As the provinces increasingly look to lucrative online gambling as a potential new source of revenue, one global Internet giant has already used a legal loophole to set up shop in Canada.
PokerStars.Net, the web's most successful online gambling site, has several Canadian connections.
For one, the software that has dealt 48 billion hands, is developed in Richmond Hill, Ont., by PYR Software. The firm was created by PokerStars founder Isai Scheinberg in 2000.
Scheinberg, a former programmer himself, had worked with IBM in Canada and Israel before he and his son Mark started what would become one of the most instantly recognizable online gambling brands in the world.
Mats Sundin, formerly of the Toronto Maple Leafs and the Vancouver Canucks, had a stint as one of website’s international celebrity ambassadors.
But PokerStars most interesting connection to Canada could be the location of a crucial server sitting on the Kahnawake Mohawk reserve in Quebec.
Kahnawake hosts PokerStars through its Internet service provider and data centre – Mohawk Internet Technologies and regulates it through the Kahnawake Gaming Commission.
The partnership has proved lucrative for the Kahnawake, which just this week announced plans to tap into its online gaming revenues to fund a multi-million-dollar wind energy farm project with a U.K. based company.
PokerStars' Canadian connections and astounding success are no doubt being watched by regulators as more provincial gaming bodies eye online gambling as potential revenue streams. B.C. has already launched its own website, and Quebec, Ontario and Saskatchewan have all announced plans to wade into the market.
Under the Criminal Code, only provincial government monopolies can offer gambling in Canada.
But John Pliniussen. a business professor and online gambling expert at Queen’s University, said a crackdown on servers on reserves is unlikely.
Mainstream casinos on First Nations land already compete in Ontario, he said.
“It’s a thorny issue. And whichever government will try and resolve it is going to be in for a big fight,” he said.
Pliniussen said he wouldn’t be surprised to see more local online gambling servers pop up on reserves as bands look to capitalize on the online gambling movement.
“It’s fair game. That’s where the action is.”
Kahnawake says the reserve is excluded from the Act for legal and historical reasons.
A spokesperson from PokerStars was not immediately available for comment.
PokerStars has managed to capitalize on the poker boom of the last decade better than any of its competitors, despite stiffer regulations in its biggest market, the U.S.
In 2006, the U.S. Congress passed the Unlawful Internet Gambling Enforcement Act designed to crackdown on third-party operators.
The legislation did not make it illegal for an individual to bet online, but it did make it harder.
The UIGEA blocked all bank transfers to the operations that provided the gambling and many websites closed up shop as a result.
That didn’t stop PokerStars, which began offering online accounts to its members and moved its headquarters to the Isle of Man, a British Crown dependency located between England and Ireland in the Irish Sea.
“As reflected in legal opinions provided to PokerStars, its activities in the U.S. are and at all times have been lawful,” the website said last month after the U.S. House updated the UIGEA.
Today, PokerStars has an estimated 38 million members, annual revenue of $1.4 billion and some $500 million in profits, according to Forbes.
Globally, online poker is a $4.8-billion annual business, according to H2 Gambling Capital. PokerStars enjoys 35% of that market.
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