Paneda, Russel: Online Gambling

ABSTRACT

Gambling is deeply rooted in the Filipino culture. This was evident during the Spanish era wherein the Illustrados and Indios used their spare time on playing cards, cara y cruz, jai alai and cockfighting, even though the Catholic church prohibits such activities, it still thrives as one of the favorite pastimes. However, when the Americans came they institutionalized and even legalized some of the gambling activities that include horse racing, lotteries, and casino. The government sees the potential of these games of chance or in layman’s parlance “gambling” as a lucrative source of income in the form of taxes.

This research paper will examine the existing legalized online gambling in the Philippines; the requisites for legitimate online gambling business and the impact of technology on their operation. It seeks to have an inventory of technology aided gambling available in the market as well as the laws covering them. To illustrate how it works and identify the role of government in these activities.

As this is an exploratory and descriptive type of study, it takes a look at how legal gambling and technology work together, and the functions that the law carry out in order to provide these activities in the present market.

Lastly, this research paper is limited in studying the technology aided gambling in the country and will not be tackling any behavioral aspect, element or impact to the society at the very least.

INTRODUCTION

Before we discuss the nature of online gambling, let us first trace the history or evolution of gambling itself. Gambling came from the root word gamble means play games of chance for money. It is said that a person is gambling if he is losing or winning money or properties and the result of which is often associated with chance. The elements to determine whether a person is gambling or not are as follows:

  • The person must realize that by gambling, he is putting his money or properties at risk
  • The result of which is determined by chance
  • Once bet is made, it is irreversible

The games of chance or gambling has long been existing since ancient times dating back about 2,300 B.C. in China but some writings mentioned that gambling have been discovered in one of the artifacts found inside the pyramid of Giza. On the other hand, inhabitants of ancient India, Greece and Rome also practiced some form of gambling.

Gambling has played important role during the early times, when the kings used pair of dice as a form of diplomatic arrangement to acquire ones territory so as to prevent blood shed. Its popularity continued in Middle Ages reportedly that soldiers participating in the games of chance prevented them from performing in their respective assignments. Thus, King Henry VIII of England banned gambling when he determined that his soldiers were devoting more time to gambling and less on improving their drills and marksmanship.

The play of cards was also developed in China, since they are the ones who first used paper. They also developed the shuffling of paper in 900 A.D. The playing of cards then spread to Mameluke Empire predominantly Muslim who decorated the cards with intricate designs. When the cards came to Mediterranean countries, they began to incorporate the royal ranks of the royal court. While the French added the king and queen sometime in the 1500s, which became the standard 52-card deck we use today.

The most commonly known gambling are casino and horseracing but there are other activities that are considered gambling, including:

  • Casino means a building facility which houses certain forms of gambling activity like slot machines, roulette, poker, baccarat, blackjack
  • Bingo is played with randomly drawn numbers which players match against numbers that have been pre-printed on 5×5 matrices.
  • Keno a game in which numbered balls are drawn at random and players cover the corresponding numbers on their cards
  • Lottery ticket is a scheme for the distribution of prizes by lot or chance, especially a gaming scheme in which one or more tickets bearing particular numbers draw
  • Jai-alai is a Basque ball game in which the players propel the ball using a long basket attached to the wrist
  • Sweepstakes or scratch card is a promotion that awards prizes on the basis of a chance drawing or preselected numbers
  • Betting on card games
  • Mah-jong or dominoes is game (originally Chinese) for four players, using a collection of tiles divided into five or six suits
  • Sports betting is the general activity of predicting sports results by making a wager on the outcome of a sporting event
  • Betting on games of skill, like pool, boxing, or golf
  • Tombola is a lottery in which tickets are drawn from a revolving drum

As our society deals with new technology in the information age so as the nature of gambling adapting to this new platform of games of chance. Even though there are so many ways for a person to engage in recreational activity but the rise of gambling in every parts of the world is evident especially with the advent of online and mobile gambling.

Online gambling or Internet gambling is typically betting on different type of games using the Internet. The activities may include online poker, online bingo, online casino and online sports. While mobile gambling is somewhat similar with online gambling but using a different platform like GPRS, GSM Data, UMTS, I-MODE and SMS being provided by telecoms provider. Mobile gambling is done on a remote wirelessly connected device. These devices can include wireless tablet PC’s, mobile phones and other non traditional mid-level networked computing devices. This is the reason why gambling operators is investing in these activities because of its potential market where 3 out of 5 persons nowadays are connected to internet and have been using mobile telecommunication.

