by Paul Doocey
April 11, 2012
At the 11th annual Gaming Laboratories International (GLI) University Roundtable, held last month at the Treasure Island Hotel & Casino in Las Vegas, a room of over 300 gaming regulators and executives witnessed something that would have been highly unlikely just two short years ago—Frank Fahrenkopf Jr., the president and CEO of the American Gaming Association (AGA), the national trade group for the commercial casino industry, actively campaigning for the legalization and federal regulation of online poker.
“There are now 2,000 offshore poker sites accepting bets from 10 to 15 million Americans each day,” an animated Fahrenkopf told the audience. “Most of these sites don’t provide consumer protection or care about issues such as underage and responsible gaming. Creating legislation that legally brings this industry onshore allows it to be policed and regulated, in addition to providing tax revenue and jobs.”
"I am a practical man…. the only hope of getting any legislation through this Congress that deals with online gaming is poker. There will be no appetite from some of the people we have to get on board for anything beyond poker. You can’t get any more than this now."
—Frank Fahrenkopf, American Gaming Association
And a number of state and federal legislators responded by introducing Internet gaming bills and proposals, most involving online poker, the most politically palatable of the Web wagering options.
“I am a practical man…. the only hope of getting any legislation through this Congress that deals with online gaming is poker,” Fahrenkopf said. “There will be no appetite from some of the people we have to get on board for anything beyond poker. You can’t get any more than this now.”
Although poker may lead the charge, most believe the Internet components of all forms of popular wagering will eventually be allowed and regulated in the U.S. “It is not a question of ‘if’ but ‘when’ with [expanded] Internet gaming,” said James Maida, president and CEO of GLI, at the GLI Roundtable. “Internet gaming is going to happen in U.S. We don’t quite know how just yet, but we know it is coming.”
The Innovation Group believes the ongoing liberalization of U.S. online gaming policies could create a $15 billion plus market with a 29 percent yearly growth rate by 2017.
The AGA and its brick-and-mortar casino members would prefer these regulations be administered on a federal level. Among the reasons:
• Uniformity—Instead of a hodgepodge of Internet poker regulations from state and tribal governments, there would be a single uniform set of rules for the gaming industry to follow and law enforcement agencies to regulate.
• Reciprocity—There is no guarantee that states and tribes will work or even communicate with each other when it comes to reciprocal issues such as licensing and law enforcement. A federal oversight will provide common ground and insure vital information is shared across borders.
• Transparency—Federal oversight will insure no one type of gaming, not matter how strong its political or lobbying power, will have an advantage over another in the Internet realm.
• Clout—A federal presence will make certain the rights of those states that do not want to be part of the online poker business are respected. Also, federal agencies are better equipped to maintain the rule of law on the borderless Internet than most state police forces. Finally, federal regulators are much more likely to work with the government on reform and bolster the Wire Act and the Unlawful Internet Gaming Enforcement Act (UIGEA), primarily to keep unregulated offshore operators from preying on U.S. poker players.
So far, the only federal bill that directly tackled Internet poker regulation is HR 2366, sponsored by Congressman Joe Baton (R-Texas), which would license and regulate online poker operators under the Secretary of Commerce. Only licensed gaming establishments (commercial and tribal casinos, racetracks, card rooms, etc.) would be considered for the Web poker licenses. The bill currently has 27 sponsors.
Fahrenkopf said HR 2366 “is a little bit closer to where we think it ought to be,” when compared to other Internet gaming legislation, but the AGA has chosen to remain neutral on the measure. Fahrenkopf admits the gaming industry will need to be “lucky” to have any federal online poker regulation pass this year. “I am still hopeful that before this Congress is over, a new piece of federal legislation will be introduced,” he said. “I wish I could tell you it is going to happen. I hope this Congress will come up with something that will solve the problem. But it is not easy to draft something that will do all that.”
All of which means if Internet poker is to be legalized and regulated this year, it will likely happen at the state level. A number of states, primarily looking to bolster tax revenue and generate high-tech jobs, have introduced online poker or some form of Internet gaming legislation. This list of states includes California, Connecticut, Hawaii, Illinois, Iowa, Maryland, Massachusetts, Mississippi, New Jersey and New York.
