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Best of Liz Benston

Gaming Guru

Liz Benston
 

Looking in on: Gaming

3 January 2007

LAS VEGAS, Nevada -- Regulators haven't yet studied whether new rules are needed to govern private equity funds, the multibillion-dollar investment vehicles that are now all the rage on Wall Street and that have recently been approved to buy into a handful of Nevada casinos.

And that bugs Bobby Siller, who retires Friday from the three-member Gaming Control Board. While Siller will most likely be remembered for taking the Hard Rock to task for risque ads, a more timely and perhaps more significant moment in gaming history involved his 2006 vote objecting to an investment by a Goldman Sachs fund in the Las Vegas Hilton. Private equity funds - which typically have a management role - have invested in Nevada casinos using rules created in 1969 for corporations, in order to license owners of more than 10 percent of a company's voting stock.

Siller says his objection wasn't a rejection of private equity funds of the type that intend to take Harrah's Entertainment private.

"This is nothing more than a modification of the creative financing we've had in the past. It's not revolutionary and it's probably the next step in the direction we should go," he said. "My only point is, let's think about the direction we're going. Let's make sure we've thought out all the issues. Our responsibility is to create a healthy environment for business but also to protect the integrity of gaming and protect the interests of the citizens of Nevada."

Over the years, the Gaming Control Board has created and modified regulations for corporations and passive investors like mutual funds.

"We didn't say, 'No,' but we said, 'Wait a minute. Let's think about this,' " Siller said.

• • •

A little-known residual benefit of last year's unwieldy Unlawful Internet Gambling Enforcement Act is the ability of states to allow residents within their borders to participate in Internet gambling, casino attorneys say. The door to so-called intrastate Internet betting might seem open in Nevada, where Station Casinos has allowed registered customers using the company's intranet to make sports bets from their home computers, which Nevada allows.

But one expert says Nevada isn't likely to press for rules allowing full-scale online wagering. "There's not enough money in it," Las Vegas attorney Tony Cabot said.

New Jersey, with more than four times Nevada's population, is a better bet, Cabot said.

New Jersey's top casino cop, Division of Gaming Enforcement Director Thomas Auriemma, says there's no great appetite for it in the Garden State, where he has discussed the prospect with gaming attorneys over the past five or so years.

"I don't see it happening at this point," he said.

New Jersey's constitution would probably have to be amended to allow Internet gambling, which would require approval in both legislative houses and a vote by the people.

• • •

Nearly three months after Congress further criminalized Internet gambling, Americans are still finding time in their busy holiday schedules to place a bets. The world's largest Internet poker site, PartyPoker.com, has slipped to No. 2 after refusing to accept bets from Americans, ceding the top spot to PokerStars.com, according to recent data from PokerSiteScout.com.

Unlike publicly traded competitors that stopped accepting U.S. business, PokerStars and No. 3 poker site FullTiltPoker.com are private companies with the luxury to flout the will of the Justice Department from exotic, far-flung locales.

As an example, PokerStars' international identity would make James Bond proud: Bets are processed from the Isle of Man and Cyprus, the site is licensed by the Kahnawake tribe of Mohawk Indians' Kahnawake Gaming Commission in Quebec, and the company is headquartered in Costa Rica. Also moving up in the burgeoning black market are private operators Bodog.com and Ultimatebet.com.

PartyPoker's parent company is looking elsewhere, reporting nearly 70 percent of Internet gambling revenue from customers in Europe, the Middle East and Africa.

Some sports betting sites also are flourishing under the ban, with smaller sites even opening poker rooms.

Already violating federal law by offering sports betting, the sites probably figure they might as well get into the poker business, Las Vegas-based poker writer and tournament organizer Nolan Dalla said.