It can be a struggle to keep pace with the constant technological advancements in modern gaming. I concluded that after sitting through three hour-long sessions at the first iGaming Institute of the May East Coast Gaming Congress in Atlantic City. So much is happening that not even the experts can predict the future.
The issue has become so key to gaming that conference coordinators separated the topic into its own afternoon agenda for the first time. The full roster of iGaming events took place to a packed house of hundreds.
Internet gaming is alive, and on a rocky path to being well, in New Jersey, Nevada and Delaware. But, like any new venture, the programs are experiencing “growing pains“ as they confront both challenges and successes and settle into a routine in all three states.
Early on, legalizing and launching Internet gaming programs was a race of the swiftest. Analysts and legislators projected huge revenues and taxes that have not yet happened.
The three jurisdictions operate under different business models. New Jersey’s law allows only Atlantic City casino operators to operate online poker rooms and casinos within New Jersey‘ borders. Software companies must partner with existing casinos and undergo the New Jersey Division of Gaming Enforcement‘s (DGE) standard licensing investigation. As of late May, 12 companies have received licenses; 163 more have applied.
New Jersey online casinos offer the same games available in commercial land-based properties. The current breakdown of players on the 325 approved games, plus poker, is 30% poker/70% traditional.
Nevada has legalized only poker. Since enacting the legislation, there have already been several revisions. Nevada now allows interstate compacts, higher license fees and the removal of a prerequisite of a federal online gambling law.
Delaware’s Internet gaming launched in October 2013. To build business, Delaware Governor Jack Markell signed a compact agreement with Nevada Governor Brian Sandoval in March 2014. The partnership permits customers within both states to play the other‘s games.
With smaller populations, introducing the ability to play against each other could be very profitable. They will work out taxing details and possible future alliances with additional states.
The Delaware Lottery Office administers Delaware’s online multigame program. It was originally designed for PC computers, but upgrades to the state’s Internet-based gaming websites now include Apple’s MAC computers. Any operating system a player chooses will open a gaming application.
Representing those states and others, the conference speakers were regulators, operators and technical experts with mixed reactions to Internet gaming. On the plus side, those companies operating iGaming believe in its future. They described minimal software problems that were quickly corrected for an efficient launch.
Brian Mattingly, CEO of 888 Holdings Plc, has aligned his company with Caesars Entertainment, which currently operates four Atlantic City casinos. Unfortunately, Caesars just announced it will close its Showboat casino on August 31, despite a profitable first quarter of 2014.
He revealed the company’s multi-layer operating model, explaining that its registration system offers multiple checkpoints within four minutes. Mattingly said, “We must blend strong regulation and strong security. 125 customer categories include demographic and financial, while also checking for authentic geographic eligibility. Our potential is based on the fact that only 10% of New Jersey adults know about legal online gaming; 40% still play illegally.”
Addressing the naysayers, one panelist compared it to criticizing an nonverbal infant. He stressed that success takes time and requires constant education and refinement. New Jersey regulators believe more gaming options responds to specific player interests.
Some tangible early negatives have resulted in many operators taking a collective “wait and see” attitude before investing. They disagree about whether the US market offers sufficient potential value.
Foreign companies must develop different marketing strategies from Europe that appeal to American players. U.S. customers demand ease of payments and registration, while also expecting American brands and content.
A streamlined, expedited application process will persuade customers to sign up. Unfortunately, illegal sites request less information, which comforts players who reluctantly divulge personal details.
Ironically, polling shows Internet gaming does not have a given popularity among the general public, even among gamblers who have a favorable view of commercial and/or tribal gaming. One recent survey revealed more adults favor legalizing marijuana over Internet gaming. Can you imagine that?
Anticipating an increase in Internet gaming jurisdictions over time, the panels offered these recommendations for operators and regulators to follow:
All component organizations should work together, share resources and coordinate their efforts to improve regulations. A harmonious approach will keep Washington at bay.
