Casino owners battle over online gambling 14-02-12


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Casino owners battle over online gambling 14-02-12

  1. 1. Casino owners battle over online gambling By Aaron Stanley in Washington ©AP A staff member demonstrates the roulette wheel A debate over the future of internet gambling has created a rift among US casino industry titans, pitting advocates of expansion such as Jim Murran, chief executive of MGM Resorts, against billionaire opponents Sheldon Adelson and Steve Wynn. The split, which erupted in an advertising battle this week, comes at a pivotal moment for the industry, following last year’s launch of online gambling in Delaware, New Jersey and Nevada. As many as 10 states – including California, Illinois and Pennsylvania – may consider similar legislation in 2014, according to the research firm Gambling Compliance. The push for expansion is coming from a new coalition led by the American Gaming Association, whose members include casino groups such as MGM andCaesars that are eager to develop the online marketfurther. The AGA has launched an ad campaign to push back against Mr Adelson and Mr Wynn – who chair Las Vegas Sands and Wynn Resorts, respectively – and promote what it claims are the benefits of legal and regulated internet gaming. “Internet gaming is here,” said Geoff Freeman, AGA president. The choice for the industry was either to get involved or be pushed aside, he added. The prize is a US online gaming market that, if legalised and regulated, could be worth as much as $13.4bn within five years, according to H2 Gambling Capital, an industry research firm. But Mr Adelson, one of the Republican party’s largest donors, has vowed to spend “whatever it takes” to stop internet gambling. Richard McGowan, a Boston College professor who studies the industry, says Mr Adelson’s opposition is rooted in a fear that internet gambling will harm his casinos in Nevada and Pennsylvania. The billionaire argues, however, that the social costs outweigh the revenues. Mr Wynn had remained publicly agnostic until siding with Mr Adelson last week. Mr Adelson has assembled other high-profile figures such as former New York Governor George Pataki and former Arkansas Senator Blanche Lincoln, to push his message at the state and federal levels. The group launched a six-figure ad campaign on Monday urging Congress to restore the Wire Act of 1961 – which prohibited internet gambling until a 2011 Department of Justice ruling overturned the federal blanket ban and allowed states to decide for themselves. Internet gaming is here. The choice for the industry is either to get involved or be pushed aside “The main thing is to raise public awareness that this is happening. Ninety-five per cent of people have no idea that three states have authorised [internet gambling]. If they did, they would be very frightened by the prospect,” Mr Pataki said.
  2. 2. Mr Adelson’s group has corralled support from 16 state attorneys-general opposed to online gambling expansion. It is circulating FBI memos warning that internet casinos can be used by terrorists and criminal syndicates to launder money. Before the late 1980s, most forms of gambling had been prohibited in the US outside Nevada and New Jersey. But the Indian Gaming Regulatory Act of 1988 changed that by allowing Indian tribes to operate casinos on reservations for their own benefit. Cash-strapped states subsequently authorised slot parlours and small casinos, and by the late 2000s, states were fiercely competing for gambling revenues by building larger and more elaborate casinos. In 2014, 22 states will operate commercial or racetrack casinos, while 28 states host tribal casinos. The AGA had previously been split on the question of internet gambling – primarily due to Las Vegas Sands’ presence on its board. But under Mr Freeman, who took over the group in mid-2013, it now contends that online play is the next logical outgrowth of the industry’s development. Pointing to the fact that Americans are already gambling online through offshore sites to the tune of $3bn a year, the AGA is advocating for federal legalisation and regulation to protect consumers and recapture lost revenues. It says Europe is an example of how online gambling can be regulated and operated safely. The AGA has retained its own team of heavy-hitters including political strategist Jim Messina, who helped mastermind President Barack Obama’s 2012 re-election and is a part-time elections adviser to David Cameron’s Conservative party. Known for his use of data and social media-driven messaging, Mr Messina could be influential in winning over voters and legislators. Other states’ appetite to consider online gambling legislation may depend on the experience of recent converts. New Jersey reaped a meagre $8.4m in online gambling revenue after launching in late 2013. The figure was much worse than Governor Chris Christie and most analysts had expected, and industry observers and advocates will be keen to see if a parallel market of online gamers emerges or if the games cannibalise bricks-and-mortar casinos’ revenues. While Europe’s online and traditional casino markets have managed to coexist, the abundance of casinos in the US compared with Europe means that there are few international precedents to help predict who will win the high-stakes battle for the industry’s future.