betting strategies popular in 18th century France. The simplest of these strategies was designed for a game in which the gambler wins his stake if a coin comes up heads and loses it if the coin comes up tails. The strategy had the gambler double his bet after every loss, so that the first win would recover all previous losses plus win a profit equal to the original stake. Since a gambler with infinite wealth will with probability 1sure thing by those who practised it. Unfortunately, none of these practitioners in fact possessed infinite wealth, and the [tag]exponential[/tag] growth of the bets would eventually bankrupt those foolish enough to use the Martingale. Moreover, it has become more impossible to implement in modern casinos, due to the betting limit at the tables. Because the betting limits reduce the casino’s short term variance, the martingale system itself does not pose a threat to the casino, and many will encourage its use, knowing that they have the house advantage no matter how much is wagered nor when.

Example Implementation

Suppose that someone applies the martingale betting system at an American roulette table, with 0 and 00 values; on average, a bet on either red or black will win 18 times out of 38. If the player’s initial bankroll is $150 and the betting unit is $10, he can afford 4 losing bets in a row (of $10, $20, $40, and $80) before he runs out of money. If any of these 4 bets wins he wins $10 and wins back any past losses. The chance of losing 4 bets in a row (and therefore losing the complete $150) is (20/38)⁴ = 7.67%. The remaining 92.3% of the time, the player will win $10.

We will call this one round (playing until you have lost 4 times or until you win, whichever comes first). If you play repeated rounds with this strategy then your average earnings will be (0.923·$10) − (0.0767·$150) = −$2.275 per round. Therefore, you lose an average of $2.275 each round.

Effect of Variance

As with any betting system, it is possible to have variance from the expected negative return by temporarily avoiding the inevitable losing streak. Furthermore, a straight string of losses is the only sequence of outcomes that results in a loss of money, so even when a player has lost the majority of their bets, they can still be ahead over-all, since they always win 1 unit when a bet wins, regardless of how many previous losses.

Detailed analysis of one round

Let q be the probability of losing (e.g. for roulette it is 20/38). Let y be the amount of the commencing bet (e.g. $10 in the example above). Let x be the finite number of bets you can afford to lose.

The probability that you lose all x bets is q^x. When you lose all your bets, the amount of money you lose is

The probability that you do not lose all x bets is 1 − q^x. If you do not lose all x bets, you win y amount of money. So the expected profit per round is

Whenever q > 1 / 2, the expression 1 − (2q)^x < 0 for all x > 0. That means for any game where it is more likely to lose than to win (e.g. all chance gambling games), you are expected to lose money on average. Furthermore, the more times you are able to afford to bet, the more you will lose.

Simpler analysis

Since expectation is linear, the expected value of a series of bets is just the sum of the expected value of each bet. Since in such games of chance the bets are independent, the expectation of all bets are going to be the same, regardless of whether you had previously won or lost. In most casino games, the expected value of any individual bet is going to be negative, so the sum of lots of negative numbers is also always going to be negative.

tag]Betting System[/tag]: The [tag]martingale system[/tag]