In this third installment of a five-part series on the future of server-based gaming, Slot Manager explores the security and regulatory aspects of this technology.

Server-based gaming promises to significantly enhance slot floor operations and the player's entertainment experience. But before regulators give the green light, they want to ensure the technology will be secure and the integrity of the games is maintained.

"This is a pretty major upheaval," said Andy Ingram, senior vice president, network gaming, International Game Technology. "How we got to where we are today was we just kept building on existing infrastructure," he explained, citing as examples the introduction of player tracking and ticketing. "Each step was a little piece, and the [gaming] regulators could buy into that little piece."

He noted IGT has been working very closely with Nevada and other jurisdictions to explain the technology and address concerns of regulators.

While some jurisdictions are moving forward steadily, others are more conservative, Ingram added.

In Nevada, gaming regulators are taking a proactive approach. Technical standards, collectively known as Regulation 14, are already in place, Bill Lerner, a Deutsche Bank gaming analyst noted in a report to investors on server-based gaming in Nevada.

"If gaming equipment suppliers had complete SBG systems perfected and ready for shipment, and the economics of SBG were worked out between suppliers and operators, full-scale rollouts of the technology could begin immediately," he wrote.

He indicated that Deutsche Bank believes server-based gaming is still on track for a material impact in calendar 2009. "Further, we believe that the NGCB's technical standards are designed with longer-term goals in mind as they are likely to accommodate several success waves of new gaming technology beyond SBG," the report states.

One thing in the product's favor is that server-based gaming technology has been in use in other industries for years, Lerner said.

"The reality of SBG technology is that it is nothing new and its various components are commonplace across a wide spectrum of industries. At the end of the day, SBG can simply be thought of as a series of wire-based transactions [financial and otherwise] routed back and forth over secure networks."

Lerner noted that trillions of dollars are handled in similar transactions on a daily basis throughout the business world with complete faith in their security.

One issue that may cause a hang-up in Nevada, Lerner noted, are minimum internal control standards. "Essentially, we do not think GCB auditors are yet comfortable with relying solely on systems to track dollar movements [as opposed to hard currency drops] - a bridge that needs to be crossed before we believe gaming operators will implement widespread SBG installations. However, these auditors have about one-and-a- half years to get comfortable with SBG MICS, which we believe is more than enough lead time to work out all the kinks."

He noted that the gaming control board has formed a steering committee made up of auditors, gaming equipment suppliers and casino operators.
"They are essentially performing an education function by making the industry aware of the technical standards and the likely changes that will need to be made to the MICS.

In Europe, server-based gaming already is in use in many jurisdictions, according to Thierry Brunet, chief systems architect, Cyberview Technology.

Cyberview is ahead of the curve on security implementation, he said, because it has been handling server-based transactions for years, and has contracts in the United Kingdom for fixed odds betting terminal, in the Czech Republic for lottery machines, and in other jurisdictions.
He has prepared a detailed document that describes Cyberview's Trusted Agility security model, which is multilayered and includes Department of Defense and Microsoft security systems.

"We're implementing what has proven to be the most appropriate security model in [the] 17 years since we got involved in gaming, whereby countless of billion of transactions have been securely processed in hostile distributed networks, for the French lottery, the German lotteries, UK FOBTs and the Czech Republic lottery. These gaming estates span over entire countries with thousands of unsecured outlets," he notes in the document.

Gaming suppliers have been meeting with and working closely with regulators to explain the technology and address their concerns.
"I think it's been very positive. We've tried to adopt a crawl, walk, run mentality," said Steve Kastner, vice president of systems, IGT. "It's been very necessary. You kind of have to rethink how we've run casinos for the last decade or so."

IGT has completed field trials of the first phase of its server-based gaming. Trials were conducted at Barona Valley Ranch Resort & Casino, Treasure Island in Nevada, Ameristar St. Charles and MGM Grand Detroit."The next step is we will have another version coming out that kind of takes it to the next level."

Kastner said regulators in Nevada are cautious and prudent but are interested in seeing the technology move forward as long as the integrity and security of the games are maintained.

"Nevada's very active on making sure our regulations can take us into the future," he said. "You had the technical regulations being put in place. Now we're really thinking about how we live with it, how we operate it and still maintain good standards and regulations."

Kastner noted that IGT is implementing all the GSA protocols and demonstrating interoperability among the manufacturers. Nevada, Michigan and Missouri, as well as GLI, have progressed significantly, Kastner said.

"The regulators have done a good job in educating themselves and trying to understand and really listen to the operators and manufacturers," he said.

"I think it can be shown that the controls match or exceed the controls that are out on the conventional gaming floor," Kastner said. "It's a matter of building your product to satisfy the regulations."

Moreover, he said, companies and regulators are on the same page in terms of having a multilayered approach to security. That way, he said, "if one aspect of the system is compromised, then another aspect still prevents or minimizes any harm that can be done."

Regulators in the United States seem to be maintaining an open mind about the technology, said Gordon Dickie, senior vice president of business development and government affairs for Cadillac Jack.

Cadillac Jack, which started as a games manufacturer in the Class II gaming market and now has added Class III gaming, is well-acquainted with server-based gaming from its Class II experience. Tribal gaming regulators in Class II jurisdictions, he said, are familiar with server-based and downloadable games because that's how Class II gaming machines operate.
"The non-tribal jurisdictions that are not yet familiar with this technology are concerned about the security of the system," he said. That's why strong internal controls will play an important role.

"It is up to the individual slot manufacturers to deliver a quality system that is secure and at the same time introduce a quality product that will greatly enhance the casino's ability to make their customers experience an enjoyable one."

Dickie, however, said regulators in general realize the importance of allowing technology and the gaming industry to progress. "They understand change is good as long as it's done with security in mind. That's why there are gaming regulations and standards."When Dickie speaks at International Masters of Gaming Law conferences, he tries to address such issues. "I plan on meeting along with our systems people in the very near future with regulators in the jurisdictions that Cadillac Jack will be transitioning into as far as Class III games."

Face-to-face meetings with regulators are effective tools to explain the technology's benefits and security.
"Demonstrating and discussing the protocols of the system, security, protection of the code, eventual approval of the technical standards, independent and or regulator lab testing, the internal controls and training. This will all be key to giving the regulators their comfort level in this new technology," Dickie said.

Dickie said he sees benefits for regulatory agencies for internal controls, including accounting, accountability, less human error and less chance of fraud.

"It will be much easier to control from a regulator standpoint because the regulator can monitor activities and prevent manipulation of numbers," Dickie said. "The regulators will be able to go right into the casino system and check drop, fills, payouts etc." This, he said, is already being done in Victoria, Australia.

Up next: The power of server-based gaming to raise the bar for the player experience.