Then and Now – A Brief History of Online Gambling

Posted by Harry Kane on Tuesday, August 17, 2021

For hundreds of years across the globe, gambling was something carried out in person in a raft of countries across the globe. This included both games of chance and skill, while saloons, speakeasys and brick-and-mortar casinos have hosted both legal and illegal gambling activity throughout history.

However, it was during the early 1990s that gambling began to transition online, while this particular market has continued to evolve into a multi-billion-pound sector ever since.

According to the most recent statistics in the year ending September 2020, the total GGY for iGaming in the UK peaked at an impressive $5.9 billion. This highlights just how far online gambling has come on these shores, while also hinting at a bright (albeit potentially challenging) long-term future.

Tracing the History of iGaming – Where Did it All Begin?

In reality, we can trace the rich history of online gambling back to 1994, when rudimentary Internet casinos were first conceived in the UK and initial regulatory bodies across the globe began to deliver verticals to a relatively niche playing audience.

At this time, the region of Antigua and Barbados passed the Free Trade & Processing Act, which created a provision for licenses to be granted to aspiring organisations that sought to open online casinos.

To facilitate this, the iconic, Isle of Man-based Microgaming brand developed the world’s first fully functional gambling software, in conjunction with online security software operator Cryptologic. This created accessible casinos that were equipped with secure transactional systems, providing early adopters with the peace of mind to wager their hard-earned cash online.

It was Cryptologic companies that also helped to conceive a transactional system that afforded both convenience and opportunity to players, with the underlying infrastructure and model designed to promote winning and an overwhelmingly positive sensory experience while gambling.

On the UK’s shores, it was the iconic William Hill gambling brand that first introduced online gambling to the masses, although it’s fair to say that the trail-blazing operators only reported an initially low take-up and relatively meagre attendance rate during their initial months of trading.

However, it was these casinos that provided a foundation for the industry that we see today, as they helped to popularise the radical concept of online gambling and created the template in which punters could wager safely and freely from the comfort of their home.

By 1996, we’d also seen the creation of the world’s first Bonafide regulatory body, in the form of the Kahnawake Gaming Commission. This regulated all activity from the Mohawk Territory of Kahnawake and issued most of the available gaming licenses to online casinos and poker rooms across the globe, in an initial attempt to create transparent operations and an effective regulatory framework.

At the same time, the initial market had grown to a point where there were 15 active gambling websites, but between 1996 and 1997, this number increased nearly 20-times to a little over 200. This trend for largely unabated growth continued uninterrupted through the remainder of the 20th century, with a comprehensive report by Frost & Sullivan revealing that online gambling revenues had exceeded an impressive $830 million in 1998 alone.

The Noughties – The Online Poker Boom and Regulatory Challenges

Interestingly, it was during 1998 that the first seeds were sewn for the online poker boom, which transcended the iGaming market while also boosting growth and capturing the attention of investors across the globe.

In 1998, the popular, high-stakes poker film Rounders hit the silver screen, popularising an activity that was beginning to benefit from significant traction online. Starring Matt Damon and Ed Norton, the show focused on a reformed gambler who was compelled to return to playing big stakes poker in order to help a friend pay off loan sharks.

At the same time, he attempted to balance a relationship with his girlfriend and concluding his legal studies, creating an emotive and high-octane film that bought poker to the masses.

Through 1998, we also saw the inception of online poker at Planet Poker, with this built on the occasional and incredibly popular telecasts of the World Series of Poker (WSOP) Main Events that were recorded each summer and broadcast later in the year.

While online poker remained an increasingly popular and generative iGaming vertical into the new millennium, it wasn’t until 2003 that the so-called “poker boom” began in earnest.

In the spring of this year, the World Poker Tour’s inaugural season debuted on the Travel Channel on cable television in America, with this providing a catalyst for the emergence of poker amongst younger and more casual players across the globe.

The reason for this was simple; as May 2003 saw amateur player Chris Moneymaker win the 2003 WSOP Main Event against an entire field of talented professionals. Incredibly, Moneymaker won his seat via an $86 satellite tournament at the PokerStars online poker room, becoming one of 839 entrants who paid $10,000 each to participate.

By winning, the aptly named Moneymaker banked a cool $2.5 million (the highest paying tournament in the series at that time), while encouraging a host of similar amateurs to take up poker online and compete for the biggest international prizes.

The latter point was borne out by the participation rate at the subsequent 2004 WSOP Main Event, where the total number of competing players more than trebled to an astonishing 2,576. By 2006, there were 8,773 players competing for the WSOP Main Event crown, with this number a staggering 14-times larger than the 2002 tournament prior to the poker boom.

While the rise of online and televised poker helped to popularise a prominent iGaming niche and increase the financial value of the market as a whole, however, such growth was being played out against the backdrop of a regulatory backlash in certain countries and territories.

