CNBC Closing Bell Tackles Internet Gambling

The Global Gaming Expo is currently unfolding from Las Vegas and, as part of its coverage of the event, CNBC’s “Closing Bell” aired a four-minute segment entitled, “Odds Favor Online Gambling?”

Two industry experts joined CNBC “Closing Bell” host Melissa Francis on Thursday, Andrew Parmentire of Height Analytics and David Katz, an Oppenheimer gaming analyst. The former began the discussion, which did not take in a debate form, but rather featured both parties agreeing that legalized internet gambling in the United States is inevitable. Parmentire explained, “Barney Frank has put a bill out there and the stars are lining up in a lot of ways. Harrah’s has shown that they have an online strategy, Congress and states are in desperate need for money, and $50 billion can offset a lot of social programs that Democrats are pushing these days.” The proposed health care initiative, for example, could come with a price tag approaching $1 trillion.

Katz told CNBC viewers, “Gambling in the U.S. has become a far more acceptable consumer product than it was five or ten years ago. That said, we really are much more focused on the publicly traded companies and that would be the brick-and-mortars like Harrah’s as well as the game providers and the technology companies that support those industries.” Katz added that Harrah’s has become a major proponent of licensing online gaming. The Las Vegas-based private company recently launched Harrah’s Interactive Entertainment (HIE), based on Montreal, to oversee its online brand, with former Party Gaming CEO Mitch Garber as its lead figure.

Harrah’s inked an agreement with 888, the parent company of Pacific Poker, to fill its online gaming needs. 888 is a publicly traded company in London, where it can be found under the same three-number acronym. Katz explained that with casinos slowly reaching their limits in the live space, the switch to the Web is inevitable: “If you go to the Bellagio, they have a couple of hundred seats to sit in, so there’s a physical constraint. If you look at the number of states out there that are considering legalizing gaming, they’re going down every year. There’s a finite opportunity for the brick-and-mortar guys to expand in the United States and at some point, they have to start thinking globally.”

The CNBC spot occurred about two weeks prior to December 1st, the date by which the financial services industry in the United States must fall into line with the Unlawful Internet Gambling Enforcement Act (UIGEA). The Poker Players Alliance (PPA), the industry’s main lobbying voice, issued a letter to Federal Reserve Chairman Ben Bernanke and U.S. Treasury Secretary Timothy Geithner to postpone the date by one year while effective legislation can be crafted. However, the two government officials have not yet responded.

The UIGEA was passed during the waning moments of the 2006 Congressional session at the direction of former Senate Majority Leader Bill Frist (D-TN). It was approved by a 3:1 margin in the House of Representatives and by unanimous consent in the Senate after being attached to the SAFE Port Act. The Third Circuit Court of Appeals recently ruled that the UIGEA did not in and of itself make any sort of internet gambling activity illegal. Instead, the legality of an online activity depends on a player’s jurisdiction. Parmentire candidly explained, “There is a lot of anger as to how this happened in 2006.” The PPA has expanded its membership from 50,000 in 2006 to over 1.2 million today.

Concurrently with the Global Gaming Expo, 2009 World Series of Poker (WSOP) Main Event champion Joe Cada, who represents the online poker room PokerStars, has spread goodwill by appearing on mainstream outlets like the “Late Show with David Letterman,” ESPN’s “SportsCenter,” and USA Today. Cada, an online poker pro, became the youngest winner of the $10,000 buy-in tournament ever at age 21, breaking Peter Eastgate’s record of 22 years-old set in 2008.