Operators must view regulatory changes positively and not as promoting competition.
The New Jersey model, which anchors Internet gaming providers with land-based properties, guarantees greater compliance. Those casinos have more at stake. Also, the brand value before online gaming launches matters, proven by the Borgata’s consistent top ranking.
Make the registration easy. Customers, especially Millenials under 35, expect expedited online registration taking less than 20 minutes. If it seems too long, they will not sign up.
While there are many business considerations, online gaming has evolved into a hot political issue, sparking intense disagreement among leading U.S. gaming companies. Operators like Caesars Entertainment and MGM are supporters; Las Vegas Sands (LVS) and Wynn advocate prohibition. Mid-sized and smaller operators remain on the sidelines, watching before making their own determinations.
LVS CEO Sheldon Adelson, the most visible opposing figure, cites his belief in Internet gaming’s destructive societal repercussions. He has gathered political support and has contributed millions to the fight.
The American Gaming Association (AGA) has felt the impact of this growing battle. The group recently reversed its earlier public position and withdrew its support for federal regulation and will now remain neutral in this conflict.
This official stance follows CEO/President Geoff Freeman’s Congressional testimony last year, where he recommended a solid, legal program, under federal guidelines, instead of ignoring that Americans wager billions illegally each year.
I agree that the AGA can no longer take a tough posture in any direction. The competing interests and wishes of its prominent members put the group in an untenable position. I would also hesitate to establish yet another potentially incompetent Washington bureaucracy. If conducted legally, I’m all about the states directing their own individual programs, based on their citizens’ unique cultures.
In the end, even the most influential moguls and advocates may find their futures are linked to the political triumphs or misfortunes of their own supporters. Last month, Adelson and Wynn experienced a major setback. A key Adelson ally, powerful six-term Virginia Republican Congressman Eric Cantor, suffered an unexpected, stunning election defeat. He lost to an unknown professor who spent 95% less than Cantor on his campaign. Cantor has held the number two Majority Leader position in the House of Representatives since 2011.
Although Cantor will remain in office through January, his power and influence are over. He will formally resign as Majority Leader on July 31.
How Cantor’s successor, California Republican Kevin McCarthy, will react remains unknown. I expect that with so many crisis situations in Washington, Internet gaming will be a distant priority this election year.
The other battle to be won, at least in New Jersey, is sports betting. Federal law, called the Professional and Amateur Sports Protection Act (PASPA), restricts sports betting to four states- Delaware, Montana, Nevada and Oregon. They all met a 1991 deadline to pass laws approving it. At the time, New Jersey failed to act during a prescribed window of time.
Today’s New Jersey legislators are trying to overturn the inattention and political inaction of their predecessors. They aim to legalize sports betting, with huge public support and bipartisan legislative agreement. This uphill battle has faced repeated court rejections.
All four national sports leagues, for baseball, football, basketball and hockey, plus the national association for college sports, support the ban. They claim it upholds the public’s trust in the integrity of each sport. That is laughable since billions are wagered nationwide in office pools and illegally.
New Jersey, under Governor Chris Christie, has rejected their actions. The state claims no federal law directly prohibits individuals from betting on sports. It only makes it illegal to be licensed or authorized by a governmental body. New Jersey has lost these arguments in lower courts over five years, but finally took the issue to the US Supreme Court in Washington.
Bad news…in June, the Supreme Court refused to even hear the case. Undeterred, Democratic New Jersey State Senator Ray Lesniak, a speaker at the May conference, introduced a bill in Senate that same day. Because New Jersey does not authorize of prohibit sports betting, Lesniak believes it should be an individual property decision.
His bill would allow NJ casinos and racetracks – starting with Monmouth Park – to take sports bets by September, regardless of federal bans. It received huge support in both state governmental chambers.
Lesniak promises to be the first to place his bet. I’ll look forward to seeing that.
