British Columbia launched North America's first government-run online casino on Thursday, aiming to take a cut of the big dollars its residents are already gambling over the web.

The western Canadian province could no longer stand on the sidelines and lose revenue to the hundreds of off-shore websites available to residents to gamble money, often illegally, officials said.

The hard reality is this - that activity is not going away, said Housing and Social Development Minister Rich Coleman, whose office oversees the British Columbia Lottery Corporation.

The province's right-of-center Liberal government, which once opposed expansion of land-based casinos in British Columbia, has sought a new revenue source to close an expected C$1.7 billion deficit in this fiscal year.

British Columbia may be the first jurisdiction in North America to offer games, but I can predict that it won't be the last, Coleman told a ceremony in Vancouver launching the site.

The global online gaming industry generates C$20 billion in revenues annually, with British Columbia residents thought to be gambling C$100 million online annually, according to provincial lottery officials.

Casino revenues will go into the province's general fund. Canada, in general, does not tax money won through a lottery or from recreational gambling. British Columbia's web casino will only take bets from provincial residents.

British Columbia said it also has worked with lottery officials in Quebec and Canada's Atlantic provinces, which have expressed interest in offering online betting on games such as craps, poker and roulette.

Lottery officials said their site would offer a safe alternative to unregulated private sites, which may not reveal the true odds of winning.

Officials said having a regulated casino would also allow them to offer help to people who have gambling addictions, but critics said the province's was already failing on that effort at the lottery and land-based casinos it now allows.

If we're going to do this as a government then we have a higher responsibility than private operators elsewhere to ensure we are protecting people, said Shane Simpson, a lawmaker with the opposition New Democratic Party.

Lottery officials have estimated online gambling is growing 20 percent annually, and acknowledge it more likely to induce addictive gambling than traditional casinos.

(Reporting by Allan Dowd, Editing by Frank McGurty)