Nevada Reexamines Intrastate Online Gambling

26 May 2004

Three years after the passage of enabling legislation setting up the groundwork for regulated interactive gambling in Nevada, the state's gaming regulators are revisiting the issue. Some say proposals for intrastate gaming could be in place by the end of the year.

The topic was discussed Friday during an all-day public forum hosted by the Gaming Commission.

The state's legislature took a step toward legalized interstate online gambling in 2001 with the passage of a bill enabling the commission to establish proper regulations. One of the clauses of the bill, however, required the commission to first get permission from the federal government, which it did not receive.

The U.S. Department of Justice informed the commission that any interstate online gambling system regulators would violate the Federal Wire Act, thereby stalling the process.

The Gaming Control Board considered an alternate, intrastate model in 2002, but Chairman Denis Neilander, citing a lack of input from the state legislature, suspended discussions on the topic in December of that year.

Last week's meeting marked the first time the issue has been studied by state regulators since Neilander put talks on hold.

The intrastate model entails a system in which gamblers use high-tech gadgets like cell phones, handheld computers and the Internet to bet without being present on a casino floor.

Officials from VirtGame, a company bidding to provide technology for such a system, presented their case to the commission. The company, which developed an Internet-based kiosk designed for sports books and bars where users can play video poker or bet on races, told the commission that intrastate online gambling would increase gaming revenues and provide a needed boost for the racing industry.

Tim Lockinger, chief financial officer of American Wagering Inc., which operates a chain of sports books, told the commissioners that his company has already established hand-held wagering devices that would be relatively easy to implement for regulators. The system, which is designed for common betting pools like sports betting, keno and bingo, isn't AWI's first venture into the interactive gambling space. The company held an Australian subsidiary that operated an online sports book licensed in Australian Capital Territory. The Nevada Gaming Control Board forced them to divest their interest in the Australian holding, however, after the Australian-based bookmaker accepted bets from investigators located in Nevada.

While the likes of American Wagering and VirtGame are eager to see an intrastate system move forward, not everyone agrees that it's in the state's best interest.

Problem gambling experts are concerned that an extension of gaming operations beyond the casino floor could cause an influx of problem gaming cases.

Carol O'Hare, executive director of the Nevada Council on Problem Gambling, said studies have shown that the more comfortable players are in their environment, whether it be their hotel room or bedroom at home, the less inhibited they are and the more likely they are to be susceptive to problem gambling behavior.

"The more you move into (gaming in) remote areas, the more you play into the denial nature of somebody who has a problem," O'Hare said.

Keith Kazer the chief deputy for the Nevada attorney general's office, pointed out that some of Nevada's larger operators are concerned that remote gambling could hurt their business.

"Would this take money away from the shopping and other areas?" Kazer asked. "This is a good and healthy debate. The right issues are being discussed."

On the other side of the coin, in terms of what's best for the state's licensed operators, most agree that allowing additional access remotely would help local properties stay competitive with rapidly increasing numbers of Indian casinos and offshore Internet casinos.

Marc Warren, chief researcher for the Nevada Gaming Commission, organized the daylong session designed to educate commissioners and other regulators on the issues at hand and opening up the dialogue on the next steps the state could take.

With the Nevada legislature meeting only once every two years, Kazer said, it is important that regulators have a clear plan of attack once the next session starts.

"We don't want to pass one thing and then six months after they adjourn find out that we should have included different language," he said. "Then you have to wait a year-and-a-half to get it right."

The commission will discuss the issue again at a meeting in Carson City scheduled for June. Officials will then take information they gather from the two meetings and draft preliminary reports for legislators around the first of the year.

Commissioners established an outline to gather information on proposed limits on venues, economic considerations, controls on limiting wagering to people in Nevada, problem gambling, gambling by minors and venue access. They also asked for comments on identity theft, hacking and compliance with existing statutes and regulations.

While the sessions are a clear sign that Nevada is studying the issue, it is no guarantee that an intrastate online gambling system will be approved.

Commission Chairman Peter Bernhard pointed out that the Nevada Legislature has frowned upon policy allowing gambling in hotel rooms. Kazer added that regulators won't even push for such a system unless they know it is what a majority of operators in the state want.

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