Online gambling is thriving in different parts of the world before this came to our country which we wholeheartedly accepted because of our culture of gambling. Ever since the introduction of internet in the early 90’s aside from porn sites, online gambling sites are one of the most visited websites on the internet because it is easy to use where you can play at the comfort of your home or even at your office without a need of travelling to gambling establishments for convenience considering it also offer same level of fun and entertainment.

However, the industry of online gambling was threatened because of the fast face change in technology and morality issues. As regards the technology change, apprehensions were identified through the development of better technology as well as how will the users or gamblers can easily adapt with new technology. But the government was not dictated by the church or other moral society to ban these forms of activity because it will destroy the lives of the people especially the young population majority of whom are the users or players because of the proliferation of internet cafes or shops. The government in response to these objections set up new set of rules to monitor these activities thus making it profitable for the government. It is not to say that the government is legalizing a new form of gambling but it is institutionalizing the same form of gambling using a different platform like internet.

The reach of internet and information technology allowed the rapid growth of gambling industry in our country; this is the reason that the government is tapping PAGCOR to be the lead agency in regulating and monitoring the online gambling in the Filipino households.

DYNAMICS OF ONLINE GAMING

Online gambling is just the other face of the coin with a different marking on it but still the same nature of gambling that requires the placing of bets. Despite of its raising popularity, there were apprehensions questioning the legality of these online games. The government has already answered this matter through its regulatory arm PAGCOR, the Philippine Amusement and Gaming Corporation (PAGCOR) functions as a regulator of the operation of gaming casinos. It was established in the year 1976 to help curb illegal gambling. The establishment of PAGCOR supported the industry of gambling in the Philippines proving that legalized gambling is a potential tool in uplifting the country’s economic status. And it is the sole authority to accept, evaluate and approve applications for PAGCOR e-Games Stations. The issue on legality will discuss later on my paper.

What makes online gambling more appealing to the market? Players usually tells that you can easily access your favorite pastime for a less cost because you do not have to travel to the gambling establishment and pay expensive food; the games online is usually have more variety than in a gambling house; some online games have higher payback percentages because it has less maintenance cost unlike in a gambling house; the games are available 24/7; there are also free online games where you can practice to hone your skills and knowledge of each games so that when you are ready to play you already familiar how it is played; some online games will give you more value for your money because it usually gives you more bonus points than in a gambling house; lastly the most important advantage in playing online games is the convenience and comfort where you do not have to deal with crowd and line up to one of the games.

How can a beginner play online gambling? There are two options. One is to visit the nearest PAGCOR e-games cafes, give them your cash and then you could play in your own computer terminal, at your own pace, in your own time. In fact it is open 24/7 to anybody 21 years old and above and typical casino games can be played in these e-games terminal like Black Jack, “21” games like Caribbean 21, Face Up 21, Match Play 21, Pontoon, Super 21, Baccarat, Pai Gow Poker, War, Red Dog, Tri-card Poker and Vegas Three Card Rummy. Or one can go directly to the online casino website and register to become a member. If the player decides to bet at home he must open an account using his credit card. If it wins and wants to withdraw his winnings, one has to go to the website’s bank or cashier to request for the withdrawal of his winnings. The website will then send a notice of withdrawal through wire transfer to the player’s personal account.

That’s why PAGCOR has embarked into internet casino business to widen the gambling market with the partnership of PhilWeb Corporation, the developer of online games, which was formally introduced on November 5, 2002. Its success develops more local online gaming like sports betting, online bingo, online poker and etc. Early 2008, PAGCOR officially renamed all land based e-Casino to PAGCOR e-Games Cafes. The partnership between PAGCOR and PhilWeb proved to be of success because it raised revenue of Php 1.896 billion as of 2008.

According to PAGCOR, as of today they have opened 171 cafes and targeting to open more in the provinces like Pangasinan and Batangas. PAGCOR has opened its doors to those private individuals who want to put up e-Games Cafes with start up capital of Php 1.2M to 1.5M only, below are the requirements:

Step 1. Locate a site
The site must be at least 200 meters (center-to-center) from any school/educational institution or place of worship/religious center, It should also ideally be in a high-traffic area with reasonable security.

Step 2. Letter of intent
This a letter that formally announces your commitment to the business.

Step 3. Letter of Approval after inspection by PAGCOR
This gives you the assurance that PAGCOR approves of your proposal.

Step 4. Build/Install Cafe
You can choose between a rented space or a modular PAGCOR e-Games café.

Step 5. Obtain Mayor’s Permit
Every business needs a Business Permit from the LGU.

