Online casino websites contend they are legal because they have gotten a license in one or more jurisdictions. The online casinos and poker rooms thus contend that they are legal gaming enterprises, not illegal gambling operations. Being licensed supposedly adds legitimacy and credibility to the business that has received a license.
For an Internet Casino to be legal, it should be licensed in the country where it or its’ web servers physically reside in, and have to report to the local government to some extent. The majority of these gambling sites are to be found outside the US, where online gambling is prohibited. Though there are still a great number of companies, running casinos and sportsbooks offshore that actually operate from the U.S. and it is only their servers that are located offshore.
Online gambling licenses are issued by special licensing authorities. Online gambling licensing authorities are statutory bodies established by governments to regulate online gambling within the jurisdiction of the governments. Online gambling operators prefer to function after obtaining a license from one of the licensing authorities because it gives them greater credibility with customers.
The more reputed of the online gambling licensing authorities carry out a strict due diligence procedure before issuing licenses to gambling operators. This would be something in the nature of the procedure carried out by commercial banks before they loan funds. The procedure begins with the evaluation of the credentials of the applicant/s. The antecedents of the applicant are gone into. If he has been operating other online gambling businesses then the functioning of those businesses are evaluated. If not, then his other businesses or operations are looked into. The licensing authority also tries to determine whether there are any legal proceedings or claims against the applicant. Next the licensing authority evaluates the financial status of the applicant. Either the applicant has to possess the funds required to run an online gambling operation or he must be backed by financers. If the latter is the case the licensing authority will require a letter from the financers pledging support. The third consideration is whether the applicant has the capabilities to manage an online gambling operation. Here the proposed management is evaluated. The experience of the persons who are appointed to run the casino operations is considered.
The online gambling licensing authorities also look into the software proposed to be used by the applicant. The reputed licensing authorities would accept software only from reputed software developers. Even then the software would be subjected to the required tests to ensure that the random number generator is unbiased and unpredictable. Usually the licensing authority is not equipped conduct these tests themselves. They get the tests conducted by independent and experienced organizations and accept their certification. The licensing authorities are more interested in how the software would control the administrative functions of the online casinos. In this regard player protection is of paramount importance. The licensing authority establishes that an infallible mechanism exists to distribute bonuses and other incentives offered by the online casino. Another important factor is the existence of a credible dispute resolution mechanism. What steps the online casino would be taking to prevent minors from wagering are also examined. The licensing authorities would also insist that adequate facilities and warnings are incorporated into the system to prevent problem gambling. Usually these include self exclusion facilities so that the players who suspect that they have a problem can be prevented from gambling for a specified period at their insistence.
Issuing the license is only one part of the responsibility of online gambling licensing authorities. The licenses are issued for a specified duration only and therefore renewing licenses also formed an important part of their function. Unless otherwise warranted, the evaluation for renewal is a less stringent. Online gambling is an evolving area. It is less than two decades old. Therefore licensing authorities are constantly upgrading their requirements based on their experiences. This is to ensure that problems faced currently by the industry are taken care of at the licensing stage itself in the future. Another important function of licensing authorities is dispute resolution. Should there be a dispute between player and online casino which does not get resolved mutually, then the licensing authority as to step in.
The first online gambling licensing authority was established in Antigua and Barbuda. Some of the other reputed licensing authorities are from the gambling jurisdictions of Malta, Gibraltar, Curacao (Netherland Antilles), Kahnawake, Isle of Man, and Alderney.