Jul

6

Gambling: It is legal at the national level in many countries. A notable exception is the United States. However, this may not be the case for very much longer. And investors could be the ultimate benefactors from such legislation. If a bill to allow gambling over the internet is presented and passed by the US Congress, it will have concluded a long and winding road to ratification.

In 2006 the 109th US Congress passed the Unlawful Gaming Enforcement Act, with the objective to prevent online gambling for people in the United Stated. The law was written to prevent the use of certain payment instruments, credit cards and fund transfers for unlawful internet gambling, and for other purposes.

This act prevented a customer's ability to electronically transfer funds to and from banks within the US to online casinos. This effectively stopped all wagers on gambling websites by gamblers in the US.  The act specifically exempted fantasy sports leagues, which gave rise to the monetary online fantasy sports competitions that we all see advertised on television. In addition to the fantasy sports league exemption the act exempted all games of skill.

This loop hole aided the rise of internet poker until April 15, 2011– a day deemed Black Friday by the online poker community. This was the day the 2 major poker internet poker sites stopped offering real money games to US players. It was also the day that Howard Lederer, the owner of Full Tilt poker refused to return over 400 million dollars in deposits to his players.

In December of 2011 the DOJ gave the gaming industry an early Christmas present in the form of reversing the long standing policy of the US government.  Controversially, the DOJ stated that all games that are not related to sporting events fall outside the reach of the WIRE ACT, that the opinion was rooted in.

Since that time the executive leadership of several major casinos reversed their original positions of being against online gambling to being for it. Opting to take the “if you can’t beat them join them” approach, several but not all US based gaming companies have heavily lobbied politicians to legalize online gambling in the US at the Federal level. And the H.R.2282 - Internet Gambling Regulation, Enforcement, and Consumer Protection Act is positioned to do just that.

It’s noteworthy to mention that the legislation that has been referred to congressional committee has a stipulation that only a few of the major US gaming companies will be issued licenses for these online casinos for the first few years they are allowed. It would not surprise me if the current bill passes the companies that will be issued the initial licenses are donors to the political sponsors of the bill.

As expected some of the international online gaming companies are lobbying to allow ALL gaming organizations to compete for licenses in the US online domain. 888 Holdings is a world market online gaming company within the based in Gibraltar. 888s recently appointed CEO Itai Frieberger recently stated: “888 is creating an infrastructure for U.S.-based internet gaming similar to what the company has accomplished in Spain and Italy.” The major US gaming companies like Caesars Entertainment and MGM are pushing back on this request for competition implemented through congressional means. But because the there is no Amendments in the US Constitution that currently forbids internet gaming there are work a rounds.

The 10th Amendment of the US Constitution expresses that anything not specifically covered in it gets referred to the States for enforcement consideration. The states of Delaware, New Jersey and Nevada have taken advantage of this and legalized online gambling. The online gaming companies  in these states offers players’ access to games that are consistence with land based casino operators from the comfort of their own home or mobile device. 

The online gaming industry in the United Kingdom, which would likely parallel a US market, has seen exceptional growth in the last several years. And as new markets continue to open up, the growth and revenue will likely continue on this upward trend.  Some internet gaming companies have even seen an increase in new depositors over 25% from previous years. If these types of results continue it is fair to assert that online gaming operators will financially benefit from the legalization of internet gambling in the US.

Many of the internet gambling companies have a variety of gambling options for their players.  They include online poker, casino slot games, live table games and bingo. The diversification allows the companies to reach a wide variety of players from the 21 year old online poker wizard to the 67 year old retiree, and as the competition between casinos increases a player can expect increased benefits  from the casinos to ensure their player loyalty.   

What is consistent among all the online gaming sites is that the content that is offered to players orbits around educating players on how to play correctly. I believe by doing this the online gaming companies are striving to ensure that when players do play at brick and mortar casinos they will lose less money. This reduces the profitability of those establishments while they keep the same overhead costs. With the low overhead when compared to brick and mortar establishments, the online casinos rely volume to drive profits. And the more markets they are in the stronger the profits.

As the US market expands the annual revenues yielded by online gaming companies is expected to grow. It is the position of this writer that despite moral resistance by some organizations, as well as the owners of some gaming companies, the legalization of gaming at the Federal level is inevitable. Tax rates will vary from state to state and in 2014 New Jersey collected 160 million dollars in taxes from online casino gaming operators. This fell short of the predicted 180 million dollars but the discrepancy was attributed to underestimated startup costs. This tax revenue is expected to grow, and I just cannot fathom legislators will pass on this mostly passive revenue stream.

Some may be inherently skeptical of the fairness of online gaming but as renowned Gaming Law Expert, Criminal Defense Attorney and co-author of the classic text Blackjack and the Law, Robert Loeb states: “Over time, there may be certain online gaming casinos that will gain a reputation for fairness and honesty, ones that casual recreational gamblers can enjoy.”  And with market organically creating third party mediation sites, thepogg.com safe guards are developing naturally. Also, free gaming analytic websites wizardofodds.com exist to ensure that the mathematical integrity of the casino games offered have been, and can be, properly evaluated. This offers additional assurances to the player.

As soon as the congressional committee is able to set up regulations to protect players from actions like that of Lederer, legislation will be presented, and voted on by congress. So it seems that casino gaming is destined to expanded its reach not only to cites outside the gaming metropolises of Las Vegas and Atlantic City, but also onto our laptops, tablets and smart phones.

The author is on Twitter @byth3numb3rsInternet


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