MGM Mirage plans to start an Internet casino next month, becoming the first United States casino to confront the challenges involved in offering blackjack, roulette and craps to gamblers on home computers.
The casino, whose computer operations will be based on the Isle of Man, a tiny island in the Irish Sea, will initially have a policy of refusing bets from residents of the United States, where it is illegal to offer gambling online.
The company will use new software and require proof of foreign residence in an effort to restrict betting to people over the age of 18 who are in a handful of European countries — no small task, given the challenge of knowing who and where someone is on the Internet.
MGM’s credibility and its license to operate are very much on the line. Regulators in some states — particularly in Nevada, where MGM has six Keluaran Hk casinos, including the Bellagio — have said they will be watching to ensure that MGM does not take bets from United States residents. Federal law prohibits offering casino and sports wagers to United States residents across state lines over telephone and the Internet, according to the Justice Department.
More generally, Internet gambling faces scrutiny from some members of Congress and religious and watchdog groups, who say that Internet casinos make it too easy for bettors to lose money rapid fire with the click of a mouse. In addition, the General Accounting Office issued a report this week warning that Internet casinos could be used for money laundering, perhaps by terrorists.
The entrance of MGM, one of the world’s largest casino companies, indicates that United States casinos are unwilling to sit on the sidelines as increasing numbers of people worldwide point, click and bet in what is already a $3.5 billion annual market, according to one analyst’s estimate.
“We see billions of dollars being made out there,” said Bill Hornbuckle, president and chief operating officer of MGM Mirage Online. He said MGM had a chance to establish itself in a big way in a nascent industry that has been in great disarray, and to be ready “if and when this comes to the U.S.”
Nevertheless, some of MGM’s top land-based competitors say it is too soon to move into online gambling. David Strow, a spokesman for Harrah’s Entertainment, which owns the Harrah’s casinos, said the company thought there were “too many unanswered questions,” including the difficulty of verifying the age and location of players. “Until those issues are all resolved to any extent, we’re not interested in participating,” Mr. Strow said.
But the Park Place Entertainment Corporation, which operates Caesars Palace, among other casinos, has also applied for a license to operate from the Isle of Man. It has not yet said whether it will open a virtual casino if it is granted a license, saying that a “lot of information has to be carefully evaluated.”
Currently, there are 2,000 Internet casino sites, with individual operators often controlling many sites. The operators are based overseas, often in the Caribbean or Costa Rica, and offer wagering on sporting events and a range of casino games. Despite laws that make it illegal to offer such wagers to United States residents, 60 percent of the bets come from America and about 20 percent from Europe, according to Bear, Stearns.
For the players, the experience is a bit like sitting in an actual casino playing video poker. Cards are “dealt” on a virtual green table, and a blackjack player, for instance, can use the mouse to click on buttons that permit him to “hit” or “hold.” Other buttons permit players to place bets or increase them, to invest more money from an account or to have their winnings sent to them.
MGM’s online casino plans to offer craps, roulette, video poker, keno and several slot machines, with bet denominations from a few pennies to a maximum wager of $4,000, on roulette.
MGM enters an industry that is very much in disarray and that has not grown nearly as quickly as industry analysts expected. According to Bear, Stearns, online gambling will generate $3.5 billion in revenue this year. Initially, Bear, Stearns had estimated that that number would grow to $5 billion next year, but it recently scaled that back to $4.2 billion.
One reason for the slower-than-expected growth is that a growing number of American banks are refusing to permit their MasterCard and Visa credit cards to be used for online gambling. The banks say they are wary of people who make bets, then later deny placing them, as well as United States laws that can make some gambling debts unenforceable. As a result of the decline in payment options, online casinos say they are finding it difficult to get payment and that revenue is down 30 percent to 40 percent.
To navigate the numerous obstacles, MGM said, it has deployed an elaborate software system intended to check the age, identity and location of gamblers.
One pillar of the system is known as geo-location, technology intended to permit businesses to find out where their Internet customers are physically situated.
One company providing this service for MGM is Quova of Mountain View, Calif. Its technology reads information contained in a stream of Internet traffic to check the route the information has traveled back to the location where the user has connected to the Internet. This is usually within 20 or 30 miles of where the person actually is, the company said. But the system is not foolproof; somebody based in the United States could dial into an Internet access provider in Britain, for example, thereby making it appear that he entered the Internet from that point.
To further verify that people are where they claim to be, MGM is using programs that check a person’s identity, age and location against publicly available databases like voter registration or national identification numbers. If a person cannot be found in the databases, he will be required to fax a copy of his driver’s license, or provide other documents verifying his identity.
“Our underlying premise is that you’re guilty until proven innocent,” Mr. Hornbuckle of MGM Mirage Online said. He declined to estimate how often someone would slip through, but said, “we can give reasonable assurance they are where they say they are and who they say they are.”
Scott Scherer, a member of the Nevada State Gaming Control Board, which ensures that casinos do not violate their licenses, said the board was confident enough in the system to let MGM go ahead, even though it did not expect the screening system to be 100 percent effective. Mr. Scherer said of the system, “We will test it.”
While there are many risks for MGM, the financial investment is relatively small. Mr. Hornbuckle said that MGM had spent around $15 million to build its computer center and set up security, and $80,000 for an annual license to operate in the Isle of Man. There, in the city of Douglas, MGM has 18 employees at two sites, a computer center and a call center.
By comparison, Mr. Hornbuckle said, it costs $1 billion to get a casino up and running on the Las Vegas Strip. Moreover, the overhead online is much smaller, because there are virtually no bricks-and-mortar requirements, like actual blackjack tables.