CBS’s 60 Minutes recently ran a story about the $18 Billion a year online gaming industry and its lack of regulation in the U.S. due to most companies keeping their Internet servers off shore, outside of U.S. jurisdiction.  60% of gambling online servers are kept on the Mohawk Indian Tribe Reservation which is located in Canada, but is not considered a part of the country.  This means that the Mohawk tribe does not abide by Canadian law, which does not allow online gambling.

It should be noted that the 60 minutes story reports that online gambling is illegal which is not true.  Online gambling is not regulated for the most part in the U.S. by federal law, however U.S. banks are now restricted from financial involvement.

The show profiles the story of the biggest scandal in online poker history.  In this scandal former employees of Absolute Poker and Ultimate Bet (some professional poker players) hacked the computer systems, which allowed the employees to view opposing players cards.  The scam cheated opposing players out of potentially $20 Million and went on for 4 years.   Those cheated out of money could not recoup their money unless they could get jurisdiction over the companies through Mohawk Indian Law.  The tribe’s gaming comission ordered that the losses be repaid to those cheated, however Absolute Poker and Ultimate Bet remain in business.

The Story can be found here:  http://www.cbsnews.com/video/watch/?id=4639016n

Since onlince gaming is currently unregulated those responsible for the cheating have not been criminally prosecuted.  There are several websites around that provide online gaming services and there is at the moment no way to tell if there is any cheating going on.  If cheaters don’t get greedy and make themselves obvious they will be hard to spot.  Regulation of the online gaming industry needs to happen in order to prevent more cheaters.  If there was a law in the U.S. regarding online gaming, a cheater could be prosecuted if they ever stepped foot in the U.S, giving U.S. courts jurisdiction.

I think I will stick to gambling the old fashioned way where there are rules in place to prevent cheating.  Even if I lose my money, at least I won’t be cheated.