As technology (in particular, the Internet) allows new kinds of connections to develop, old network forms are challenged.

An 7/7/04 item from Internet Week, "Peer-To-Peer Gambling Coming Soon To America" describes the rise of a new form of online gambling that bypasses the "house" altogether. See the "house" (the casino, which literally, Italian diminutive for "house") as the centralized node via which individual gamblers can find a game; or punters can assemble the parimutuel pool. In the past this would be the brick and mortar facility, although with the Internet, the gambling space has become quite virtual. This scheme goes one step further, to remove even the virtual house -- you can become the bookie.

"It's like Kazaa or Morpheus, but for betting", per the BetBug website. If I understand the way this works, the individual bettor offers odds on some event, and escrows the money in an account; any takers also park money in an account (in a Cyprus-based bank). So the website is the vehicle for connecting bettor to bettor, rather that bettor to house, and through the house to other bettors. BetBug scrapes 5% from the winning account for the service.

According to the Internet Week article:

Unlike Web casinos, bettors using peer-to-peer services don't wager against the house, but rather against each other. The online betting services allow users to set their own terms. This shift in risk from more traditional casinos to individual users poses a threat to established online gambling sites. A market that some analysts estimate generates $8 billion per year.

While online wagering is technically illegal in the U.S., BetBug is arguing that this is legal, because the betting takes place between two individuals, like you betting with your neighbor whose garage will collapse first. With no "middlemen" -- i.e., the bookie or the house -- the U.S. Wire Act (the legal basis for outlawing online gaming)is not violated. Or so they argue.

Here's a link to a more comprehensive New York Times article on the same: "Gambling Sites Offering Ways to Let Any User Be the Bookie".

What is clear is that the Internet is changing how gambling is conducted, just as it has changed auctions, securities day-trading and music sales.

While Web casinos are not new, a new generation of online services like Betfair has emerged to allow sports bettors to wager not against the house but directly against each other. The services, by letting individuals set the terms of their own wager easily and efficiently, threaten to diminish the role of more traditional casinos, which set the odds of a contest and then assume the risk for paying a winning bet.