Step 6. PAGCOR will issue a Certificate To Operate (CTO)

Step 7. Launch!

PhilWeb will support you with marketing materials and strategies aside from 24/7 technical help and customer support for PAGCOR e-games café and 24/7 cash and security support.

PAGCOR also offers other online games like sports betting where players place their bets on athletic competitions of every kind, one of them is Basketball. Since basketball is popular in our country and there have been betting going around like ending game, PAGCOR tapped this opportunity by incorporating it into its sports betting or most commonly known as BasketballJackpot. How it is played:

Last 2 digits
2-digit combination game based on the last two digits of the final scores of a featured basketball game. Every P10 winning bet wins P500-800

Quarter Ending
2-digit combination game based on the last two digits of the ending score per quarter of a featured basketball game. Every P10 winning bet wins P700

Last 3 Digits
Last 3 is essentially, Last 2 with a kicker number. The winning Last 3 combination is derived from the Last 2 digits combination plus the last digit of the total points made by the highest scorer of the game. Last 3 is made more exciting since a P10 wager can win P5000.

Last Two Jackpot Special
6-Digit combination game based on the scores for the second and third quarter and the final score. Every P10 wins a progressive jackpot that starts at P100, 000. Consolation prize of P500 when you get only the last 2 digits correct.

What does PhilWeb have to do with online gambling? PhilWeb is the first and largest listed Internet Company in the Philippines by market capitalization. They are the dominant technology-based gaming firm in the country and a principal technology enabler to the Bureau of Internal Revenue in their efforts to increase tax collection and to the Philippines Amusement and Gaming Corporation (PAGCOR), the regulatory agency for all games of chance. In short, PhilWeb is the online developer and technical support for all online games which PAGCOR regulates. They have subsidiaries like Big Game Inc. or BGI is the subsidiary of PhilWeb that operates PAGCOR e-games cafes and the Philweb Casino Corporation or PCC is intended to develop, engage, and maintain gaming systems and applications for all types of casino operations, whether land-based, internet based or virtual.

PhilWeb as of to date is the only principal service provider for Internet Gaming recognized by PAGCOR which gave them the agreement/contracts on (1) Intellectual Property License Agreement (IPLMA) for Internet Sports Betting, (2) IPLMA for PAGCOR e-Games Cafes, (3) IPLMA for Premyo sa Resibo Mobile Games, and (4) IPLMA for TXTINGO mobile game. These contracts legalized the operations of online gambling in the Philippines which also promised to update these technologies as the times improve.

LEGAL ISSUES

The main contention or issue posited in this paper is whether or not online gaming is legal. As provided for in PD 1869 sec. 10, PAGCOR is authorized by legislative franchise to conduct all kinds of games of chance.

Section 10. Nature and term of franchise. Subject to the terms and conditions established in this Decree, the Corporation is hereby granted for a period of twenty-five (25) years, renewable for another twenty-five (25) years, the rights, privilege and authority to operate and maintain gambling casinos, clubs, and other recreation or amusement places, sports, gaming pools, i.e. basketball, football, lotteries, etc. whether on land or sea, within the territorial jurisdiction of the Republic of the Philippines.

However, this was challenge in one or two high court decisions contesting the legality of online gaming one of those is the case filed by former senator Robert Jaworski against PAGCOR (GR no. 144463 January 14, 2004). The petitioner raised several issues:

I. WHETHER OR NOT RESPONDENT PAGCOR IS AUTHORIZED UNDER P.D. NO. 1869 TO OPERATE GAMBLING ACTIVITIES ON THE INTERNET;

II. WHETHER RESPONDENT PAGCOR ACTED WITHOUT OR IN EXCESS OF ITS JURISDICTION, OR GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION, WHEN IT AUTHORIZED RESPONDENT SAGE TO OPERATE INTERNET GAMBLING ON THE BASIS OF ITS RIGHT “TO OPERATE AND MAINTAIN GAMBLING CASINOS, CLUBS AND OTHER AMUSEMENT PLACES” UNDER SECTION 10 OF P.D. 1869;

III. WHETHER RESPONDENT PAGCOR ACTED WITHOUT OR IN EXCESS OF ITS JURISDICTION OR WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT GRANTED AUTHORITY TO SAGE TO OPERATE GAMBLING ACTIVITIES IN THE INTERNET.

