Tweet
May 17, 2001
Las Vegas Casinos Shift Stand, Backing Internet Wagering
By MATT RICHTEL
In a sharp reversal, several of Las Vegas's most powerful casinos no longer
want to ban Internet gambling, and some are starting Web sites and exploring
technology that could eventually offer wagering in homes, offices or
anywhere there is a computer wired into cyberspace.
The policy change is reverberating through Nevada and Washington, where some
casino companies are gearing up to oppose legislation they once embraced
that would explicitly ban Internet gambling and force Internet companies to
block access to illegal sites.
The $40 billion casino industry is not unanimous on the issue. But those who
oppose a ban on Internet gambling say they now believe such a ban is not
technologically feasible and therefore they should be allowed to compete
with the 1,400 sites, operated from overseas, that already offer gambling.
Some politicians and industry analysts have a more skeptical view of the
casinos' motives, asserting that the casinos are seeking to control a
lucrative field that they have realized they cannot legislate out of
existence. These critics expect the casinos eventually to seek regulation
that could give them the only legitimate licenses, enabling them to co- opt,
if not monopolize, the industry.
In the last Congress, legislation intended to halt Internet gambling passed
in the Senate and fell just short in the House. But the bill's Senate
sponsor, Jon Kyl, Republican of Arizona, said that because of the casino
industry's reversal and the power of its lobby, the window to pass such a
law "may have closed."
Already, members of Congress from Nevada who supported the bills just months
ago are suggesting that their positions have changed, echoing the sentiments
of an industry that pours millions of dollars into campaign coffers.
Sally Denton, co-author of "The Money and the Power," a recently published
book that chronicles the influence of Las Vegas casinos, said the
maneuvering appeared to be a precursor to the casinos' seeking to "take over
Internet gambling," leaving legalized online betting in the hands of the
existing casino companies.
According to a report in March by the investment bank Bear, Stearns,
Internet gambling generated $1.6 billion in revenue worldwide in 2000 and is
projected to grow to $5 billion in 2003. Roughly 1,400 sites are operated by
250 companies, situated in several dozen countries where Internet gambling
is either not regulated or is explicitly licensed, said Marc Falcone, a
gambling industry analyst with Bear, Stearns. He added that hundreds of them
give unusually poor odds, fix games or do not pay gamblers what they are
owed.
Still, Americans are logging on in droves. Around 4.5 million Americans have
gambled online at least once, and a million do so every day, according to a
study last year by the Pew Internet and American Life project. Sitting at
home computers, players see vivid images that make it seem as if they are at
a real blackjack table or slot machine, or sitting in the sports-betting
area of a casino, complete with bells, whistles and even background chatter.
To wager, a player simply enters a credit or debit card number, enabling
cash to be deducted from a bank or credit card account with the click of a
mouse and winnings to be credited back.
"You can literally wake up in the morning, log on and start losing all your
money," Senator Kyl said.
Some states have passed laws making it illegal to place a bet on the
Internet, while many others have laws that could be interpreted as doing so,
according to legal experts. The federal law enforcement officials say,
meanwhile, that the foreign-based operators are breaking federal law, which
prohibits telephone-based interstate gambling operations, including those
run on the Internet. But enforcement has been almost nonexistent.
The bills sponsored by Senator Kyl and Representative Robert W. Goodlatte,
Republican of Virginia, would have added new teeth to the federal law by
explicitly prohibiting operation of an Internet gambling site. Under those
bills, the federal government would also have been able to ask Internet
service providers like America Online to prevent users from gaining access
to illegal sites.
Both Senator Kyl and Representative Goodlatte say they plan to re- introduce
online gambling legislation in this Congress, but neither has committed
himself to a timetable.
They will find new opposition. J. Terrence Lanni, chairman and chief
executive of MGM Mirage and a member of the board of the American Gaming
Association, the lobbying arm of the industry, predicted that when the
organization next meets, on Tuesday, there "may well be a vote against
reintroduction of the bill," which the organization previously supported.
Philip G. Satre, chairman and chief executive of Harrah's Entertainment and
another prominent member of the gaming association board, will also support
reversal of the position, said Gary Thompson, Harrah's spokesman.
Mr. Lanni, considered one of the most powerful men in the casino lobby, said
that until late 1999 he opposed Internet gambling. But he said he came to
believe that regardless of legislation that bans online wagering, people
would still be able to gain access to gambling sites. He said people would
find ways around restrictions by using foreign-based Internet service
providers or foreign banks or credit cards, which the United States cannot
regulate.
Given what Mr. Lanni deems the inevitability of Internet gambling, he said
he favored legalizing Internet gambling but "regulating and taxing" it so
that governments receive some benefit and consumers can feel assured they
are dealing with reputable casinos.
