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Best of Liz Benston

Gaming Guru

Liz Benston

Online Gaming Entices Casinos

31 May 2006

and Lisa Mascaro

LAS VEGAS, Nevada -- What a difference $15 billion makes.

After watching the fortunes of online casinos soar fivefold in as many years - an extraordinary winning streak with no apparent end in sight - Las Vegas casino giants want Congress to study letting them in on the action.

Casino executives are licking their chops for good reason.

A gambling industry survey indicates that U.S. gamblers who bet online - which is illegal in this country - are young, savvy, college-educated men with money to burn.

But even as the industry wants to create dot-com casinos, conservative members of Congress were pushing last week to strengthen the ban on Internet betting - and were buoyed by a public opinion poll that showed growing concern about gambling.

The Pew Research Center released poll results last week showing that 70 percent of Americans think legalized gambling encourages people to gamble more than they can afford, up from 62 percent in 1989.

Online gaming catapulted onto the scene this decade, skyrocketing from a $3 billion industry in 2001 to a $15 billion jackpot last year.

As much as 60 percent of the revenue is estimated to have come from U.S. citizens, many of whom reported in the survey commissioned by the American Gaming Association that they didn't realize they were breaking the law.

Online gambling revenue is projected to balloon to $24 billion by the end of the decade.

The AGA, the casino industry's lobbying arm, has long been neutral toward Internet gambling. Some members were suspicious of the industry, others were experimenting with online gambling but most didn't have an opinion one way or the other.

Nevada lawmakers introduced a bill last week calling for the study.

But also last week, a House committee passed a pair of bills to further crack down on Internet gambling, and the full House is slated to take up the issue this summer - just in time to inject a hot-button issue into the November elections.

The bills would modernize the 40-year-old Wire Act - the current basis of the U.S. ban on Internet gambling because it says you can't use your telephone to place a bet with your bookie. Updated language would also prohibit use of the Internet and other technologies, and also prevent the use of many credit and debit cards to make bets.

Conservative groups hope Congress will pass the bill so GOP candidates in the fall will have a moral issue to offer voters.

"There are many (members of Congress) who have concerns about the fact you have these illegal, unregulated, untaxed, offshore sites siphoning billions of dollars out of the country. This bill makes it clear that act is illegal," Rep. Bob Goodlatte, R-Va., said after his bill to ban Internet gambling passed out of the House Judiciary Committee.

"I'm anti-gambling. There are lots of reasons to be concerned about gambling. I know in Las Vegas they have a different perspective."

Some say after a decade of prohibition bills that went nowhere, a ban is more likely than ever.

"Too many members have voted 'yes' for too many years for it not to happen," Tom Susman, a partner with the law firm Ropes & Gray, said at a gaming industry conference recently in Las Vegas. "This issue is not going away."

But Rep. Jon Porter, R-Nev., who with Rep. Shelley Berkley, D-Nev., introduced the bill to launch the study, said there are signs of support for it within the House GOP.

"It's an alternative for members of Congress to have, as opposed to the Goodlatte bill," said Porter spokesman T.J. Crawford. "We need to have a much better understanding before we make a decision as a Congress."

Although the bill has dozens of sponsors, only a handful come from the ranks of Republicans.

Berkley says that as much as she believes a study is the way to tackle the issue, she sees little chance of it getting traction in the Republican-controlled House.

"The Republican majority in Congress wants to be able to demonstrate to their base that they're somehow doing something to protect the morals of America," she said.

Even if a bill did get out of Congress, with just a little more than 30 days to go in the legislative session, some doubt whether both the House and Senate have the appetite to tackle the issue with so many others on their plate.

The AGA's survey of Internet gamblers offers a clue as to why the industry would like to tap online bettors.

Online gamblers are not the desperate or vulnerable loners they're often perceived to be. They tend to be younger, more affluent and better-educated than gamblers who frequent land-based casinos.

"The American people clearly want to gamble on the Internet," said Frank Fahrenkopf of the American Gaming Association and a former national GOP chairman.

"The question is, what's the best way to protect them? Is it better to have them offshore or would it be better to license, regulate and tax them here? That's what (a study commission) should look at."

The Justice Department's inflexible position that Internet gambling is illegal has left American casino giants standing on the sidelines of one of the most lucrative business opportunities in the past decade.

Casino bosses have also been nervous about opening the floodgates to home-based gambling, where minors have been known to gamble with credit cards and people with gambling problems can feed their habit more easily.

"People are very concerned about the Internet - as well they should be," Harrah's Entertainment Chief Executive Gary Loveman said in a recent presentation before the Nevada Society of Certified Public Accountants.

But there is growing confidence that technology can shield online gambling sites from the uninvited.

MGM Mirage says the time has come for Internet gambling to be regulated by states similar to land-based casinos - and be taxed, providing a lucrative revenue stream for the states.

A Congress-authorized study that shows how Internet gambling can be regulated effectively could persuade state governments to legalize the practice, said MGM Mirage spokesman Alan Feldman.

"The current situation makes no sense. There's no enforcement, there's no protection for consumers."

For its part, the Interactive Gaming Council, an Internet gambling trade group based in Toronto, welcomes any discussion about allowing U.S. casino companies a piece of the action.

"We view this as a complex policy issue that should be looked at," said Keith Furlong, of the trade group.

Online Gaming Entices Casinos is republished from