The Inevitability of Online Gambling in the U.S.

Although several online poker rooms were seized by U.S. authorities, the majority of Americans believe that online gaming is inevitable. The primary issue in question is whether online gaming will be regulated at the federal or state level. Many experts opine that the regulation will involve both bodies.

Internet Gambling: The Game Changer Discussion

Sponsored by the Global Gaming Business and the Senior Associate of Market Research at the Spectrum Gaming Group, the East Coast Gaming Congress included a discussion entitled, “Internet Gambling: The Game Changer.” Four nationally-recognized experts on the subject addressed a variety of questions related to the popular activity.

The Speakers included; Melanie Brenner, President of the U.S. Online Gaming Association; Honorable John Burzichelli, New Jersey State Assembly; Richard “Skip” Bronson, Chairman of U.S. Digital Gaming and Jan Jones, Senior Vice President of Communications/Government Relations of Caesars Entertainment. The selected speakers offered well-rounded expertise in gaming and government.

The East Coast Gaming Congress

The Congress has always been a popular even for the online gambling industry with over 600 gaming operators, regulators, attorneys, architects, public officials, analysts, investors, equipment manufacturers and other related professionals in attendance. The event began with a reception at The Pool at Harrah’s Resort Atlantic City.

Land-Based Casino Discussions

Although the focal point of the Congress was online gambling, several land-based gambling issues were also discussed. For instance, the economic condition of the land casinos in Atlantic City was an important topic. The entire conference schedule is available at the East Coast Gaming Congress website.

New Jersey was selected as the location for the Congress due to the chance (until late 2010) that the state could be the first jurisdiction to legalize and regulate online gambling. Unfortunately, Governor Christie vetoed the bill on the final day. The Congress was an excellent chance for many citizens and law-makers to learn more about the positive and negative effects of online gambling. This will perhaps allow them to make a more informed decision.

Why this is an Issue

Local casinos make their money through convenience of reaching a small, localized market and building strong, lasting relationships with their customers. Adding online properties to the mix will result in the biggest brands acquiring the most customers thus phasing out smaller competitors. It’s a simple matter of economies of scale. Those that offer the largest service will continue to expand, grow and attract more customers.

Supporters of Legalization

The primary supporters of the legalization of gambling include foreign-based gaming websites, celebrities, no-name poker players, a few U.S. casino companies and recently the American Gaming Association (AGA) who is lobbying for tough licensing requirements. A select few in Congress have argued that prohibition is ineffective and U.S.-based players are simply spending their money overseas which is continuing to hurt the American economy.

The Las Vegas Culinary Union supports the legalization of online poker. Additionally, gaming giant Harrah’s Entertainment supports online gaming.  Harrah’s commissioned a study in 2009 that concluded the legalization of online gaming could triple the industry as opposed to hinder it. The study was based on the continued growth of Internet poker rooms; European growth and U.S. retail chains that have boosted sales following the launch of Internet stores.

In the past 10 years, it is proven those businesses that have not adopted the Internet as a medium of growth have died out and those supporters have shown vast growth and expansion. This is an excellent opportunity for older casinos to cater to the younger crowd using technology as its medium.

The Opposition

Few U.S. casinos have someone in Washington lobbying for legalization. 14 California tribes that own and operate major casinos are against the bill stating the tribal members will suffer because of extra competition. Additionally, the nation’s largest poker room, Commerce Casino, is against online wagering. The Nevada Resort Association has not yet taken a position on the matter. They represent large casinos at the state level.

The legalization of online gaming has been a long, heated debate. The mechanisms in place to stop problem gamblers or those underage have been minimal. On the other hand, through prohibition the U.S. is losing out money that is being pumped into foreign markets. The country is at crossroad and a firm decision must be made.

What is Sega Games?

Sega Games makes video games for several consoles like the Playstation 2 and Playstation 3. Sega Games has produced over 900 video games in total, but the company may be most famous for their Sonic the Hedgehog games. Sonic the Hedgehog has been played on several gaming consoles and even had his own cartoon series. In recent years, Sega Games took a back burner to larger companies like Nintendo but has recently announced that they are branching out in to the casino world.