"My view, very simply, is you should not put American business at a
disadvantage to business outside the U.S.," he said, adding later: "We want
to move ahead with an Internet future to our gaming."
The three largest gambling companies - MGM, Harrah's and Park Place
Entertainment, which operates Caesar's Palace and Bally's - have already
established sites where players can gamble, not for money but for prizes.
Mr. Thompson, Harrah's spokesman, said that if questions about enforcement
and legality could be cleared up, and presuming Internet gambling fitted the
company's code of ethics, "we plan to be a player."
Not all casino executives are convinced. Thomas E. Gallagher, president and
chief executive of Park Place, said he had not decided his position on the
Kyl legislation and was not certain that Internet gambling was inevitable.
And Frank J. Fahrenkopf Jr., president and chief executive of the American
Gaming Association, said it was not possible to predict yet, as Mr. Lanni
had suggested, that the group would come out against the Kyl legislation.
Indeed, the argument that Internet gambling is inevitable carries little
weight with Senator Kyl and Representative Goodlatte, who said that just
because all Internet gambling could not be stopped did not mean it should be
ignored or sanctioned to benefit corporations.
"So all illegal activity we should keep in the U.S. so we can get our take?"
Senator Kyl said. "You don't have to accept something you can stop most of."
Nevertheless, he said in an interview last week that he had become more
pessimistic about the chances his bill would become law if the industry
opposed it. Senator Kyl said the industry "has a ton of money, and money is
what killed us last time." The bill was opposed then by some Indian tribes,
which are permitted to operate casinos on their reservations; Internet
service providers that did not want to have to enforce blocks on gambling
sites; and e-lottery interests seeking to make lotteries available online.
Representative Goodlatte was more optimistic about chances for a bill,
saying that governments that are losing lottery revenue to the Internet
might support a ban, giving his side a new ally.
According to the Center for Responsive Politics, an organization that
monitors political spending, the gambling industry spent $10.7 million in
the 2000 election cycle, up from $6.6 million in 1998, making it one of the
fastest-growing special interests in the United States.
Legislators from Nevada, who not long ago supported Senator Kyl and
Representative Goodlatte's legislation, are starting to move toward the
position of the casinos.
Senator John R. Ensign, a freshman Republican Senator who voted for the
Goodlatte bill in the last Congress when he was in the House, said he now
had reservations. He said he still found Internet gambling to be an
"unhealthy form of gambling."
But, echoing the sentiments of the gambling lobby, he said he would like to
see it legalized and regulated if a ban was not enforceable, adding that
United States casinos were "going to have to get in there and try to
compete."
Representative Shelley Berkley, a Democrat who represents the Las Vegas
area, said that since last July, when she voted for the Goodlatte bill, her
position had changed, too. "I was beginning to have serious reservations"
last year, she said. She added that people in the industry had assured her
that technology was emerging that would make it possible to regulate and tax
games and keep them fair, and when that happened she would embrace
legalization.
The groundwork to legalize Internet gambling has been laid in Nevada. The
Assembly there recently passed a bill, which the Senate is debating, to
permit state regulatory bodies to license Internet sites.
Mr. Lanni of MGM said he was optimistic officials would see fit to grant
such licenses, noting that the regulators, who he said were lukewarm to the
idea of Internet gambling as recently as last year, had changed their minds,
too.
Casinos in New Jersey are taking a different tack. Proposed legislation in
New Jersey that would lead to licensing casinos there for online gambling
"is being defeated, because not a single casino company supports the idea,"
said I. Nelson Rose, a professor and gambling law expert at the Whittier Law
School in California.
Mr. Rose said that the difference between Nevada and New Jersey on Internet
gambling revolved around the states' views in general toward gambling.
Nevada's livelihood centers on gambling, Mr. Rose said, while New Jersey has
always seen casino gambling as an inevitable evil that should be isolated in
Atlantic City.
Ms. Denton and the co-author of her book, Roger Morris, said the change in
view among Nevada regulators was not a coincidence but showed the influence
of the industry. "It's a company town and a company state, and they're going
to do what the company wants," Ms. Denton said.
Mr. Lanni characterized his own change of viewpoint as a 180-degree turn.
And he said that was partly because he believed technology might soon be
available that could make it possible to verify whether Internet users, no
matter how far- flung, were old enough to gamble.
With a small device attached to a person's computer, "we could identify the
person who has the account," he said.
The industry has also talked of using global positioning systems to
establish a user's physical location, to determine if the person is wagering
from a jurisdiction where gambling is permitted. But industry critics
question how reliable such technology could be.
Senator Kyl said he did not know if it was feasible to create such
technology, but he said the activity to create it suggested just how much
money was at stake.
"Considering the expense one would go to to employ it," he said, "what does
that tell you about the potential economic benefits? Should society be
promoting taking that much money out of productive use and putting it in the
hands of MGM?"
