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Heightened Awareness

25 November 2005

Although the U.S. Department of Justice insists that online gambling is illegal, an estimated 12.5 million Americans gamble over the Internet, representing about 80 percent of global online gambling traffic. The American public has been generally uninformed about the peculiar legal status of online gambling until this Sunday when the popular investigative journalism television show 60 Minutes broadcast a segment titled "I-Gaming: Illegal and Thriving" exploring the topic.


". . . I think that on balance what came out of the piece for me is that the issues that Senator Kyl has are real issues. I don't think we should hide away from them, but I think anybody who is watching that piece objectively will conclude that it is possible to manage and control those issues in a properly managed and regulated environment.
- Nigel Payne
Sportingbet

First broadcast in 1968, CBS News' 60 Minutes boasts a solid reputation for excellence in generating news and controversy. The show and its staff have won 11 Peabody Awards for distinguished achievement and meritorious service in journalism, in addition to 78 Emmy Awards, among them a lifetime achievement award. From a ratings perspective, 60 Minutes has been one of the most successful American television programs of all time, having been ranked the most watched television show through five of its years and a top ten show for a record 23 seasons in a row from 1977 to 2000.

60 Minutes remains among one of the top 20 most watched programs in America, averaging about 12 million viewers per show, according to Nielsen Ratings. Airing on Sundays at 7 p.m. (EST), it usually follows NFL football during the fall and winter and is often delayed when the evening's game runs past 7:00, as was the case last weekend.

Perhaps the promos run by CBS throughout the day previewing the online gambling segment were enough to retain the football fans because by the time 60 Minutes finally opened the show with its I-gaming segment--50 minutes later than its scheduled start time--it was being watched by an audience of 18 million, its largest of the year.

Correspondent Lesley Stahl opened the segment by describing the massive popularity of online gambling in the United States. She then explained how American casino companies once opposed online gambling as competition to their business but are shifting their position in favor of regulating it so that they can profit from it rather than miss out to foreign companies that pay no tax to the U.S. government.

"I think the issue is very simple: that you should license it, regulate it and tax it," stated Terri Lanni, CEO of MGM/Mirage.

Stahl pointed out that there are no legislators pushing to regulate online gambling, although there is one senator--Jon Kyl from Arizona--who is trying to pass legislation to ban it. Kyl explained his concerns about gambling addiction and gambling by minors, and to test Kyl's arguments the segment's producer gave his credit card to his 16-year-old son to see whether he could log on and gamble.

Nigel Payne, CEO of U.K.-based online gambling operator Sportingbet, explained that the minor would not be able to log onto his site. "That 16-year-old has got to give me four or five pieces of information about him relative to his bank account, his personal details, where he lives and other things," he said. "So I can be 99 percent comfortable that this 16-year-old doesn't even get through my front door."

It was true; the minor was not able to gamble on Sportingbet's Paradise Poker Web site. He then attempted to log on and gamble with the sites of other online gambling companies and was successful on his third attempt.

Stahl went on to explain the argument that proper regulation of online gambling in the United States could lead to both improved consumer safety and increased tax revenue--about $1.2 billion in 2004, according to Payne.

Reactions

The online gambling industry has responded positively to the report, with 50 percent of respondents to an IGN readers poll question saying they felt it was positive for the industry. Ten percent of respondents felt the report was neither good nor bad for the industry, while the remaining 40 percent have not seen it.

Payne, the most predominantly featured proponent of online gambling in the report, also has a favorable opinion of the segment. "I think from an industry perspective it has got to be good news," he said. "I thought the piece was reasonably balanced, and I thought it was very encouraging that we had the likes of Terri Lanni on record saying that regulation is the way to go. I think that is very important," he said.


