Nevada Gaming Commission Faces Steep Challenge in Regulating Online Gambling

After two days of presentations and open dialogue, the Nevada Gaming Commission now knows it has a monumental task in front of it.

The commission had two days of open meetings to discuss ways to regulate Internet gambling. That task has been handed to the commission through the passing of an "enabling" bill to allow for online gaming.

The commission now must set up the standards and regulations for the industry. In particular, the commission is determined to find ways to block players who live in states and countries where online gaming is illegal from gambling at Nevada sites. The commission is also hoping to set up a system that will block minors from playing.

" We just hit the tip of the iceberg here today. This just shows us how much work there is to be done on this now."

- Brian Sandoval, Chairman
Nevada Gaming Commission

Commission Chairman Brian Sandoval, whose last official day on the job was Wednesday, said the sessions were enlightening to him and the commission, but the biggest issue facing the industry in Nevada is the federal government’s stance on the issue.

The government currently uses the Wire Act of 1961 as the standard for prosecuting operators of Internet gambling services. Some say the law only applies to sports betting conducted over the telephone and not the Internet, but efforts on Capitol Hill to pass a prohibition bill, if successful, would clear the way for prosecutors to go after operators of other types of gambling services as well. Until the federal government makes a move one way or the other, a huge gray area exists.

"The biggest issue for us is not so much minors or jurisdictional blocking," Sandoval said. "The biggest issue is the legality of the activity. The (Nevada) bill has a clause that says we can't allow for online gaming in Nevada until we know for sure that it is OK from a federal standpoint."

The commission must move forward in the regulatory process for online gaming, according to Sandoval, and just hope the federal government gives Nevada the green light.

"We aren't going to jump into this right away," he said. "We aren't going to go ahead and then have the federal government come down months later and start indicting our licensees. We don't want to put their Las Vegas interests at risk for the sake of the Internet."

In addition to discussing various technological methods for blocking minors and those located in jurisdictions where Internet gaming is prohibited, the two-day meeting consisted of sessions discussing the safety and security of the Internet; how interactive gaming systems are tested; and the legal and economic issues facing the Internet gaming industry.

Speakers for the meeting came from as far as Australia and the United Kingdom. Gaming companies such as Park Place, MGM, GSS, Wager Works, and Access Gaming were represented.

The bottom line, according to Sandoval, is the commission's realization of how big of a challenge it now faces.

"We just hit the tip of the iceberg here today," he said. "This just shows us how much work there is to be done on this now. It is not a matter of whether we can or can't do it; there is just a whole lot more out there that we need to look into that we didn't even realize existed before we took on this venture."

Since passing the Nevada bill, state legislators and regulators alike have predicted that it would be 18 months to two years before Nevada operators would have their own gambling sites up and running. Sandoval wouldn't commit to an extension on that time frame, but he did admit that the commission will not be pressured into making any moves or decisions if it compromises the process.

"I always heard that Nevada has the best regulatory body in all of the world before I started," he said. "I used to think it was just people saying that. But now, I firmly believe it and that tradition will certainly be upheld during the online process. We are going to do this and do it right, no matter how long it takes."