Copyright 2001 The New York Times Company
Las Vegas Casinos Shift Stand, Backing Internet Wagering
By MATT RICHTEL
In a sharp reversal, several of Las Vegas's most powerful casinos no longer
want to ban Internet gambling, and some are starting Web sites and exploring
technology that could eventually offer wagering in homes, offices or
anywhere there is a computer wired into cyberspace.
The policy change is reverberating through Nevada and Washington, where some
casino companies are gearing up to oppose legislation they once embraced
that would explicitly ban Internet gambling and force Internet companies to
block access to illegal sites.
The $40 billion casino industry is not unanimous on the issue. But those who
oppose a ban on Internet gambling say they now believe such a ban is not
technologically feasible and therefore they should be allowed to compete
with the 1,400 sites, operated from overseas, that already offer gambling.
Some politicians and industry analysts have a more skeptical view of the
casinos' motives, asserting that the casinos are seeking to control a
lucrative field that they have realized they cannot legislate out of
existence. These critics expect the casinos eventually to seek regulation
that could give them the only legitimate licenses, enabling them to co- opt,
if not monopolize, the industry.
In the last Congress, legislation intended to halt Internet gambling passed
in the Senate and fell just short in the House. But the bill's Senate
sponsor, Jon Kyl, Republican of Arizona, said that because of the casino
industry's reversal and the power of its lobby, the window to pass such a
law "may have closed."
Already, members of Congress from Nevada who supported the bills just months
ago are suggesting that their positions have changed, echoing the sentiments
of an industry that pours millions of dollars into campaign coffers.
Sally Denton, co-author of "The Money and the Power," a recently published
book that chronicles the influence of Las Vegas casinos, said the
maneuvering appeared to be a precursor to the casinos' seeking to "take over
Internet gambling," leaving legalized online betting in the hands of the
existing casino companies.
According to a report in March by the investment bank Bear, Stearns,
Internet gambling generated $1.6 billion in revenue worldwide in 2000 and is
projected to grow to $5 billion in 2003. Roughly 1,400 sites are operated by
250 companies, situated in several dozen countries where Internet gambling
is either not regulated or is explicitly licensed, said Marc Falcone, a
gambling industry analyst with Bear, Stearns. He added that hundreds of them
give unusually poor odds, fix games or do not pay gamblers what they are
owed.
Still, Americans are logging on in droves. Around 4.5 million Americans have
gambled online at least once, and a million do so every day, according to a
study last year by the Pew Internet and American Life project. Sitting at
home computers, players see vivid images that make it seem as if they are at
a real blackjack table or slot machine, or sitting in the sports-betting
area of a casino, complete with bells, whistles and even background chatter.
To wager, a player simply enters a credit or debit card number, enabling
cash to be deducted from a bank or credit card account with the click of a
mouse and winnings to be credited back.
"You can literally wake up in the morning, log on and start losing all your
money," Senator Kyl said.
Some states have passed laws making it illegal to place a bet on the
Internet, while many others have laws that could be interpreted as doing so,
according to legal experts. The federal law enforcement officials say,
meanwhile, that the foreign-based operators are breaking federal law, which
prohibits telephone-based interstate gambling operations, including those
run on the Internet. But enforcement has been almost nonexistent.
The bills sponsored by Senator Kyl and Representative Robert W. Goodlatte,
Republican of Virginia, would have added new teeth to the federal law by
explicitly prohibiting operation of an Internet gambling site. Under those
bills, the federal government would also have been able to ask Internet
service providers like America Online to prevent users from gaining access
to illegal sites.
Both Senator Kyl and Representative Goodlatte say they plan to re- introduce
online gambling legislation in this Congress, but neither has committed
himself to a timetable.
They will find new opposition. J. Terrence Lanni, chairman and chief
executive of MGM Mirage and a member of the board of the American Gaming
Association, the lobbying arm of the industry, predicted that when the
organization next meets, on Tuesday, there "may well be a vote against
reintroduction of the bill," which the organization previously supported.
Philip G. Satre, chairman and chief executive of Harrah's Entertainment and
another prominent member of the gaming association board, will also support
reversal of the position, said Gary Thompson, Harrah's spokesman.
Mr. Lanni, considered one of the most powerful men in the casino lobby, said
that until late 1999 he opposed Internet gambling. But he said he came to
believe that regardless of legislation that bans online wagering, people
would still be able to gain access to gambling sites. He said people would
find ways around restrictions by using foreign-based Internet service
providers or foreign banks or credit cards, which the United States cannot
regulate.
Given what Mr. Lanni deems the inevitability of Internet gambling, he said
he favored legalizing Internet gambling but "regulating and taxing" it so
that governments receive some benefit and consumers can feel assured they
are dealing with reputable casinos.
"My view, very simply, is you should not put American business at a
disadvantage to business outside the U.S.," he said, adding later: "We want
to move ahead with an Internet future to our gaming."
