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Kevin Smith

Strip Operators React to Justice Department Letter

30 August 2002

News that the U.S. Department of Justice notified the Nevada Gaming Commission that any initiative to regulate online gaming would be in violation of federal law was no real surprise for Las Vegas Strip-based operators.

A select few operators in Las Vegas have already explored ways to merge their brand strength with online or interactive gaming. MGM Mirage, Station Casinos and the Venetian have taken steps to lay the foundation for Internet casinos or Web-based partnerships.

Just days after it announced that one of its subsidiaries applied for an online gaming license in Alderney, the Venetian remained tight-lipped about the Department of Justice letter to the Nevada Gaming Commission.

"We have no comment," said a Venetian spokesman when asked how the letter would effect his company's plans to expand online.

Officials with Station Casinos didn't return phone calls and e-mails, but Bill Hornbuckle, the President of MGM Mirage Online, said the letter did not come as a shock.

"We knew that getting into the American market would be a long and drawn out process," he said. "It is disappointing in the short term that we can't leverage our brand in the area where it is probably strongest, but we weren't really counting on it either."

MGM Mirage has already won a license to operate on Internet casino in the Isle of Man, but is waiting to move forward with the venture until it gets a go-ahead from regulators in Nevada. He said no action would be taken to jeopardize the interest or reputation the company.

On the positive side, though, he said the Justice Department made no indication that U.S. operators are prohibited from venturing online via international channels, which has been MGM's plan all along. Hornbuckle said Nevada regulators have already publicly said they agree that companies are free explore options elsewhere, but will need to be regulated to comply with Nevada gaming regulations.

"It doesn't impact any international operations," he said. "As long as we abide by both the laws here, which are prohibitive, and the laws of any international jurisdiction that we are in, we will be fine."

MGM and other operators were aware that if they wanted to target U.S. players via Internet casinos, they had a large uphill battle to fight. Hornbuckle said the guidance letter from the Justice Department drives home that point even more.

"In the long term, it makes the U.S. market that much more complex, but in the short term we have always presumed that the U.S. would be a non-market for us and we are prepared to launch internationally," he said. "We will take it from there."

What is disappointing to Hornbuckle, though, is that U.S. residents can easily access Internet casinos and sports books, and without regulation in the U.S., the industry is opened up to less credible operators.

Officials with the American Gaming Association, the largest lobbying group for the land-based gaming industry, were unavailable for comment. The AGA took an active role in the last federal legislative session to fight against a prohibition bill that was aimed at expanding federal laws to make Internet gaming illegal.

Strip Operators React to Justice Department Letter is republished from
Kevin Smith
Kevin Smith