The Supreme Court ruled that the franchise given to Sports and Games and Enterntainment Corporation (SAGE) by PAGCOR was null and void that it acted beyond its authority that Internet gambling does not fall under any of the categories of the authorized gambling activities enumerated under PD 1869, the legislative franchise of PAGCOR, which grants to it the right and privilege to operate and maintain gambling casinos, clubs, and other amusement or recreation places. The High Court went on to say further that an institution like PAGCOR is allowed only to provide just the physical structures where people who intend to gamble go to play.
Similar case and issue were filed against PAGCOR by Mr. Ramon Gonzales (GR no. 144891 May 27, 2004), as a citizen, taxpayer and member of the Philippine Bar, filed on September 28, 2000 the instant Petition as a class suit under Section 12, Rule 3 of the Rules of Court seeking to restrain PAGCOR from continuing its operations and prohibit it and its co-respondents from enforcing: (1) the “Grant of an Authority and Agreement for the Operation of Sports Betting and Internet Gambling” executed between PAGCOR and SAGE.

In the case at bar, “PAGCOR executed an agreement with SAGE whereby the former grants the latter the authority to operate and maintain sports betting stations and Internet gaming operations. In essence, the grant of authority gives SAGE the privilege to actively participate, partake and share PAGCOR’s franchise to operate a gambling activity. The grant of franchise is a special privilege that constitutes a right and a duty to be performed by the grantee. The grantee must not perform its activities arbitrarily and whimsically but must abide by the limits set by its franchise and strictly adhere to its terms and conditionalities. A corporation as a creature of the State is presumed to exist for the common good. Hence, the special privileges and franchises it receives are subject to the laws of the State and the limitations of its charter. There is therefore a reserved right of the State to inquire how these privileges had been employed, and whether they have been abused.”

“While PAGCOR is allowed under its charter to enter into operator’s and/or management contracts, it is not allowed under the same charter to relinquish or share its franchise, much less grant a veritable franchise to another entity such as SAGE. PAGCOR can not delegate its power in view of the legal principle of delegata potestas delegare non potest, inasmuch as there is nothing in the charter to show that it has been expressly authorized to do so. The Supreme Court ruled that the agreement executed by PAGCOR to SAGE is null and void.”

The question is still standing as to whether PAGCOR is authorized to engage in online gaming. Based on the above mentioned cases the court did not mentioned that online gambling is illegal per se but the authority given by PAGCOR to these entities are illegal because there is nothing in their charter that allows them to give franchise to operate a separate online gambling activity. Neither there was laws prohibiting them to engage in online gaming because when the charter of PAGCOR was promulgated internet is non-existent. From thereon PAGCOR took upon itself the operation of online gaming and entered into a management contract with PhilWeb as the internet provider as provided under their charter:

Section 11. Scope of Franchise.

1. Enter into operating and/or management contracts with any registered and accredited company possessing the knowledge, skill, expertise and facilities to insure the efficient operation of gambling casinos; provided, that the service fees of such management and/or operator companies whose services may be retained by the Corporation shall not in the aggregate exceed ten (10%) percent of the gross income;

Since there were no laws granting or prohibiting the online gambling, there are moves in Congress proposing that gambling on the Internet be made illegal. The House Bill No. 5613 or the “Internet Gambling Prohibition Act of 2008,” asserts that online gambling should be made illegal for people running a gambling operation to use the Internet, “ or for any other interactive computer service to place, receive, or otherwise make a bet or wager; or send, receive, or invite information that may assist in the placing of a bet or wager.” those found violating the proposed law would be fined with appropriate amounts or sentenced to jail for up to four years.

Up until now this House Bill remains a proposal because of lack of support locally. The reason maybe the additional income or funds it generates for the government and the bandwagon effect of utilizing the technology among its users. Besides if we do not recognize this activity other entity whether internationally or locally might illegally take advantage on the gamblers money.

CONCLUSION

The coming of new technology and information age are among the changes that our society must adapt. Gambling has long been embedded in our culture and it’s only right that gambling must also adapt with these new platform. There’s no doubt that technology has played its role in our society changing the way we think, interact, communicate, and play making our lives more convenient and comfortable. It is good that the government is harnessing its capability in this new technology looking for ways to tap or utilize it to raise revenue. But again its promising benefits are equated by the increasing ethical and legal issues that it poses to society. Its general growth and development was brought about by its easy, accessible and convenient nature. What the government must do is to make rules and regulations more stringent so as to address the ethical and legal issues.

Lastly, the foremost motivation for its operation and continued popularity is its economic benefits. Online gambling not only provides income for the government but also jobs to many unemployed Filipinos. In addition, the entertainment and thrills for the players of the online gambling.


REFERENCES

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