The three largest gambling companies - MGM, Harrah's and Park Place
Entertainment, which operates Caesar's Palace and Bally's - have already
established sites where players can gamble, not for money but for prizes.
Mr. Thompson, Harrah's spokesman, said that if questions about enforcement
and legality could be cleared up, and presuming Internet gambling fitted the
company's code of ethics, "we plan to be a player."
Not all casino executives are convinced. Thomas E. Gallagher, president and
chief executive of Park Place, said he had not decided his position on the
Kyl legislation and was not certain that Internet gambling was inevitable.
And Frank J. Fahrenkopf Jr., president and chief executive of the American
Gaming Association, said it was not possible to predict yet, as Mr. Lanni
had suggested, that the group would come out against the Kyl legislation.
Indeed, the argument that Internet gambling is inevitable carries little
weight with Senator Kyl and Representative Goodlatte, who said that just
because all Internet gambling could not be stopped did not mean it should be
ignored or sanctioned to benefit corporations.
"So all illegal activity we should keep in the U.S. so we can get our take?"
Senator Kyl said. "You don't have to accept something you can stop most of."
Nevertheless, he said in an interview last week that he had become more
pessimistic about the chances his bill would become law if the industry
opposed it. Senator Kyl said the industry "has a ton of money, and money is
what killed us last time." The bill was opposed then by some Indian tribes,
which are permitted to operate casinos on their reservations; Internet
service providers that did not want to have to enforce blocks on gambling
sites; and e-lottery interests seeking to make lotteries available online.
Representative Goodlatte was more optimistic about chances for a bill,
saying that governments that are losing lottery revenue to the Internet
might support a ban, giving his side a new ally.
According to the Center for Responsive Politics, an organization that
monitors political spending, the gambling industry spent $10.7 million in
the 2000 election cycle, up from $6.6 million in 1998, making it one of the
fastest-growing special interests in the United States.
Legislators from Nevada, who not long ago supported Senator Kyl and
Representative Goodlatte's legislation, are starting to move toward the
position of the casinos.
Senator John R. Ensign, a freshman Republican Senator who voted for the
Goodlatte bill in the last Congress when he was in the House, said he now
had reservations. He said he still found Internet gambling to be an
"unhealthy form of gambling."
But, echoing the sentiments of the gambling lobby, he said he would like to
see it legalized and regulated if a ban was not enforceable, adding that
United States casinos were "going to have to get in there and try to
compete."
Representative Shelley Berkley, a Democrat who represents the Las Vegas
area, said that since last July, when she voted for the Goodlatte bill, her
position had changed, too. "I was beginning to have serious reservations"
last year, she said. She added that people in the industry had assured her
that technology was emerging that would make it possible to regulate and tax
games and keep them fair, and when that happened she would embrace
legalization.
The groundwork to legalize Internet gambling has been laid in Nevada. The
Assembly there recently passed a bill, which the Senate is debating, to
permit state regulatory bodies to license Internet sites.
Mr. Lanni of MGM said he was optimistic officials would see fit to grant
such licenses, noting that the regulators, who he said were lukewarm to the
idea of Internet gambling as recently as last year, had changed their minds,
too.
Casinos in New Jersey are taking a different tack. Proposed legislation in
New Jersey that would lead to licensing casinos there for online gambling
"is being defeated, because not a single casino company supports the idea,"
said I. Nelson Rose, a professor and gambling law expert at the Whittier Law
School in California.
Mr. Rose said that the difference between Nevada and New Jersey on Internet
gambling revolved around the states' views in general toward gambling.
Nevada's livelihood centers on gambling, Mr. Rose said, while New Jersey has
always seen casino gambling as an inevitable evil that should be isolated in
Atlantic City.
Ms. Denton and the co-author of her book, Roger Morris, said the change in
view among Nevada regulators was not a coincidence but showed the influence
of the industry. "It's a company town and a company state, and they're going
to do what the company wants," Ms. Denton said.
Mr. Lanni characterized his own change of viewpoint as a 180-degree turn.
And he said that was partly because he believed technology might soon be
available that could make it possible to verify whether Internet users, no
matter how far- flung, were old enough to gamble.
With a small device attached to a person's computer, "we could identify the
person who has the account," he said.
The industry has also talked of using global positioning systems to
establish a user's physical location, to determine if the person is wagering
from a jurisdiction where gambling is permitted. But industry critics
question how reliable such technology could be.
Senator Kyl said he did not know if it was feasible to create such
technology, but he said the activity to create it suggested just how much
money was at stake.
"Considering the expense one would go to to employ it," he said, "what does
that tell you about the potential economic benefits? Should society be
promoting taking that much money out of productive use and putting it in the
hands of MGM?"
Copyright 2001 The New York Times Company
Comment