Sega Games Launches an Online Casino

It may seem like a big leap to go from video games to internet gambling, but it may not be for a company like Sega Games. Sega has launched two new websites, SegaCasino.com and SegaPoker.com. Both websites will host Sega branded games. Both sites will offer players the chance to win actual money.

SegaCasino.com

SegaCasino.com will feature both popular poker games as well as virtual slot machines. Currently, SegaCasino.com offers Blackjack, Roulette, and a few other poker games with plans to expand in the upcoming year. SegaCasino.com also hosts several virtual slot machines that are based around the Sega brand name. Players have the chance to win several bonuses that are exclusive to the Sega Company.

SegaPoker.com

SegaPoker.com is a poker room hosted separately from SegaCasino.com. The poker room offers players a chance to compete against each other and win money by playing Sega style poker games. The poker room is live action and can host as many as 30,000 players at a time. This will make the stakes high and the action live.

The Future of Sega Casinos

Sega hopes to cash in on the billions of dollars spent on online gaming in Europe each year. They have several plans to expand both SegaCasino.com and SegaPoker.com through the duration of 2010. At the launch of both websites, Sega will be hosting tournaments in their poker room and special incentives for the first players to join in on the action at SegaCasino.com

A logical way to raise needed revenue

“I suspect that many of my colleagues will take more interest in this issue once they see $41 billion available that they can match up with any number of worthy programs,” McDermott said in a press release associated with the report. “I would suspect it’s only a matter of time before Congress appropriately moves to regulate the industry in order to protect consumers and reverse the flow of billions of dollars currently lost offshore as Americans gamble billions online despite attempts to prohibit the activity,” he added.

The report has also gained the attention of many in the online gaming industry. “This analysis further reinforces the fact that a regulated environment will generate billions in new revenue to offset the costs of health care reform or other vital government programs,” said Michael Waxman, spokesman for the Safe and Secure Internet Gambling Initiative. “With the completed analysis, and support for Internet gambling regulation growing daily, it’s only a matter of time before Congress acts and begins allocating the billions in new revenue sitting on the table to one program or another. This is a very significant development in support of the push to regulate the industry. We would expect that there will be more conversation and more interest in internet gambling regulations.”

The industry is hoping that the report will be a wake up call for the members of congress that haven’t been on board with the initiative. “We believe this tax revenue analysis will encourage immediate discussions and consideration of pending legislation to regulate Internet gambling,” said Waxman.  “With everyone acknowledging that attempts to prohibit the activity have failed, this provides even more incentive for Congress to act.”

McDermott, Frank leading reform efforts

This past spring, McDermott introduced bill HR 2268. The Internet Gambling Regulation and Tax Enforcement Act would impose a fee of 2% of deposits on licensed internet gambling operators. McDermott is joined in the fight by Massachusetts Democratic Congressman Barney Frank. The chairman of the House Committee on Financial Services has announced his desire to hold a hearing and markup in the coming months on his legislation, the Internet Gambling Regulation, Consumer Protection and Enforcement Act of 2009 (H.R. 2267).

Chairman Frank’s bill would establish a framework to allow licensed gambling operators to accept bets from individuals in the U.S.  It includes several consumer protections including safeguards against money laundering and identity theft. Additional provisions in the bill support the rights of each state to determine whether to allow web gambling activity for people within the state. 

UIGEA Reception

The initial reaction to the UIGEA can be compared to that of Prohibition back in the in the early 1920s.  It was similar in a sense that several publicly regulated offshore online casino operators abandoned the American market in fear of punishment from lawmakers.  However, the drastic market shift that left players with fewer gaming options simply directed them to privately owned firms who were not afraid to accept wagers from U.S. citizens.  For this reason, critics of the bill have frequently remarked that the UIGEA really does nothing to stop internet gambling for the simple fact that players can seemingly always find a loophole that allows them to play somewhere.  Jurisdictions such as Antigua and Barbuda have labeled the UIGEA and other legal actions taken by the United States as discrimination against online casino operators and a breach of international free trade.  Battles have already been won against the U.S. and several more countries are planning to file complaints because it continuously fails to make efforts to comply with WTO’s (World Trade Organization’s) filing back in 2005.

