Editorial | A New Star Rising?

19 November 2008

Significant attention at this year's Global Gaming Expo in Las Vegas has been devoted to Internet gambling in the United States. Perhaps that’s because the stars have finally begun to align for sensible discussion of regulation.

One only need walk past the empty, overstaffed high-roller rooms or speak with a cab driver or cocktail waitress to know that all is not well for the land-based gaming industry.

With annual revenue forecasts for Sin City on the chopping block, 43 out of 50 states, too, are carrying budget deficits. As the Dow Jones hit a five-year low today, it’s clear that new sources of tax revenue are front and center for governments throughout the country.

However, a solid majority of Democrats in Congress and a poker-playing president-elect (who carries a chip in his pocket as a lucky charm) engender hope for a fresh, substantive discussion on I-gaming regulation.

A conference panel of legal experts was quick to predict that regulation-friendly prospects are unlikely to bear fruit in 2009 due to vast, systemic problems currently facing state and federal governments.

But that’s not what Gary W. Loveman and Frank J. Fahrenkopf Jr., the chairman and chief executive of the American Gaming Association, respectively, are saying.

The association they head has history with Internet gambling. In the late-1990's, its members -- land-based casinos -- were phobic toward I-gaming; they feared, above all, that people would no longer come into their mega-million dollar facilities.

As the poker phenomenon took hold in the early-2000's it became clear that the I-gaming medium could well serve as a training ground for, and feeder system to, terrestrial gambling palaces.

Now, the association is once again exploring its Internet gambling policy. An anointed committee of members will be meeting in Vegas this week to discuss the topic. The association, which currently supports a federal I-gaming study bill, is likely to brainstorm on how best to proceed on tricky state-versus-federal issues.

This is a great topic because gambling regulation has traditionally been overseen at the state level. But given the borderless nature of this medium, others point to federal regulation -- with the ability for states to opt out -- as the way to go.

The association has members on both sides of the state-versus-federal fence, as well as a dinosaur or two that still doesn't see what the big deal is about Internet gaming. So, it will be quite instructional as to how the association's policy is articulated.

If there is positive movement on regulatory issues at all, however, it will happen at both the state and federal level. And that’s probably for the best.

The California intrastate poker initiative is likely to be reintroduced in 2009 -- that state, which has a $28 billion deficit, may well be open to the concept of "found money" in I-gaming tax revenue. California loves to be the innovator, and with Silicon Valley’s tech giants like Google Inc. and Yahoo Inc., the Golden State clearly has the eyeballs to attract.

If one state will break the I-gaming logjam, other populous states are sure to follow. Under the controversial Unlawful Internet Gambling Enforcement Act, states have the right to legalize I-gaming and compact with each other, a la the multistate Powerball lottery, to create some attractive liquidity.

In the mean time, there’s much work to be done at the federal level. With the recent issuance of the UIGEA's so-called midnight rule, overturning that rule will be the first order of business and a variety of strategies are being discussed to accomplish that.

The next step will be to evaluate numerous bills that were introduced in 2008 and determine which, if any, have potential for passage in the upcoming 111th Congress. Or is a clean slate called for to allow the introduction of an innovative, simple bill?

One thing's for sure: Any new bill will not be friendly to sports betting. What's more, new draft legislation may focus on poker products, exclusively.

Of course, the wild card in the regulatory equation is the Department of Justice, which has maintained a hostile stance toward I-gaming executives whose companies operated here. All eyes, therefore, are on Barack Obama's likely nominee for attorney general, Eric H. Holder Jr.

Will 2009 be the year for a regulation-minded approach to I-gaming in the United States? Too soon to say . . . but, for the first time in many years, there are indications that the moral majority will be overcome by the increasingly exigent need of governments -- state and federal -- to generate income.

Stand by.

Mrs. Schneider is the founder of IGamingNews and former chief executive of River City Group. She now consults for Clarion Gaming and contributes regularly to IGamingNews.