Online gambling is on the move again

Online gambling is an idea whose time has come.  Whether you support online gambling or opposite you cannot ignore it.  This is online gambling’s beginning time; not that internet gambling has not existed before, because it has been around for years and in other parts of the world it is big business.  But in the United States, after a period of legal confusion and ambiguity, it is just starting to break through the mist of off-shore, semi-legal internet gambling sites and the not yet gambling world of social gaming.  But it does seem to be breaking through, if the abundance of media coverage is any indication of a new day for online gambling.  This week alone three separate media outlets call me looking for opinions about the future of online gambling and its impact on bricks and mortar casinos.

Unless Congress takes control and sets up a regulatory framework, the individual states under authority implied in the Department of Justice’s ruling in December are going to let the cat out of the bag.  Maryland, Delaware, Rhode Island, Illinois, Iowa, Nevada, California and West Virginia have already taken some steps toward legalizing online gambling within their borders.  And at least three states have begun negotiations to cooperate across state lines and share products and customers.

This an unfolding and evolving story, at the rate articles are being written now, one can expect new chapters weekly if not daily.  Besides the stories related to the individual states authorizing some form of online wagering, there are the stories concerning social gaming.  The social gaming stories are currently focused on two separate storylines, the social platform, like Facebook and the game providers like Zynga, Betable, 3G Studios, International Game Technology, Bally, Aristocrat and Williams.  At the moment the social networking sites do not offer any real money wagering opportunities – but everyone expects that to change.

Recently, Zynga announced with its earnings release that it was going to move into real money gambling outside the United States – with the implication that it would be offering the same options within the country as soon as it was possible. Those two storylines will converge as soon as there are states which have authorized online gambling through their state lottery.  At that point, the state lottery can offer the games being made by Zynga, 3G Studios or one of the slot manufacturers or other game makers to the lottery players within the state.

There is one piece missing from the mix so far, the bricks and mortar gaming companies, like Caesars and MGM.  All the major casino companies are very eager to get their own shot at the brass ring, but have no mechanism currently for doing so.  Nevada may provide the first opportunity, but online gaming restricted to just the citizens of Nevada is not going to be a very big business.  For that to work, the those with a Nevada “online gaming license”  – about 30 casinos companies are said to have applied for such a license thus far – need to be able to spring board into other states with larger populations.  To be commercially viable it will take states with large populations, like California and New York.

In the meantime, the bricks and mortar guys are trying to develop an online presence and use social media as much as possible, while they bide their time and twiddle their thumbs.  That biding and twiddling is something state lotteries and game makers are not doing. If something does not happen legislatively at the federal level the lotteries are going to get a very big head start – and that just might be a game changer for the bricks and mortar casinos.  They do not want to take that chance; therefore, the major gaming companies are doing something, they are lobbying; their best bet, or so they believe, is congress.  And with Nevada’s Harry Reid as majority leader of the Senate they are giving it a concentrated effort.  Federal legislation might, if written correctly,  give the bricks and mortar companies the online opportunity they seek and still protect the bricks and mortar investments.  That is a tall order, or in the parlay of the industry a bet with long odds.

 Internet gambling, which could bring slot machines to every home, office or smart phone, has moved from the periphery of Maryland’s debate over expanded gambling to center stage. Speaker Michael E. Busch informed Democratic members of the House of Delegates on Wednesday that Internet gambling should be among the topics explored in next week’s special legislative session. And Thursday, a spokeswoman for Gov Martin O’Malley gave the proposal a little more momentum when she refused to rule out an inclusion of Internet gambling in an overall casino expansion bill. Baltimore Sun, 8-2-12

 The New York Times’ Michael Cooper has an interesting article examining the gambling landscape up and down the East Coast, and raising questions about whether there’s enough demand to merit the industry’s continued expansion…Cooper also notes a new law signed in Delaware last month that made it the first state to legalize Internet gambling, which the feds are now allowing. Rhode Island officials are open to online gambling, and Delaware reportedly wants to partner with Rhode Island and West Virginia on some sort of online poker offering. Ted Nesi, WPRI, 8-3-12

 The casino industry is trying to get a grasp on the growing social gaming phenomena. Slot machine giant International Game Technology is offering its Double Down social gaming website to casino operators interested in exploring the process. IGT, which acquired Double Down in January for $500 million, recently placed the ability to enter the free play casino through the websites of several small casino companies. There is no charge to the casino operator…Eric Tom, IGT executive vice president of global sales, said discussions are ongoing with some 20 other companies. Howard Stutz, Las Vegas Review-Journal, 8-3-12

 The Justice Department’s reinterpretation of the Wire Act might have given Sen. Harry Reid the dose of urgency he needed to sign up congressional support for online poker legislation. But it’s also made the task of keeping a coalition of supporters together much more complicated… Reid has to be careful not to alienate the slew of senators from those states — many of them natural allies of Reid’s online poker effort — with a bill that sticks too closely to a poker-only model. And other recent supporters of online gaming, including American Indian tribes, must be persuaded to trust Reid and his chief negotiating partner, Sen. Jon Kyl, to come up with an agreeable system. Those competing interests make it challenging to keep a united public front while talks and vote counts continue behind closed doors. Karoun Demirjian, Las Vegas Sun, 8-3-12



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