The United Kingdom, Belgium, Italy  and many other nations have decided to regulate and tax the online gambling industry instead of outlaw it completely.  In fact, several countries, including Germany, Sweden, Finland, Denmark and The Netherlands were warned back in 2006 by the European Commission for allowing local lotteries to offer sports betting, but preventing other operators from doing so.  Charlie McCreevy, EU Financial Services Commissioner, recently hinted that more nations could be added to the growing list of juristidtions currently pending legal ramifications for refusing to open their markets to online gambling.

The Battle Continues

Recent studies conducted by the British government reveal that there are nearly one million avid online gamblers residing in the country.  These players account for an estimated one-third of Europe’s approximate number of 3.5 million people who gamble online.  When combined with nearly 20 million online gamblers in the U.S., you have a rather large group of global supporters that help to power the billion dollar per year industry that has become the internet gambling market.  Players everywhere want a piece of the action so until viable agreements are reached, online gambling regulation will likely be a controversial matter for some time to come.

Casino Manager

The casino manager is a key figure in the online casino operation.  This individual has many responsibilities but their major role is to make sure the casino runs smoothly.  More specific roles include making arrangements with software providers and the gaming jurisdiction, as well as supervising staff to assure that the necessary duties are being performed.  Almost always, it is the online casino manager who ensures that gaming options, promotional offers and payment processing solutions are seamlessly integrated with the software platform.

VIP Reward Reps

There are many types of players that partake in online gambling.  Some are merely dabbling with the experience while others tend to hop from site to site in search of an advantage.  The type of players online casinos love is those who stick around and become regular customers.  Players such as these are often rewarded handsomely for their loyalty, but the actual rewards largely depend on how much they wager.  VIP representatives are casino employees designated to ensuring these special players receive their benefits.  They generally keep track of wagering levels and inform players on the benefits they are eligible for and what needs to be done to claim them.

Customer Support Agents

Support is one of the most critical aspects of online casino gaming.  What makes it so important is that this is an environment deals with a high degree of virtual features and automation where human intervention is quite limited on the casino side.  The support staff is usually highly skilled in dealing with various aspects of the casino operation as well as customer relations.  An online casino that lacks in the support department is often one that will lose a lot of customers very quickly.

Affiliate Program Managers

Affiliate programs are systems used to help online casinos drive interested traffic to their sites.  These programs allow individuals and businesses to earn commissions from the internet gambling industry by directing users to the casino sites through banner and text link advertisements.  Once the user signs, up, the affiliate gets a percentage of the sale.  The job of the affiliate manager is to oversee the program by providing affiliates with comprehensive details of their stats, sales and most importantly, making sure they are promptly and accurately compensated.

As you can see, there is a lot that goes on behind the scenes of an online casino operation.  While you will only see one name on the marquee, it takes the role of several different parties to make sure everything goes off without a hitch.

UIGEA Violates US-European Union Trade Agreements

The point of contention between America and the European Union is the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA).  UIGEA was originally created in order to prevent any American financial institution from transferring monies into online casinos, with the exception of horse racing and lottery websites.

Currently, the European Commission argues that the United States’ UIGEA legislation is violating EU trade agreements.  While the Bush administration simply ignored working jointly with international organizations, Obama’s approach is much different.  In fact, the Obama administration is currently working to resolve the conflict with the European Commission. A resolution should come forth before the expiration of the “grace period,” or else the issue will be turned over to the World Trade Organization for further investigations.

While Obama has not declared his stance on internet gambling, his desire to work with the European Commission and United Nations to resolve conflicts may signal legalized online gambling.

The Future of Legalized Online Gambling

What does the future hold for legalized online gambling?  Last year, Congressman Barney Frank proposed a bill that would overturn UIGEA, but upon voting, the bill tied at 32-32.  In order to pass through the committee floor, the bill simply needed one more vote.

