Being licensed by some authority “supposedly” adds legitimacy and credibility to the business that has received the license. Online casino websites contend they are legal because they have obtained a license in one or more jurisdictions. Therefore, online casinos contend that they are legal gaming enterprises and not illegal gambling operations. In my opinion, the act of licensing should imply investigating and assuring the legitimacy of the licensed business and continue with the ongoing regulation of the licensee.

What is the actual process of licensing? How much does the license cost? Is there substance to the licensing process in the authority that grants licenses to online casinos? How much effort is involved in obtaining a license? What are the standards, if any, that have to be met to get a license?  What is the time frame involved in carrying out a background check?  Does the licensee have to prove its legitimacy?  Is there any ongoing regulation and oversight by the licensing authority after they license has been granted?

Nevada and New Jersey are jurisdictions that are known to thoroughly investigate licensees and the following is part of the background on the licensing procedures carried out. Precise information on the processes in the jurisdictions that license online casinos is not available, but some idea of what it entails can be discerned from the time it takes to get those licenses and the costs involved.

The applicant for an unrestricted gaming license in the states of Nevada and New Jersey can expect the process to take one to two years. The burden of proving to the licensing authorities that it is legitimate and has the necessary skills available to operate a casino in compliance with the law falls on the applicant. All costs in connection with the independent investigation which is undertaken to test the accuracy and complete truthfulness of its responses to the myriad questions answered in filling out the application must be borne by the applicant. These costs routinely amount to between $500,000 and $1,000,000. These amounts do not take into consideration the legal fees that each applicant incurs in getting help and advice in connection with the process. Public hearings are held and delve into personal and business transgressions admitted in the application or turned up in the investigation. 

In Nevada licensees are charged fees which are based on the number of slot machines and games that the licensee intends to operate. The current annual fee is $250 per slot machine and between $200 and $1,000 for each table game. There are also quarterly fees payable on a ‘per machine’ and ‘per table’ basis. The annual total of these fees for a bricks and mortar casino with 2,000 slot machines and 200 table games would amount to over $800,000. 

The licensee is also taxed on the gross revenue from the gaming operation, with the tax being 3.5% of the first $50,000 per month, 4.5% of the next $84,000 and 6.75% of amounts over $134,000. So, if gross revenues amount to $100 per day per slot machine and $500 per day per table, the annual gross revenue would come to about $100 million, with a resulting total annual state tax of about $6,700,000.

The following table is taken from information presented by Slogold, a member of the Haglley Holding group, which assists in the establishment of offshore businesses and obtaining offshore casino licenses. The table shows the license fees, tax rates, estimated times for licensing and estimated legal fees that an applicant can expect in each of the offshore jurisdictions noted.

A report in 2001 commissioned by the Canada West Foundation is headed: “Internet Gambling: Kahnawake Gaming Commission”. In June 1996, the Mohawk Council of Kahnawake established the Kahnawake Gaming Commission to approve Internet gambling activities. The Commission has been providing gaming licenses for businesses to use their Internet servers to host online casinos. The Kahnawake First Nation claims that they are offering their clients the legal protection of a sovereign nation. While the Kahnawake Nation are not themselves conducting gambling activities, under the Criminal Code they do not have the authority to license such activities without provincial approval.

The issue of Internet gambling and online betting is a controversial policy area. While in North America Internet gambling is prohibited, it is very difficult, if not impossible to regulate. Even if Internet gambling continues to be prohibited in Canada, there is no realistic way to stop Canadians from betting on offshore gambling sites.