Of the measures focusing on Internet poker, those from California, Iowa and New Jersey appear to have the best chances of actual passage. The California bill, SB 1436, calls for licensing, regulating and taxing all forms of Internet gaming, but would originally be restricted to poker. Only previously licensed California-based tribes and racetracks will be allowed to have online poker licenses. The Iowa legislation, SF 2275, would also limit Internet poker purveyors to companies that already operate gaming facilities. In New Jersey, S1565 would permit Atlantic City casinos to offer online “approved games” to state residents.
“I think we should be an epicenter for that business, but I want to do it right—I do not want to rush and get legislation that either doesn’t pass state constitutional muster, or creates other problems for us,” New Jersey Gov. Chris Christie told Reuters when the bill was introduced in January.
If one of these bills comes to fruition, they will also have a state model of Internet poker regulation to emulate. This past December, the Nevada Gaming Commission approved and released rules companies would have to adhere to in order to receive licenses to operate Internet poker sites within state borders. According to the Las Vegas Review Journal, companies with other Nevada licenses would have the new title attached to their licenses while companies new to Nevada would be vetted with full licensing investigations, which usually take several months. Among the requirements for the license: operators have to show they can limit play to state residents of legal age; detect money laundering and other forms of fraud; and have a large enough cash reserve to cover money deposited by customers.
A number of well-know gaming operators and suppliers already announced they would be applying for Internet poker licenses. This list includes Caesars Entertainment, Boyd Gaming, MGM Resorts International, Bally Technologies, Spielo, Cantor Gaming, IGT, Aristocrat and WMS.
UPPING THE ANTE
"Poker is a natural fit for our table‐centric online offerings and our many jurisdictional licenses present a compelling opportunity for our current and future online customers."
—Gavin Isaacs, Shuffle Master
“Online poker is an important business for casinos going forward…it offers one of the best growth opportunities available given current market factors,” said Jonathan Halkyard, executive vice president and CFO for Caesars Entertainment Corporation at the iGaming North America conference that took place last month in Las Vegas. “Worries about cannibalism are unfounded. Caesars bought the World Series of Poker [WSOP] in 2004 and it had a grand total of 800 players in the final. By 2007, that number grew to 7,000, despite the fact online poker was thriving. In my mind, each business reinforces the other without question.”
A number of gaming properties have already taken steps to insure a space at the online poker table. For example, Michael Gaughan, owner of the South Point Hotel, Casino & Spa in Las Vegas, created SouthPointPoker.com, the first free-play site approved for a Nevada regulated casino in the United States. Hosted on a Zen Entertainment platform, SouthPointPoker.com will offer a $10,000 Main Event seat every week with daily qualifying tournaments; up to an additional $100,000 in cash and prizes each month; and daily tie-in promotions allowing players to win online.
Meanwhile, Golden Nugget and Chiligaming, an international developer and operator of multi‐platform social games and gambling products that was recently purchased by Bally Technologies, have entered into an online gaming partnership, with a free‐play Web site due to launch this spring. Golden Nugget has selected Chiligaming as its exclusive online gaming partner in anticipation of the legalization of online gaming in the United States.
Chiligaming’s proprietary iGaming platform, which enables it to connect to any poker platform or gaming content provider, is a central feature of its U.S. proposition and is designed to both facilitate swift entry into the market and maximize options for the Golden Nugget as the U.S. regulatory and vendor landscape takes shape.
Many other companies are emulating the free play/social gaming strategy with poker and other popular casino games, with the thought that once real-money online wagering sites are allowed to go live in Nevada and elsewhere, they will already have built-in and loyal audiences.
Other operators have opted to go the acquisition/merger route to improve online offerings. Last year, bwin.Party, the parent company of the Party Poker online franchise, formed a joint company with MGM Resorts International and Boyd Gaming to launch an online poker offering. Caesars International and 888 Holdings formed a similar alliance last year as well.
Caesars Entertainment plans for the online medium are quite ambitious, with its 888 Holdings arrangement, the ongoing online marketing and expansion of its WSOP franchise and its recent purchase of Playtika, a well-known company in the social games space.
