'Round the North American Issues

16 May 2008

The recent Canadian Gaming Summit provided fresh insight into issues of concern to the North American land-based and Internet gambling industries, with highlights including a scathing critique of the U.S. Justice Department by one of I-gaming's most well-known legal experts, as well as a call to terrestrial operators to buck the bricks and delve into the digital.

Anthony N. Cabot and Michael D. Lipton -- members of the International Masters of Gaming Law, a nonprofit association of gaming attorneys, regulators and executives -- were on hand to provide a roundup of legal and regulatory developments on the continent.

Mr. Cabot, an attorney with Lewis and Roca, a Las Vegas-based firm, was outspoken as usual, and described the legal climate for Internet gambling in the United States -- inopportune though it may seem -- as “not what you think.”

The Unlawful Internet Gambling Enforcement Act of 2006 was a "compromise bill," he said, and therefore includes a variety of exceptions which clearly legalize certain forms of gambling.

He noted that a recent bill seeking to examine the feasibility of intrastate Internet poker in California, sponsored by Assemblyman Lloyd A. Levine, constitutes a pertinent example of what is allowed under the act. Lotteries, horseracing, and fantasy sports leagues, moreover, are beginning to take advantage of the act's numerous exemptions.

Critically, Mr. Cabot went on to describe the justice department's strategy as one of “extortion.”

“They’re basically going after those who won’t fight and getting huge civil forfeitures of cash from them," he said.

Mr. Cabot pointed to the January 2006 civil settlement between The Sporting News and the justice department as an example. The publication, operated then by Vulcan Sports Media Inc., a company owned by Microsoft co-founder Paul G. Allen, settled for $7.2 million.

“The New York district office has bragged that they’ll seize $500 million in Internet gaming industry fines this year,” Mr. Cabot added.

Meanwhile, Mr. Lipton, an attorney with Elkind & Lipton, a Toronto-based firm, said there’s been noise of Internet gambling legislative activity in the Canadian House of Commons.

Roy Cullen, a member of Parliament representing electoral district Etobicoke North, home to racecourse operator Woodbine Entertainment Group, has publicly discussed drafting a bill similar to the UIGEA.

“During a Question Period in February, Cullen discussed his concern for citizens who had been 'victimized' by Internet gambling sites,” said Mr. Lipton, noting Mr. Cullen has been exploring the issue further, and may be looking more seriously at a regulatory bill.

With regard to the thorny federal-provincial issue of enacting new gaming legislation, Margaret McGee, a vice president of the Nova Scotia Gaming Corporation, asked: “Given that the provinces are mandated to conduct and manage gambling activities, the federal government can enact a federal prohibition law but where does that leave the provinces?”

Should legislation in Canada emerge, be it regulatory or prohibitory, it’s clear the issue remains a catalyst for debate.

Concerning matters digital, Gary W. Loveman, chief executive of Harrah's Entertainment Inc., said that while the terrestrial gaming industry has, historically, shown an obsession with constructing new bricks-and-mortar properties, its focus should shift toward innovation in core gaming products offered to the public.

Mr. Loveman, a former professor at Harvard Business School, said new and highly-popularized participatory activities like "American Idol," fantasy sports, Nintendo Wii, day trading -- even the waning moments of an eBay auction -- offer bettors opportunities to realize an uncertain result.

“As Generations X and Y move to online gaming and multiplayer role-playing games, the gambling industry is challenged to bring new digital content into our businesses,” Mr. Loveman said.

As other segments of the entertainment industry have worked toward maximizing convergence of Internet, mobile, and other electronic delivery channels, he said, the North American gambling industry’s lack of emphasis thereon has led to only “marginal innovations."

Of course, the primary challenge to such innovation is political, Mr. Loveman said.

However, he did predict forward political movement with regard to online poker, at least in the United States, where the popularity of the game is high.

“I can’t see the U.S. allowing online casino games or sports betting but I would expect that Internet poker may be legalized in the future,” he said.

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.