Analysis | Dust Off, Ye American Bulls

13 October 2008

The recent introduction of the Skill Games Licensing and Control Act by Senator Robert Menendez of New Jersey provides fecund ground for a speculative discussion of the American Gaming Association's orientation toward Internet gambling.

Mr. Menendez's bill, briefly, would create a licensing and regulatory regime for Internet-based games of skill -- including poker -- in the United States.

Meanwhile, the Garden State -- as New Jersey is known on wonderfully trashy American license plates -- is home to the country's eastern gambling capital, Atlantic City. Two of the world's best-known names in bricks-and-mortar gambling, MGM Mirage and Harrah's Entertainment Inc., have footprints there and, intriguingly, have shown sustained interest in the world of real-money Internet gambling.

MGM Mirage, which is in the process of constructing Atlantic City's largest-ever casino, has long been interested in Internet gaming. In 2000, it did a deal with Silicon Gaming Inc. -- which later merged with International Game Technology -- to develop an online, play-for-free gaming community. MGM subsequently launched a play-for-money casino,, with licensure from the Isle of Man, which it shut down in 2003.

Similarly, Harrah's Entertainment Inc., which operates Harrah's Atlantic City, in 2000 launched a play-for-free casino on software from Chartwell Technology Inc. In 2004, the company, via licensure from Alderney, launched Lucky Me, a subscription-based online gaming network targeting residents of the United Kingdom. The project ultimately flopped.

Both bricks-and-mortar giants are members of the American Gaming Association, a powerful Washington trade organization that for many years supported the prohibition of Internet gambling in the United States. Since 2007, however, Frank J. Fahrenkopf Jr., the association's president and chief executive, has gone as far as to publicly express support for a one-year study of Internet gambling, plans for which were laid out in a bill proposed by Shelley Berkley, Democrat of Nevada.

Meanwhile, J. Terrence Lanni, the chief executive of MGM, and Gary W. Loveman, the chief executive of Harrah's, suggested at the 2007 Global Gaming Expo that Internet poker would very likely be the first regulated I-gaming offering in the United States. At subsequent trade shows -- and even in a desktop conference with Sue Schneider, co-founder of IGamingNews -- Mr. Loveman suggested as much.

"We think it would be great to start with online poker as the first and perhaps most politically palatable case, and then move on to other sorts of casino games," Mr. Loveman, whose company owns the popular World Series of Poker franchise, told IGN in May. "I think we have a reasonable shot at poker online in the relatively near future in the United States. On the other hand, I believe we have a relatively poor shot at anything else."

It is conceivable, therefore, that Harrah's -- a successful company with interests in New Jersey; an influential member of the American Gaming Association; a big-name player in the world of poker; and headed by a technologically savvy Mr. Loveman, who, incidentally, holds a Ph.D. from the Massachusetts Institute of Technology -- would have a hand in getting Mr. Mendez's bill to the Senate floor.

If true, Harrah's involvement would necessarily entail the blessing of the American Gaming Association -- the organization observers have long maintained holds the keys to getting regulated Internet gambling off the ground in the United States.

At last year's Global Gaming Expo, however, Mr. Lanni of MGM called the prospect of federally regulated Internet gambling under Barney Frank's Internet Gambling Regulation and Enforcement Act -- no matter what the offering -- "nonsensical."

"These agencies" -- the Treasury Department and its Financial Crimes Enforcement Network -- "can't fulfill their current responsibilities, much less take on more," he said.

It would stand to reason that Mr. Lanni would not support Mr. Menendez's new bill, as it marries the regulatory regime set out in Mr. Frank's regulation and enforcement act with the games (poker, bridge, mah-jongg and others) included under Robert I. Wexler's Skill Games Protection Act.

Was Harrah's, then, behind Mr. Menedez's licensing and control act with an O.K. from the American Gaming Association? Truth be told, we don't know -- both Harrah's and the American Gaming Association declined comment to IGamingNews when the senator's bill was introduced in late September. Assuming the argument presented here is sound, however, signs are indeed pointing toward Yes.

Should the American Gaming Association be recalibrating its position on Internet gambling, what few bulls there are on the United States market may have reason yet to hope regulated I-gaming -- in some form or another -- is coming sooner than later.

Chris Krafcik is the editor of IGamingNews. He lives in St. Louis, Mo.