The History of Online Casinos – From One Website to a $35 Billion Industry

Jan 12

It has been over 20 years since the first jurisdiction legalized online gambling and the first online casino went live, paving the way for a huge international industry. The history so far spans two decades and it is safe to say that more is to come.

The online casino industry has proven to be one of the fastest growing industries over the past couple of decades and what was once a simple website launched out of the Caribbean has now turned into a huge international industry worth over $35 billion. Needless to say that there were some bumps along the way and the road is only starting to take shape as the numbers are expected to get even bigger over upcoming years.

Overall, the history of online gambling and online casinos in general is not that long as it has been around for 20 years since the first website was officially launched.

The Start of the Industry

It was in 1994 that the first step was made to start what would later become a multi-billion dollar industry. The Caribbean nation of Antigua and Barbuda was the first jurisdiction in the world to make this a reality by passing the Free Trade & Processing Zone act that would allow organizations to apply for licenses and launch websites with real money casino games.

This of course was not as easy as it would seem and if regulations now can take up years before we get to see real results available online, things weren’t so different back then. While online casinos were legal by licensed operators in Antigua and Barbuda, the problem was that the industry was just getting started and there were no established companies to make the most out of this opportunity. Microgaming came into the scene as the first software developer in the iGaming industry and began creating casino games that could be offered on the internet to a variety of players.

Another problem that had to be solved in order for online gambling to become a reality was internet security. The guarantee that all players would enjoy a safe environment and that all their personal information shared with the casino would remain secure was provided by Cryptologic, a new company that followed Microgaming after a short period of time and focused on encryption protocols.

With the software ready to go and online security guaranteed by a reliable company, the first online casinos were set to open their virtual doors to the public by the end of 1996. The distinction of offering the first real money casino games on the internet and taking the first money wager in the industry is attributed to Intercasino, which launched with a total offer of 18 titles as well as access to the National Indian Lottery.

Both Microgaming and Cryptologic established themselves as leading companies in their respective fields and continued to expand in order to help the industry grow.

With the ice now broken, things started growing at a very fast pace and more and more players opted to enjoy their favorite games on the internet by downloading the software on their personal computers. The Kahnawake Gaming Commission started offering licenses and regulating online casinos also played a big role in the early growth of the iGaming industry and only a couple of years later, it was clear that online casinos were here to stay.

As an important note, the early growth of online casinos was largely influenced by the improving technology in that time, which meant that more people would have access to affordable internet and have the freedom to check out their favorite options in a secure environment. With the demand only growing from year to year, the pressure was on operators and developers to deliver.

The First Progressive Slot Goes Online

With Microgaming remaining the biggest software developer for online casinos, new games were released quite often and huge waves were made when Cash Splash went live. This was the first ever progressive slot machine on the internet and it featured a jackpot that would increase with every bet made by the players.

The promise of large prizes from a small bet only made the customer base even more excited about playing online. It didn’t take for the Cash Splash jackpot to reach an impressive figure and it only took a bit of luck to win the entire thing, creating various headlines of slots players winning big. What made it even better was the fact that anyone could have won it and this was done by players from the comfort of their own homes.

Reports showed that revenues from online gambling in 1998 were over $830 million and that there were more than 700 websites running, compared to only 15 in 1996.

The First Online Poker Room

After the success of online casino games, online poker followed by the end of 1998 with the launch of PlanetPoker, the first internet card room. Similar to how casinos work, the online poker room would allow players to take a seat at the tables and play for real money, while paying a fee known as a rake to the house.

Regulations and Opposition

With online gambling now being quite the industry, it attracted quite a bit of opposition and governments began paying a lot more attention, looking for ways to either regulate and tax it properly or ban it altogether. In the United States, Senator John Kyl was among the big politicians who opposed online gambling in the country and he introduced the Internet Gambling prohibition act in 1998.

Although the bill did not make it past the House on the first run, it was enough to show signs of opposition in the biggest market for online gambling in the world. Kyl returned in 1999 with an amended bill that also saw to ban internet gambling but this too failed to become law. The Senator lobbied new bills for the next 6 years.

When the year 2000 came along, online casinos were generating over $2.2 billion in revenue and two thirds of the players were from the US.

The Federal Government in Australia was the first major market to pass a new act that would prohibit unlicensed online casinos from accepting Australian players. The bill also had a mention that saw all casinos who had accepted customers from Australia before May 2000 banned from the country. The result was only one casino still accepting bets Down Under.

Global Growth

The success found in the United States determined growth over the ocean as well as UK territories like Isle of Man, Gibraltar and Alderney start offering licenses for online casinos. By the end of 2001, there are 8 million registered online players around the world and more websites launching to meet the demand.

Cassava Enterprises launches in 2003, with the name based on the lucky numbers from the Chinese culture. The website would go one to become one of the biggest operators in the business, offering casino games, poker, sports betting and more.

It was considered that 2005 was when the online gambling industry reaches its peak. Several big companies register initial public offerings and these include PartyGaming and Playtech.

More Roadblocks and Regulation

While the UK Gambling Act makes the country the most liberal gambling legislation in Europe in the year 2005, things will take a turn for the worst in the United States.

In 2006, the Unlawful Internet Gambling Enforcement Act, known as UIGEA, is passed in the US. Although the bill is quite ambiguous, it makes online gambling a lot more difficult by preventing credit card companies and banks from processing financial transactions that are related to internet gambling. Quite a few international operators decide to leave the US market in order to avoid further issues with the Federal Government.

Despite this hit to the biggest market in the world, H2 Gambling Capital releases reports in 2008 that estimate the worldwide online gambling industry having revenue of $21 billion.

Two years later, in 2010, more than 860 online casinos are registered and available on the internet. In the same year, two of the biggest operators decided to merge and PartyGaming and Bwin shake hands for $3.3 billion, making it the largest publicly traded company in the gambling sector.

In April 2011, the US government comes cracking down on operators who have violated the UIGEA and shut down the three major poker rooms still running in the country. PokerStars, Full Tilt Poker and Cereus are accused of money laundering and online fraud in a day that would go down in history as “Black Friday”. Although the move only focused poker sites, it was a major hit for the online gambling industry as a whole.

Improving Technology

The continuous improvement of technology meant that the online gambling industry would also grow as a result. More players opt of mobile gambling and the games offered online get better, bigger and more entertaining. In 2011, a Norwegian student winds a record breaking progressive jackpot on Net Entertainment’s Mega Fortune slot game for 11.7 million euros.

The technology trend continues for several years and the mobile gambling boom takes place in 2013, with reports showing that $10 billion was wagered via mobile devices in twelve months. Social gambling rides the same wave as casino games on social networks account for one fifth of the entire social gaming industry, estimated at $8 billion.

Rebuilding in the US

In 2013, the Wire Act on which UIGEA was based is interpreted and the federal ban online gambling is somewhat lifted in the US, giving individual states the freedom to pursue and legalize online poker and online casino games within their borders. Nevada is the first to go live with online poker, while Delaware and New Jersey follow by the end of the year, also adding casino games to their regulations.

New Jersey quickly becomes the biggest online gambling hub in the nation and shows great results in the first few months. Several established European operators reach partnerships with land-based casino owners in Atlantic City in order to offer a product online in New Jersey.

Other states look towards legalizing online poker although none do so by the end of 2014.

Now, there are 85 countries with legalized online gambling and they contribute to an industry of $35 billion.

What the future holds remains to be seen but if the history of online gambling so far is any indication, it is safe to say that it will continue to grow and become even bigger while legislatures from around the world will look to keep everything in check.