“We are firmly convinced that the expansion of online gaming offerings for real money, for fun, and for social and mobile mediums will benefit our land based casino portfolio due to further brand enhancement, customer acquisition in these new channels and marketing arrangements including incorporating our Total Rewards cash back points program into our online gaming offerings,” Halkyard said.
Vendors are also pursuing acquisitions and partnerships to make sure they are relevant in the Internet poker and online arenas. The list of companies active in this space includes:
• Bally Technologies has launched an Interactive Gaming division composed of mobile, Internet and social media applications. It has been bulked up by two key acquisitions; MacroView on the mobile side and Chiligaming on the Internet gaming end.
“MacroView provides you with a platform; when you design content, that platform can take care of it on all sorts of mobile devices, not just the iPhone,” said Ramesh Srinivasan, president and chief operating officer, Bally Technologies, at the company’s recent user conference in California. “This is cutting-edge technology. It is not just a matter of putting games for free play on mobile devices. This is about providing marketing solutions for you and your patrons and to build relationships with them.”
Srinivasan called Chiligaming “the most open platform available in the Internet space today,” making it is easy to create interfaces from any front-end solution that you choose; bingo, poker, slots, live tables, etc.
• Aristocrat Technologies has actually teamed up with Bally to offer the same third-party poker networks as part of their business-to-business (B2B) Internet-gaming solutions for U.S. operators. Working together, the companies will be better able to more quickly and effectively offer attractive and credible online poker games that will provide stronger player experiences and functionality and greater poker liquidity for both Bally and Aristocrat’s casino-operator customers.
Both companies are offering iGaming platforms with an integration to their back–end core system solutions, while providing operators with the flexibility to choose best–in–class applications from multiple suppliers around the world; Bally through its recently announced acquisition of Chiligaming’s iGaming platform, and Aristocrat through its exclusive collaboration with GameAccount Network.
Under the strategic alliance, Bally and Aristocrat will secure arrangements with leading poker providers, who will then be integrated into Bally’s and Aristocrat’s iGaming platforms. Advanced discussions with several poker providers are currently underway.
• International Game Technology (IGT) recently purchased Double Down Interactive LLC—a leading online social gaming company and developer of the popular DoubleDown Casino found on Facebook.
Launched in April 2010, the DoubleDown Casino is the world’s largest virtual casino and one of the top four social media games in 2011 as rated by Facebook. According to AppData.com, DoubleDown Casino currently has 4.7 million monthly active users, up from 3.3 million in October 2011. With a broad and expanding portfolio, Double Down offers blackjack, slots, slot tournaments, video poker, and roulette to social gamers all around the world.
The addition of Double Down provides IGT instant size and scale in the fast growing world of casino-style social gaming and is expected to broaden IGT’s popular gaming titles beyond the physical casino to Facebook, the world’s largest social network with over 800 million global users. This distribution model is anticipated to provide IGT an opportunity to entertain players with consistent, ubiquitous, thrilling gaming experiences across multiple platforms.
• Shuffle Master acquired Ongame Network from bwin.party Services (Austria) GmbH. Ongame is one of the world’s largest poker providers to online gaming operators, with a global network that includes more than 25 of the iGaming industry’s strongest brands and operators, as well as regional networks in France and Italy.
The acquisition aligns with Shuffle Master’s strategy of expanding its online product offerings to capitalize on regulated online gaming, while operating purely as a B2B provider and not providing gaming content directly to players.
“I am confident that Ongame will fit seamlessly into our ongoing interactive initiatives of delivering our renowned brands to online gaming operators, partner Web sites, social networks and mobile platforms,” said Gavin Isaacs, CEO of Shuffle Master. “Poker is a natural fit for our table‐centric online offerings and our many jurisdictional licenses present a compelling opportunity for our current and future online customers.”
If online poker earns anywhere near the amount of money industry observers predict it will, chances are more vendors will find a way to fit the game into their line of products, natural fit or not.
is editor of Casino Journal magazine. He can be reached at firstname.lastname@example.org.
Did you enjoy this article? Click here to subscribe to the magazine.