Traditional Web casinos and bookmakers may face extinction as more users turn to companies like Betfair who let their customers set the terms of their own wagers easily and efficiently.
New generation of online gambling threatens traditional Web casinos
As Internet technology is getting more sophisticated a new generation of online services has emerged that allows punters to wager not against the house but directly against each other. Traditional Web casinos and bookmakers may face extinction as more users turn to companies like Betfair.com who let their customers set the terms of their own wager easily and efficiently.
Mark Davies, managing director of Betfair.com, a booming Internet gambling operation based in London, said that while Britain's traditional betting parlours are regarded as "male-oriented and smoke-filled" his company is "making wagering much more of a leisure activity than a seedy, below-the-line activity," according to a New York Times article, quoted by International Herald Tribune.
Today Internet is changing how people gamble, just as it has changed auctions, securities day-trading and music sales.
Peer-to-peer betting, which has been increasingly popular in Europe, Asia and Australia, is one of the fastest-growing online gambling industry, according to analysts. Now, several entrepreneurs are introducing similar services in the United States despite the fact that such operations are prohibited by the U.S. federal law.
"This is a clearly growing phenomenon, and a cheaper way for players to bet," said Sebastian Sinclair, an analyst with Christiansen Capital Advisors. He added that the new operations had become a forum where astute gamblers could solicit hundreds of bets, effectively becoming semiprofessional bookies. "The wise guys love it," he said, "because there are all kinds of squares out there to take advantage of."
The betting exchanges are becoming aggressive competitors to the hundreds of Internet casinos situated and licensed in, for example, Britain, Costa Rica and the Caribbean. Those Web operations, offering virtual games like blackjack, roulette and poker, as well as wagering on sporting events, generate $7 billion to $8 billion in global revenue a year, according to Christiansen Capital Advisors. John O'Malia, an American entrepreneur based in London, is hoping to win a share of that business. His latest venture is 1xInc.com, a company that plans to begin a peer-to-peer betting service on July 21 in the United States and around the globe.
The service, called Betbug, is remarkably similar to file-sharing programs like Kazaa and Morpheus, which let people exchange music and other media over the Internet. Anyone downloading the Betbug software will be able to propose a wager, then reach out to everyone else on the network to find a taker for the bet.
For instance, a bettor could offer to take the New York Yankees over the Boston Red Sox, then propose terms for the wager. Betbug would take a 5 percent fee from the winning amount. It would secure the money by making sure both parties had put enough money into an escrow account (in a Cyprus-based bank) when they agreed to the terms of the wager.
"We are the Kazaa" of betting, O'Malia said. "We let people search out other people directly who are interested in wagering."
Although the U.S. Justice Department began a grand jury investigation into American companies that do business with online casinos, O'Malia said he should be exempt from American law because he is not acting as the sports bookmaker by setting the odds or participating in the wager. But he is also not taking any chances and is putting his new business in Toronto.
Betfair, the model of success for betting exchanges, is somewhat different from Betbug in that it has a central Web site customers visit to find other bettors and to place wagers. Started in 2000, Betfair is now used to place a million wagers a day.