In 1999, for example, the Internet Gambling Prohibition Act has been introduced as a bill in the US Senate, creating a scenario where a company was legally prevented from offering any online gambling product to a US citizen.

This was unveiled at the same time as multiplayer gambling becoming a popular concept across the globe, creating a volatile worldwide marketplace that continued to face up to a growing number of regulatory challenges.

However, the end of the poker boom is widely thought to have begun in October 2006, when the US Senate passed the highly controversial Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA) into law.

This piece of legislation, which was added as Title VIII to the Safe Port Act which otherwise regulated port security, prohibited any gambling businesses from “knowingly accepting payments in connection with the participation of another person in a bet or eager that involves the use of the Internet and that is unlawful under any federal state or law”.

This act expressly excluded most fantasy sports betting and skill games such as poker, while also prohibiting legal intrastate and intertribal gaming.

This had a dramatic impact on virtual casino gameplay and online gambling as a whole, while this was felt almost immediately after the bill was passed. In fact, the market leading Party Poker brand led an exodus from the US market in the wake of the announcement, while the discipline once again became a niche pastime nationwide.

This was borne out by the participation numbers at the first WSOP tournament after the legislation was passed into law, where the attendance at the main event decline by nearly 28% (from 8,773 in 2006 to just 6,358 in 2007).

The Gambling Act of 2005 – Creating a Growth Market in the UK

Interestingly, the global iGaming market arrived at something of a crossroads in the mid-noughties, as while the US legislation regressed and introduced restrictions the Labour government in the UK set about establishing a progressive and woduced restrictions the Labour government in the UK set about establishing a progressive and well-regulated space.

More specifically, Tony Blair’s government passed the Gambling Act of 2005, barely 12 months before the US Senate sought to crack down on iGaming verticals with the UIGEA legislation.

Applied to England, Wales and Scotland, the Gambling Act was introduced as a way of regulating all forms of gambling, by transferring the authority from the magistrates’ courts to the local and unitary authorities that were specifically formed for this purpose.

To this end, the act established the now omni-potent Gambling Commission (UKGC), which created the licensing criteria for domestic operators, enforced regulatory measures and minimise the impact of gambling-related harm.

This represented a completely different direction to the one taken by lawmakers in the US, as the UK government sought to legalise online gambling and ensure that players could enjoy this safely, transparently and in a completely transparent marketplace.

The legislation also made it completely legal for private gambling brands to advertise their vertical and products both online and across broadcast media, laying the foundations for the exponential iGaming market growth that we’ve witnessed in the subsequent 16 years.

Barely a year after the bill was enacted fully in 2007, the total gambling industry in the UK grew to a value of £8.36 billion, while it expanded by a further 39.4% in the following nine years to peak at a whopping £13.8 billion.

As for remote gambling in the UK, this totalled £817 million in 2009, but rose to £4.5 billion in the year ending March 2017. This constitutes an average 10.1% per annum rise over the course of eight years, while online gambling on these shores continues to account for a growing share of the industry as a whole.

These facts have been borne by the most recent figures released by the UKGC, which covered the reporting period between April and September 2020.

More specifically, the iGaming market in the UK peaked at £5.9 billion in the year ending September 2020, with remote casino gambling accounting for 52.3% of this yield (£3.1 billion).

Interestingly, slots continued to dominate the iGaming space, accounting for nearly two-thirds of the total GGY and continuing to capture the imagination of casual players and potentially new demographics.

Remote sports betting for the period totalled approximately £1.0 billion (led by football and horse racing betting), while online bingo generated a yield of approximately £98.1 million.

Of course, this most recent growth has come against the backdrop of the UK’s own regulatory issues, as the UKGC has doubled-down on its commitment to safeguard vulnerable players and minimise gambling-related harm.

Make no mistake; both of these goals were announced as core strategic objectives through 2021 just three years ago, and this has prompted a raft of more stringent regulatory changes and heavy financial sanctions for operators that fail to protect their customers.

Similarly, the UK government has also pledged to legislate for the iGaming market in the same way that it introduced laws to govern FOBTs and offline wagering, while hiking the remote gaming duty (RGD) payable by operators from 15% to 21% last year.

With a full-scale gambling review also underway in the UK, we could see further measures introduced in the near-term, each of which could have a significant impact on future growth and prosperity.

The Last Word

Clearly, the iGaming market has enjoyed exponential growth across the globe since its inception in 1994, with this being largely led by developed markets in the UK and Europe.

However, online gambling continues to embark on something of a regulatory rollercoaster ride throughout the world, particularly in the US (where sports betting is now being legalised at state level while lawmakers continue to resist the lure online casino gambling and interstate betting).

This makes the future for this market hard to predict with any great degree of accuracy, although most experts forecast at least incremental increases in profitability even if revenues fall as a result of regulatory measures.

What’s certain is that the demand for online gambling continues to rise globally, and this trend is unlikely to change anytime soon.