However, Frank continues to work to overturn UIGEA, and he believes that his bill will pass in 2009 with the help of both a Democratic president and Democrat majority in Congress.  Frank has 48 cosponsors for his act to revoke UIGEA, and if the bill is passed to legalize and regulate online gambling, then the American government stands to gain significant tax revenue – which is sorely needed to begin to replenish the severe budget deficit.

Along with legislative assistance, President Obama’s stance on conciliatory foreign relations may bode well for legalized online gambling in the United States.  Stay tuned for the latest news at Online Casino Spotlight!

According to the RGA (Remote Gaming Association), the online gambling industry isn’t the haven for money laundering that many think it is.  With the aid of MHA Consulting, the RGA released a new report and stresses that there have been no definitive examples of money laundering occurring within licensed online gambling jurisdictions.  On the other hand, hearing this news from the RGA should be no big surprise, especially when considering that it is a trade body for several leading online casinos and software developers.  Because of this, it is natural that the organization would be doing everything possible to distance the industry from money laundering.

The truth of the matter is that the RGA didn’t have to cover up much of anything for this particular report.  How can we be so sure?  Well, MHA Consulting came to conclude that statutory and self regulation have both played a major role in dramatically reducing the number of documented money laundering incidents in jurisdictions that license internet casinos.  In addition, the report also concluded that online gambling is not particularly vulnerable to money laundering activities.  Other than the lack of documented cases, these findings were attributed to the actual makeup of the online gambling industry itself.  Since the transactions are processed electronically, all betting activities are recorded and analyzed, and the identities of all gamblers are known, the industry makes itself transparent for investigations and comprehensive audits.  The information used in the RGA’s report was complied by  reviewing bodies in European licensing jurisdictions, which are more open about online gambling than any other in the world.

The big story is that both the RGA and MHA Consulting have drawn the conclusion that the online gambling industry is in the clear for now.  However, the report also gives indication that the industry needs to remain proactive in the area of detecting and preventing the threat of money laundering.  To help achieve this, online casino operators should only work with licensing jurisdictions and stay aware of the advanced tactics being employed by the more sophisticated money launders.  Because the industry is still relatively new with equally new regulations, it is imperative for casinos to work together to keep the criminals away from the industry.

Why the Ban?

Right about now, online gambling is at the height of its popularity. However, like many other areas, times are not so exciting for players in Norway.  The country’s lawmakers are fearful of internet gambling for some of the same reasons stressed by gambling opponents in the U.S.  One of the biggest gripes shared by both nations is the concern that some players will develop compulsive personalities and be forced to deal with addiction.  Another concern is getting a handle on fraudulent casinos and enforcing age restrictions to prevent the youth from getting involved.  While these are certainly matters that need to be addressed, Norwegian proponents are making the argument that it simply isn’t enough to completely prohibit online gambling.  Similar to players in the U.S., many Norwegian citizens feel as if they are being unfairly penalized because of a few bad apples who will just find other ways to fuel their addiction.  Players in Norway are fighting for a change in hopes of the ban on internet gambling being lifted for good.

A New Hope?

As of now, Norway is teetering on the idea of implementing laws similar to legislation in the United States.  The UIGEA is very sketchy but legislation is certainly not in the favor of U.S. players looking to gamble online.  In fact, there are a number of states that completely forbid online gambling, Michigan, New Jersey and the gambling capital of Nevada included.  It is also illegal for financial institutions that service internet casinos to do business with American players.  This makes it equally difficult and often impossible for both U.S. and Norwegian citizens to get online and try their luck at the plethora of online casino games available to other players.  Unfortunately, these restrictions have led several players to find illegal ways to obtain the thrills they seek.  It would probably be much easier to simply allow citizens to play at their leisure and regulate online casino games in the manner that some many other countries have.

While Norway lawmakers are busy trying to enforce the rules, its citizens are off trying to find ways to gamble any way they can.  It is a very fine line because players who are caught could be charged with a serious offense.  The country seems to be looking out for the safety of its citizen on one hand, yet terribly frustrating several more on the other.  The tension in Norway will likely carry on for sometime until the country reaches a viable compromise regarding the issue of internet gambling.

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