An article in the Sunday edition of the New York Times notes that the land-based casino industry, for quite some time a vehement opponent to legalized online gaming and poker, is beginning to warm to the idea.
The article, written by Barry Meier, inaccurately points out that online gaming and poker are illegal (the Unlawful Internet Gambling Enforcement Act, or UIGEA, only made financing an online account an actionable offense), but it does bring to light that many in the casino world are now open to the idea of legalized online gambling. After initially seeing it as a threat to their bottom line, Meier now notes that several companies’ concerns are beginning to thaw in the current economic landscape.
Meier’s article points out that, as recently as the end of 2009, the American Gaming Association (AGA) – the organization that counts such casino operations as Harrah’s Entertainment, MGM Resorts, and Wynn Resorts, among others – was in opposition to the idea of a legalized online gaming industry. That mood changed this spring, when the AGA changed its stance after the markup of Massachusetts Representative Barney Frank’s proposed bill to regulate the online gaming industry (HR 2267). After getting concessions from Frank, including a ban on those that had violated the UIGEA from being active in the online gaming market in the United States, the AGA reversed its stance and supported a regulated industry.
In his article, Meier points out the often contentious debate that has existed among those in the “brick and mortar” casino industry. Meier correctly states that some, such as Harrah’s, have actively lobbied for a regulated online gaming industry while investing heavily in such activities overseas. On the other side, Wynn Resorts has continually stated that it is against the regulatory idea, believing that it couldn’t be adequately policed. Meier asks those in charge at Wynn for a current stance on the issue. “Wynn Resorts monitors any legislative activity, federal or state, that pertains to our industry,” Meier reports was the reply. “We make judgments after such legislation is passed.”
The reason for the change of heart among those in the casino industry may be due to online poker being the main driver behind the regulatory actions. Meier points out in his article that poker in the casinos only amounts to 2% of the activity in a land-based gaming operation. If regulation were to only be for online poker, it is thought that the casino industry would not view that as a threat to their operations. If the possibility of full fledged online casinos came into play, however, there is a chance that the casino industry could have some issues with legalization and regulation.
Another possibility for the AGA’s change of stance could be the revenues generated by online poker. Meier points out in the article the results of a study by Poker Analytics, a consulting firm in New York, that says the online industry’s biggest player, PokerStars, brings in over $1 billion per year. Add to that the other U.S. facing operations such as Full Tilt Poker, the CEREUS Network, and the Cake Poker Network (among others) and it is conceivable that online poker revenues could approach up to $5 billion per year, generating tremendous revenues through regulation and taxation. All of the above noted operations, however, have been actively courting American poker players during the life of the UIGEA and may be excluded as the current legislation is written.
Currently, the push for regulation may be on life support. Frank has stated he is “not optimistic” about the passage of HR 2267, as the bill has yet to come to a vote on the House floor. With the Congress in recess until after the midterm elections in November, the issue will not be looked at until the “lame duck” session. Even if it is passed out of the House, Frank’s bill lacks the taxation legislation covered by fellow Congressman Jim McDermott’s HR 2268 and also lacks a companion bill ready for a vote in the Senate, although Senator Robert Menendez has a bill in committee. If the legislation doesn’t move through the Congress during the “lame duck” session, the bill would die when the new Congress is seated in January.
