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Internet Gambling Uses Loophole in the Regulation

Posted July. 12, 2005 03:15,   


HanGame, Netmarble, Pmang, and Mgame, local Internet sites providing online gambling games, recorded a 234.3 billion won revenue last year, from a mere 82.4 billion won in 2002.

Traditional gambling industry represented by horseracing, motorboat-racing, Kangwon Land Casino, on the other hand, saw its revenue last year decline by 25 percent to record 7.92 trillion won.

The growth of Internet gambling sites has been spurred by the explosive increase of users in their 20s and 30s and female users. The number of registered users for four gambling major sites amounts to between 15 million to 24 million, an increase of 1~2 million per year. Sixty percent of users are in their 20s and 30s, and female users account for 40 percent of total users.

The Korean Game Development Institute (KGDI) expects the online game market to grow by 20 percent annually until 2007, soon surpassing the revenue from Kangwon Land Casino.

Cyber Money Equals Cash-

The gaming sites` main source of income is from selling cyber items or avatars (one`s characterized self on the Internet) which give cyber money. Users will get as much as one billion won in cyber money for online Go-stop, a traditional Korean card gambling game, if buying an avatar worth 70,000 won.

Cyber money worth one billion won for go-stop is being traded at 13,000 to 15,000 won in the online game market. The actual price fluctuates similar to stock price, controlled by supply and demand.

Sellers, after completing the transaction, play a game with the buyers, in which sellers intentionally lose money to the buyers. This activity is called "transfusion." Some sellers go further and hand over the ID and password of the account containing the cyber money.

The total monetary amount of items exchanged across 100 Internet sites reached 500 billion won last year. The lack of relevant regulation keeps this transaction within the legal boundary.

Promoting Speculative Spirit-

According to the Korea Media Rating Board, 196 games with varying degrees of gambling element were newly released last year, twice that of the number released in 2003.

The committee is not eligible for regulating these games unless cyber money is directly charged by using cash, or cyber money is transferred to gift certificates, letting gaming companies sell items with cyber money as a form of bonus to avoid regulation.

According to a person from Dandobak, a group to discourage the spread of gambling, "It is nonsense not to judge the nature of the gambling based on cyber money and real cash. The group sees members` playing Internet gambling games as the recurrence of the gambling addiction.”

Lee Jin-oh, the general executive of the Korean Network to Regulate and Improve Gambling Industry, said that online games could lead to real gambling such as horse racing or casino games. "Internet gambling games are clearly stirred up in a speculative spirit and lead to gambling addiction that should be heavily regulated along with traditional gambling industry," he added.

Jae-Myoung Lee egija@donga.com