Officials could see battle over Internet gambling this year
Terrorism and economic stimulus might be at the top of the congressional agenda, but two familiar topics to the gaming industry — Internet gambling and a proposed ban on college sports betting — are waiting to emerge in 2002.
Two bills aiming to ban Internet gambling in the United States — one introduced by Rep. Bob Goodlatte, R-Va., the other by Rep. James Leach, R-Iowa — were introduced in Congress last year. Both bills are targeted at banning the use of credit cards, electronic transfers and checks at Internet casinos — and both could emerge in 2002, said Rep. John Gibbons, R-Nev.
“It’s going to be a battle,” Gibbons said at an afternoon session of the American Gaming Summit. “Both of them are very strong-willed individuals.”
Few observers give either bill much of a chance at passage this year, though Prudential Securities noted in a Monday research note it is possible either Goodlatte or Leach could attach their bills to numerous anti-terrorism or anti-money laundering bills now pending before Congress.
In the past, such bills enjoyed the support of U.S. casino operators. But now, “given the industry’s divided posture on an e-gaming ban, we would be surprised to see such legislation pass,” the Prudential note said.
That divided posture was apparent Monday afternoon. Reflective of the growing support for regulated Internet gaming in Nevada was Gibbons, who said his opposition to Internet gambling was reserved for Internet casinos operated without regulatory oversight.
‘When it’s regulated and controlled, it’s a state’s rights issue,” Gibbons said. “Unregulated Internet gambling is the genesis for the legislation now being considered by Congress.”
Also leaning toward regulated Internet gaming in Nevada was Bobby Siller, member of the Nevada Gaming Control Board.
Legality under federal law, technology, security and problem gambling are all issues that must be considered and resolved first, Siller said. But solutions must be found, he said.
“Internet gaming will be here… (and Nevada licensees) must have an opportunity to take advantage of this,” Siller said. “We’re in a new era. We have to have an environment that allows them to grow. If we don’t, they’ll be left out. We need to be flexible and creative.”
But others are leery of moving forward. Nevada’s most powerful Congressional delegate — Senate Majority Whip Harry Reid — remains “opposed in principle” to Internet gambling, said James Ryan, Reid’s legislative director.
And Kim Sinatra, Park Place Entertainment Corp.’s assistant general counsel, warned gaming companies against pressing too hard for legalization of Internet casinos in the United States.
“It’s taken a long time to bring credibility to this (Trusted Online Casino Singapore) business,” Sinatra said. “It’s important we don’t do anything that would jeopardize that respect.”
Tom Gallagher, Park Place’s chief executive and chairman of the Nevada Resort Association, was more blunt after the session.
“We should be very careful about creating the belief that all we’re interested in doing is putting a vacuum cleaner in people’s pockets and sucking out all the loose change,” Gallagher said.
In a Monday research note, Bear Stearns gaming analyst Marc Falcone said he believes the debate’s a moot point, since the Goodlatte and Leach bills have little chance of passing.
But that will be of little benefit to existing Internet casinos, he wrote. Though Congress is unlikely to act, more and more U.S. banks — including First USA, Wells Fargo, Chase and Providian — are banning the use of their credit cards at online casinos on their own initiative.
‘Some (online casino) operators have reported that business levels are down as much as 50 percent, due to the credit card issue,” Falcone wrote.
This decline in business, combined with rising costs of new customer acquisition, should result in a big shake-out in the ranks of online casinos, Falcone wrote. That could result in opportunity for big casino operators like MGM MIRAGE, he said.
“We believe attrition would give a land-based operator the ability to increase its web presence through enhanced branding and targeted marketing efforts, which could ultimately drive additional traffic to their land-based facilities,” Falcone wrote.
But Falcone said such efforts by Nevada casino operators will likely have to be overseas, as MGM MIRAGE is trying to do at the Isle of Man, a British dependency.
“The Nevada regulatory bodies appear to have put the Internet gaming issue on the backburner for now, and don’t seem likely to move forward on the issue in the near term, in our view,” Falcone wrote.
While Nevada’s ranks might be split on Internet gaming, there is no such split on proposals to ban collegiate sports betting. And the ban’s most vocal proponent, Sen. John McCain, R-Ariz., is expected to move ahead soon, Ryan said.
Reid has been successful in keeping previous bills off the Senate floor, Ryan said. But McCain said last week he plans to find another bill on which to attach the betting ban — and Ryan said that will be tougher to stop.
“(Reid) can’t prevent any single senator from attaching an amendment,” Ryan said. “That’s going to be a tough fight, and one we will face early on.”
McCain could coordinate the ban with his push for campaign finance reform, or he could time the ban’s introduction with the NCAA basketball championship tourney, better known as “March Madness,” Ryan said. Using such symbolism — and bringing out college coaches, athletes and university presidents to speak for the bill — can make the fight to convince Congress to side with Nevada tougher, Ryan said.
“It’s very difficult to get people opposed to that kind of force,” Ryan said.