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Best of Howard Stutz

Gaming Guru

Howard Stutz
 

Nevada may need partners for Net poker

1 July 2012

Two of the state's largest slot machine manufacturers received Nevada's first interactive gaming licenses in June. Regulators could license three more suppliers this month.

Another 30-plus casino operators and gaming equipment providers have interactive license applications on file with the Gaming Control Board. If all goes as planned, gaming regulators could rule on two or three applications per month well into 2013.

Meanwhile, Nevada has handed the technology certification process for Internet gaming systems to two of the industry's largest testing laboratories, which have certified the equipment used in legal online gaming worldwide.

Based on industry talk, Nevada could have 20 online gaming websites launched in 2013. So why must online poker players wait even longer to place their bets?

Numbers.

Unless the global Internet poker community decides en masse to reinvigorate the Las Vegas housing market, there just aren't enough players residing in Nevada to make intrastate online play a lucrative return on investment.

"It's all about liquidity, the more players you can attract to your website, the better," Bally Technologies Chief Executive Officer Richard Haddrill said shortly after his company was awarded Nevada Interactive Gaming License No. 1 on June 21.

Some wonder whether Nevada could partner with other states - California, New York and New Jersey immediately come to mind - to increase the player pool through interstate compacts.

How this would work - regulating the gambling, sharing gross gaming tax revenues and fees - is a whole other column.

The first step is to figure out whether Nevada can find a dance partner. In the process, the state gains more Internet poker players and creates a network for Nevada to earn a slice of the estimated $4 billion to $6 billion per year that Americans wagered online before the April 15, 2011, "Black Friday" crackdown by the U.S. Department of Justice.

American Gaming Association President Frank Fahrenkopf Jr., the industry's chief Washington, D.C., lobbyist, said partnering with another state might take an act of Congress - literally.

Fahrenkopf told Nevada's Gaming Policy Committee on June 14 that federal lawmakers have historically shown little concern over interstate compacts, such as Nevada's agreement with California over management of Lake Tahoe.

Gaming is different.

"I can assure you with a controversial subject such as gaming, I can see some people in the Republican party on the right, and some Democrats on the left, who might want to exercise Congress' power," Fahrenkopf said.

Several states are in various stages of legalizing Internet poker. Nevada, however, is the only one with laws and regulations in place. Nevada's licensing process is also moving forward.

But we may not be alone for long. That's the dangerous part of the equation.

Fahrenkopf said the American Gaming Association, whose board includes a wide range of executives from casino operation, manufacturing and ancillary businesses tied to gaming, wants a federal solution to the Internet poker question. The idea calls for minimum federal standards for consumer protection and policing of under-age and problem gambling.

The problem is Washington, D.C., is in gridlock over every issue imaginable. Internet poker legalization has been pushed aside, mostly likely until 2013. The lottery industry has also weighed in on the debate, saying Internet gaming is a state matter.

"Federal legislation is necessary because if state after state around the country just goes after their own, we are going to end up with a patchwork quilt of regulations," Fahrenkopf said.

The Nevada Legislature last year directed the Gaming Commission to establish Internet poker regulations. The idea was to jump ahead of the competition, making Nevada the regulatory hub for a booming U.S. Internet poker market.

For now, that concept is on hold.

Moving forward and entering agreements with other states may require revisiting the issue during next year's legislative session.

Assembly Judiciary Chairman William Horne, the primary author of last year's Internet gaming law, AB 258, and a member of the Gaming Policy Committee, is worried Nevada could be left "flat-footed" unless it partners with other states.

"I think we need to consider teaming up with some other jurisdiction," Horne said. "Because we don't have population, we need to have those other legislators in those other jurisdictions as well helping us."

Nor does Nevada Gaming Commission Chairman Pete Bernhard want to "hang our state's future" on the possibility that Congress will act.

"We hope that there is something that provides some uniformity," Bernhard said. "But if it doesn't happen, I want us to be at the forefront and ready to move."

None of this will keep some casino operators from jumping into online poker once they receive Nevada regulatory permission.

Caesars Entertainment Corp. owns the World Series of Poker and operates pay-for-play websites under the brand throughout Europe. Fertitta Interactive plans to use its association with Ultimate Fighting Championship to launch Ultimate Poker. Bally is operating a free-play online gaming site for the Golden Nugget casinos in Las Vegas and Atlantic City. The next step is Golden Nugget's pay-to-play online poker website in Nevada.

There will be others.