"If everybody's doing it, and these foreign companies are making a lot of money, then the argument becomes legalize it so that at least our government can regulate it and prevent young people from gambling on the Internet.
- Lesley Stahl
60 Minutes

Regarding the 50 percent spike in 60 Minutes audience size for the segment, Payne stated, "What that says to me is there is genuinely a lot of grassroots interest in it, and I think that on balance what came out of the piece for me is that the issues that Senator Kyl has are real issues. I don't think we should hide away from them, but I think anybody who is watching that piece objectively will conclude that it is possible to manage and control those issues in a properly managed and regulated environment. We showed that you can control children from betting, and it would be reasonable for an objective, independent observer to watch that show and think, 'Well actually, this is an industry that is crying out to be regulated and taxed, and it has probably shown that that is the way to go.'"

He continued, " We've had over 500 pieces of correspondence from various parts of the world--industry leaders, industry companies, regulators around the world. The piece has been very broadly watched by people all over the world, and I haven't had anybody come back and say that they didn't think it was any good. And I think that's good for 60 Minutes as well. I think fair play to them. . . . We should recognize that they actually had the courage to air this in public and that they also had the courage to give a fair crack at both sides of the line. I think they tried very hard to try and beat me up over a couple of issues, but hopefully we stood our ground."

Based upon comments she made on CBSNews.com's Web site for 60 Minutes after putting the report together, it appears that correspondent Lesley Stahl may find more merit in the arguments for online gambling regulation rather than those for legislative prohibition or lack of action.

"You're not going to stop gambling," Stahl stated. "I learned that when I was covering this story. It is illegal, and the companies do not do it in the United States because of that reason. They do it offshore, but people are gambling and really there is no enforcement when it comes to individuals gambling on the Internet.

"It's interesting what the established casinos have done. Over the years they have opposed legalizing Internet gambling because they thought it might be competition for them. But they're beginning to change their views when they see how much money these Internet gaming companies are making. There's been a shift, and I would guess that pretty soon you're going to see a lot of these casinos come out and start arguing for legalizing this so that American companies--so that casinos themselves--can open Web sites for gambling. It's a debate right now, and you'll see in our story some of the casinos beginning to come around.

"One of the major objections, as you can well imagine, to legalizing Internet gambling is underage kids going online with their fathers' credit card and running up enormous debt and teaching our children that this is acceptable behavior. And so you have a big lobby against legalizing Internet gambling. It's very tricky. If everybody's doing it, and these foreign companies are making a lot of money, then the argument becomes legalize it so that at least our government can regulate it and prevent young people from gambling on the Internet. This way, where millions are doing it anyway and nobody is enforcing that side of it, the argument is that kids are doing it and people with addiction problems are doing it and there's no way really to regulate it. And the other argument of course is that a lot of tax revenues can be had if you legalize it."

Sunday was not the first time 60 Minutes focused on Internet gambling. In January of 2001, Jay Cohen, president of online gaming company World Sports Exchange, gave his first public interview to the show since he was found guilty eleven months earlier of conspiracy and violating the Interstate Wire Act. Cohen was one of 21 offshore sports book operators who received criminal complaints filed in 1998 by U.S. Attorney Mary Jo White but was the only representative of any of the companies who returned to the United States to appear in court. He was consequently sentenced to 21 months in prison and fined $5,000.

Heightened Awareness is republished from iGamingNews.com.
Bradley Vallerius

Bradley P. Vallerius, JD manages For the Bettor Good, a comprehensive resource for information related to Internet gaming policy in the U.S. federal and state governments. For the Bettor Good provides official government documents, jurisdiction updates, policy analysis, and many other helpful research materials.

Bradley has been researching and writing about the business and law of internet gaming since 2003. His work has covered all aspects of the industry, including technology, finance, advertising, taxation, poker, betting exchanges, and laws and regulations around the world.

Bradley Vallerius Websites:

www.FortheBettorGood.com
Bradley Vallerius
Bradley P. Vallerius, JD manages For the Bettor Good, a comprehensive resource for information related to Internet gaming policy in the U.S. federal and state governments. For the Bettor Good provides official government documents, jurisdiction updates, policy analysis, and many other helpful research materials.

Bradley has been researching and writing about the business and law of internet gaming since 2003. His work has covered all aspects of the industry, including technology, finance, advertising, taxation, poker, betting exchanges, and laws and regulations around the world.

Bradley Vallerius Websites:

www.FortheBettorGood.com