The Mouthpiece


By Martin Owens
Contributing Editor


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    Martin Owens

    Appearances can deceive

    Recent developments in US Internet Gaming- Legal, Illegal, and Who Knows?

    "Well, it just goes to show... things are not what they seem..."
    The Rolling Stones


    (Sports Network) -

    The "Good"

    The legal expansion of Internet gambling in the USA continues to hang fire, both at the state and Federal level.

    Washington DC is the most interesting venue. On the one hand, Rep Joe Barton's HR 2366 is a new twist: it takes another crack at licensing Internet poker on the national level, but without involving the national government. The aim of the bill is to limit the offering of Internet poker games to operators who have valid licenses issued by state/tribal authorities; it goes so far as to require Uncle Sam to keep a running list of unlicensed Internet poker providers, the better to taboo them with US financial institutions. This is progress; previous proposals had always involve putting the Department of the Treasury directly in charge, and forcing the states to split the revenue with the national government. This time, instead of trying to override or supplant state efforts, HR 2366 (with the easy-to-remember title of Internet Gambling Prohibition, Poker Consumer Protection, and Strengthening UIGEA Act of 2011) lends Federal backing to state licensing programs. But while this bill is an improvement, it still suffers from the same problems as all previous congressional Internet gambling legislation. First, it's hard to find active support (the Barton bill so far only has about 20 sponsors). Gambling remains a highly controversial subject, with obvious ballot box penalties for favoring it, but no discernible rewards, at least in the short term, for backing it. Second, it's hard to get anyone to focus on the subject, while such matters as the budget crisis continue to hog center stage. The Barton bill is a worthwhile effort; whether Congress will get around to dealing with it in a serious manner is another question.

    On the other hand, the government of the District of Columbia itself is going ahead with its search for an acceptable operator to install an Internet poker system, which it voted into being at the end of last year. Politically speaking, this ought to be a done deal, but the District of Columbia is a strange beast, even by the standards of American politics. The final say over all Colombian municipal legislation rests with Congress. Now supposedly there is a deadline by which Congress must put in its veto for any DC action which it disapproves. And that deadline has come and gone. Yet some diehard gambling opponents still insist the DC poker program can be voted out of existence even yet. They may have a point. It's becoming clearer every day that in post-Constitutional America, the government can pretty much do any damn thing it wants. Nevertheless DC may slip its program through the cracks yet.

    At the state level, things remain pretty much the same. California is the only state where any state legislative proposal for online poker or other online gambling still stands a chance for this year. Sacramento has two competing bills for an I gaming system in the Golden State. Sen. Roderick Wright's SB 40 looks like a more balanced and thought out approach than Senator Lou Correa's SB 45, which would demand up to $250 million in upfront licensing fees from potential operators- and some really horrific price boosts for latecomers. Meanwhile, The California Online Poker Association (COPA) has partnered with Playtech's joint venture with Scientific Games, Sciplay, to provide the platform for a free-play site, scheduled to come online before 2012 . Whether this will amount to a market advantage to seize California's licensed online poker remains to be seen.. Finally, at least some elements of the influential Indian gaming lobby continue to oppose Internet poker, Internet table games- in fact, Internet anything- as a supposed violation of alleged tribal "sovereignty and exclusivity" in gaming matters.

    As of this writing, California lawmakers are in recess, having defied tradition and turned in a state budget more or less on time. Whether they get around to voting on Internet gambling this year, or let it wander out in the woods and die again, is anybody's guess. Given the California legislature's track record of allowing the clock to run out on Internet poker and other Internet gambling proposals, it looks like many of the other serious Igaming operators have quite frankly lost interest in this market. It's taking too long; almost nobody with the power to say "yes" is acting like they're even paying attention, and the people who want to say "no" are all too prominent. If there are genuine efforts afoot to bring state licensed Internet poker to California, at the moment they're quite well hidden

    The "Bad"

    Conventional wisdom says that if the " good guys" (US state or Federal governments) won't serve the American I-gaming market, the "bad guys" (offshore operators) surely will. Surprise! BoDog, the most prominent "bad boy" on the block has stopped accepting US Internet poker players as part of a bid to get licensed. That's not a misprint. BoDog is coming in from the cold and applying for our UK gambling license. At the same time, The Greek sportsbook, a well-known operation based in Jamaica now, has also bowed out of the American market, possibly to help Jamaica get a "white label" listing from the British government, which would allow outfits based in Jamaica to advertise in the UK, and quite possibly the rest of Europe, too.

    Is this the long-awaited beginning of the Decline and Fall of the Dark Side, so often foretold by gambling opponents? Are all the "bad" offshore operators finally giving up their wicked ways? Not hardly, to steal a line from John Wayne. Already certain Internet gaming operations are moving to take up the slack in the market left by the departure of Full Tilt, Absolute Poker, and Poker Stars. The departure of BoDog will simply free up new block of trained customers to these new adventurers, and quite likely attract others into the vacuum as well. As far as sports betting, that always was illegal in the USA outside of Nevada. The transition away from The Greek will be, if anything, quicker. The worldwide Internet gambling market is predicted to reach $30 billion by the end of next year. And the biggest single segment of that market- in any I-gambling format- is still the USA. As long as that kind of money is at stake, somebody or something will step up.

    And the Trendy

    It didn't used to make a difference whether we called it "gambling" or "gaming". The more cynical souls among us noted that once wicked "gambling" came into camp and got a license, it immediately became acceptable (if not quite respectable) "gaming". And of course it could be instantly told apart from "kid games" like Monopoly . But today the situation has changed. There are all kinds of contests and software programs called "gaming" that don't fit under the technical definition of gambling, and may have nothing to do with it at all. But they have developed huge adult markets of their own.

    There is the online mobile gaming market, featuring such things as apps for iPhones which deliver amusement and arcade style offering such as "Angry Birds" - just out this year. It cost $140,000 to make and has so far grossed $70 million. (2000% ROI in THIS economy? Not bad!) Mobile gaming of this type in is now worth $10 billion annually. It is considered to be one segment of the entire videogame industry, which comes in at about $40 billion. And there are deeper and more complicated offering such as the role playing "virtual worlds" - MMO (massively multiplayer online) games such as World of Warcraft, which are a multibillion-dollar segment of their own.

    But from the online gambling point of view, the most interesting are the social media based games, such as Zynga. With a unique combination of marketing in game formatting, they have not only made online poker legal (via subscription and no-pay-to-play mechanisms, but profitable, too (through Prizes that exist as virtual concepts only and the absolutely brilliant stroke of harnessing the viral market potential of social media, at virtually no cost). Success has been quick- Zynga just launched a billion dollar IPO - in THIS economy. How's business for them? Well to give you an idea, in the Farmville game alone (not even gambling, it's a lesser species of virtual world) customers are making online purchases of "magic seeds" and "plants" and all the rest, at the rate of 38,000 per second. That's right, I said per second. Even in Vegas, are there 38,000 handles pulled every SECOND?

    So successful has this new format become that there is even talk of state lotteries using this type of game to keep people coming to the online lottery sales sites- once they decide to set them up, that is.

    And so we end up where we began, in the state legislatures. Waiting for... what?

    Mr. Owens is a California attorney specializing in the law of Internet and interactive gaming since 1998. Co-author of INTERNET GAMING LAW with Professor Nelson Rose,( Mary Ann Liebert Publishers , 2nd ed 2009) ; Associate Editor , Gaming Law Review & Economics; Contributing Editor, TSN. Com Comments and inquiries welcome at to mowens@trade-attorney.com.

    Copyright 2011


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